Company Overview
Muscle Flex Inc. is focusing on delivering personal health and fitness products to consumers through its direct marketing strategies. The Company is structured as a platform company that is outsourcing manufacturing and distribution, while maintaining its focus on identifying and designing new products for the healthy lifestyle marketplace. The Company is launching three new inexpensively priced products in the second half of 2009. We believe the weak economic environment favors the adoption of new products with low price points. The marquee product, the Muscle Flex™, is a home fitness product that is scheduled to launch in early 2010. The product offers the benefits of flexibility and strength training along with a cardiovascular workout all from one piece of equipment. The Muscle Flex Inc. direct marketing model is designed to successfully launch new products by cross-marketing and selling using multiple sales channels, such as infomercials, advertorials, the Internet and select retail stores. Leveraging the global brand awareness of “As Seen on TV” product and a growing portfolio of wholly-owned trademarks and patents, Muscle Flex Inc. is competitively positioned to capture share in the consumer products market. Past performance in the direct response TV industry has shown strong market acceptance for home fitness equipment and many other everyday use consumer products. We expect Muscle Flex Inc.'s revenues to ramp up to $8.7 million in 2010 and grow to $24.7 million in 2013, based on a number of products in the pipeline.
Investment Highlights
- The Company’s business model of outsourcing manufacturing and distribution lowers its requirement for initial capital during the product ramp up phase.
- The outsourcing business model also reduces ongoing operational risk since a large percentage of manufacturing, distribution and marketing expenses are a variable cost.
- The first three products will be launched in the second half or 2009. The Muscle Flex™ home fitness unit is scheduled for launch in early 2010.
- Muscle Flex is an innovative home fitness product that provides strength training, flexibility training and a cardiovascular workout in one unit.
- The Company will use direct marketing through advertorials and infomercials, which have proven very successful for personal health and fitness products.
- Muscle Flex is in discussions to create a pilot program for prime time TV and/or cable about healthy lifestyles.
- The Company plans to use celebrities in its infomercials.
Business Model
Muscle Flex Inc. is executing a business model that outsources manufacturing and distribution operations to entities with considerable experience in these areas. This model minimizes the initial capital required to ramp up production, marketing and distribution, while enabling management to leverage its intellectual capital. The Company has agreements with manufacturers in China for each of its first three products. For the Muscle Flex™ product, the Company has contracted with a manufacturer in Viet Nam and is seeking a second manufacturer. Contract manufacturers source the necessary raw materials and make the product to the Company’s specifications. MFLI has agreements with call centers to outsource all ordering and distribution of products to consumers.
By outsourcing much of the operational functions, the Company can focus on leveraging its intellectual capital by (1) identifying new personal health and fitness related products that can benefit from direct marketing, (2) designing infomercials and advertorials that clearly convey the products benefits, (3) effectively marketing the infomercial, and (4) creating a healthy lifestyle pilot program. Designing infomercials may include the use of a celebrity as the infomercial MC, and/or may highlight endorsements by celebrities. The direct marketing advertorials are 30 seconds to 5 minutes long, and the infomercials are 20 to 30 minutes.
Each infomercial and advertorial goes through a media test phase which provides data on its effectiveness. With this information, the Company forms agreements to pay media outlets a percentage of gross revenues for the air time in launching the infomercial/advertorial to a broader audience. This business model incorporates a high level of variable costs for each component, from manufacturing to marketing and distribution. On an ongoing basis, the Company’s business model lowers operating risk since much of the costs are incurred relative to sales volume.
The direct response marketing and distribution is an important component in executing this low cost business model. An effective order and distribution system improves customer satisfaction with courteous service and on-time delivery of products.
Market for Home Fitness 
The Sporting Goods Manufacturers Association reports sales in the US of sports equipment and apparel was $66.4 billion in 2006. According to the Mercanti Group, approximately 43 million Americans belong to health clubs. Revenues from health clubs are over $17 billion annually. Americans are clearly willing to spend on their physical health needs. The aging baby boomer population has been far more focused on healthy living practices in older age as compared to older generations.
It is estimated that up to 65% of the US adult population is overweight or obese, and yet, spending on new diet fads continues. More Americans are becoming aware of the need for healthier living including low impact exercise that leads to a higher quality of life. We believe as the baby boomer generation moves into the pre-retirement and early retirement age, the interest in quality of life and personal health increases.
In the last several decades, the baby boomer generation has provided an increased emphasis on personal health. The trends of more health clubs with treadmills, stationary bikes, and other aerobic devices and the popularity of workout regimens including weight machine and free weight training, all occurred to meet the health requirements of the baby boomers. Several in-home fitness products sold through infomercials have performed very well. The Bow-Flex strength training, which sells for up $5,000 per unit, has generated over $1 billion in revenues. The Total Gym, which costs up to $2,000 per unit has generated revenues of approximately $2 billion. The Nordic Track set the record for the highest number of personal fitness units sold in one month through direct advertising at 350,000 units. The direct advertising marketing channel has clearly shown that it is effective for home fitness equipment.
Initial Products
The Company is in the process of creating the infomercials for three innovative personal health, safety and hygiene products. Scripts and conceptual framework for the infomercials and advertorials are completed. Filming is scheduled to complete soon, and airtime is planned for the second half of 2009.
Vitamin Buddy 
The Vitamin Buddy™ is a portable vitamin / pill box that has adjustable timers to remind the consumer when to take medication. Each Vitamin Buddy™ has three separate timers that can be adjusted for different time intervals. The Vitamin Buddy™ beeps when the previously set time occurs. We believe this device can be highly valuable to an aging population. The Company pans to market the product at two price points, $9.95 and 14.95, with a buy one get one free offer.
Securo-Marker
The Securo-Marker™ is a marking pen that has invisible ink which can only be seen when a UV light is directed to the marking. The marking pen has a UV light built in, at the opposite end of the pen. The pen can be used to mark valuables that can later be identified in the event of a theft, misplacement or co-mingling of belongings. Other applications include written documentation of computer and Internet based passwords, marking toys or items that are shared. The Company plans to market it at $9.95 for 3 Securo-Markers.
Magic Clipper
The Magic Clippers are nail clippers that collect the cut nail inside the clipper. The Magic Clippers have a casing over the clipper with a vessel to catch the nail and eliminate the “flying nail” syndrome. There are likely to be several styles to choose from. The Company plans to market the Magic Clippers at two price points $9.95 and $14.95 for a set of four.
Future Products
The Company is in discussions with an entertainment production company to co-develop a pilot program that is designed for prime time/daytime television. The program will deliver real life practical solutions to those seeking a healthy lifestyle. Topics will include sugar free recipes, exercises and how to maintain healthy meals while at work events. Guest celebrity appearances are planned to add variety.
Muscle Flex anticipates introducing additional personal health and safety products. Some of the potential new products include vitamins that are branded with Muscle Flex, a smaller version of the Muscle Flex product, and natural hair removal products.
The Company owns the Canadian trademark “In the Raw®”, acquired from Danny Alex in 2008. The In the Raw® is registered to distribute products for extreme sports, In the Raw® T-shirts, caps, and CD’s.
Direct Advertising Industry
The direct advertising industry which utilizes the entertainment and media markets for advertising and infomercials, has shown significant resiliency in the current weak economic environment. According to a recent article (April 22, 2009), CNBC reports that the $150 billion infomercial industry has been booming throughout the recession, http://www.msnbc.msn.com/id/30308356/.
Once an infomercial is produced, a media test is conducted to determine its effectiveness. Health care and fitness products are typically aired on lifestyle, health and sport related cable channels, or during popular sporting events on network TV. The media test is designed to focus on the appropriate demographics and may, for example, include a large city on a weekend afternoon sports channel and a medium city on a week night lifestyle channel. Since each geographic and media channel market is tracked with a different toll-free number, accurate media response data is generated. After the media test is complete, the Company then creates an airtime strategy to address the most appropriate markets.
Infomercials and advertorials are effective due to the ubiquitous nature of cable and TV viewers. In a weak economic environment, TV and cable offer inexpensive entertainment options, and as a result viewership is strong. According to the Company, industry analysts project continued growth in the TV, film and media markets. As a result, television is still seen as a preferred media for advertisers.
Corporate Update - July 29, 2009
Muscle Flex Inc. Provides a Corporate Update on The Buddy Tablet Caddy(TM), Sugar Free TV Show Pilot, "In the Raw(R)" / WWE "Raw" Trademark Victory and More
The BUDDY Tablet Caddy:
On July 15, 2007, Muscle Flex Inc. announced the release of its first value priced "As Seen on TV" product, The Buddy Tablet Caddy(TM) (The Vitamin BUDDY). The BUDDY Tablet Caddy is a compact and portable vitamin / prescription tablet caddy that has 3 compartments and an adjustable timer to remind the user to take their medications or vitamins. It has a number of user friendly features: it's small, light weight, portable, compact, very easy to use and has a timer and alarm mechanism that can be adjusted at different time intervals. The name was changed from "The Vitamin BUDDY" to "The BUDDY Tablet Caddy" to more accurately reflect the full "BUDDY" line of Tablet Caddy dispensers that are planned. The first product is the "The Buddy Tablet Caddy" which is scheduled for release in September 2009 via a national short form infomercial campaign. Filming of the infomercial is in the late stages of development. The BUDDY Tablet Caddy infomercial will be a North American release to start, with plans to go global soon thereafter.
Muscle Flex Inc. / WWE "In the Raw®" Trademark Victory:
Muscle Flex Inc. is currently evaluating all of its options with regards to the WWE's unauthorized use of 'Raw' in Canada and has accumulated significant evidence that it believes proves trademark infringement on the part of WWE for the wares and services legally and rightfully protected and owned by Muscle Flex Inc.'s "In the Raw®" trademark in Canada. In April of this year, Muscle Flex Inc. won the final court appeal by the WWE in Canadian Federal court after the CIPO (Canadian Intellectual Property Office) Opposition Board decided in favor on Muscle Flex Inc. for a significant number of the claimed wares and services in June 2008. We are also in the process of expanding our In the Raw® product line for national distribution as well as investigating any licensing opportunities. Muscle Flex Inc. shall provide material updates as they develop.
The Sugar Free Daily Primetime / Daytime TV Show Pilot
Muscle Flex Inc. and Sterling Worldwide Entertainment jointly announced on July 22, 2009 that the companies have completed development on a daily prime time/daytime television talk show called "Sugar Free." Muscle Flex® and Sterling will each hold a 50/50 ownership of the show and share equally in its future revenue streams. The companies are now preparing to film the TV pilot, which, upon completion, will be pitched to major television networks and national cable stations for future North American distribution. "Sugar Free" delivers real-life, practical solutions to anyone seeking to develop and maintain a healthy lifestyle. With the huge success of such TV shows as the "Biggest Loser" and "Celebrity Fit Club," diet and exercise shows have been spun into television gold. We have been moving quickly on this project with Sterling Worldwide and expect some exciting news very soon.
Muscle Flex® Goes Hollywood with Influential Hollywood Insider, GBK Productions
Gavin Keilly, President of GBK Productions (www.gbkproductions.com) and influential Hollywood Insider, has given Muscle Flex Inc. a standing invite to participate in their exclusive Hollywood and event-driven gifting suites which include: The MTV Music Awards, The Golden Globes, The Oscars, The American Music Awards, the Cannes and Sundance Film Festival, The Emmy Awards, the Super Bowl and many others for product promotions and launches. The relationship with GBK Productions forms an integral part of Muscle Flex Inc.'s strategy of launching new products with intensified media exposure and allows for potential endorsement deals, testimonials and participation by some of Hollywood's most visible celebrities in helping to establish Muscle Flex brands. GBK Productions invites only selected companies and products to attend their high profile gifting suites and seeks to connect today's hottest celebrities and personalities with new and exciting products to create an industry "buzz" and national media exposure for companies showcasing their products at their world-class prestigious events.
Muscle Flex Inc. to Release Two Additional Products, One Later in 2009 and Early 2010:
Muscle Flex Inc. has two additional value priced products planned for release via the "As Seen on TV" infomercial format in late 2009 and early 2010. Product details shall be released as the projected release date nears and any and all intellectual property considerations are completed. Muscle Flex Inc. has a number of projects it is considering as the product pipeline is very rich and robust with a number of compelling product offerings.
Muscle Flex Inc. -- A Strong Pipeline of Products
Muscle Flex Inc. has an exceptionally strong pipeline of direct response "As Seen on TV" products that are both original and innovative. With a strong focus on lower value priced consumer products given the economy, the pipeline of potential products includes a number of health and fitness, electronics and beauty related products. The R&D and product "discovery" process at Muscle Flex Inc. is very robust with a number of compelling product considerations. Muscle Flex Inc. intends to bring a significant amount of innovation to the "As Seen on TV" industry by developing and deploying products in ways that are unique and unconventional. Out with the old, in with the new!!
The Muscle Flex® "As Seen on TV" Business Model
The Muscle Flex Inc. business model is one of accelerating growth of the "As Seen on TV" program exponentially by maintaining a very low fixed cost structure and infusing the majority of the 'free cash flow' generated from sales back into inventory and additional airtime. The majority of the program costs have been developed around a variable cost model that increases only as product sales do. Danny Alex, company CEO and founder, will host all TV infomercials and print advertorials for The BUDDY Tablet Caddy(TM) which effectively eliminates the cost of talent and rehearsals.
