SOURCE: Three Sixty, Inc.

July 06, 2007 16:56 ET

Three Sixty, Inc. (TSXT) Addresses Shareholders' Questions and Comments

ATHENS, GA--(Marketwire - July 6, 2007) - Three Sixty, Inc. (PINKSHEETS: TSXT) announces its plan to further strengthen its market position by investing $13.5 million dollars from equity sales. The equity funds will be infused into Rockford-Montgomery Labs, Inc. ("RML"), a wholly owned subsidiary of Three Sixty, Inc., and utilized for future acquisitions.

Rockford-Montgomery Labs, Inc. is a Federal Drug Administration ("FDA") Registered Drug company (#24432) incorporated in June of 2006 focused on the marketing, sales, production, and distribution of 360 OTC™ pharmaceuticals. Rockford-Montgomery has developed the brand 360 OTC™ and has acquired a proprietary formula for the only FDA over-the-counter ("OTC") approved hangover relief medicine. The following plan demonstrates management's belief that we can increase market penetration and continue to build our brand equity with 360 OTC™. "We are excited to create more transparency between the company and the public. This summary to the shareholders is intended to provide the public with an overview of the company's operations and explains the use of the equity funds. Our number one goal is to increase shareholder value," stated Michelle Shearer, CEO and Chairman.

Ms. Shearer also stated, "RML incorporated a little over a year ago and launched in February of 2007. In a short period of time, the 360 OTC™ brand has made it to consumers' medicine cabinets. To continue branding the product line, the company will incur up-front costs to manufacturers and retailers. These costs include, but are not limited to, manufacturing, warehousing, inventory, slotting fees, customer service, internal processes, travel and advertising promotions dictated by the retailer."

Business strategy. Create a trusted, household brand founded on a non-traditional, cutting-edge, interactive marketing campaign that delivers to retailers both increased consumer traffic and considerable retail margins.

Distribution network. We have an established national sales and distribution network that sells directly to mass merchandisers, drug and food retailers such as TARGET Stores, Inc., Walgreen Co., CVS Corp. and Meijer Stores, Inc. We plan to add at least ten additional retailers by year-end. In 2007, we are targeting our selling efforts to our key customers and tailoring specific programs to meet their needs. We rely on a national network of brokers to provide retail support, sell and distribute our brand while maintaining tight controls over selling expenses. Our seasoned sales executive serves all accounts on an individual basis.

All of our domestic orders are received electronically through electronic data interchange ("EDI"). Our sales and marketing departments perform significant analyses helping both our customers understand sales patterns and create appropriate promotions and merchandising aids for our products. Consistent with industry practice, we allow our customers to return unsold merchandise, and we provide extended payment terms. Meeting these industry standards create substantial, up-front costs for the company.

Brand management and growth. We seek to increase market share for our brand through focused marketing of our existing products and product line extensions. Our products target high-density, niche markets that are often outside the core product areas of larger companies. Our marketing strategy is to position our unique 360 OTC™ brand and proprietary products to meet consumer preferences identified through extensive use of market and consumer research with assistance from the University of Georgia ("UGA") Grady College of Journalism and Mass Communication of the New Media Institute. We intend to channel advertising and promotion resources to those brands that we feel exhibit the most potential for growth. Our focus is primarily on the early adapting youth niche market and sports enthusiast which provides us with the opportunity to develop strong brand equity, identify and respond to consumer trends in these markets and leverage our strong selling and distribution capabilities.

Focus on new product development. We strive to increase the value of our base brands while obtaining an increased market presence through product line extensions. Recently we added a Director of Research & Development to ensure we meet the qualifications and requirements of the FDA. We rely on internal market research as well as consultants to identify new product formulations and product line extensions that we believe appeal to the needs of our target consumers. Recent examples of successful product line extensions include 360 OTC™ Hangover Relief, 360 OTC™ Hangover Lite, 360 OTC™ Ibuprofen and 360 OTC™ PM. In 2007, we have introduced two new products and four new product line extensions and currently have three new products under development for 2008.

Strategic acquisitions. We intend to identify and acquire brands in niche markets where we believe we can achieve a significant market presence through our interactive advertising and promotion platform, sales and distribution network and research and development capabilities. We target brands with sales that are highly responsive to increased advertising support, provide an opportunity for product line extensions through our research and development efforts and have the potential to meet our high gross margin goals. We will continue to seek opportunities to acquire attractive brands that fall within our niche markets.

Competition. We currently compete in the OTC health care markets. These markets are highly competitive and often are accompanied by major advertising and promotional support. Our competitors include large pharmaceutical companies of which have considerably greater financial and other resources. The company feels it is in a great position to compete with its competitors due to its aggressive marketing campaign, unique proprietary 360 OTC™ Hangover Relief and 360 OTC™ Hangover Lite product lines and the branding of the 360 OTC™ product line.

Differentiators among the 360 OTC™ brand remains crucial as we continue to compete against some of the largest pharmaceutical companies in the world. Pricing and image are differentiators that touch all of our products across the 360 OTC™ brand. Our products are aggressively priced and show great value as historically they provide 50% more product at an equal or lower price than that of our competitors. After extensive research, pricing was determined by placing the price point midway between the private label and the leading brands. It was extremely important to our retailers that we did not compete with their private label products. Todd Weller, President, states, "It is truly a niche market that can be exploited. The 360 OTC™ Hangover Relief and 360 OTC™ Hangover Lite products bring a unique opportunity that has little to no competition. However, if there is a potential barrier it could be the perceived size of the opportunity. With that said, we are confident that our marketing plan will allow us to overachieve in these categories as we continue to target the 'under served' youth market."

Our products continue to compete for shelf space, in which we have been extremely successful. We have obtained permanent shelf space in all of our current retail customers and anticipate the same with future retail customers and our new expansion line of products. Shelf space is an up-front investment for the company. The effectiveness of the shelf space depends on the amount of product sold, which is a direct reflection of our marketing efforts. Retailers set their shelf space once, and sometimes twice a year. Therefore, timely meetings to present the 360 OTC™ product line and adequate inventory levels relate to the location and amount of shelf space the retailer is willing to give the 360 OTC™ brand.

Advertising and Promotion. We aggressively seek to build brand awareness and usage of our brand through interactive advertising strategies that emphasize the competitive strengths of our products. We plan to rely principally on television and radio advertising, sports sponsorships, airship advertising, print advertising and promotional sampling programs. We strive to achieve cost efficiencies in our advertising by being opportunistic in our purchase of media and controlling our production costs. We also maintain the flexibility to allocate purchased media time among our product lines to respond quickly to changing consumer trends and to support our growing brand. We believe our well-developed advertising and promotion platform allows us to quickly and efficiently launch and support our brand and product line extensions, as well as increase market penetration of our existing products.

Advertising and promotion expenditures will represent approximately 50% of our total revenues in 2007 and an estimated 28% of total revenues for 2008. Our main objective is to create brand awareness, which will result in increased sales and prime shelf locations at retail. We aggressively seek to build brand awareness and product usage through cost-effective advertising strategies that emphasize the uniqueness and strengths of our products.

Our retail customers purchase the 360 OTC™ brand with the understanding that the brand will be supported by extensive media advertising, substantial marketing assets and sampling. This advertising supports the retailers' sales effort and maintains the important brand franchise with the consuming public. It creates awareness that the 360 OTC™ brand exists and tells the consumer where they can purchase 360 OTC™ products.

Accordingly, we consider our advertising program to be clearly implicit in our sales arrangements with our customers. Therefore, we believe it is appropriate to allocate a percentage of the necessary supporting advertising expenses to each dollar of sales by charging a percentage of sales on an interim basis based upon anticipated annual sales and advertising expenditures. We will seek to increase market share for our brands through focused marketing of our existing products and product line extensions.

Sampling is an effective and cost-efficient way to gain instant brand awareness. We will sample our proprietary product, 360 OTC™ Hangover Relief, at major sporting events, concerts and college campuses. Sampling has proven a 44% increase in purchases, 22% increase in unaided awareness and 12% conversion of new users.

We work directly with retailers to develop promotional calendars and campaigns for our brand, customizing the promotion to the particular requirements of the individual retailer. These programs, which include cooperative advertising, temporary price reductions, in-store displays and special events, are designed to obtain or enhance distribution at the retail level and to reach the ultimate consumers of the product. We also utilize consumer promotions such as coupons, samples and trial sizes to increase the trial and consumption of the products.

Internal Analgesics Category       Product Description
----------------------------       -------------------

Extra Strength Pain Reliever       Pain Reliever/Fever Reducer
Maximum Strength Alertness Aid     Restores Mental Alertness
Maximum Strength Ibuprofen         Pain Reliever/Fever Reducer
Extra Strength PM                  Non-Addictive Sleep Aid
Hangover Relief                    Relieves Hangover, Headache & Fatigue
Hangover Relief Lite               Relieves Hangover & Headache
Manufacturing and quality control. All of our products are manufactured by third-party manufacturers and we use a logistics service located in California and Oregon to warehouse and distribute our products throughout the United States. Our expansion plan includes purchasing a warehouse in Georgia to facilitate shipments to our retail distribution points East of the Rocky Mountains. We use outside carriers, approved by our retail customers, to transport our products. In many cases, third-party manufacturers are not obligated under contracts that fix the term of their commitment. All third-party manufacturers require full payment of the product upon shipment. We believe we have adequate relationships with our supply network to meet anticipated demand for our products through our third-party manufacturers.

To monitor the quality of our products, our manufacturers maintain an internal quality control system supported by onsite microbiology and analytical laboratories. We have a trained quality control technician who tests our products and processes to guide the products through the manufacturing cycle. Consultants also are employed from time to time to test our quality control procedures and the compliance of our suppliers manufacturing operations with the United States Food and Drug Administration ("FDA") regulations. We audit our third-party manufacturers to monitor compliance with applicable current good manufacturing practices ("GMPs") as defined by FDA regulations.

We purchase raw materials and packaging materials from a number of third-party suppliers primarily on a purchase order basis. We are not limited to a single source of supply for the ingredients used in the manufacture of our products. In addition, we believe that our current and potential alternative sources of suppliers will be adequate to meet future product demands.

Government Regulation. The manufacturing, distribution, processing, formulation, packaging, labeling and advertising of our products are subject to numerous and complicated federal, state and foreign governmental regulations. Some of the regulation by federal agencies we must adhere to, include, but are not limited to:

--  the Food & Drug Administration ("FDA");
--  the Federal Trade Commission ("FTC");
--  the Drug Enforcement Administration ("DEA");
--  the Consumer Product Safety Commission ("CPSC");
--  the United States Postal Service ("USPS");
--  the Environmental Protection Agency ("EPA"); and
--  the Occupational Safety and Health Administration ("OSHA").
    
The FDA regulates the safety, manufacturing, labeling and distributing of our OTC products. In addition, the FTC may regulate the promotion and advertising of our OTC products. Currently, we have adhered to the standards required by the federal and state regulations. The hiring of our Director of Research and Development is instrumental in assuring we continue to adhere to the various regulatory agencies.

Trademarks and patents. Our trademarks are of material importance to our business and among our most important assets. We own all of our trademarks associated with the 360 OTC™ brand. In 2007, substantially all of our total revenues will be derived from products bearing the proprietary 360 OTC™ brand name. Accordingly, our future success may depend, in part, upon the goodwill associated with 360 OTC™.

Our principal brand names are registered trademarks in the United States and certain foreign countries. We maintain or have applied for patent and copyright protection in the United States relating to certain of our existing and proposed products and processes. We also may license from third parties other intellectual property that is used in certain of our products. The sale of these products rely on our ability to maintain and extend our supply and licensing agreements with these third parties.

Legal proceedings. During the third quarter of 2006, Rockford-Montgomery Labs, Inc. entered into a twelve-month sponsorship agreement with Morgan-McClure Motorsports ("MMM") for the 2007 NASCAR Nextel Cup Series for $10,000,000. On November 1, 2006, RML terminated this agreement based on non-performance by MMM. During the first quarter of 2007, MMM filed a lawsuit in the Northern District Court of Georgia against Rockford-Montgomery Labs, Inc., for the sum of $10,000,000 alleging non-performance of the contract that RML had previously cancelled. RML is currently in the process of filing a counter claim against MMM. The outcome of this litigation cannot be predicted, but, in the opinion of management, based in part upon assessments from counsel, this pending matter is without merit and will not have a material adverse effect on our financial position, results of operations or cash flows if disposed of unfavorably.

During the fourth quarter of 2006, Rockford-Montgomery Labs, Inc. entered into a marketing agreement with Just Marketing, Inc. ("JMI") for representation of RML for the motorsports industry under specific circumstances. In the first quarter of 2007, RML was served a summons by JMI in the Superior Court of Athens-Clarke County for non-payment of agency fees under the terms of the agreement and statement of work. RML is currently in the process of filing a counter claim against JMI in this matter. Management is currently in discussions with JMI to renegotiate the terms and conditions of the original agreement to satisfy both parties. The outcome of this litigation cannot be predicted, but, in the opinion of management, based in part upon assessments from counsel, this pending matter is without merit and will not have a material adverse effect on our financial position, results of operations or cash flows if disposed of unfavorably.

Employees. We employ seven persons on a full-time basis in the United States. Six are located in Athens, Georgia and one in Novi, Michigan. In addition, our employees are not represented by any organized labor union, and we consider our labor relations to be good.

General Comments. Rockford-Montgomery Labs, Inc. entered into distribution agreements, for the year 2006 only, with Aero Exhaust and Race Face sunscreen. After an in-depth analysis of these product categories, all parties decided to focus on their core business and therefore RML did not renew the distribution agreements for 2007.

Michelle Shearer concluded, "We hope that this information addresses the questions and concerns of our existing and future shareholders. We will continue to inform the public as information becomes available. The company has great potential for increased success and we plan to be around for many years to come and make 360 OTC™ a permanent icon in your medicine cabinet."

ABOUT THREE SIXTY, INC:

Three Sixty, Inc. is an acquisition company of branded healthcare and food products. The Company targets niche market segments of nationally distributed brands in their respective categories across food, drug, dollar, warehouse, convenience stores and mass merchandisers.

360 OTC™ products include 360 OTC™ Pain Relief and 360 OTC™ Alertness Aid which are available now in approximately 12,121 CVS/pharmacy, Walgreens and Meijer stores nationally. 360 OTC™ is shipping its 360 OTC™ Hangover Relief and Hangover Relief Lite products in a few weeks to all of its current retailers and the addition of TARGET.

For more information, please visit the Company's website: www.360OTC.com.

This press release does not constitute an offer of any securities for sale. This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements involve certain risks and uncertainties that could cause actual results to differ, including, without limitation, the company's limited operating history and history of losses, the inability to successfully obtain further funding, the inability to raise capital on terms acceptable to the company, the inability to compete effectively in the marketplace, the inability to complete the proposed acquisition and such other risks that could cause the actual results to differ materially from those contained in the company's projections or forward-looking statements. All forward-looking statements in this press release are based on information available to the company as of the date hereof, and the company undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this press release.

Contact Information

  • Contact:
    Three Sixty, Inc.
    Investor Relations
    Tel: 1-706-354-3725
    Fax: 1-800-927-1593