Edward Grayver - Money Matters - Cannabis Plan.pdf 2452a
This document was ed by and they confirmed that they have the permission to share it. If you are author or own the copyright of this book, please report to us by using this report form. Report r6l17
Overview 4q3b3c
& View Edward Grayver - Money Matters - Cannabis Plan.pdf as PDF for free.
More details 26j3b
- Words: 4,947
- Pages: 42
Cannæstate Holdings Corp.
Business Plan
CONFIDENTIAL March 25, 2018 Cannæstate Holdings Corp.
1
Confidentiality Agreement
The undersigned reader of Cannæstate Holdings Corp.’s Business Plan (“Cannæstate” or the “Company”) hereby acknowledges that the information provided is completely confidential and therefore the reader agrees not to disclose anything found in the business plan without the express written consent of Cannæstate. It is also acknowledged by the reader that the information to be furnished in this business plan is in all aspects confidential in nature, other than information that is in the public domain through other means and that any disclosure or use of the same by the reader may cause serious harm and or damage to Cannæstate. Upon request this business plan document will be immediately returned to Cannæstate. This is a business plan. It does not imply an offer of any securities.
Applicable Law This contract shall be governed by the laws in the State of California.
__________________________________________________ Signature
__________________________________________________ Printed Name
Cannæstate Holdings Corp.
2
Overview With the age of Proposition 64, California is poised to become the world’s largest marijuana market with more than $1.5 billion in additional revenue coming into the state during 2018. With a projected CAGR of more than 20% through 2020, the marijuana industry in California is one of the hottest markets in the United States and Cannæstate is poised to become one of the nation’s largest players. Through a unique ownership structure whereby Cannæstate will be the primary shareholder in three LLCs, the Company will create a vertically integrated cannabis production and distribution company with economies of scale, and profit margins, that are unachievable in the current market environment. Therefore, not only will Cannæstate bring to market some of the best branded products in the industry, they will do so more efficiently and at a lower cost than any potential competitor.
Cannæstate Holdings Corp.
3
Table of Contents Confidentiality Agreement.................................................................................................................... 2
Executive Summary ............................................................................................................... 5 Product Summary................................................................................................................................. 5 Market Summary ................................................................................................................................. 5 Three Year Objectives........................................................................................................................... 6 Keys to Success .................................................................................................................................... 6 Financing Summary .............................................................................................................................. 7
Vertically Integrated Cannabis Operations ............................................................................. 8 Product Description.............................................................................................................................. 8 Organization Structure ......................................................................................................................... 8
Industry Overview ............................................................................................................... 10 Macroeconomic Trends ...................................................................................................................... 11 General Population Acceptance and Market Growth ........................................................................... 11 California Market Growth ................................................................................................................... 14
Strategy & Implementation Summary .................................................................................. 15 Management Team ............................................................................................................................ 17 Personnel Strategy ............................................................................................................................. 18 SWOT Analysis ................................................................................................................................... 19
Marketing Plan .................................................................................................................... 20 Promotion Strategy ............................................................................................................................ 20
Financial Forecasts .............................................................................................................. 21 Startup Summary ............................................................................................................................... 21 Financial Highlights ............................................................................................................................ 22 Financial Indicators ............................................................................................................................ 23 Break-Even Analysis ........................................................................................................................... 24 Projected Profit and Loss .................................................................................................................... 25 Projected Cash Flow ........................................................................................................................... 26 Projected Balance Sheet ..................................................................................................................... 27 Sensitivity Analysis ............................................................................................................................. 28
Appendix............................................................................................................................. 29 LLCs – Articles of Organization ............................................................................................................ 31 Product Portfolio – Current Products .................................................................................................. 40 Product Portfolio – Financial Performance .......................................................................................... 41 Product Portfolio – Future Expansion .................................................................................................. 41
Cannæstate Holdings Corp.
4
Executive Summary The following business plan outlines the proposal, development plan, and most likely financial projections based upon the establishment of Cannæstate’s collection of highly optimized LLCs that when combined give the Company a vertically integrated production process from cloning all the way through to distribution. Cannæstate is the primary investor in each LLC and will provide operating and management consulting services to the LLCs in order to maximize the yield and ensure a consistent level of operating excellence. Across all the facilities, Cannæstate will have state of the art facilities for cannabis cultivation, production, and distribution. The two proposed facilities, which consists of a 20,000 sq. ft. facility for the main product production and an 8,200 sq. ft. boutique facility, will a conservative annual yield of 30,000 lbs. with products, including flowers and extracts, sold through multiple channels including wholesale, private label, and branded products for up to $1,200 per pound. Cannæstate’s facility is state-of-the-art and is able to produce a highly optimized yield at a fraction of industry energy costs, accomplished through the use of LED lighting allowing them to generate up to 2.25 grams of product per watt vs. the industry average of 1.5 grams per watt. The potential also exists for Cannæstate to expand production facilities, grow additional branded products, as well as expand into adjacent service verticals, however the plan focuses on the most conservative scenario of a conservative fixed yield.
Product Summary Cannæstate, through the collection of the Company’s LLC ownership, will achieve full vertical integration through all stages of the cannabis production cycle, from cloning through to distribution. Across the Company’s two facilities, totaling more than 28,000 sq. ft., Cannæstate will be producing up to 30,000 lbs. of product annually. Cannæstate will be growing products that will be packaged as flower, sold as pre-rolls, or used for extracts based on the end-product’s quality and consumer demand. This type of flexibility is one of the key differentiators for Cannæstate versus the competitors. By consolidating the supply chain and providing a single point of management oversight, Cannæstate will be able to produce all their branded products in-house while also building a sophisticated set of processes allowing the Company to also be a highly successful 3rd party contract manufacturer for entrepreneurs and other companies in the cannabis industry looking for a stronger go-to-market strategy or lower costs. In addition to state-of-the-art facilities, Cannæstate’s management team also will allow their sister company, Elevated Agency, to run Cannæstate’s brand development process. Elevated Agency will work with new brands from concept and licensing all the way to distribution. This additional service is another reason that Cannæstate will become the premier launching pad for new brands in the cannabis industry.
Market Summary The recent ing of Proposition 64 in November 2016 has made California one of the most recent states to legalize recreational marijuana for adult use with marijuana shops opening their doors on January 1, 2018. As more and more states begin to legal both medical and recreational marijuana use, the industry is growing at a rapid pace. Marijuana sales in North America reached $6.73 billion in 2016—reflecting Cannæstate Holdings Corp.
5
34% growth over 2015 ($5.04 billion), according to Arcview Market Research/BDS Analytics. The research firm projects sales to jump to $21.6 billion by 2021, representing a 26% CAGR. While Canada is included in Arcview’s market view for the first time, the United States represented 87% of legal spending in 2016. California ed for 27% of the 2016 legal market in North America, Colorado represented 20% and Washington represented 11%. As the general public’s sentiment toward the legalization of marijuana continues to become more favorable, more than 64% of people marijuana legalization with 8 states already allowing adultuse, the industry is experiencing significant tailwinds that Cannæstate will be able to capture is it looks to vertically integrate through the full production process to maximize economics of scale.
Three Year Objectives Cannæstate has the following objectives: • • • • • •
Raise $10,000,000 from investors by issuing shares of the Cannæstate Corporation Setup the growing facility with the complete built-out and yield maximizing set-up in place. Modify the facility and procure all necessary assets for the new production cycle. Implement security protocols for production, packaging, and delivery. Drive sales across multiple channels (wholesale, branded, private label, etc.) in order to diversify revenue streams, thereby limiting concentration risk. Explore growth outside California to begin a national expansion strategy, in locations they or partners have state licenses, in order to develop naturally recognized brands and products.
Keys to Success Cannæstate recognizes the following as keys to success for its operation: • • • • •
Ensure that the modified building is EPA compliant and equipped with all state-of-the-art technology offerings available. Establish strict procedures for quality control, environmental policies, and workplace ethics. Only hire and train experienced workers that have been pre-vetted and licensed. Follow the best cultivation processes to ensure consistent quality. Manage costs and production schedules to ensure that the facility is operating optimally and maximizing production yield.
Cannæstate Holdings Corp.
6
Financing Summary
Below is a detailed breakdown of startup expenses and asset allocation, including the cash needs for the first year that equate to the cash on hand remaining from financing.
Cannæstate Holdings Corp.
7
Vertically Integrated Cannabis Operations Product Description Strains will be selected based on those with the highest return on investment based on the various market prices and potential yields. While strains are subject to change based on market prices and yield performance, some strains may be utilized consistently throughout the Company’s growing cycle in order to develop a brand reputation for offering a high-quality product. Cannæstate also has the tools and technology to create their own genetically unique cannabis, providing the Company an additional barrier from new competition. At this time, Cannæstate is currently working on developing multiple strains of product that will each have their own benefits, growing habits, and effects. While specific details on each strain are not available, Cannæstate has decided to group all growing initiatives into the following three buckets: •
Strains that are popular in the market These are the main strains that the business will generate income from initially. Cannæstate will dedicate the majority of its resources to growing and cultivating these strains, ones that are already proven successful in the market, in order to generate cashflow to funnel into oils and other experimental strains unique to Cannæstate.
•
Strains specifically grown to press These strains are developed exclusively for press, including oils, that will supplement the sale of Cannæstate’s main strains that are used for flower sales.
•
Strains that are genetically unique to Cannæstate These strains are experimental and while they will not initially have a meaningful footprint in the production facility, Cannæstate is determined to find unique products to bring to market that will separate the Company from its competitors.
Organization Structure Based on current legislature and licensing requirements, Cannæstate has developed an innovative way of achieving vertical integration in the cannabis industry at a time when competitors are still only owning one part of the supply chain. Through Cannæstate’s role as the primary shareholder in through separate LLCs that the Company has invested in, Cannæstate has replicated the full cannabis supply chain in order Cannæstate Holdings Corp.
8
to achieve economies of scale. Additionally, Cannæstate will be sharing their consulting, management, and operational expertise across all three LLCs thereby ensuring a uniform set of policies and procedures that will maximize the shared facilities’ yield without sacrificing any savings realized with shared services. With their state-of-the-art facility, Cannæstate is able to attract the most experienced growers in California, particularly those with a background in larger-scale commercial cultivation, in order to maximize yield while minimizing waste and retaining the talent. The three LLCs that Cannæstate will be the primary shareholder of are detailed below: Fossil Fuel, LLC. o o o o
Located at 8178 Belvedere Ave Suite E, Sacramento, CA 95826 Serves as the main processing and manufacturing unit with 2,000 sq. ft. of space All extraction and distribution will be managed out of this LLC Holds three key machinery assets including a Pope distillation machine, a rosin press, and an industry-leading extraction machine
FuTech, LLC. o o o
Located at 8661 Morrison Creek Dr, Sacramento, CA 95828 Serves as the main cultivation facility with more than 20,000 sq. ft. for growing All the main commercial strains will be grown at this facility
HiTech, LLC. o o o o
Located at 8178 Belvedere Ave Suite A and B, Sacramento, CA 95826 Serves as the secondary cultivation facility with 8,200 sq. ft. for growing All the boutique commercial strains will be grown at this facility Half the facility will be dedicated to the already successful Ganja Gold Blue Tarantula line of products
Cannæstate Holdings Corp.
9
Industry Overview For decades, all Cannabis transactions in the United States were conducted under implicit or explicit prohibition. States have increasingly moved to legalize nonprofit Cannabis growing for medical purposes, however, as well as implement regulations for organizations that produce and distribute Cannabis. The growing acceptance of medical Cannabis is providing operators and investors with unprecedented opportunities, while leading to growth in states with legal adult use recreational laws. California is one of the states that is poised to generate significant benefits from legalizing adult-use marijuana as the estimates market size for marijuana in California is $8.5 billion and this will bring in more than $4.3 billion in revenue to the state, of which $1.6 billion is derived from adult use. The rise in popularity of the consumer cannabis industry appears to be closely aligned with the rise in craft breweries and the craft beer industry. As the cannabis industry expands, consumer purchase habits are anticipated to be driven by taste, product quality, and overall experience. This consumer purchasing power will drive companies, in order to be successful, to create brands across multiple consumer demographics and taste profiles. Additionally, similar to craft breweries, the cannabis industry is ripe for consolidation and acquisitions, as evident when Corona acquired a $191 state in the world’s largest legal marijuana producer and Aphria bought Indoor Cannabis Grower for $230 million. As the industry grows, brands will carve out niches within the market and large organizations will grow through acquisitions in order to achieve economies of scale, similar to large beverage companies and craft breweries. North American consumers spent $6.7 billion on legal cannabis products in 2016, up 34% from $5.0 billion in 2015. The growth continues a robust pattern that Arcview estimates will lead to a $22.6-bilion market in 2021 at a 27% compound annual growth rate. While Canada is included in Arcview’s market view for the first time, the United States represented 87% of legal spending in 2016. California ed for 27% of the 2016 legal market in North America, Colorado represented 20% and Washington represented 11%.
Cannæstate Holdings Corp.
10
Macroeconomic Trends The U.S. commerce industry in 2017 is best characterized by a continual shift away from traditional experiences with more consumers opting to purchase new and previously unattainable items (hence the rise in marijuana tourism). As the consumer trends continue to shift, the overall industry demand is still largely impacted by macroeconomic factors such as disposable income and unemployment rates. From an economic standpoint, the United States market continues to add jobs, see strong disposable income and low unemployment rates, all of which ultimately adds to the increased consumer demand and spending power to use on legal or medicinal marijuana. The high-quality marijuana market, including medicinal, is dependent on the rise in disposable income within the United States. As per capita disposable income has risen since the recession, consumers have felt the freedom to make more deliberate and oftentimes extravagant purchases. Additionally, as national unemployment rates have fallen since the recession, consumers, particularly millennials, are less focused on saving money and more concerned with buying goods, food, and experiences that are authentic, unique, and potentially as an alternative to costly medical problems.
General Population Acceptance and Market Growth As the states continue to adopt a more progressive stance on marijuana use, the public’s sentiment has risen in lockstep with 64% of people favoring the legalization of recreational and medicinal use. As the public’s favorability toward marijuana usage has risen since 1996, Arcview projects more than 30 states plus Canada will have active legal markets by 2021 with further upside as they are not projecting Florida or New York, two of the largest markets, to be fully legalized by 2021. Furthermore, Arcview believes that
Cannæstate Holdings Corp.
11
by 2026, the US federal prohibition will be repealed which will fuel explosive growth an industry that is already experiencing 20+% CAGRs.
Cannæstate Holdings Corp.
12
Cannæstate Holdings Corp.
13
California Market Growth The recent enactment of Proposition 64 coupled with the new presidency which has expressed a national policy against legalization with avoidance of state level control likely means that the market in California will reflect that of Colorado. California, as a separate entity, is the 6th largest economy in the world with a $2.6 trillion GDP. Given the size of the potential target demographic, California’s marijuana market is already projected to be worth $8.5 billion, of which $5.7 billion will be for adult use. As detailed in the chart below, the potential revenue income generated by the state of California from the age of marijuana laws is currently $2.8 billion for 2017 and will grow to $6.5 billion by 2020. This growth is due to the significant rise of the adult use business. This business was non-existent in 2017 and is projected to grow to a $3.9 billion by 2020, representing a 23% CAGR.
Cannæstate Holdings Corp.
14
Strategy & Implementation Summary Product Lifecycle Given Cannæstate’s vertically integrated entities, who all share a consulting and management group, the Company is confident that they will be able to not only maximize their product yield while minimizing waste but also develop a superior group of branded products that do not exist in the market today. Cannæstate will be developing branded products, including captive brands and as brands where Cannæstate is the contract manufacturer, that they will then package and market to the Company’s vast network of potential buyers in order to maximize product velocity and allow for Cannæstate to drive increased yield efficiencies by turning each branded product quicker through the production process. By owning all stages of the production cycle, Cannæstate will be able to achieve economies of scale and drive up profit margins for the Company.
Facility Enhancements In order to achieve the level of yield that Cannæstate is targeting, they have developed a truly state-ofthe-art growing and production facility that not only is able to generate more than 30,000 lbs. of product per year but can do so by leveraging the following resources: •
Full LED lighting system, utilizing SPYDRx lights, that is able to reduce the electricity cost per pound from $600 for traditional lighting to only $200 per pound
•
Full LED lighting also reduces air conditioning costs given the low heat emissions of LED lights
•
Sacramento Canna will also achieve increased efficiencies by exclusively using veteran growers who have more than 10 years of experience in the industry. Experienced growers are able to maximize yield without using unnecessary and wasteful resources like electricity and water, unless required for growth
•
With the full LED lighting system and the experienced growers, Sacramento Canna beats the competition by generating between 1.55 to 2.25 grams per watt compared to the industry average of 1.5 grams per watt
Cannæstate Holdings Corp.
15
In addition to the cost savings and minimal waste generated by Cannæstate’s facility, the Company has also developed a thorough set of standard operating procedures by which the entire facility will be run. With these procedures in place, Cannæstate will have a set process in place for each stage of development as well as how each employee is involved in the supply chain, thereby minimizing error. From the cloning to processing, Cannæstate has automated as much of the steps as possible and has ensured that all procedures are well documents.
Cannæstate Holdings Corp.
16
Management Team Manish Patel Title Mr. Patel, serving as the Title, has been heavily involved in the cannabis industry for over a decade and have gained a wealth of knowledge in the space, which he has continually leveraged to help build several successful cannabis companies. Since being introduced to the cannabis industry in 2004, Mr. Patel has advocated for the removal of the stigmas surrounding cannabis and has been at the forefront of this rapidly growing industry. Manish’s main focus over the last few years has been to combine his professional capabilities with his ion for the cannabis industry, while tapping into his deep network in order to create a national cannabis enterprise. Having grown up in New Jersey, Mr. Patel completed a double major in mathematics and economics at Rutgers University before receiving a Juris Doctorate from New York Law School and a Master in Business istration from Baruch College’s Zicklin School of Business. While in Law School, he co-founded Millennium Asset Management, Inc., for which he is presently the CFO. After ing the bar in NY and NJ, he co-founded Sentient Law Group, P.C., a boutique Manhattan law firm specializing in business planning, corporations, and finance.
Bryan Kern Title Mr. Kern has been involved in the cannabis industry his entire adult life and is a second-generation cultivator. Mr. Kern started his first indoor grow in 2009 and has since moved on to large scale medical cannabis grows in California. He has devoted the last four years to perfecting his craft by founding and operating several medical cannabis gardens ranging from half an acre to over three acres in size. Mr. Kern’s experience cultivating cannabis for the past eight years coupled with the experience received from his father and many other growers around him has allowed Mr. Kern to develop into a master grower. Mr. Kern truly has a ion for growing cannabis and wants to continue the mastery of his craft for the rest of his life. Mr. Kern was born and raised in Long Island, New York. He attended colleges at Suffolk Community and Nassau Community, where he played football and finished a 2-year associates degree in liberal arts. He attended Stony Brook University for one semester before leaving in 2013 to start and manage a landscaping business full-time.
Cannæstate Holdings Corp.
17
Personnel Strategy Cannæstate will have personnel in each department that is to be hired on a contract basis with a background aligned with the specific process to be followed. The team will consist of horticulturists, finished plant producers, trimmers, managers, and a security/ personnel. Additional floor level management may also be hired such that they may oversee the efficiency and productivity of the production floor. Staff will initially be hired on a part time basis, with the potential for full-time as the operation scales.
Horticulturists: The horticulturists are responsible for caring for the plant and ensuring that all processes and machinery is functioning properly. The role is also responsible for applying predetermined amounts of nutrients, water, and the management of plant growing cycles in compliance with the Company’s cultivation process. Since contrasting strains grow differently, it will take an experienced professional to understand the unique treatment of each strain. Given the intricacies of the position, Cannæstate is only using 3rd and 4th generation growers who have experience growing in a variety of situations and with multiple strains while maintaining a highquality product.
Processor: The processing team will have a background in quality control inspection so that they are familiar with a high-performance role that also trains them to inspect defective products. Seeds or loose stems and leaves that enter the processing area will be removed and additional screening will take place to reduce the amount from entering the processing area.
Security: The facilities will be constantly monitored by an experienced security services firm during non-working hours. This will ensure that the facility is constantly maintained and Cannæstate will be sufficiently protected once plants are onsite.
Cannæstate Holdings Corp.
18
SWOT Analysis Strengths • • • • • •
The management team has extensive experience in the cannabis industry with experience ranging from production to product creation to sales and marketing to distribution. The Company has a development plan to ensure the consistency and quality of the products. The management team has a deep network of wholesale relationships in the space that will ensure constant product velocity. Sustainable building practices will be implemented to conserve energy and water consumption. The building site is designed to produce a maximum yield per square foot. Despite market saturation, Cannæstate can achieve the lowest cost to produce in the state
Weaknesses • • •
The long-term product demand is unknown, so it is feasible the market will be oversaturated. Market saturation may lead to depressed wholesale prices. Building the facility may increase the initial investment needed to expand operations.
Opportunities • • • • •
As market awareness grows, the demand for Cannabis will increase. It is unlikely Cannabis will be nationally legal in the next three years, offering Cannabis tourism. Medical Cannabis is increasingly being socially acceptable within the state. California is the first state for Cannæstate where they can refine operations enabling them to maximize efficiency as they explore national expansion. The market for medical Cannabis continues to grow and is unlikely to slow down.
Threats • • • •
The medication is still federally illegal, which makes the future market potential unclear. There is the risk of market adoption rates, which may only be projected at this point. It is possible that some potential patients have already left to medicalized states. Many competitors will enter the market to aggressively compete for price and quality.
Cannæstate Holdings Corp.
19
.
Marketing Plan The marketing plan is focused around educating the market, creating customer loyalty through high quality products and outstanding customer service, and community engagement. The individual brands will also be positioned in the market as premier products while Cannæstate will offer a full suite of proprietary branded, private label, and wholesale products. The Company already has relationships in place with distributors, currently partnered with companies like Leafly.com, to sell the product to maximize yield but will be using various promotional strategies to further brand reach and increase customer engagement.
Promotion Strategy Customer Relationship Management (CRM) Once a dispensary and/or wholesale buyer is ed with Cannæstate, the staff will utilize their bestin-class 3rd party CRM platform, Brandboom, that will function as a virtual showroom where buyers can see the product, pricing, and place orders directly in the system. The system also integrates with email so that Cannæstate can send unique email codes to buyers who will use them to purchase products, thus allowing Cannæstate to track individual buying history automatically. Website Strategy A professional website will be created for each unique branded product utilizing search engine optimizations (SEO), pay per click ads and display advertising. Cannæstate’s brand websites will be easy to navigate, have a professional theme, with instructions for wholesale buyers.
Enterprise Sales Cannæstate will initially begin distributing within the management team’s already established network of over 300 dispensaries where the owner’s Ganja Gold product has already sold successfully. Over the past four years, the ownership team has built one of the most sophisticated dispensary networks in California all driven by the success of Ganja Gold. With Cannæstate, the ownership team as well as their promotion arm, Elevated Agency, will drive and promote each new brand through the existing dispensary network enabling each brand’s products to sell quickly once they hit the market.
Cannæstate Holdings Corp.
20
Financial Forecasts Startup Summary
Below is a detailed breakdown of startup expenses and asset allocation, including the cash needs for the first year that equate to the cash on hand remaining from financing.
Cannæstate Holdings Corp.
21
Financial Highlights
TABLE 1: FIVE YEAR FINANCIAL OVERVIEW
Projected Operating Highlights By Year ($000) 80000
Projected Revenues By Year ($000) 80000
Revenue
70000 60000
70000 60000
50000
Gross Margin
40000
50000 40000
30000
EBITDA
20000 10000
30000 20000 10000
Net Profit
0
0
Year 1 Year 2 Year 3 Year 4 Year 5
Year 1
Year 2
Year 3
Year 4
Year 5
Projected Net Income By Year ($000)
Projected Cash Flow By Year ($000) 60000
180000 160000 140000 120000 100000 80000 60000 40000 20000 0
50000 Net Cash Flow
40000 30000 20000
Cash Balance
10000 Year Year Year Year Year 1 2 3 4 5
Cannæstate Holdings Corp.
0 Year 1
Year 2
Year 3
Year 4
Year 5
22
Financial Indicators
TABLE 2: THREE YEAR FINANCIAL RATIOS
Financial Indicators 120% Gross Margin
100% 80%
Net Profit Margin
60% EBITDA to Revenue
40% 20%
Return on Assets
0% Year 1
Cannæstate Holdings Corp.
Year 2
Year 3
23
Break-Even Analysis
TABLE 3: YEAR ONE BREAK-EVEN ANALYSIS
Breakeven Analysis $30,000,000
COST-VOLUME-PROFIT
$25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000
20000
18750
17500
16250
15000
13750
12500
11250
10000
8750
7500
6250
5000
3750
2500
1250
0
$0
NET UNITS
Cannæstate Holdings Corp.
24
Projected Profit and Loss
TABLE 4: FIVE YEAR PROFIT & LOSS PROJECTIONS
Revenue By Year ('000s) 80000 70000 60000 50000 40000 30000 20000 10000 0 Year 1
Cannæstate Holdings Corp.
Year 2
Year 3
Year 4
Year 5
25
Year 1 Revenue Monthly 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000
Month 12
Month 11
Month 10
Month 9
Month 8
Month 7
Month 6
Month 5
Month 4
Month 3
Month 2
Month 1
-
Projected Cash Flow
TABLE 5: FIVE YEAR CASH FLOW PROJECTION
Cannæstate Holdings Corp.
26
Year 1 Cash 25,000,000
20,000,000
15,000,000
Net Cash Flows
10,000,000
Cash Balance
5,000,000
Month 12
Month 11
Month 10
Month 9
Month 8
Month 7
Month 6
Month 5
Month 4
Month 3
Month 2
(5,000,000)
Month 1
-
Projected Balance Sheet
TABLE 6: FIVE YEAR BALANCE SHEET PROJECTIONS
Cannæstate Holdings Corp.
27
Sensitivity Analysis
TABLE 7: FIVE YEAR SENSITIVITY (SCENARIO) ANALYSIS
Revenue $100,000,000 $90,000,000 $80,000,000 $70,000,000 Best Case
$60,000,000 $50,000,000
Most Likely
$40,000,000
Worst Case
$30,000,000 $20,000,000 $10,000,000 $Year 1
Cannæstate Holdings Corp.
Year 2
Year 3
Year 4
Year 5
28
Appendix
TABLE 8: 12 MONTH PROFIT & LOSS PROJECTIONS
Cannæstate Holdings Corp.
29
TABLE 9: 12 MONTH CASH FLOW PROJECTIONS
Cannæstate Holdings Corp.
30
LLCs – Articles of Organization
Cannæstate Holdings Corp.
31
Cannæstate Holdings Corp.
32
Cannæstate Holdings Corp.
33
Cannæstate Holdings Corp.
34
Cannæstate Holdings Corp.
35
Cannæstate Holdings Corp.
36
Cannæstate Holdings Corp.
37
Cannæstate Holdings Corp.
38
Cannæstate Holdings Corp.
39
Product Portfolio – Current Products
Cannæstate Holdings Corp.
40
Product Portfolio – Financial Performance
Product Portfolio – Future Expansion
Cannæstate Holdings Corp.
41
Cannæstate Holdings Corp.
42
Business Plan
CONFIDENTIAL March 25, 2018 Cannæstate Holdings Corp.
1
Confidentiality Agreement
The undersigned reader of Cannæstate Holdings Corp.’s Business Plan (“Cannæstate” or the “Company”) hereby acknowledges that the information provided is completely confidential and therefore the reader agrees not to disclose anything found in the business plan without the express written consent of Cannæstate. It is also acknowledged by the reader that the information to be furnished in this business plan is in all aspects confidential in nature, other than information that is in the public domain through other means and that any disclosure or use of the same by the reader may cause serious harm and or damage to Cannæstate. Upon request this business plan document will be immediately returned to Cannæstate. This is a business plan. It does not imply an offer of any securities.
Applicable Law This contract shall be governed by the laws in the State of California.
__________________________________________________ Signature
__________________________________________________ Printed Name
Cannæstate Holdings Corp.
2
Overview With the age of Proposition 64, California is poised to become the world’s largest marijuana market with more than $1.5 billion in additional revenue coming into the state during 2018. With a projected CAGR of more than 20% through 2020, the marijuana industry in California is one of the hottest markets in the United States and Cannæstate is poised to become one of the nation’s largest players. Through a unique ownership structure whereby Cannæstate will be the primary shareholder in three LLCs, the Company will create a vertically integrated cannabis production and distribution company with economies of scale, and profit margins, that are unachievable in the current market environment. Therefore, not only will Cannæstate bring to market some of the best branded products in the industry, they will do so more efficiently and at a lower cost than any potential competitor.
Cannæstate Holdings Corp.
3
Table of Contents Confidentiality Agreement.................................................................................................................... 2
Executive Summary ............................................................................................................... 5 Product Summary................................................................................................................................. 5 Market Summary ................................................................................................................................. 5 Three Year Objectives........................................................................................................................... 6 Keys to Success .................................................................................................................................... 6 Financing Summary .............................................................................................................................. 7
Vertically Integrated Cannabis Operations ............................................................................. 8 Product Description.............................................................................................................................. 8 Organization Structure ......................................................................................................................... 8
Industry Overview ............................................................................................................... 10 Macroeconomic Trends ...................................................................................................................... 11 General Population Acceptance and Market Growth ........................................................................... 11 California Market Growth ................................................................................................................... 14
Strategy & Implementation Summary .................................................................................. 15 Management Team ............................................................................................................................ 17 Personnel Strategy ............................................................................................................................. 18 SWOT Analysis ................................................................................................................................... 19
Marketing Plan .................................................................................................................... 20 Promotion Strategy ............................................................................................................................ 20
Financial Forecasts .............................................................................................................. 21 Startup Summary ............................................................................................................................... 21 Financial Highlights ............................................................................................................................ 22 Financial Indicators ............................................................................................................................ 23 Break-Even Analysis ........................................................................................................................... 24 Projected Profit and Loss .................................................................................................................... 25 Projected Cash Flow ........................................................................................................................... 26 Projected Balance Sheet ..................................................................................................................... 27 Sensitivity Analysis ............................................................................................................................. 28
Appendix............................................................................................................................. 29 LLCs – Articles of Organization ............................................................................................................ 31 Product Portfolio – Current Products .................................................................................................. 40 Product Portfolio – Financial Performance .......................................................................................... 41 Product Portfolio – Future Expansion .................................................................................................. 41
Cannæstate Holdings Corp.
4
Executive Summary The following business plan outlines the proposal, development plan, and most likely financial projections based upon the establishment of Cannæstate’s collection of highly optimized LLCs that when combined give the Company a vertically integrated production process from cloning all the way through to distribution. Cannæstate is the primary investor in each LLC and will provide operating and management consulting services to the LLCs in order to maximize the yield and ensure a consistent level of operating excellence. Across all the facilities, Cannæstate will have state of the art facilities for cannabis cultivation, production, and distribution. The two proposed facilities, which consists of a 20,000 sq. ft. facility for the main product production and an 8,200 sq. ft. boutique facility, will a conservative annual yield of 30,000 lbs. with products, including flowers and extracts, sold through multiple channels including wholesale, private label, and branded products for up to $1,200 per pound. Cannæstate’s facility is state-of-the-art and is able to produce a highly optimized yield at a fraction of industry energy costs, accomplished through the use of LED lighting allowing them to generate up to 2.25 grams of product per watt vs. the industry average of 1.5 grams per watt. The potential also exists for Cannæstate to expand production facilities, grow additional branded products, as well as expand into adjacent service verticals, however the plan focuses on the most conservative scenario of a conservative fixed yield.
Product Summary Cannæstate, through the collection of the Company’s LLC ownership, will achieve full vertical integration through all stages of the cannabis production cycle, from cloning through to distribution. Across the Company’s two facilities, totaling more than 28,000 sq. ft., Cannæstate will be producing up to 30,000 lbs. of product annually. Cannæstate will be growing products that will be packaged as flower, sold as pre-rolls, or used for extracts based on the end-product’s quality and consumer demand. This type of flexibility is one of the key differentiators for Cannæstate versus the competitors. By consolidating the supply chain and providing a single point of management oversight, Cannæstate will be able to produce all their branded products in-house while also building a sophisticated set of processes allowing the Company to also be a highly successful 3rd party contract manufacturer for entrepreneurs and other companies in the cannabis industry looking for a stronger go-to-market strategy or lower costs. In addition to state-of-the-art facilities, Cannæstate’s management team also will allow their sister company, Elevated Agency, to run Cannæstate’s brand development process. Elevated Agency will work with new brands from concept and licensing all the way to distribution. This additional service is another reason that Cannæstate will become the premier launching pad for new brands in the cannabis industry.
Market Summary The recent ing of Proposition 64 in November 2016 has made California one of the most recent states to legalize recreational marijuana for adult use with marijuana shops opening their doors on January 1, 2018. As more and more states begin to legal both medical and recreational marijuana use, the industry is growing at a rapid pace. Marijuana sales in North America reached $6.73 billion in 2016—reflecting Cannæstate Holdings Corp.
5
34% growth over 2015 ($5.04 billion), according to Arcview Market Research/BDS Analytics. The research firm projects sales to jump to $21.6 billion by 2021, representing a 26% CAGR. While Canada is included in Arcview’s market view for the first time, the United States represented 87% of legal spending in 2016. California ed for 27% of the 2016 legal market in North America, Colorado represented 20% and Washington represented 11%. As the general public’s sentiment toward the legalization of marijuana continues to become more favorable, more than 64% of people marijuana legalization with 8 states already allowing adultuse, the industry is experiencing significant tailwinds that Cannæstate will be able to capture is it looks to vertically integrate through the full production process to maximize economics of scale.
Three Year Objectives Cannæstate has the following objectives: • • • • • •
Raise $10,000,000 from investors by issuing shares of the Cannæstate Corporation Setup the growing facility with the complete built-out and yield maximizing set-up in place. Modify the facility and procure all necessary assets for the new production cycle. Implement security protocols for production, packaging, and delivery. Drive sales across multiple channels (wholesale, branded, private label, etc.) in order to diversify revenue streams, thereby limiting concentration risk. Explore growth outside California to begin a national expansion strategy, in locations they or partners have state licenses, in order to develop naturally recognized brands and products.
Keys to Success Cannæstate recognizes the following as keys to success for its operation: • • • • •
Ensure that the modified building is EPA compliant and equipped with all state-of-the-art technology offerings available. Establish strict procedures for quality control, environmental policies, and workplace ethics. Only hire and train experienced workers that have been pre-vetted and licensed. Follow the best cultivation processes to ensure consistent quality. Manage costs and production schedules to ensure that the facility is operating optimally and maximizing production yield.
Cannæstate Holdings Corp.
6
Financing Summary
Below is a detailed breakdown of startup expenses and asset allocation, including the cash needs for the first year that equate to the cash on hand remaining from financing.
Cannæstate Holdings Corp.
7
Vertically Integrated Cannabis Operations Product Description Strains will be selected based on those with the highest return on investment based on the various market prices and potential yields. While strains are subject to change based on market prices and yield performance, some strains may be utilized consistently throughout the Company’s growing cycle in order to develop a brand reputation for offering a high-quality product. Cannæstate also has the tools and technology to create their own genetically unique cannabis, providing the Company an additional barrier from new competition. At this time, Cannæstate is currently working on developing multiple strains of product that will each have their own benefits, growing habits, and effects. While specific details on each strain are not available, Cannæstate has decided to group all growing initiatives into the following three buckets: •
Strains that are popular in the market These are the main strains that the business will generate income from initially. Cannæstate will dedicate the majority of its resources to growing and cultivating these strains, ones that are already proven successful in the market, in order to generate cashflow to funnel into oils and other experimental strains unique to Cannæstate.
•
Strains specifically grown to press These strains are developed exclusively for press, including oils, that will supplement the sale of Cannæstate’s main strains that are used for flower sales.
•
Strains that are genetically unique to Cannæstate These strains are experimental and while they will not initially have a meaningful footprint in the production facility, Cannæstate is determined to find unique products to bring to market that will separate the Company from its competitors.
Organization Structure Based on current legislature and licensing requirements, Cannæstate has developed an innovative way of achieving vertical integration in the cannabis industry at a time when competitors are still only owning one part of the supply chain. Through Cannæstate’s role as the primary shareholder in through separate LLCs that the Company has invested in, Cannæstate has replicated the full cannabis supply chain in order Cannæstate Holdings Corp.
8
to achieve economies of scale. Additionally, Cannæstate will be sharing their consulting, management, and operational expertise across all three LLCs thereby ensuring a uniform set of policies and procedures that will maximize the shared facilities’ yield without sacrificing any savings realized with shared services. With their state-of-the-art facility, Cannæstate is able to attract the most experienced growers in California, particularly those with a background in larger-scale commercial cultivation, in order to maximize yield while minimizing waste and retaining the talent. The three LLCs that Cannæstate will be the primary shareholder of are detailed below: Fossil Fuel, LLC. o o o o
Located at 8178 Belvedere Ave Suite E, Sacramento, CA 95826 Serves as the main processing and manufacturing unit with 2,000 sq. ft. of space All extraction and distribution will be managed out of this LLC Holds three key machinery assets including a Pope distillation machine, a rosin press, and an industry-leading extraction machine
FuTech, LLC. o o o
Located at 8661 Morrison Creek Dr, Sacramento, CA 95828 Serves as the main cultivation facility with more than 20,000 sq. ft. for growing All the main commercial strains will be grown at this facility
HiTech, LLC. o o o o
Located at 8178 Belvedere Ave Suite A and B, Sacramento, CA 95826 Serves as the secondary cultivation facility with 8,200 sq. ft. for growing All the boutique commercial strains will be grown at this facility Half the facility will be dedicated to the already successful Ganja Gold Blue Tarantula line of products
Cannæstate Holdings Corp.
9
Industry Overview For decades, all Cannabis transactions in the United States were conducted under implicit or explicit prohibition. States have increasingly moved to legalize nonprofit Cannabis growing for medical purposes, however, as well as implement regulations for organizations that produce and distribute Cannabis. The growing acceptance of medical Cannabis is providing operators and investors with unprecedented opportunities, while leading to growth in states with legal adult use recreational laws. California is one of the states that is poised to generate significant benefits from legalizing adult-use marijuana as the estimates market size for marijuana in California is $8.5 billion and this will bring in more than $4.3 billion in revenue to the state, of which $1.6 billion is derived from adult use. The rise in popularity of the consumer cannabis industry appears to be closely aligned with the rise in craft breweries and the craft beer industry. As the cannabis industry expands, consumer purchase habits are anticipated to be driven by taste, product quality, and overall experience. This consumer purchasing power will drive companies, in order to be successful, to create brands across multiple consumer demographics and taste profiles. Additionally, similar to craft breweries, the cannabis industry is ripe for consolidation and acquisitions, as evident when Corona acquired a $191 state in the world’s largest legal marijuana producer and Aphria bought Indoor Cannabis Grower for $230 million. As the industry grows, brands will carve out niches within the market and large organizations will grow through acquisitions in order to achieve economies of scale, similar to large beverage companies and craft breweries. North American consumers spent $6.7 billion on legal cannabis products in 2016, up 34% from $5.0 billion in 2015. The growth continues a robust pattern that Arcview estimates will lead to a $22.6-bilion market in 2021 at a 27% compound annual growth rate. While Canada is included in Arcview’s market view for the first time, the United States represented 87% of legal spending in 2016. California ed for 27% of the 2016 legal market in North America, Colorado represented 20% and Washington represented 11%.
Cannæstate Holdings Corp.
10
Macroeconomic Trends The U.S. commerce industry in 2017 is best characterized by a continual shift away from traditional experiences with more consumers opting to purchase new and previously unattainable items (hence the rise in marijuana tourism). As the consumer trends continue to shift, the overall industry demand is still largely impacted by macroeconomic factors such as disposable income and unemployment rates. From an economic standpoint, the United States market continues to add jobs, see strong disposable income and low unemployment rates, all of which ultimately adds to the increased consumer demand and spending power to use on legal or medicinal marijuana. The high-quality marijuana market, including medicinal, is dependent on the rise in disposable income within the United States. As per capita disposable income has risen since the recession, consumers have felt the freedom to make more deliberate and oftentimes extravagant purchases. Additionally, as national unemployment rates have fallen since the recession, consumers, particularly millennials, are less focused on saving money and more concerned with buying goods, food, and experiences that are authentic, unique, and potentially as an alternative to costly medical problems.
General Population Acceptance and Market Growth As the states continue to adopt a more progressive stance on marijuana use, the public’s sentiment has risen in lockstep with 64% of people favoring the legalization of recreational and medicinal use. As the public’s favorability toward marijuana usage has risen since 1996, Arcview projects more than 30 states plus Canada will have active legal markets by 2021 with further upside as they are not projecting Florida or New York, two of the largest markets, to be fully legalized by 2021. Furthermore, Arcview believes that
Cannæstate Holdings Corp.
11
by 2026, the US federal prohibition will be repealed which will fuel explosive growth an industry that is already experiencing 20+% CAGRs.
Cannæstate Holdings Corp.
12
Cannæstate Holdings Corp.
13
California Market Growth The recent enactment of Proposition 64 coupled with the new presidency which has expressed a national policy against legalization with avoidance of state level control likely means that the market in California will reflect that of Colorado. California, as a separate entity, is the 6th largest economy in the world with a $2.6 trillion GDP. Given the size of the potential target demographic, California’s marijuana market is already projected to be worth $8.5 billion, of which $5.7 billion will be for adult use. As detailed in the chart below, the potential revenue income generated by the state of California from the age of marijuana laws is currently $2.8 billion for 2017 and will grow to $6.5 billion by 2020. This growth is due to the significant rise of the adult use business. This business was non-existent in 2017 and is projected to grow to a $3.9 billion by 2020, representing a 23% CAGR.
Cannæstate Holdings Corp.
14
Strategy & Implementation Summary Product Lifecycle Given Cannæstate’s vertically integrated entities, who all share a consulting and management group, the Company is confident that they will be able to not only maximize their product yield while minimizing waste but also develop a superior group of branded products that do not exist in the market today. Cannæstate will be developing branded products, including captive brands and as brands where Cannæstate is the contract manufacturer, that they will then package and market to the Company’s vast network of potential buyers in order to maximize product velocity and allow for Cannæstate to drive increased yield efficiencies by turning each branded product quicker through the production process. By owning all stages of the production cycle, Cannæstate will be able to achieve economies of scale and drive up profit margins for the Company.
Facility Enhancements In order to achieve the level of yield that Cannæstate is targeting, they have developed a truly state-ofthe-art growing and production facility that not only is able to generate more than 30,000 lbs. of product per year but can do so by leveraging the following resources: •
Full LED lighting system, utilizing SPYDRx lights, that is able to reduce the electricity cost per pound from $600 for traditional lighting to only $200 per pound
•
Full LED lighting also reduces air conditioning costs given the low heat emissions of LED lights
•
Sacramento Canna will also achieve increased efficiencies by exclusively using veteran growers who have more than 10 years of experience in the industry. Experienced growers are able to maximize yield without using unnecessary and wasteful resources like electricity and water, unless required for growth
•
With the full LED lighting system and the experienced growers, Sacramento Canna beats the competition by generating between 1.55 to 2.25 grams per watt compared to the industry average of 1.5 grams per watt
Cannæstate Holdings Corp.
15
In addition to the cost savings and minimal waste generated by Cannæstate’s facility, the Company has also developed a thorough set of standard operating procedures by which the entire facility will be run. With these procedures in place, Cannæstate will have a set process in place for each stage of development as well as how each employee is involved in the supply chain, thereby minimizing error. From the cloning to processing, Cannæstate has automated as much of the steps as possible and has ensured that all procedures are well documents.
Cannæstate Holdings Corp.
16
Management Team Manish Patel Title Mr. Patel, serving as the Title, has been heavily involved in the cannabis industry for over a decade and have gained a wealth of knowledge in the space, which he has continually leveraged to help build several successful cannabis companies. Since being introduced to the cannabis industry in 2004, Mr. Patel has advocated for the removal of the stigmas surrounding cannabis and has been at the forefront of this rapidly growing industry. Manish’s main focus over the last few years has been to combine his professional capabilities with his ion for the cannabis industry, while tapping into his deep network in order to create a national cannabis enterprise. Having grown up in New Jersey, Mr. Patel completed a double major in mathematics and economics at Rutgers University before receiving a Juris Doctorate from New York Law School and a Master in Business istration from Baruch College’s Zicklin School of Business. While in Law School, he co-founded Millennium Asset Management, Inc., for which he is presently the CFO. After ing the bar in NY and NJ, he co-founded Sentient Law Group, P.C., a boutique Manhattan law firm specializing in business planning, corporations, and finance.
Bryan Kern Title Mr. Kern has been involved in the cannabis industry his entire adult life and is a second-generation cultivator. Mr. Kern started his first indoor grow in 2009 and has since moved on to large scale medical cannabis grows in California. He has devoted the last four years to perfecting his craft by founding and operating several medical cannabis gardens ranging from half an acre to over three acres in size. Mr. Kern’s experience cultivating cannabis for the past eight years coupled with the experience received from his father and many other growers around him has allowed Mr. Kern to develop into a master grower. Mr. Kern truly has a ion for growing cannabis and wants to continue the mastery of his craft for the rest of his life. Mr. Kern was born and raised in Long Island, New York. He attended colleges at Suffolk Community and Nassau Community, where he played football and finished a 2-year associates degree in liberal arts. He attended Stony Brook University for one semester before leaving in 2013 to start and manage a landscaping business full-time.
Cannæstate Holdings Corp.
17
Personnel Strategy Cannæstate will have personnel in each department that is to be hired on a contract basis with a background aligned with the specific process to be followed. The team will consist of horticulturists, finished plant producers, trimmers, managers, and a security/ personnel. Additional floor level management may also be hired such that they may oversee the efficiency and productivity of the production floor. Staff will initially be hired on a part time basis, with the potential for full-time as the operation scales.
Horticulturists: The horticulturists are responsible for caring for the plant and ensuring that all processes and machinery is functioning properly. The role is also responsible for applying predetermined amounts of nutrients, water, and the management of plant growing cycles in compliance with the Company’s cultivation process. Since contrasting strains grow differently, it will take an experienced professional to understand the unique treatment of each strain. Given the intricacies of the position, Cannæstate is only using 3rd and 4th generation growers who have experience growing in a variety of situations and with multiple strains while maintaining a highquality product.
Processor: The processing team will have a background in quality control inspection so that they are familiar with a high-performance role that also trains them to inspect defective products. Seeds or loose stems and leaves that enter the processing area will be removed and additional screening will take place to reduce the amount from entering the processing area.
Security: The facilities will be constantly monitored by an experienced security services firm during non-working hours. This will ensure that the facility is constantly maintained and Cannæstate will be sufficiently protected once plants are onsite.
Cannæstate Holdings Corp.
18
SWOT Analysis Strengths • • • • • •
The management team has extensive experience in the cannabis industry with experience ranging from production to product creation to sales and marketing to distribution. The Company has a development plan to ensure the consistency and quality of the products. The management team has a deep network of wholesale relationships in the space that will ensure constant product velocity. Sustainable building practices will be implemented to conserve energy and water consumption. The building site is designed to produce a maximum yield per square foot. Despite market saturation, Cannæstate can achieve the lowest cost to produce in the state
Weaknesses • • •
The long-term product demand is unknown, so it is feasible the market will be oversaturated. Market saturation may lead to depressed wholesale prices. Building the facility may increase the initial investment needed to expand operations.
Opportunities • • • • •
As market awareness grows, the demand for Cannabis will increase. It is unlikely Cannabis will be nationally legal in the next three years, offering Cannabis tourism. Medical Cannabis is increasingly being socially acceptable within the state. California is the first state for Cannæstate where they can refine operations enabling them to maximize efficiency as they explore national expansion. The market for medical Cannabis continues to grow and is unlikely to slow down.
Threats • • • •
The medication is still federally illegal, which makes the future market potential unclear. There is the risk of market adoption rates, which may only be projected at this point. It is possible that some potential patients have already left to medicalized states. Many competitors will enter the market to aggressively compete for price and quality.
Cannæstate Holdings Corp.
19
.
Marketing Plan The marketing plan is focused around educating the market, creating customer loyalty through high quality products and outstanding customer service, and community engagement. The individual brands will also be positioned in the market as premier products while Cannæstate will offer a full suite of proprietary branded, private label, and wholesale products. The Company already has relationships in place with distributors, currently partnered with companies like Leafly.com, to sell the product to maximize yield but will be using various promotional strategies to further brand reach and increase customer engagement.
Promotion Strategy Customer Relationship Management (CRM) Once a dispensary and/or wholesale buyer is ed with Cannæstate, the staff will utilize their bestin-class 3rd party CRM platform, Brandboom, that will function as a virtual showroom where buyers can see the product, pricing, and place orders directly in the system. The system also integrates with email so that Cannæstate can send unique email codes to buyers who will use them to purchase products, thus allowing Cannæstate to track individual buying history automatically. Website Strategy A professional website will be created for each unique branded product utilizing search engine optimizations (SEO), pay per click ads and display advertising. Cannæstate’s brand websites will be easy to navigate, have a professional theme, with instructions for wholesale buyers.
Enterprise Sales Cannæstate will initially begin distributing within the management team’s already established network of over 300 dispensaries where the owner’s Ganja Gold product has already sold successfully. Over the past four years, the ownership team has built one of the most sophisticated dispensary networks in California all driven by the success of Ganja Gold. With Cannæstate, the ownership team as well as their promotion arm, Elevated Agency, will drive and promote each new brand through the existing dispensary network enabling each brand’s products to sell quickly once they hit the market.
Cannæstate Holdings Corp.
20
Financial Forecasts Startup Summary
Below is a detailed breakdown of startup expenses and asset allocation, including the cash needs for the first year that equate to the cash on hand remaining from financing.
Cannæstate Holdings Corp.
21
Financial Highlights
TABLE 1: FIVE YEAR FINANCIAL OVERVIEW
Projected Operating Highlights By Year ($000) 80000
Projected Revenues By Year ($000) 80000
Revenue
70000 60000
70000 60000
50000
Gross Margin
40000
50000 40000
30000
EBITDA
20000 10000
30000 20000 10000
Net Profit
0
0
Year 1 Year 2 Year 3 Year 4 Year 5
Year 1
Year 2
Year 3
Year 4
Year 5
Projected Net Income By Year ($000)
Projected Cash Flow By Year ($000) 60000
180000 160000 140000 120000 100000 80000 60000 40000 20000 0
50000 Net Cash Flow
40000 30000 20000
Cash Balance
10000 Year Year Year Year Year 1 2 3 4 5
Cannæstate Holdings Corp.
0 Year 1
Year 2
Year 3
Year 4
Year 5
22
Financial Indicators
TABLE 2: THREE YEAR FINANCIAL RATIOS
Financial Indicators 120% Gross Margin
100% 80%
Net Profit Margin
60% EBITDA to Revenue
40% 20%
Return on Assets
0% Year 1
Cannæstate Holdings Corp.
Year 2
Year 3
23
Break-Even Analysis
TABLE 3: YEAR ONE BREAK-EVEN ANALYSIS
Breakeven Analysis $30,000,000
COST-VOLUME-PROFIT
$25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000
20000
18750
17500
16250
15000
13750
12500
11250
10000
8750
7500
6250
5000
3750
2500
1250
0
$0
NET UNITS
Cannæstate Holdings Corp.
24
Projected Profit and Loss
TABLE 4: FIVE YEAR PROFIT & LOSS PROJECTIONS
Revenue By Year ('000s) 80000 70000 60000 50000 40000 30000 20000 10000 0 Year 1
Cannæstate Holdings Corp.
Year 2
Year 3
Year 4
Year 5
25
Year 1 Revenue Monthly 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000
Month 12
Month 11
Month 10
Month 9
Month 8
Month 7
Month 6
Month 5
Month 4
Month 3
Month 2
Month 1
-
Projected Cash Flow
TABLE 5: FIVE YEAR CASH FLOW PROJECTION
Cannæstate Holdings Corp.
26
Year 1 Cash 25,000,000
20,000,000
15,000,000
Net Cash Flows
10,000,000
Cash Balance
5,000,000
Month 12
Month 11
Month 10
Month 9
Month 8
Month 7
Month 6
Month 5
Month 4
Month 3
Month 2
(5,000,000)
Month 1
-
Projected Balance Sheet
TABLE 6: FIVE YEAR BALANCE SHEET PROJECTIONS
Cannæstate Holdings Corp.
27
Sensitivity Analysis
TABLE 7: FIVE YEAR SENSITIVITY (SCENARIO) ANALYSIS
Revenue $100,000,000 $90,000,000 $80,000,000 $70,000,000 Best Case
$60,000,000 $50,000,000
Most Likely
$40,000,000
Worst Case
$30,000,000 $20,000,000 $10,000,000 $Year 1
Cannæstate Holdings Corp.
Year 2
Year 3
Year 4
Year 5
28
Appendix
TABLE 8: 12 MONTH PROFIT & LOSS PROJECTIONS
Cannæstate Holdings Corp.
29
TABLE 9: 12 MONTH CASH FLOW PROJECTIONS
Cannæstate Holdings Corp.
30
LLCs – Articles of Organization
Cannæstate Holdings Corp.
31
Cannæstate Holdings Corp.
32
Cannæstate Holdings Corp.
33
Cannæstate Holdings Corp.
34
Cannæstate Holdings Corp.
35
Cannæstate Holdings Corp.
36
Cannæstate Holdings Corp.
37
Cannæstate Holdings Corp.
38
Cannæstate Holdings Corp.
39
Product Portfolio – Current Products
Cannæstate Holdings Corp.
40
Product Portfolio – Financial Performance
Product Portfolio – Future Expansion
Cannæstate Holdings Corp.
41
Cannæstate Holdings Corp.
42
Related Documents 171j1w
Edward Grayver - Money Matters - Cannabis Plan.pdf 2452a
December 2019 60
Review Chapter Three Dave Ramsey Money Matters 246n3i
December 2019 34
Cannabis Ebook 59a3w
December 2020 0
Money Money Money 58133g
February 2021 0
Cannabis Indica 2y3s33
March 2021 0
Cannabis Alchemy.pdf 4x3740
January 2022 0More Documents from "Pro Business Plans" 6ti4r
Edward Grayver - Money Matters - Cannabis Plan.pdf 2452a
December 2019 60
1. Sofi(site).pdf p3g49
November 2022 0
Direct Shear Test.docx 4n703t
October 2019 112
2c82t
February 2022 0
Gsm-19t Magnetometer Manual 1j604o
January 2022 0