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8-K - FORM 8-K - CV Sciences, Inc. | cannavest_8k.htm |
Exhibit 99.1
The following reprints in their entirety certain sections of the confidential offering memorandum which contain previously undisclosed information.
Operating Summary
A five-year operating forecast is below.
(in thousands) | 2014 (est) | 2015 | 2016 | 2017 | 2018 | 2019 | ||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Oil Sales | 8,416 | 16,869 | 29,364 | 46,983 | 70,474 | 98,664 | ||||||||||||||||||
Product Sales | 1,815 | 4,986 | 12,875 | 20,601 | 30,901 | 43,261 | ||||||||||||||||||
Total Revenues | 10,231 | 21,855 | 42,240 | 67,584 | 101,375 | 141,926 | ||||||||||||||||||
COGS | 4,297 | 9,260 | 19,405 | 35,819 | 52,715 | 72,382 | ||||||||||||||||||
Gross Margin | 5,934 | 12,595 | 22,835 | 31,764 | 48,660 | 69,544 | ||||||||||||||||||
58.0 | % | 57.6 | % | 54.1 | % | 53.0 | % | 52.0 | % | 51.0 | % | |||||||||||||
SG&A | 4,579 | 6,578 | 8,156 | 8,971 | 9,868 | 10,855 | ||||||||||||||||||
R&D | 781 | 976 | 1,059 | 1,165 | 1,281 | 1,409 | ||||||||||||||||||
EBITDA | 574 | 5,040 | 13,621 | 21,628 | 37,511 | 57,279 |
The worldwide CBD opportunity is included in the cannabis market, which is estimated to have a $50 billion market potential in the United States alone over the next 5-10 years. The worldwide market opportunity is estimated at $200 billion over the same timeframe. The immediate addressable CBD market is currently comprised of the following channels:
· | Medical Marijuana Dispensaries (approximately 2,500 locations currently in U.S.) |
· | Early adopters – e-commerce sites |
· | CannaVest e-commerce |
· | Early adopters – retail brick & mortar (Pharmaca) |
Within 1-2 years, we believe the CBD market will expand significantly with the addition of the following channels:
· | Natural products |
· | Vitamin retail |
· | Cosmetic companies |
· | Beverage companies |
· | Food, Drug & Mass |
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Cash Flow Summary
A five-year cash flow including the financing source and use of funds is below.
(in thousands) | 2015 | 2016 | 2017 | 2018 | 2019 | |||||||||||||||
Source of Funds | ||||||||||||||||||||
EBITDA | 5,040 | 13,621 | 21,628 | 37,511 | 57,279 | |||||||||||||||
Proceeds from Financing | 24,000 | – | – | – | – | |||||||||||||||
Total Source of Funds | 29,040 | 13,621 | 21,628 | 37,511 | 57,279 | |||||||||||||||
Use of Funds | ||||||||||||||||||||
Financing costs | (1,500 | ) | – | – | – | – | ||||||||||||||
Inventory purchases | (17,000 | ) | (6,000 | ) | (6,000 | ) | (6,000 | ) | (6,000 | ) | ||||||||||
Working capital change | (3,642 | ) | (3,498 | ) | (4,324 | ) | (5,732 | ) | (6,858 | ) | ||||||||||
PP&E/Other | (500 | ) | (1,000 | ) | (1,100 | ) | (1,200 | ) | (1,300 | ) | ||||||||||
Estimated Corp tax | (1,616 | ) | (5,048 | ) | (8,251 | ) | (14,604 | ) | (22,512 | ) | ||||||||||
Total Use of Funds | (24,259 | ) | (15,546 | ) | (19,675 | ) | (27,536 | ) | (36,670 | ) | ||||||||||
BB - Cash | 1,500 | 6,282 | 4,357 | 6,310 | 16,284 | |||||||||||||||
EB - Cash | 6,282 | 4,357 | 6,310 | 16,284 | 36,893 |
The primary cash flow needs are to finance inventory purchases and finance expansion of revenues through increased credit sales (working capital).
CannaVest Strategic Plan – The next 5 years
1. Increase brand awareness of Company’s proprietary consumer products and raw materials – “Mainstream CBD as a dietary and beauty product ingredient.”
2. Expand the market of innovators, formulators, product development and consumers of CBD products worldwide.
3. Invest in Company infrastructure to produce, market and distribute CBD products worldwide.
4. Expand our internally developed product offerings containing natural, hemp-based CBD.
5. Expand our worldwide network of hemp farmers.
6. Establish the infrastructure to grow hemp domestically.
7. Scale-up our manufacturing process and QA/QC systems to ensure the safety, quality and supply of CBD for the expanding worldwide customer base.
8. Continue to monitor the industry and evaluate strategic acquisitions that will provide additional capabilities to maintain our dominant position in growing, harvesting, and processing hemp-derived products.
Financial Information
The Company is seeking to raise $24 million to expand operations and finance working capital needs. The two most significant working capital areas include inventory purchases ($17M in 2015) and financing of working capital ($3.6M in 2015). Our ability to finance our working capital needs will allow the Company to maintain its dominant supply chain position in the industry and to further expand the market by increasing credit sales.
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