Canadian CANNAINVESTOR Magazine April / May 2018 | Page 128

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Valuation
We are revising our fair value per share estimate of Alliance . Our new revenue forecasts are given below :
2018E
2019E
2020E
2021E
2022E
2023E
2024E
2025E
2026E
Cannabis Plantlets
1,750,000
3,500,000
3,500,000
7,000,000
7,000,000
7,000,000
7,000,000
7,000,000
Plantlets Sold
-
1,487,500
2,975,000
2,975,000
5,950,000
5,950,000
5,950,000
5,950,000
5,950,000
Price per Plantlet
$
5.00
$
5.00
$
5.00
$
5.00
$
5.00
$
5.00
$
5.00
$
5.00
$
5.00
Cannabis Plantlet Revenue
$
-
$
7,437,500
$
14,875,000
$
14,875,000
$
29,750,000
$
29,750,000
$
29,750,000
$
29,750,000
$
29,750,000
Cost per Plantlet
$
1.00
$
1.00
$
1.00
$
1.00
$
1.00
$
1.00
$
1.00
$
1.00
$
1.00
Cannabis Plantlet COGS
$
-
$
1,487,500
$
2,975,000
$
2,975,000
$
5,950,000
$
5,950,000
$
5,950,000
$
5,950,000
$
5,950,000
Cannabis Dried Flower ( KG )
-
700
2,800
4,900
4,900
4,900
4,900
4,900
4,900
Dried Flower Sales
-
525
2,100
3,675
3,675
3,675
3,675
3,675
3,675
Price per KG
$
5,000
$
5,000
$
5,000
$
5,000
$
5,000
$
5,000
$
5,000
$
5,000
$
5,000
Cannabis Dried Flower Revenue
$
-
$
2,625,000
$
10,500,000
$
18,375,000
$
18,375,000
$
18,375,000
$
18,375,000
$
18,375,000
$
18,375,000
Cost per KG
$
2,500
$
2,500
$
2,500
$
2,500
$
2,500
$
2,500
$
2,500
$
2,500
$
2,500
Cannabis Dried Flower COGS
$
-
$
1,312,500
$
5,250,000
$
9,187,500
$
9,187,500
$
9,187,500
$
9,187,500
$
9,187,500
$
9,187,500
Oil Production ( L )
-
1,800
7,200
12,600
12,600
12,600
12,600
12,600
12,600
Oil Sales ( L )
-
1,350
5,400
9,450
9,450
9,450
9,450
9,450
9,450
Price per L
$
1,250
$
1,250
$
1,250
$
1,250
$
1,250
$
1,250
$
1,250
$
1,250
$
1,250
Oil Revenue
$
-
$
1,687,500
$
6,750,000
$
11,812,500
$
11,812,500
$
11,812,500
$
11,812,500
$
11,812,500
$
11,812,500
Cost per L
$
250
$
250
$
250
$
250
$
250
$
250
$
250
$
250
$
250
Oil COGS
$
-
$
337,500
$
1,350,000
$
2,362,500
$
2,362,500
$
2,362,500
$
2,362,500
$
2,362,500
$
2,362,500
Total Revenues
$
-
$
6,543,750
$
21,712,500
$
34,650,000
$
43,575,000
$
48,037,500
$
52,500,000
$
56,962,500
$
59,937,500
COGS
$
-
$
2,096,250
$
7,492,500
$
12,442,500
$
13,335,000
$
17,500,000
$
17,500,000
$
17,500,000
$
17,500,000
Source : FRC Below are the consolidated revenues presented in income statement format :
STATEMENTS OF OPERATIONS ( in C $) - YE Aug 31st
2018E
2019E
2020E
2021E
2022E
2023E
2024E
2025E
2026E
Revenue
6,543,750
21,712,500
34,650,000
43,575,000
48,037,500
52,500,000
56,962,500
59,937,500
COGS
2,096,250
7,492,500
12,442,500
13,335,000
17,500,000
17,500,000
17,500,000
17,500,000
Gross Profit
-
4,447,500
14,220,000
22,207,500
30,240,000
30,537,500
35,000,000
39,462,500
42,437,500
EXPENSES SG & A Expense
965,784
1,666,039
5,528,003
8,821,890
11,094,195
12,230,348
13,366,500
14,502,653
15,260,088
EBITDA
( 965,784 ) 2,781,461
8,691,998
13,385,610
19,145,805
18,307,153
21,633,500
24,959,848
27,177,413
Depreciation
164,000
719,950
1,210,768
1,167,226
1,186,060
1,204,173
1,221,622
1,238,464
EBIT
( 965,784 ) 2,617,461
7,972,048
12,174,843
17,978,579
17,121,092
20,429,327
23,738,226
25,938,949
Financing Costs
EBT
( 965,784 ) 2,617,461
7,972,048
12,174,843
17,978,579
17,121,092
20,429,327
23,738,226
25,938,949
Non-Recurring Expenses
-4,413
Taxes
680,540
2,072,732
3,165,459
4,674,431
4,451,484
5,311,625
6,171,939
6,744,127
Net Profit ( Loss )
( 961,371 ) 1,936,921
5,899,315
9,009,383
13,304,149
12,669,608
15,117,702
17,566,287
19,194,822
Source : FRC
Our new assumptions include the following :
� Cannabis botany centre projections as our initial draft , though we delay operational launch until the latter half of 2019 . Furthermore , we assume Alliance will increase ownership by 15 % per year , beginning 2022 . We assume that Pharmagreen will approach Alliance for future equity raises . We assume that Alliance will pay $ 1.5 million per 15 % ownership stake , similar to the valuation for the initial investment .
� We maintain cannabis plantlet pricing and costs .
� The Biocannatech facility to be operational in 2019 . We estimate that actual buildout of the facility will cost $ 3.5 million , with an additional cost of $ 10.5 million required to expand the facility .
� Production capacity initially at 1,000 kg , growing to 7,000 kg after expansion . We estimate 30 % of dried production will be used for cannabis oils production . Oil equivalency of 6L per kg of dried cannabis flower .
�2018 Fundamental Research Corp . “ 10 + Years of Bringing Undiscovered Investment Opportunities to the Forefront ” www . researchfrc . com PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT

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