Ann: Capital Raise Investor Presentation, page-14

Appreciate the civil tone. I can guarantee we both are wrong. The quest is to be approximately right.

Sales and marketing is below the gross profit line in accounts. I am unaware of the company stating a 40% gross profit margin goal. Can you source this? The most optimistic analyst forecast I've seen have GP margins in five years at 30%, which is probably realistic expansion given GP margins in the second half of FY21 were 26%.

Gross profit margin expansion (reduction in cost of goods sold) is challenged by excise taxes. A 700 ml, 40% alc/vol, bottle of spirits selling for $60 has excise taxes of $25 (41%). The excise tax on a $5, 375 ml, RTD can at 6% alc/vol is $2 or 40%. Excise taxes have been steadily rising.

I don't have any axe to grind, or agenda here, other than highlighting risk. I don't have a short position and appreciate the challenge that the founders/management have in succeeding. My point is not that they cannot make a profit, it's that there will be a lot of negative cash flows (and capital raising) for years to come before they can turn a profit (which is before positive cash flows due to the increases in working capital as a result of the lead time between investment and sales for whisky and agave). The blowout of overheads from prospectus just increases this time (revaluation of agave assets in a non-cash item). This time until profitability ASSUMES a significant sales growth CAGR.

To answer your question - the $75 mill overhead included everything, but was a MINIMUM forecast imho. You don't have overheads growing by 200% in the last year suddenly going to zero growth for the next five years while sales go up over 10 times.

As a heads up on your depreciation estimate - most of depreciation has been placed in cost of goods sold using a per volume production attribution (TSI adopted policy) which minimises depreciation whilst production is lower in the early years. If they used straight line depreciation - NPAT would be lower.

My main argument was that overheads blew out significantly from prospectus forecasts and were saved on the EBITDA and earnings numbers by a non-prospectus, non-cash flow, agave crop revaluation number of +$5 mill. A revaluation that eventually (assuming the crop reaches maturity) will transfer to inventory and added to cost of goods sold, crimping future gross margins. It does however make the non-cash NPAT and EBITDA look better in the early years, as well as the debt ratios, so I can understand why it was used. I just have some doubt over their assumed 3.5 years to pina maturity (4 years from planting) when research suggests a longer maturation time. I also don't like the smoke and mirrors not highlighting how it was used to "make" prospectus numbers.

Analysis is about determining probabilities, not absolutes. I wish every shareholder good fortune - it will be a tremendous achievement to succeed imho - but the odds of success don't warrant investing imho.