Slide 1: Heximal Video Compressions & Enlightened Capital Valuation Studies
HEXIMAL VIDEO COMPRESSIONS & ENLIGHTENED CAPITAL VALUATION STUDIES FEBRUARY 2019 STRICTLY PRIVATE & CONFIDENTIAL
Slide 2: BDO valuation report cover letter
|BDO Mr. David Danielli, Moti Dattelkramer C.P.A (Isr.) MBA CEO Partner, Head of Corporate Finance Phone: +972 (0)3-637-4818 Cell: +972 (0)50-6145020 Email: Motid@bdo.co. il Dear Mr. Danielli, In accordance with your instructions, confirmed in our engagement letter dated January 15 2019 - (the “Enga
Slide 3: Contents
Slide 4: BDO DCF analysis and sensitivity of company values
BDO conducted a DCF analysis to derive the companies’ value: Below are the sensitivity analyses preformed on Enlightened Capital and Heximal Video Compressions’ value of operations: Enlightened Capital: Enlightened - CER 4,160 Heximal Video Compressions 34,293 Total Valuation 38,453 The Companies re
Slide 5: Enlightened Capital Overview
SECTION 1 ENLIGHTENED CAPITAL OVERVIEW
Slide 6: Company Overview - Enlightened Capital
COMPANY OVERVIEW - ENLIGHTENED CAPITAL About Enlightened Capital LLC » Enlightened Capital LLC (Enlightened) seeks to reduce global climate change through innovation and invention. Enlightened has obtained exclusive licenses to sell pollution savings back to the EU resulting from Solar Projects in I
Slide 7: Market Overview - Enlightened Capital
MARKET OVERVIEW - ENLIGHTENED CAPITAL Global Climate Change Initiatives » The Kyoto Protocol is an international treaty which extends the 1992 United Nations Framework Convention on Climate Change (UNFCCC). The Protocol commits state parties to reduce greenhouse gas emissions, based on two agreement
Slide 8: Market Overview - Enlightened Capital
MARKET OVERVIEW - ENLIGHTENED CAPITAL Europe » In Europe, there is the EU Emissions Trading System (ETS) in place, a trading program for European Union Allowances, (EUAs), the carbon credit in Europe. » In February 2018, European regulators confirmed the EU ETS phase 4 (2021-2030) reforms. The refor
Slide 9: Heximal Overview
SECTION 2 HEXIMAL OVERVIEW
Slide 10: Company Overview - Heximal Video Compression
COMPANY OVERVIEW - HEXIMAL VIDEO COMPRESSION About Heximal Video Compression > Hemixal Video Compression (HVC) has developed a disruptive, patented IP technology improving video compression output between 30%-75% using a range of global networks. HVC offers a turnkey solution for companies to implem
Slide 11: Market Overview - Heximal Video Compression
MARKET OVERVIEW - HEXIMAL VIDEO COMPRESSION Video Encoding Market » The Video Encoder Market was expected to be valued in 2017 at 1.7 B USD, and is forecasted to grow to 2.15 B USD by 2023 representing a CAGR of approximately 4% throughout the period. Video Encoder Market (2017- 2023, USD B) CAGR 4%
Slide 12: Market Overview - Heximal Video Compression
MARKET OVERVIEW - HEXIMAL VIDEO COMPRESSION Video Streaming Market » The video streaming market had approximately 777 M users in 2017, and is expected to reach 967 M by 2023, growing at a rate of 3%. The US is responsible for generating a majority of the revenue. Video Streaming Users (2017-2023, M)
Slide 13: Valuation Methodology
SECTION 3 VALUATION METHODOLOGY
Slide 14: Methodology: Approaches to Valuation
METHODOLOGY Approaches to Valuation > In order to arrive at estimate value, the three generally accepted approaches to valuation were considered as described below. The generally accepted approaches to valuation are commonly referred to as the following: 1. Market approach 2. Income approach 3. Asse
Slide 15: Methodology Continued: Discount Rate
METHODOLOGY CONTINUED Discount Rate » When applying the Income Approach, the cash flows expected to be generated by a business are discounted to their present value equivalent using a rate of return that reflects the relative risk of the investment, as well as the time value of money. This return, k
Slide 16: Enlightened Valuation
SECTION 4 ENLIGHTENED VALUATION
Slide 17: Forecast Summaries - Enlightened CER Business
FORECAST SUMMARIES - ENLIGHTENED CER BUSINESS » Asummary of the forecasted operations for Enlightened's CER business can be seen below: 2019 2020 Terminal ICER Sales 988 3,221 5,089 7,634 —*10,103—12,124 13,337 14,270 14,984 15,433 [YoY Growth 226% 58% «50% += «32% = 20% = 10% = 7% 35% 3% cocs Reven
Slide 18: Forecast Assumptions - Enlightened Revenues
FORECAST ASSUMPTIONS - ENLIGHTENED REVENUES Revenues COGS & GM Assumptions » As mentioned, Enlightened is currently focused on trading its CERs produced in Israel to the EU, for projects of up to 15MW. > Currently, the Company has 47 MW signed to CER sharing agreements. By the end of 2019, we foreca
Slide 19: Forecast Assumptions - Enlightened Operations
FORECAST ASSUMPTIONS - ENLIGHTENED OPERATIONS Assumptions » The Company employs subcontractors to operate the solar energy plants in Israel. These subcontractors are paid based on the amount of MWH they produce, and receive a portion of the CER sales. Solar plants that produce less than 15 MW receiv
Slide 20: Assumptions
Assumptions Tax: The Company pays the Israeli corporate tax rate of 23%. The Company is expected to pay taxes in the third year of the forecast for CER activity. CAPEX: The Company does not expect to incur any significant capital expenditures throughout the forecast for its CER business. The company
Slide 21: Valuation - Enlightened CER Business
VALUATION - ENLIGHTENED CER BUSINESS Discounted Cash Flow Analysis The present value of the Company’s operations is approximately 4.2 M USD: [cER Sales 988 3,221 5,089 7,634 10,103 12,124 13,337 14,270 14,984 15,433 [YoY Growth 226% 58% SOK «32K ~~—«OS”~SCNOKSOCSHOC*KSOCSCOM Value from operations Ic
Slide 22: Heximal Valuation
SECTION 5 HEXIMAL VALUATION
Slide 23: Forecast Summaries - Heximal
FORECAST SUMMARIES - HEXIMAL » Asummary of the forecasted operations for Heximal are shown below: Total Revenues (M USD) USD 2019 2020 2023 2024 2025 Terminal Gross Margin (%) Revenues 25,000 120% Streaming - 683 «2,820 4,352 5,969 6,864 7,344,565 94% 96% 97% 98% baad oer | sae Other : 1,577 5,783 9
Slide 24: Forecast Assumptions - Revenues for 2020 and Pilot Now
FORECAST ASSUMPTIONS - REVENUES FOR 2020 AND PILOT NOW Assumptions ‘As mentioned, the estimated number of global video users is 20 billion according to the Company. Heximal will focus on the US streaming market as the region hosts the markets major players, providing Heximal with immediate global ex
Slide 25: Forecast Assumptions - Operations
FORECAST ASSUMPTIONS - OPERATIONS Assumptions G&A 2019 2020 2021 2022 2023 The company's main expense throughout the forecast is general and administrative expenses. The Salaries 390 410, 430, 451474 , composition of the expenses can be seen below. As can be seen, salaries are the largest expense, c
Slide 26: Assumptions
Assumptions Tax: The Company will pay the Israeli Corporate Tax rate of 23%. CAPEX: The Company does not expect to incur any significant capital expenditures throughout the forecast. The company expects to purchase typical equipment required for employees inclusive of computers, software and furnitu
Slide 27: Valuation - Heximal
VALUATION - HEXIMAL Discounted Cash Flow Analysis Below is the weighted average cost of capital applied to the Company’s free cash flows a an ee ee and the long term growth rate applied to the terminal year: Revenues Streaming - 683 2,820 4,352 «5,969 6,864 7,344 «7,565 WACC 20% Other : 1,577 5,783
Slide 28: Appendix
SECTION 6 APPENDIX
Slide 29: Forecast Assumptions - Enlightened PV Systems
FORECAST ASSUMPTIONS - ENLIGHTENED PV SYSTEMS Assumptions Enlightened Capital wishes to create a PV system investment operation. Currently, the Company has no initial leads or operations and has not decided on the financing plan for the new venture. We have included a representative forecast for the
Slide 30: Forecast Summaries - Enlightened Photovoltaic Systems
FORECAST SUMMARIES - ENLIGHTENED PHOTOVOLTAIC SYSTEMS > Asummary of the forecasted operations for Enlightened's Photovoltaic Solar System business can be seen below: Terminal Year PV System Revenues 270-900 1,350 2,025 3,038 3,129 3,222 «3,319 3,419 YoY Growth 233% 50% 50% 50% 3% 3% 3% 3% cocs Depre
Slide 31: Discount rate inputs for Heximal and Enlightened
Input Symbol Heximal Source & Comments Financial leverage D/E 90% — Damodaran Data 2019 Debt ratio D/V 11% Damodaran Data 2019 Equity ratio E/V 89% Damodaran Data 2019 Cost of Debt Kd 6% Damodaran Data 2019 1-Tax Rate 1T 73% _Israeli corporate tax rate Risk free rate Rf 2.1% Trading Economics Israel
Slide 32: Carbon Pricing: Initiatives Globally
CARBON PRICING Initiatives Globally » Below is a global view of Carbon Pricing initiatives: Figure’ 7 Regional, national and subnational carbon pricing initiatives: share of global emissions covered 28 ‘re of ota annus GAGemésons 1 IW Friand carbon tax(1950 3) Wi roxy cat 2010) Poland carbon (1990)