Operations are the core of a strong medical marijuana business plan. It is important that there is a strong standard of operating procedures.
Radio frequency identification (RFID) technology is a key component in asset tracking. The industry is expected to grow 70% moving into 2016...that is HUGE.
Legal marijuana was a $700 million dollar industry in Colorado last year, Colorado retailers sold $386 million of medical marijuana and $313 million for purely recreational purposes. The two segments of the market generated $63 million in tax revenue, with an additional $13 million collected in licenses and fees. Look for a $1 billion dollar retail market 2016.
Preliminary estimate of NSAV pps valuation at $0.0103
Purpose: To calculate a preliminary estimate of the NSAV pps valuation based on the Code Kush volume and pricing information only communicated to shareholders as of May 6/15.
Notes: i) Other revenue sources or streams such as RFID, Pinjoint, Litjoint and Special Products (to name a few) that were communicated in the May 7/15 PR (http://ih.advfn.com/p.php?pid=nmona&article=66756334&symbol=NSAV) for which volume and pricing information have not been communicated to shareholders and accordingly have been excluded from the calculations below.
ii)The calculations below have not been verified by an independent party or reviewed, please do your own DD and do not buy and sell NSAV securities based on the calculations below.
Key Assumptions
1. The pps valuation calculations below are based on revenues starting from the acquisition of Pyrotree, and not before.
2. 50% of new customers that purchase a custom designed website will purchase the 'Informative Website' package at $1,250 (http://codekush.com) and 50% will purchase the 'Ecommerce/Subscription' package at $2,500 (http://codekush.com)
4. No growth factors to estimate revenue and net income growth for future years have been included in the calculations below. Accordingly, the valuation below is based on one year and not the typical 3-5 years time horizon discounted back at the weighted average cost of capital. In turn, no client loss/drop-off rate has been included in the calculations below.
Revenue Calculations
5. Based on the new customers added every month information communicated in the May 5/15 PR (http://ih.advfn.com/p.php?pid=nmona&article=66715832) the following product mix assumption is made for this valuation:
2 weeks = 188 new customers added 1 month equivalent = 188 x 2 = 376 new customers
In order to perform a pps valuation, a normalization of a 1 month equivalent of new customers is required to ensure that the number of new customers signed up every month during the year is achievable:
376 new customers/month - 40% = 225 new customers/month
6. For this valuation, an assumption is made that only 60% of the new customers will purchase a custom designed website.
Customer designed website purchased = 225 x 60% = 135 new customers/month
7. Monthly maintenance revenues = 225 new customers/month x 12 months = 2,700 new customers/ year
Month 1 = 225 customers x $199/month = $44,775 Month 2 = (225 customers x 2) x $199/month = $89,550 Month 3 = (225 customers x 3) x $199/month = $134,325 Month 4 = (225 customers x 4) x $199/month = $179,100 Month 5 = (225 customers x 5) x $199/month = $223,875 Month 6 = (225 customers x 6) x $199/month = $268,650 Month 7 = (225 customers x 7) x $199/month = $313,425 Month 8 = (225 customers x 8) x $199/month = $358,200 Month 9 = (225 customers x 9) x $199/month = $402,975 Month 10= (225 customers x10) x $199/month = $447,750 Month 11= (225 customers x11) x $199/month = $492,525 Month 12= (225 customers x12) x $199/month = $537,300
Total maintenance revenues for 1 year = $3,492,450
8. Website design customers = 135 new customers/month x 12 months = 1,620 new customers/year
As per assumption #2, website design revenues = (810 customers x $1,250/customer) + (810 customers x $2,500/customer)
= $1,012,500 + $2,025,000
Total website design revenues = $3,037,500
Total Pyrotree revenues = $3,492,450 + $3,037,500 = $ 6,529,500
PPS Valuation
9. We do not have any information on gross profit margins for the MJ POS systems that NSAV is working on; therefore, we will take a conservative estimate of 75%.
Gross Profit margin = $6,529,500 x 75% = $4,897,463
For the purposes of this valuation, a P/E ratio of 15 on the low end will be used even though the expected growth that NSAV will experience has not been factored in the calculations above.