The Hempire LLC
Welcome to the Hempire!
2020 Business Plan 11/17/2019
Contact Information
Eva Bell [email protected] 801-404-6851 76 E Frontier CT Saratoga Springs, UT 84045
Trevor Thomas [email protected] 208-749-1274
Table of Contents Executive Summary 3
Opportunity 3 Expectations 3
Forecast 3 Financing Needed 3
Opportunity 4 What We Offer to the Hemp Industry 4 Our Primary Customer and Partner 4
Execution 5 Operations 5
Locations & Facilities 5 Equipment & Tools 5
Milestones & Metrics 5 Milestones 5 Key Metrics 6
Company 7 Overview 7 Team 7
Management Team 7 Advisors 7
Financial Plan 7 Forecast 7
Key Assumptions 7 Net Profit (or Loss) by Year 8
Financing 10 Use of Funds 10 Sources of Funds 10
Statements 11 Projected Profit & Loss 11 2019 11
Executive Summary
Opportunity
The Hempire wants to make the most of its newly acquired experience in hemp farming to provide high CBD hemp for our partner, Kana Rules. We have an agreement with Kana Rules to utilize their growing system, seeds and nutrients, in return they will purchase all of the hemp produced on our farm at market value. Fifty percent of the initial seed purchase cost will be financed by Kana Rules to help reduce our initial expenses. We will work closely with Kana Rules to take advantage of their success in this field and continue to build on our own success growing hemp in the 2019 season.
Expectations
Forecast
Our goal is to plant 60 acres of hemp this year. We are expecting a minimum profit of 106% on our investment. This number is based on the guaranteed minimum of $30,000 per acre that Kana Rules has agreed to in our contract. Our numbers also show that if we hit our stretch target of 2 lbs per plant, we project a profit which may be as high as 400%, depending on the market price at harvest time. The numbers we are using for our forecast includes a plant yield of .75 lb per plant, although Kana Rules has been able to produce plants that yield 2 - 4 lbs per plant. We feel it is best to forecast conservatively. Please note that these forecast numbers are not a guarantee to investors. We cannot predict unforeseen issues that may impact the final outcome. We have attempted to mitigate all known risks.
Financing Needed
(This section updated on 3/19/2020 according to current financing needs) Our earlier estimate showed that we would need to raise a total of $566,200 to get us to harvest time. That number has changed to $428,000 as Kana Rules has secured harvesting equipment that we will be able to lease from them. We have also cut some of our costs by employing a plastic mulch system which will lower our labor cost associated with weed removal. We plan to obtain this money through an operating loan and investments. The current funds committed to this project is $245,000. We still need $183,000 to cover our pre-harvest costs. We are asking for a total additional investment of $200,000. We are asking for a minimum investment of $10,000 per investor. We are currently offering a 15% profit on investments to be paid before the end of the year. This amount would be in addition to any agreed upon broker fees.
Unforeseen Loss
In the unforeseen event that The Hempire produces a negative profit this year, the management of the loss will happen by assessing an equal amount of the loss to the original investment and to
an extension of the operating loan. For example: Let’s say that we have operating costs of $855,000 and sales of only $755,000. This would create a shortage of $100,000. Half of that, $50,000, would be covered by investor funds, which would show as a loss of 30% of investor funds. An investment of $10,000 would return $7,000 total. Given this, a shortage of $332,000 would result in a total loss for investors. Although we feel it is necessary to identify how an unforeseen loss would be addressed, we are taking measures to address all known risks. We are currently unaware of any reasonable risk that would result in a loss by investors. Please contact us to discuss any concerns that you feel we may not have addressed.
Opportunity
What We Offer to the Hemp Industry
CBD based products are a growing industry expected to grow by between 32% and 147% over the next 5 years (depending on which market research papers you look at). Although there are many new producers of hemp since the 2018 farm bill was passed, there is room in the market to to grow and sell hemp, especially if we are able to take advantage of our strengths:
● We have a contract to provide hemp to an existing sales channel. ● We have negotiated an agreement with our partner, Kana Rules, to sell our hemp at a
guaranteed price of $30,000 per acre.. ● We completed a successful year of growing hemp, and have gained critical knowledge we
need to be even more successful in the years to come. ● We are on track to be able to label our product as organic, and will continue to grow
pesticide free. ● We will gain the benefit of using certified seed. One of the primary lessons we learned
was that the plant genetics are critical to meeting the state requirements, and to grow the product that meets the market needs.
● We have industry partners that will help us continue to learn and grow the best and cleanest hemp available.
Our Primary Customer and Partner
We have signed a contract with Kana Rules that we see as highly beneficial to our success, and with an opportunity to provide them with a very high quality product. Here is what we gain through this partnership:
● They have agreed to purchase all of our hemp biomass at market price. ● They have agreed to a guaranteed minimum of $30,000 per acre based on 2800 plants per
acre and .75 lbs per plant. The estimates in this plan are based on this guaranteed minimum.
● Kana Rules has secured a credit line of $210,000,000 for the purchase of hemp from us and other contracted farmers.
● They will provide high quality certified hemp seed. The good genetics of these seeds have some important characteristics.
○ They are able to generate the cannabinoid profile that we are looking for (high CBD, low THC)
○ They grow in the time frame that works for our climate (90 days in the ground). ○ They have a high resistance to pests and diseases. ○ They produce high yielding plants when using their farming processes. Their
farms are seeing yields of 2 to 4 lbs per plant. ● They are able to provide us with high quality, low priced, organic nutrients for our plants.
We paid twice as much for similar quality nutrients last year, and were unable to feed our crop as well last year as we will be able to in 2020.
● They have equipment that we can lease at a reasonable price which will lower our costs this year. They will work with us at harvest time to ensure an efficient and effective harvest and processing of hemp into hemp crude for their purposes.
● We will consult with Kana Rule’s farming experts to help us with such things as soil preparation, plant density, watering and feeding frequency, and drying requirements. Kana Rules has produced the quality of crop that we aspire to. This partnership will enable us to bring our hemp farm to the next level.
Execution
Operations
Locations & Facilities
Our farm is located at 3535 S. 3000 W., Roosevelt, UT. It covers 600 acres, with 300 acres under irrigation. In addition to hemp farming, it has a pig farm, alfalfa and other hay crops, and fields used for cattle grazing. This year The Hempire will be using 60 acres that is irrigated with a pivot. We are also building a 2300 square foot greenhouse which will be used for sprouting hemp seed. There is plenty of room to grow in future years.
Equipment & Tools
We will be renting some of the specialty equipment needed, specifically for planting and harvest. We have arranged with a local hemp farmer to rent a 6 row planter, and we will use a harvester provided by Kana Rules. We need to purchase a cultivator and a hemp dryer this year.
Milestones & Metrics
Milestones
We have a roadmap set out for this year’s growing season. Here are the major milestones:
12/31/2019 5% deposit on hemp seed sent to Kana Rules.
1/31/2020 Renew hemp grower’s license.
2/28/2020 Target date for realization of financing.
3/31/2020 Drop dead date for realization of financing.
Upon financing availability
Purchase hemp seed.
3/31/2020 Complete greenhouse
4/1/2020 Personnel hired/ hemp sprouting begins
Soil preparation begins with taking soil samples. Based on test results, the addition of organic nutrients will help adjust for ph and other deficiencies in the soil.
5/24/2020 Final preparation of the soil for planting by disking the soil and marking the row positions relative to the pivot drop lines.
6/1/2020 Planting begins. Weed mitigation begins as soon as the planting is complete. This includes cultivation as long as the plant size allows it. Addition of organic nutrients to the irrigation water follows the schedule outlined by Kana Rules best practices. Ongoing soil testing will continue in search of possible problem areas.
7/15/2020 Switch from weed management to plant sexing. We will remove all of the male plants we find. At this point the plants should be large enough to dominate the weeds. Some continued weed removal will continue, but should be relatively clear of weeds.
7/15/2020 Begin weekly potency testing. We will monitor THC levels to ensure that we won’t exceed state standard of 0.3% THC. We plan to use a testing method that matches the state’s so that we can anticipate the likely outcome of their tests.
8/15/2020 Expected date of state pre-harvest potency test. This date may be adjusted depending on the maturity of the plants and the monitored THC levels.
9/1/2020 Harvest begins. This may be adjusted depending on the availability of water, and testing status of plants. If we might benefit from growing longer, and there is water available, we may delay the harvest. We will begin the harvest no longer than two weeks after we get a successful state test.
9/15/2020 Complete harvest and drying process. We will send dried biomass to Kana Rules as we have a truck load of product to send.
10/1/2020 Receive payment from Kana Rules. They have agreed to provide
payment 2 weeks after receiving product which gives them time to run their tests to verify the quality of the product.
Key Metrics
We will assess our success based on hitting our milestones, evaluating our soil and potency tests, and measuring plant growth. Each week we will make adjustments to our plan based on actual vs. expected results.
Company
Overview
The Hempire is organized as an LLC. Members of the LLC include Eva Bell and Trevor Thomas.
Team
Management Team
Eva Bell is the Manager of The Hempire LLC. She will provide her project management skills to keep things running smoothly. She will keep us on schedule and on budget. She will oversee the acquisition of personnel and materials, and coordinating with our partners and our customers. Also, she isn’t afraid of pulling weeds. Trevor Thomas has excellent experience in farming and farm equipment. He was a key contributor in the 2019 season’s success. He will help us manage our finances, and acquire funding for this year’s operation. Nile Thayne will oversee the daily field and labor management as well as consult with our partners for best practices. He was the leader in our farming effort in 2019, and will continue to lead us in 2020. Tracy Thayne is our Director of Marketing. He has many years experience consulting with Fortune 500 companies. His experience in marketing and business will be critical to our success.
Advisors
Taylor Thayne - Father and brother, long time farmer, and highly experienced at building stuff and just plain getting stuff done. Jim Thayne - Brother and uncle, mechanic, welder and long time farmer. Jim built a bucking machine that was critical to our harvest in the 2019 growing season. Kirk Fausett - Kirk is a long time friend and trusted associate. He brought us the opportunity to partner with Kana Rules. Thanks Kirk! Steven Whitaker - The revered leader of Kana Rules. He has a great vision of what we can accomplish together, providing high quality organic hemp products.
Financial Plan
Forecast
Key Assumptions
● Our first year of farming experience will launch us into a successful second year. We have the experience and support we need to be successful.
● Although the market prices of hemp have been volatile due to the emergence of a new federally available crop, Kana Rules has agreed to purchase our hemp at a base price that will be lucrative.
● In an attempt to stay conservative, our estimates are based on the guaranteed price that Kana Rules has offered us.
● Increased feeding of the crop, and reliance on successful hemp farming methods will provide a significant yield increase in our second year.
● We will purchase crop insurance to mitigate the risk of crop failure. We will provide further information about the forecasted results in the event of crop failure once we have the details of insurance coverage.
● Although we are using feminized seeds, a certain number of seeds will produce male plants. We will pull these to ensure a high level of oil production. We are projecting a 2% loss of plants due to removal of males, which is a very conservative estimate.
Net Profit (or Loss) by Year
Financing
2020 Profit
Use of Funds
Seed $168,000.00 Nutrients $90,000.00 Labor $60,000.00 Mulch/tape $36,000.00 Testing $4,000.00 Harvester (rental) $21,000.00 Dryer (rental) $10,000.00 Planter (rental) $2,000.00 Greenhouse $30,000.00 Cultivator $0.00 Other Tools/expenses $40,000.00 Farm Lease $25,000.00 Sprinkler Loan Payment $9,000.00 Salaries (beyond labor cost) $0.00 Crop Insurance $60,000.00 Final Seed Payment $168,000.00 Utilities $3,000.00 Total Expenses $726,000.00
Sources of Funds
We plan to gather funds for this year’s growing season through a combination of investments, a loan from the Department of Agriculture, and sales of our current stock of hemp.
Statements
Projected Profit & Loss
2019
The Hempire LLC
Profit & Loss Statement for the period 1 January 2019 to 31 December 2019
Inventory Biomass Inventory Species Total Weight Price per LB Value Berry Blossom 1156 25 $28,900 Oregon Cherry 747 25 $18,675 Total Value $47,575 Flower Inventory Species Total Weight Price per # Value Berry Blossom 700 $200.00 $140,000.00 Oregon Cherry 100 $150.00 $15,000.00 Total Value $155,000.00 Total Inventory Value $202,575
Expenses Owed to TBros Farm $20,000.00 Owed to Nile $20,000.00 Owed to Eva $4,000.00 Owed to Joe $3,580.00 Farm Lease $25,000.00 Pivot payment $9,000.00 Owed to Consultants $60,585 Accounts Payable $142,165.00 Profit $60,585.00 Total Inventory Expenses Profit/Loss
$202,575.00 $142,165.00 $60,585.00
2020
The Hempire LLC
Profit & Loss Statement for the period 1 January 2020 to 31 December 2020
Expenses Seed $168,000.00 Nutrients $90,000.00 Labor $60,000.00 Mulch/tape $36,000.00 Testing $4,000.00 Harvester (rental) $21,000.00 Dryer (rental) $10,000.00 Planter (rental) $2,000.00 Greenhouse $30,000.00 Other Tools/expenses $40,000.00 Farm Lease $25,000.00 Sprinkler Loan Payment $9,000.00 Crop Insurance $60,000.00 Final Seed Payment $168,000.00
Utilities $3,000.00 Total Expenses $726,000.00 Expected Earnings Expected Case price/lb 14.55 Guaranteed case yield l/bs/plant 0.75 Guaranteed price/lb 14.55 Plants/ 60 acres 164640 60 acres $1,796,634.00
Expected Case Earnings $1,070,634.00 Percent Profit 147.47% Total Sales $1,796,634.00 Total Expenses $726,000.00 Net Profit $1,070,634.00
