Sacramento Canna

Business Plan

CONFIDENTIAL
February 28, 2018

1
 Confidentiality Agreement

The undersigned reader of Sacramento Canna’ Business Plan (the “Company”) hereby acknowledges that
the information provided is completely confidential and therefore the reader agrees not to disclose
anything found in the business plan without the express written consent of Sacramento Canna.

It is also acknowledged by the reader that the information to be furnished in this business plan is in all
aspects confidential in nature, other than information that is in the public domain through other means
and that any disclosure or use of the same by the reader may cause serious harm and or damage to
Sacramento Canna.

Upon request this business plan document will be immediately returned to Sacramento Canna.

This is a business plan. It does not imply an offer of any securities.

Applicable Law

This contract shall be governed by the laws in the State of California.

__________________________________________________

Signature

__________________________________________________

Printed Name

2
 Overview

With the passage of Proposition 64, California is poised to become the world’s largest
marijuana market with more than $1.5 billion in additional revenue coming into the state
during 2018. With a projected CAGR of more than 20% through 2020, the marijuana
industry in California is one of the hottest markets in the United States and Sacramento
Canna is poised to become one of the nation’s largest players. With vertically integrated
operations and a management team with more than a decade of experience in the
industry, Sacramento Canna has built a company that can achieve industry-leading profit
margins while offering a world-class product that will help them dominate the industry.

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 Table of Contents

Confidentiality Agreement.................................................................................................................... 2

Executive Summary ............................................................................................................... 6

Product Summary................................................................................................................................. 6
Market Summary ................................................................................................................................. 6
Three Year Objectives........................................................................................................................... 7
Keys to Success .................................................................................................................................... 7
Financing Summary .............................................................................................................................. 7

Vertically Integrated Cannabis Operations ............................................................................. 8

Product Description.............................................................................................................................. 8

Industry Overview ................................................................................................................. 9

Macroeconomic Trends ........................................................................................................................ 9
General Population Acceptance and Market Growth ........................................................................... 10
California Market Growth ................................................................................................................... 13

Strategy & Implementation Summary .................................................................................. 14

Production Line Process ............................................................................................................................. 14
Harvesting & Drying/Curing........................................................................................................................ 15
Production Packaging, Storage & Testing................................................................................................... 15
Management Team ............................................................................................................................ 16
Personnel Strategy ............................................................................................................................. 16
SWOT Analysis ................................................................................................................................... 17

Marketing Plan .................................................................................................................... 18

Promotion Strategy ............................................................................................................................ 18

Financial Forecasts .............................................................................................................. 19

Startup Summary ............................................................................................................................... 19
Financial Highlights ............................................................................................................................ 19
Financial Indicators ............................................................................................................................ 20
Revenue Forecast ............................................................................................................................... 21
Break-Even Analysis ........................................................................................................................... 22
Projected Profit and Loss .................................................................................................................... 23
Projected Cash Flow ........................................................................................................................... 25
Projected Balance Sheet ..................................................................................................................... 26
Sensitivity Analysis ............................................................................................................................. 27

Appendix............................................................................................................................. 28

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Table 1: Three Year Financial Overview .............................................................................................................. 19
Table 2: Three Year Financial Ratios ................................................................................................................... 20
Table 3: Three Year Revenue Forecast ............................................................................................................... 21
Table 4: Year One Break-Even Analysis............................................................................................................... 22
Table 5: Three Year Profit & Loss Projections ..................................................................................................... 23
Table 6: Three Year Cash Flow Projection .......................................................................................................... 25
Table 7: Three Year Balance Sheet Projections .................................................................................................. 26
Table 8: Three Year Sensitivity (Scenario) Analysis............................................................................................. 27
Table 9: 12 Month Profit & Loss Projections ...................................................................................................... 28
Table 10: 12 Month Cash Flow Projections ........................................................................................................ 29

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Executive Summary
The following business plan outlines the proposal, development plan, and most likely financial
projections based upon the establishment of Sacramento Canna’s state of the art facilities for cannabis
cultivation, production, and distribution. The proposed facility would support a conservative annual yield
of 6,900 with product sold through multiple channels including wholesale, private label, and branded
products for up to $1,800 per pound. The potential also exists for Sacramento Canna to expand
production facilities, grow branded products, as well as expand into adjacent service verticals, however
the plan focuses on the most conservative scenario of a conservative fixed yield.

Product Summary

The following is a high-level process flow for the cultivation and processing operations for the cultivation
facility for the various strains of cannabis Sacramento Canna be producing:

1. Initiating Production
2. Production Line Process
3. Harvest and Drying/Curing
4. Packaging and Storage
5. Preparing Transport & Distribution

Market Summary

The recent passing of Proposition 64 in November 2016 has made California one of the most recent states
to legalize recreational marijuana for adult use with marijuana shops opening their doors on January 1,
2018. As more and more states begin to legal both medical and recreational marijuana use, the industry
is growing at a rapid pace. Marijuana sales in North America reached $6.73 billion in 2016—reflecting
34% growth over 2015 ($5.04 billion), according to Arcview Market Research/BDS Analytics. The research
firm projects sales to jump to $21.6 billion by 2021, representing a 26% CAGR. While Canada is included
in Arcview’s market view for the first time, the United States represented 87% of legal spending in 2016.
California accounted for 27% of the 2016 legal market in North America, Colorado represented 20% and
Washington represented 11%.

As the general public’s sentiment toward the legalization of marijuana continues to become more
favorable, more than 64% of people support marijuana legalization with 8 states already allowing adult-
use, the industry is experiencing significant tailwinds that Sacramento Canna will be able to capture is it
looks to vertically integrate through the full production process to maximize economics of scale.

6
Three Year Objectives

Sacramento Canna has the following objectives:

• Raise $10,000,000 from investors by issuing shares of the Sacramento Canna Corporation
• Setup the growing facility with the complete built-out and yield maximizing set-up in place.
• Modify the facility and procure all necessary assets for the new production cycle.
• Implement security protocols for production, packaging, and delivery.
• Drive sales across multiple channels (wholesale, branded, private label, etc.) in order to diversify
revenue streams, thereby limiting concentration risk.
• Explore growth outside California to begin a national expansion strategy.

Keys to Success

Sacramento Canna recognizes the following as keys to success for its operation:

• Ensure that the modified building is EPA compliant and equipped with all state-of-the-art
technology offerings available.
• Establish strict procedures for quality control, environmental policies, and workplace ethics.
• Only hire and train experienced workers that have been pre-vetted and licensed.
• Follow the best cultivation processes to ensure consistent quality.
• Manage costs and production schedules to ensure that the facility is operating optimally and
maximizing production yield.

Financing Summary

7
Vertically Integrated Cannabis Operations

Product Description

Strains will be selected based on those with the highest return on investment based on the various market
prices and potential yields. While strains are subject to change based on market prices and yield performance,
some strains may be utilized consistently throughout the Company’s growing cycle in order to develop a brand
reputation for offering a high-quality product.

Need detail on specific strains of product used in the following format:

Strain X

Highlights, effects, and growing habits on Strain X

Strain Y

Highlights, effects, and growing habits on Strain Y

Strain Z

Highlights, effects, and growing habits on Strain Z

8
Industry Overview

For decades, all Cannabis transactions in the United States were conducted under implicit or explicit
prohibition. States have increasingly moved to legalize nonprofit Cannabis growing for medical purposes,
however, as well as implement regulations for organizations that produce and distribute Cannabis. The
growing acceptance of medical Cannabis is providing operators and investors with unprecedented
opportunities, while leading to growth in states with legal adult use recreational laws. California is one of
the states that is poised to generate significant benefits from legalizing adult-use marijuana as the
estimates market size for marijuana in California is $8.5 billion and this will bring in more than $4.3 billion
in revenue to the state, of which $1.6 billion is derived from adult use.

North American consumers spent $6.7 billion on legal cannabis products in 2016, up 34% from $5.0 billion
in 2015. The growth continues a robust pattern that Arcview estimates will lead to a $22.6-bilion market
in 2021 at a 27% compound annual growth rate. While Canada is included in Arcview’s market view for
the first time, the United States represented 87% of legal spending in 2016. California accounted for 27%
of the 2016 legal market in North America, Colorado represented 20% and Washington represented 11%.

Macroeconomic Trends

The U.S. commerce industry in 2017 is best characterized by a continual shift away from traditional
experiences with more consumers opting to purchase new and previously unattainable items (hence the
rise in marijuana tourism). As the consumer trends continue to shift, the overall industry demand is still
largely impacted by macroeconomic factors such as disposable income and unemployment rates. From
an economic standpoint, the United States market continues to add jobs, see strong disposable income

9
and low unemployment rates, all of which ultimately adds to the increased consumer demand and
spending power to use on legal or medicinal marijuana.

The high-quality marijuana market, including medicinal, is dependent on the rise in disposable income
within the United States. As per capita disposable income has risen since the recession, consumers have
felt the freedom to make more deliberate and oftentimes extravagant purchases. Additionally, as national
unemployment rates have fallen since the recession, consumers, particularly millennials, are less focused
on saving money and more concerned with buying goods, food, and experiences that are authentic,
unique, and potentially as an alternative to costly medical problems.

General Population Acceptance and Market Growth

As the states continue to adopt a more progressive stance on marijuana use, the public’s sentiment has
risen in lockstep with 64% of people favoring the legalization of recreational and medicinal use. As the
public’s favorability toward marijuana usage has risen since 1996, Arcview projects more than 30 states
plus Canada will have active legal markets by 2021 with further upside as they are not projecting Florida
or New York, two of the largest markets, to be fully legalized by 2021. Furthermore, Arcview believes that
by 2026, the US federal prohibition will be repealed which will fuel explosive growth an industry that is
already experiencing 20+% CAGRs.

10
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12
California Market Growth

The recent enactment of Proposition 64 coupled with the new presidency which has expressed a national
policy against legalization with avoidance of state level control likely means that the market in California
will reflect that of Colorado. California, as a separate entity, is the 6th largest economy in the world with a
$2.6 trillion GDP. Given the size of the potential target demographic, California’s marijuana market is
already projected to be worth $8.5 billion, of which $5.7 billion will be for adult use.

As detailed in the chart below, the potential revenue income generated by the state of California from the
passage of marijuana laws is currently $2.8 billion for 2017 and will grow to $6.5 billion by 2020. This
growth is due to the significant rise of the adult use business. This business was non-existent in 2017 and
is projected to grow to a $3.9 billion by 2020, representing a 23% CAGR.

13
Strategy & Implementation Summary

Production Description

To initiate a new cycle, cloning/taking cuttings will be employed. When beginning new plants, Sacramento
Canna always starts in a clean environment to prevent cross-contamination. Every clone that is created
will be recorded by strain and date that the immature plant was created. All immature plants will be
recorded in state-mandated inventory tracking system and batched by strain and date.

1. Need detailed production process flowchart or description

Production Line Process

There are two phases of production; vegetative and bloom (flower). Before plants are placed into veg, the
strongest and best immature plants are chosen. After the new plants are placed into veg, they are
recorded by phase, what room they were placed in, strain, and day they were placed. When the plants
have been in a vegetative phase for 3-6 weeks they are ready to be placed into bloom rooms. The plants
are recorded with their new phase, new room (location), and date they were moved. After plants have
been in the bloom phase for 9 weeks or so, they will be ready to be harvested.

Vegetative Phase:

• On a commercial scale, plants are placed into a vegetative phase for 3-6 weeks
• When clones are first placed into veg, nutrient solutions should have a low PPM (>400 PPM)
and gradually increase as plant size increases (600-800 PPM)
• Vegetative plants can be topped at 4-10 inches of new growth and can be used as clones or
discarded
• This is a good time to start foliar feeding no more than once every seven days
• Throughout the vegetative phase, plants should be checked daily for yellowing of the leaves
and to have them removed
• During the course of vegetative growth, weak plants should always be eliminated before
being transferred to bloom and the strongest plants should be cloned for future mother plants

Bloom Phase:

• Need detail on specific bloom phase process

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Harvesting & Drying/Curing
During the harvesting process, harvests are categorized by whole rooms or segments of rooms clearly
separated. For each plant that is processed (taken down) it will be weighed in grams and recorded in the
inventory tracking system. The trimmers can either do wet trimming or dry trimming of the flower and
each trimming process.

After all the plants have been cut down, weighed, trimmed and put up to dry, the total amount of waste
will be recorded in grams by plant (strain). Each wet weight of the plant is recorded and the overall weight
of all the plants harvested together will be accurately reported. The product will be dried by hanging the
flower still attached to stems or by placing flower on a mesh screen. After the flowers have dried for 5-10
days they will be placed in air-tight containers for the curing process.

Production Packaging, Storage & Testing

All batches of final cultivated marijuana must be inspected and quality tested by a qualified third-party
distributor and testing facility prior to distribution to a dispensary as required by the MMRSA, Business
and Professions Code sections 19326 and 19342, the Department of Food and Agriculture regulations,
and the State Department of Public Health regulations.

To make packages, the Company combines the finished product by strain, each package cannot weigh
over 453g (1 lb.) and the product must be in a heat-sealed bag. The package should be clearly labeled with
strain, weight, date, and packager’s initials.

Security & Safety

The facility will be equipped with a sophisticated security system. Product that is pending outbound
logistics will be stored properly and under more security than the rest of the facility. Before vendors
receive the production, they will be required to provide their personal identification to be validated by an
employee, along with a copy of the purchasing order. Policy procedures will regularly be updated and
employees will be trained and tested to ensure that every phase in the process is error free.

15
Management Team

• Detailed management bios to follow for company leadership

Personnel Strategy

Sacramento Canna will have personnel in each department that is to be hired on a contract basis with a
background aligned with the specific process to be followed. The team will consist of horticulturists,
finished plant producers, managers, and a security/admin personnel. Additional floor level management
may also be hired such that they may oversee the efficiency and productivity of the production floor. Staff
will initially be hired on a part time basis, with the potential for full-time as the operation scales.

Horticulturists: The horticulturists are responsible for caring for the plant and ensuring that all
processes and machinery is functioning properly. The role is also responsible for applying
predetermined amounts of nutrients, water, and the management of plant growing cycles in
compliance with the Company’s cultivation process. Since contrasting strains grow differently, it
will take an experienced professional to understand the unique treatment of each strain. Given
the intricacies of the position, Sacramento Canna is only using 3rd and 4th generation growers who
have experience growing in a variety of situations and with multiple strains while maintaining a
high-quality product.

Processor: The processing team will have a background in quality control inspection so that they
are familiar with a high-performance role that also trains them to inspect defective products.
Seeds or loose stems and leaves that enter the processing area will be removed and additional
screening will take place to reduce the amount from entering the processing area.

Security: The facilities will be constantly monitored by an experienced security services firm
during non-working hours. This will ensure that the facility is constantly maintained and
Sacramento Canna will be sufficiently protected once plants are onsite.

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SWOT Analysis

Strengths

• The management team has extensive experience in the cannabis industry with experience
ranging from sales to marketing to distribution.
• The Company has a development plan to ensure the consistency and quality of the products.
• The management team has a deep network of wholesale relationships in the space that will
drive revenue growth.
• Sustainable building practices will be implemented to conserve energy and water consumption.
• The building site is designed to produce a maximum yield per square foot.

Weaknesses

• The new regulation may decrease the retail price per gram sold to consumers.
• The long-term product demand is unknown, so it is feasible the market will be oversaturated.
• Building the facility may increase the initial investment needed to expand operations.

Opportunities

• As market awareness grows, the demand for Cannabis will increase.

• It is unlikely Cannabis will be nationally legal in the next three years, offering Cannabis tourists.
• Medical Cannabis is increasingly being socially acceptable within the state.
• The Company is protected from government established barriers to market entry nationally.
• The market for medical Cannabis continues to grow and is unlikely to slow down.

Threats

• The medication is still federally illegal, which makes the future market potential unclear.
• There is the risk of market adoption rates, which may only be projected at this point.
• It is possible that some potential patients have already left to medicalized states.
• Many competitors will enter the market to aggressively compete for price and quality.

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Marketing Plan

The marketing plan is focused around educating the market, creating customer loyalty through high
quality products and outstanding customer service, and community engagement. The brand will also be
positioned in the market as a premier full service and integrated provider with proprietary branded,
private label, and wholesale products. The Company already has relationships in place with distributors
to sell the product to maximize yield but will be using various promotional strategies to further brand
reach and increase customer engagement.

Promotion Strategy

Customer Relationship Management (CRM)

Once a dispensary and/or wholesale buyer is registered with Sacramento Canna, the staff will employ
Customer Relations Management by having administrative staff serving as account managers and
emphasizing high quality product at a reasonable price.

Website Strategy

A professional website will be created utilizing search engine optimizations (SEO), pay per click ads and
display advertising. Sacramento Canna’ website will be easy to navigate, have a professional theme, with
a secure log in for wholesale buyers.

Enterprise Sales

The management team will notify the existing dispensaries of its market entry and regularly search for
new distributors if its current one does not continue. The dispensaries will be notified that Sacramento
Canna has the capability to diversify their strain offerings and will incentivize a long-term relationship by
offering quantity price discounts.

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Financial Forecasts

Startup Summary

Financial Highlights

TABLE 1: FIVE YEAR FINANCIAL OVERVIEW

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 Projected Operating Highlights By Year ($000) Projected Revenues By Year ($000)
45000 45000
40000 Revenue 40000
35000 35000
30000 30000
Gross Margin
25000 25000
20000 20000
15000 EBITDA 15000
10000 10000
5000 5000
0 Net Profit 0
Year 1 Year 2 Year 3 Year 4 Year 5 Year 1 Year 2 Year 3 Year 4 Year 5

Projected Cash Flow By Year ($000) Projected Net Income By Year ($000)
90000 30000
80000
70000 25000
60000 Net Cash Flow 20000
50000
40000 15000
30000
10000
20000
Cash Balance
10000 5000
0
Year Year Year Year Year 0
1 2 3 4 5 Year 1 Year 2 Year 3 Year 4 Year 5

Financial Indicators

TABLE 2: THREE YEAR FINANCIAL RATIOS

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 Financial Indicators
100%
90%
Gross Margin
80%
70%
60% Net Profit Margin
50%
40%
EBITDA to Revenue
30%
20%
10% Return on Assets
0%
Year 1 Year 2 Year 3

Revenue Forecast

TABLE 3: FIVE YEAR REVENUE FORECAST

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Break-Even Analysis

TABLE 4: YEAR ONE BREAK-EVEN ANALYSIS

Breakeven Analysis

$14,000,000

$12,000,000
COST-VOLUME-PROFIT

$10,000,000

$8,000,000

$6,000,000

$4,000,000

$2,000,000

$0
0

1000

1500

2000

2500

3000

3500

4000

4500

5000

5500

6000

6500

7000

7500

8000
500

NET UNITS

22
Projected Profit and Loss

TABLE 5: FIVE YEAR PROFIT & LOSS PROJECTIONS

23
 Revenue By Year ('000s)
45000
40000
35000
30000
25000
20000
15000
10000
5000
0
Year 1 Year 2 Year 3 Year 4 Year 5

Year 1 Revenue Monthly

3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
-

Month 11
Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 12

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Projected Cash Flow

TABLE 6: FIVE YEAR CASH FLOW PROJECTION

Year 1 Cash
14,000,000

12,000,000

10,000,000

8,000,000

6,000,000 Net
Cash
Flows
4,000,000

2,000,000

-
Month 1

Month 2

Month 3

Month 4

Month 5

Month 6

Month 7

Month 8

Month 9

Month 10

Month 11

Month 12

(2,000,000)

25
Projected Balance Sheet

TABLE 7: FIVE YEAR BALANCE SHEET PROJECTIONS

26
Sensitivity Analysis

TABLE 8: FIVE YEAR SENSITIVITY (SCENARIO) ANALYSIS

Revenue
$50,000,000

$45,000,000

$40,000,000

$35,000,000

$30,000,000 Best Case

$25,000,000
Most
$20,000,000 Likely

$15,000,000 Worst
Case
$10,000,000

$5,000,000

$-
Year 1 Year 2 Year 3 Year 4 Year 5

27
Appendix

TABLE 9: 12 MONTH PROFIT & LOSS PROJECTIONS

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TABLE 10: 12 MONTH CASH FLOW PROJECTIONS

29