Hemp Inc (HEMP)

[Condor65]

Preliminary evaluation of potential revenues from the decorticator plant:

Source of data:

a)"Alberta Hemp Cost of Production and Market Assessment" (Canada, 2012)

http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/econ14086/$file/hemp_production_marketassessment_report.pdf?OpenElement

http://www.votehemp.com/PDF/hemp_production_marketassessment_report.pdf


b)Video interview between Bruce Perlowin (CEO Hemp Inc.) and David Schmitt (COO, Industrial Hemp Manifacturing, LLC)

"The daily production capacity (3 shifts of 8 hours by day) of the plant is almost 100.000 pounds per day ."


c)Q3/2014 Report:

http://www.otcmarkets.com/financialReportViewer?symbol=HEMP&id=129768

"In August 7, 2014 the Company acquired a 70,000 square-foot North Carolina factory building on 8 acres to house the decortication equipment along rolling stock and forklifts. The Company’s CEO advanced the $17,000 to open escrow on the purchase. The Company borrowed $1,600,000 to finance the purchase of the land, building, equipment and to provide working capital on a long term convertible note payable." (Note 11 of Q3 Report, pag 24)


Unfortunately we do not have the technical specifications of the equipment.

Some sources indicate the maximum production capacity of a Temafa plant up to 3 tons / hour.

I asked for clarification.

-----------------------------

"Alberta Hemp Cost of Production and Market Assessment" (2012),

"Weighted Average Value of Industrial Fibre Revenue Determination"

Table 6, Pag 24 (29 in PDF viewer)

http://www.votehemp.com/PDF/hemp_production_marketassessment_report.pdf

The revenues presented in this table are in CAD (1 $CAD = 0.89 USD).

The revenue have to be considered in total, because the plant produce the different parts simultaneously.

The table shows the fraction, the proportion and the estimated value in $ CAD.


Fraction *************** Proportion * Estimated Value/lb *$/kg

Fibre ***************** 15-20% **** 0.30 $CAD ********** 0.17

Clean shiv or core **** 40-45% **** 0.18 ************** 0.12

Mixed shiv and fibre *** 20-25% **** 0.12 ************** 0.09

Dust and fine fibres *** 15-20% **** - ************** -

Total **************** ~100% **** 0.173 $CAD ******* 0.38CAD

Total in USD ********************** 0.154 USD ******* 0.338


The plant in full production(3 shifts/24hours)works almost 350 days/year, including stop for maintenance service.

(The industrial plants never stops. If you doubt that ask to Mr. Marchionne.)


For a estimated max production of 50 Tons/day (2 Tons/hour)we can create this table:

Full Production
(350 days/year, 24 hours) = 350 * 50 Tons = 17500 Tons

Minimum production
(175 days/year, 8 hours) = 175 * 16.5 Tons = 2887 Tons

Estimated Revenues (gross):

Full production 0.338 USD *17500 = 5.915.000 USD

Minimum production 0.338 USD * 2887 = 975.806 USD

Gross Profit:

About Table 7: "Projected Hemp Processing Income and Costs for Fibre", we have to consider:

1)the plant analyzed in the canadian prospectus is totally different, really smaller than Temafa.

2)the dimensions of the plant influence not only the cost (1.6 Millions the canadian Vs 10 Millions of the Temafa as new), but also the maintenance costs.

3)transportation costs ... unknown. Depends on distances.


Anyway, the table suggest a % gross margin from 42% to 59%.

It means up to 3.5 Million USD.

The Hemp decortication plant was paid 1.6 Million USD.



Suggestions or other docs are welcome.

Condor65