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OTCQX Virtual Investor Presentation October 5, 2017 OTCQX: OPCO www.ourpets.com/investors 1

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Page 1: OTCQX Virtual Investor Presentation - ourpets.comourpets.com/ourpets/wp-content/uploads/2017/10/OTCQX-Virtual...• Pet Clean-Up and Odor-Control products ... sound • Whirling Wiggler

OTCQX Virtual Investor PresentationOctober 5, 2017

OTCQX: OPCOwww.ourpets.com/investors

1

Page 2: OTCQX Virtual Investor Presentation - ourpets.comourpets.com/ourpets/wp-content/uploads/2017/10/OTCQX-Virtual...• Pet Clean-Up and Odor-Control products ... sound • Whirling Wiggler

Investment Thesis

2

Safe Harbor Statement

This presentation may contain various “forward-looking statements” within the meaning of Section 27A of the Securities Act of1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), which represent ourexpectations or beliefs concerning future events. Forward-looking statements generally include words such as “anticipates,”“believes,” “expects,” “planned,” “scheduled,” or similar expressions and statements. Although we believe these forward-lookingstatements are based on reasonable assumptions, statements made regarding future results are subject to a number ofassumptions, uncertainties, and risks that could cause future results to be materially different from the results stated or implied inthis presentation. Uncertainties, risks, and other factors that may cause actual results or performance to differ materially from anyresults of performance expressed or implied by forward-looking statements in this presentation include: (1) our ability to manageour operating expenses and realize operating efficiencies, (2) our ability to maintain and grow our sales with existing and newcustomers, (3) our ability to retain existing members of our senior management team and to attract additional managementemployees, (4) our ability to manage fluctuations in the availability and cost of key materials and tools of production, (5) generaleconomic conditions that might impact demand for our products, (6) competition from existing or new participants in the petproducts industry, (7) our ability to design and bring to market new products on a timely and profitable basis, (8) challenges to ourpatents or trademarks on existing or new products, or (9) our ability to secure access to sufficient capital on favourable terms tomanage and grow our business. We caution that these risk factors are not exclusive. Additionally, we do not undertake to updateany forward looking statements that may be made from time to time by or on behalf of us except as required by law.

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Agenda• OurPet’s Story

• Pet Industry & Markets

• Our Product Categories and Products

• Our Channels of Distribution

• Financial Highlights through 6-30-17

• Questions & Answers

3

Agenda

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• Pet industry is large, healthy and recession resistant

• OurPet’s (OPCO) is one of the few non-retail pet pure plays

• Strong intellectual property portfolio

• Successful two-brand strategy

• Solidly positioned for growth and disciplined for profitability

• Strong management, people, systems and products

4

Why Invest in OurPet’s?

Page 5: OTCQX Virtual Investor Presentation - ourpets.comourpets.com/ourpets/wp-content/uploads/2017/10/OTCQX-Virtual...• Pet Clean-Up and Odor-Control products ... sound • Whirling Wiggler

• Founded in 1995 by Dr. Steve Tsengas and Dean Tsengas - “Big Dog Feeder®”

• Focused on high growth categories in non-food pet products

• Interactive cat and dog toys and accessories ($1B/year category)

• Pet Clean-Up and Odor-Control products ($3.5B/year category)

• Healthy feeding/storage systems ($309M/year category)

• Products designed to:

• Satisfy the mental/physical health, safety and comfort of pets

• Satisfy the pet owners pleasure and convenience of owning a pet

• Satisfy the needs of retailers for innovative, upscale, profitable products

• Strong, diversified product portfolio across two brands (approximately 1,000 SKUs)

• Solid pipeline of new, innovative products and line extensions

• 170 patents issued/pending

Source: Packaged Facts Dog and Cat toys: U.S. Pet Market Trends 2017Packaged Facts Pet Litter, Clean-Up, and Odor-Control Products: U.S. Market Trends 2016Packaged Facts 2014

The OurPet’s Company

5

The OurPet’s Company

Page 6: OTCQX Virtual Investor Presentation - ourpets.comourpets.com/ourpets/wp-content/uploads/2017/10/OTCQX-Virtual...• Pet Clean-Up and Odor-Control products ... sound • Whirling Wiggler

Strong Management Team and People

6

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Business Model

Innovative Product Offerings Backed by Strong R&D and Patents

Positioning with Leading Retailers

Specific Pet Industry Trends

7Mintel, September 2016

Technology + Pet Knowledge = Innovation

✓ Products are brought to market after careful investment in behavioral and technology research

✓ Focus on functional and solution based products

✓ Aversion to developing “me too” commodity products

✓ Formidable patent fencing process to secure inimitability versus the competition

✓ Strong sell-through history with retailers such as Wal-Mart, PetSmart, and Petco

✓ Private label business helps maintain shelf space within pet specialty retailers

✓ Consolidation of vendors within leading retailers

✓ The humanization of pets is increasing to where people are treating “pets as family”

✓ #1 ranking within product category position at Amazon

✓ Broad retail presence across pet specialty and food, drug & mass retailers, as well as within e-commerce

✓ Growth in Toys & Accessories continue

✓ The Waste & Odor control market represents a particularly attractive, growing segment

Page 8: OTCQX Virtual Investor Presentation - ourpets.comourpets.com/ourpets/wp-content/uploads/2017/10/OTCQX-Virtual...• Pet Clean-Up and Odor-Control products ... sound • Whirling Wiggler

Market Trends

U.S. Pet Industry

• Third largest consumer market ($81.4B in 2016)

• Projected total U.S. retail sales of expected to grow to approximately $101.3B by 2021

• Forecasted compound annual growth rate over 4.5% through 2021

• 68% of households own a pet, totaling 84.6 million pet owners

• Dogs owned by 48% and cats by 38% of households

• Recession resistant

Pet Accessories and Treats Category

• Represents about 20% of U.S. pet industry annual sales

• Annual category sales of approximately $16.5B

• Forecasted compound annual growth rate of 3.1% through 2020

• Pets are living longer: 31.8% of dogs and 21.3% of cats are “seniors”

8

Source: Packaged Facts U.S. Pet Market Outlook 2017-2018/APPA National Pet Owner’s Survey, 2017-2018

Page 9: OTCQX Virtual Investor Presentation - ourpets.comourpets.com/ourpets/wp-content/uploads/2017/10/OTCQX-Virtual...• Pet Clean-Up and Odor-Control products ... sound • Whirling Wiggler

Premium brand and pet specialty channel of products for

“pet parents”

• OurPets® displays are located in Pet Speciality Retailors• PetCo• PetSmart• PetValu

Pet-specialty quality products at affordable prices for pet

enthusiasts

• Pet Zone® displays are located in Food, Drug & Mass Retailors• Walmart• Kroger• Big Lots

9

Dual Brand Strategy

Page 10: OTCQX Virtual Investor Presentation - ourpets.comourpets.com/ourpets/wp-content/uploads/2017/10/OTCQX-Virtual...• Pet Clean-Up and Odor-Control products ... sound • Whirling Wiggler

Pet Specialty41%

Food, Drug, & Mass44%

E-Commerce10%

Other5%

10

Customers/Distribution Channels

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Products Categories

Product Overview – First 6 months Year 2017

Total Revenue Toys & Accessories Waste Management Solutions

Feeding Solutions

11

42%57%

1%

Dog

Cat

Other

12%

88%

Dog

Cat

89%

7%

4%

Dog

Cat

Other

14%

83%

3%

Dog

Cat

Other

Page 12: OTCQX Virtual Investor Presentation - ourpets.comourpets.com/ourpets/wp-content/uploads/2017/10/OTCQX-Virtual...• Pet Clean-Up and Odor-Control products ... sound • Whirling Wiggler

• Many types of cat and dog toys for different types of play

• Patented dog toys• IQ Treat Ball®

• Flappy® Toys

• Atomic Treat Ball®

12

Interactive

Electronic• Pounce House™

• Unpredictable feather movement

• Mouse in Pouch™• Mouse rolls around randomly inside

or outside of the pouch

• Bird in a Cage™• Realistic fluttering bird and RealBird™

sound

• Whirling Wiggler™• Dual butterflies flutter as they fly

• Catty Whack®• Random feather movement and

patented electronic RealMouse®

Toys & Accessories

Page 13: OTCQX Virtual Investor Presentation - ourpets.comourpets.com/ourpets/wp-content/uploads/2017/10/OTCQX-Virtual...• Pet Clean-Up and Odor-Control products ... sound • Whirling Wiggler

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Toys & Accessories

North American Catnip

Cat Scratchers

• NEW – Scratch-N-Sniff Cat Scratcher with microencapsulated catnip bursts

• Cats love to scratch a variety of surfaces and angles including carpet, corrugate, and sisal

• Innovative leader with patented catnip technologies

• Loose Catnip Flakes• 100% Filled Toys, Refillable Toys• Spray & Liquid• Catnip Gel• Compressed Catnip• Edibles (Tuna Flakes)

Page 14: OTCQX Virtual Investor Presentation - ourpets.comourpets.com/ourpets/wp-content/uploads/2017/10/OTCQX-Virtual...• Pet Clean-Up and Odor-Control products ... sound • Whirling Wiggler

Feeding Solutions

Big Dog Feeder®(OurPet’s First Product)

High Rise Diner

14

Barking Bistro®3- position feeder

All these feeders are Made in USA

Category Creator & Innovator: Complete Program of Feeders and Storage Systems

Wonderbowl® Selective Feeder

Chalkboard Bowls

No-Tip BowlsOval Cat Dish

Store-N-Feed® Single

Slow Feed Bowls

Festiva Bowls

Page 15: OTCQX Virtual Investor Presentation - ourpets.comourpets.com/ourpets/wp-content/uploads/2017/10/OTCQX-Virtual...• Pet Clean-Up and Odor-Control products ... sound • Whirling Wiggler

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Feeding Solutions: New Product Pipeline

is a method of electrically depositing metals such as Chrome on special plastic.

• MetalShield™ finish has a luxurious look

• Durable, chip resistant coating

• Dishwasher safe

• MetalShield™ technology discourages the growth of surface bacteria

• MetalShield™ does not release toxic colorants or plasticizers when exposed to food

• Patent-Pending technique makes it easy to make elaborate, sophisticated designs on products

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Waste Management Solutions

Litter Disposal Systems

• OurPet’s offers a full line of innovative solutions in waste management to make cleaning up after pets an easy, hygienic, and hassle-free experience

• Innovative and convenient systems featuring: • No Touch • Odor Control• No-Stick

Smart Scoop® Automatic Litter Box odorLESS™ Disposable Litter Boxes

Proudly Made in U.S.A.

Kitty Potty™ Litter Box

EZ Scoop™ No Touch Litter Box

Page 17: OTCQX Virtual Investor Presentation - ourpets.comourpets.com/ourpets/wp-content/uploads/2017/10/OTCQX-Virtual...• Pet Clean-Up and Odor-Control products ... sound • Whirling Wiggler

What is Switchgrass?A hardy, natural grass that is exclusive to and grows in North America and does not require fertilization, use of chemical sprays (pesticides, herbicides & fungicides) or use of toxins. It is a biodegradable, flushable material. Primarily used for flood control, landscaping & thermal fuel (pelletized form)

What is Biochar?A highly absorbent, non-marking, specially produced activated carbon. Due to it’s absorptive properties, it’s used for water absorption, retention and odor control

Why Switchgrass Natural Cat Litter™ with BioChar?

• Holds waste odors with activated carbon traps • High water absorption• Sturdy clumping action• Biodegradable – not apt to cause problems,

similar to clay litters, if inhaled• 100% Natural• Minimal dust & Light weight• Made in the USA

Switchgrass Natural Cat Litter™ with BioChar

It’s what customers want!

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The smarter way to love your pet with one complete system!

• The Intelligent Pet Care™ products are changing the face of traditional waste management systems, pet feeders, and pet water systems.

• Allows pet parents to monitor their pets’ essential functions as they would their own via the dedicated OurPets® IntelligentPetLink™ app.

New Products: Intelligent Pet Care™

SmartScoop® – Intelligent Litter Box SmartLink® Feeder – Intelligent Pet Bowl SmartLink® Feeder –Intelligent Water Fountain

SmartLink® TagSmartLink® Gateway – WiFi Pet Care Connector

Health Monitoring System +

Page 19: OTCQX Virtual Investor Presentation - ourpets.comourpets.com/ourpets/wp-content/uploads/2017/10/OTCQX-Virtual...• Pet Clean-Up and Odor-Control products ... sound • Whirling Wiggler

The Pet Landscape is Changing

19

Traditional Channels

Consumer purchasing channel preferences are changing

• Pet Specialty & FDM Large Box Retailers – Slow/No Growth

• Pet Regional Chains – Moderate Growth

• TV Direct (HSN, Infomercials) – Moderate Growth

Growth Channels

OPCO will focus our efforts strategically to follow growth

• E-Commerce – Rapid Growth

• International Pet Business – Moderate Growth

• Value Stores (Big Lots, TJ Max) – Moderate Growth

Source: https://www.forbes.com/sites/richardkestenbaum/2017/09/11/there-will-be-more-retail-stores-opening-than-closing-in-2017/#5b8972543447

AdaptabilityInnovative Products

Response

Page 20: OTCQX Virtual Investor Presentation - ourpets.comourpets.com/ourpets/wp-content/uploads/2017/10/OTCQX-Virtual...• Pet Clean-Up and Odor-Control products ... sound • Whirling Wiggler

E-Commerce

• E-Commerce sales in 1st half 2017 have grown 70% over first half of 2016 and 77.% in Q2’17 over Q2’16.

• E-Commerce accounted for almost 10% 2016 of all OPCO sales

– E-Commerce will comprise 20% of all sales within the next 5 years

• OPCO has made E-Commerce a primary strategic initiative

– OPCO has allocated resources to continue growing E-Commerce business

• Recent Industry Acquisitions

– Walmart – Jet.com

– PetSmart – Chewey.com ($26m to $2b valuation in 6 years)

– Petco – Drs. Foster & Smith

20

Page 21: OTCQX Virtual Investor Presentation - ourpets.comourpets.com/ourpets/wp-content/uploads/2017/10/OTCQX-Virtual...• Pet Clean-Up and Odor-Control products ... sound • Whirling Wiggler

International

• Europe Master Distributor

– German based, can distribute within the 28 countries in EU

– Products will be marketed under the OurPets® and PetZone® brands as well as under private label.

• Amazon EU – Direct Import Program

– OPCO ships to NY port

– Amazon distributes to EU

• Chinese Distributor

– FOFOs to market OurPet’s brand

21

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Value Stores

• Big Lots

– Traditionally a close out account with roughly 1500 stores

– Evolved to a strategic partner

– Moving away from private label to carry our Pet Zone® brand for all their pet products

• TJ Maxx

– Treasure chest business model, 4000 stores

– Expanding their Pet Toys and Accessories offerings

– Want OurPet’s as their cat toy vendor

22

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89%

11%

Private Label vs. Branded Sales-2017

Branded

Private Label

75% of Sales are Covered by Patents

39%

15%

36%

10%

Sales by Channel-2017

Food, Drug, &Mass

E-Commerce

Pet Specialty

Other

90%

10%

Domestic vs. International Sales-2017

US

International

6%

1%

48%39%

0% 1%

5%

Sales by Product Category-2017

Edibles/Consumables

Housing

Toys/Accessories

Bowls/Feeders

Health/Wellness

Universal/Other

Waste & Odor Control

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Financials

Demonstrated commitment to growing both top and bottom lines

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

2012 2013 2014 2015 2016 2017

Net Income

10

15

20

25

30

35

2012 2013 2014 2015 2016 2017

Net Sales--$Millions

25%

27%

29%

31%

33%

35%

2012 2013 2014 2015 2016 2017

Gross Margin %

0%

2%

4%

6%

8%

10%

12%

14%

2012 2013 2014 2015 2016 2017

EBITDA as % of Net Sales

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Dollars and shares outstanding in millions except per share amounts

25

2012 2013 2014 2015 2016 2017

Net Sales 20.2 21.5 22.8 23.8 27.1 28.2

Gross Profit Margin 26.0% 31.0% 29.9% 31.7% 32.3% 33.2%

Income from Operations 0.4 1.7 1.2 2.2 2.7 2.8

Income Tax expense (benefit) -0.1 0.7 0.4 0.8 0.5 .4

Net Income 0.2 1.1 0.8 1.3 2.1 2.4

Net Income per share $0.01 $0.06 $0.04 $0.07 $0.11 $.12

Weighted average number of shares and common share equivalents outstanding

16.2 18.3 18.2 19.3 20.1 18.9

Financial Trends

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2016 Financial Results 2017 Financial Results (1st 6 months)

$'s in '000's 2016 2015 % Change 2017 2016 % Change

Net sales $27,070 $23,819 13.65% $12,720 $11,613 9.53%

Gross profit margin 32.33% 31.70% 1.99% 31.59% 29.31% 2.28%

Income from operations $2,683 $1,428 87.89% $777 $643 20.86%

Income tax expense $531 $497 6.84% $88 $195 -54.94%

Net income $2,145 $886 142.10% $630 $421 49.57%

Net income per common share $0.11 $0.04 150.00% $0.03 $0.02 50.00%

Financials

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Q2’2017 vs. Q2’2016

$'s in '000's 2017 2016 % Change

Net sales $6,184 $5,437 13.74%

Gross profit margin 30.62% 28.91% 5.91%

Income from operations $296 $228 30.08%

Income tax expense $22 $53 -57.50%

Net income $247 $155 59.49%

Net income per common share $0.01 $0.01 -0-

Financials

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OPCO 1 Year Share Performance

28

• OPCO shares have seen strong one-year growth

• Positioned comfortably above $1.50

• Recent increase in volume to support more trading

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• Pet industry is large, healthy and recession resistant

• OurPet’s (OPCO) is one of the few non-retail pet pure plays

• Strong intellectual property portfolio

• Successful two-brand strategy

• Solidly positioned for growth and disciplined for profitability

• Strong management, people, systems and products

29

Why Invest in OurPet’s?

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Appendix

Trading and Stock Characteristics 31

Organization Chart 32

Capitalization Structure 33

EBITDA Details 34

2016 Review 35

OurPet’s History 38

Page(s)

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Trading and Stock Characteristics

31

• Ticker: OPCO

• Exchange: OTCQX

• 19,522,001 shares outstanding (21,000,000 fully diluted)

• 8,000,000 Float

• 800 shareholders

• Stock price-$1.75, High $1.79 , Low $.80

• EPS 2016 - $.11

• P/E ratio range – 12.5 to 15.0

• Avg volume/day – 13,000

www.ourpets.com/investorsAs of 9/26/17

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Organization Chart

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Capitalization Structure

Authorized OutstandingCommon Stock

Equivalents

Common Stock 50,000,000 19,522,001 19,522,001

Preferred Stock

No Series 4,825,000 63,500 635,000

Series 2009 175,000 -0- -0-

Options 1,750,000 484,167 484,167

Warrants N/A 396,343 396,343

Total 20,466,011 21,037,511

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EBITDA Calculation

2012 2013 2014 2015 2016 2017 TTM

Net Income ($) 192,740 1,070,995 769,274 1,336,910 2,144,586 2,371,784

Interest ($) 158,269 160,572 126,771 115,735 109,591 93,596

Tax Expense ($) 58,298 660,893 373,007 750,593 531,055 406,775

Depreciation ($) 602,576 571,682 571,586 619,647 599,417 536,869

Amortization ($) 41,418 52,921 79,353 76,341 54,291 58,271

Total EBITDA ($) 1,053,301 2,517,063 1,919,991 2,899,226 3,438,940 3,467,295

The above table reconciles the Company’s disclosure of Net Income per GAAP with the non GAAP financial measure EBITDA (Earnings before Interest,Taxes, Depreciation and Amortization.) As the investment community has often requested the EBITDA calculation to help them evaluate performance,Management has chosen to provide this disclosure. Although EBITDA is widely used in the investment community as a benchmark to reflect operatingperformance, financing capability and liquidity, it is not regarded as a measure of operating performance and liquidity under generally acceptedaccounting principles (“GAAP”). It also does not represent cash flows from operating activities. In addition, the Company’s EBITDA may not becomparable to similar indicators provided by other companies. The Presentation of this additional information is not meant to be considered inisolation or as a substitute for net income (loss), or any component thereof, in accordance with GAAP.

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Products Categories

Product Overview - Full Year 2016

Total Revenue Toys & Accessories Waste Management Solutions

Feeding Solutions

35

37%

62%

1%

Dog

Cat

Other

9%

91%

0%

Dog

Cat

Other86%

10%4%

Dog

Cat

Other

18%

79%

3%

Dog

Cat

Other

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85%

15%

Private Label vs. Branded Sales-2016

Branded

Private Label

75% of Sales are Covered by Patents

43%

10%

41%

5%

Sales by Channel-2016

Food, Drug, &Mass

E-Commerce

Pet Specialty

Other

91%

9%

Domestic vs. International Sales-2016

US

International

6%

2%

53%

34%

0%1% 4%

Sales by Product Category-2016

Edibles/Consumables

Housing

Toys/Accessories

Bowls/Feeders

Health/Wellness

Universal/Other

Waste & Odor Control

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$18

$20

$22

$24

$26

$28

2012 2013 2014 2015 2016

Mill

ion

s

Net Sales

$4

$5

$6

$7

$8

$9

2012 2013 2014 2015 2016

Mill

ion

s

Gross Profit

$0

$0

$1

$1

$2

2012 2013 2014 2015 2016

Mill

ion

s

Net Income

0%

2%

4%

6%

8%

10%

12%

14%

2012 2013 2014 2015 2016

EBITDA as % of Net Sales

Financials

Demonstrated commitment to growing both top and bottom lines

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OurPet’s History