000000_Synthonics_ChyloCureBook_Rev031919

BUSINESS MODEL ChyloCure intends to manufacture CBDa-rich chylobinoids for sale to retailers and formulators. We seek to offer a premium product of consistent purity (approximately 70% CBDa and 5% CBD) and composition. Although we believe that chylobinoids will be better absorbed and therefore more effective than other compositions containing similar quantities of CBDa and that CBDa-rich compounds will prove more effective in certain applications than CBD-rich compounds, we assume for purposes of our financial modeling that our CBDa-rich chylobinoids will sell for about the same price as similarly pure CBD-rich products. We have secured local sources of hemp flower that contains an average of about 8% CBDa and sells for approximately $44.00 per pound. Extrapolating from our trial runs, we expect to produce approximately one kilogram of chylobinoid powder from every 34 pounds of hemp leaves and flower. Based on discussions with potential distributors, we believe that our chylobinoid powder will sell for more than $25,000 per kilogram of CBDa. Assuming costs of about $300 for adjuvants and testing and $750 for labor on each kilogram, our cost of goods should be about $3,500 per kilogram. After paying 15% commission on sales, our profit margin should be over 70%, or nearly $18,000 per kilogram. Even if our costs prove to be 25% higher than anticipated and our sale price is 25% lower than anticipated, our margins on powder produced from hemp leaf would still be about 63%, or about $12,000 per kilogram. We have assumed for modelling purposes that we will sell product in bulk to third parties that will repackage it for resale and that our product will be priced comparably to other similarly pure hemp- based powders. We intend, however, to conduct animal tests to demonstrate Chylobinoids’ superior absorption and efficacy against certain disease states or conditions, which should increase the bulk price for our product. In addition, we intend to produce capsules and cream for sale to consumers, which could substantially increase the revenue and profit derived from our chylobinoids. For example, one kilogram of chylobinoid powder could be packaged into approximately 66,000 capsules that could be sold for about $1.00 each. Our base case projection for bulk sales of chylobinoids through 2023 appear below. 2019 2020 2021 2022 2023 Net Sales 600,000 $ 2,039,400 $ 3,812,556 $ 7,127,383 $ 9,286,624 $ Cost of Goods 82,980 $ 290,510 $ 559,388 $ 1,077,120 $ 1,445,536 $

Gross Margins Cost of Sales

$ $ $ $

517,020 90,000 80,000 246,000

1,748,890 $ 305,910 $ 100,000 $ 270,000 $

3,253,168 $ 571,883 $ 100,000 $ 300,000 $

6,050,263 $ 1,069,107 $ 100,000 $ 450,000 $

7,841,088 $ 1,392,994 $ 120,000 $ 500,000 $

R&D

General and Admin

Operating Income Capital Expenditures

$ $

101,020 425,000

1,072,980 $

2,281,285 $ 120,000 $

4,431,156 $ 180,000 $

5,828,094 $

$

60,000

$

18,000

Net Pre-Tax Cash Flow

$

(323,980)

1,012,980 $

2,161,285 $

4,251,156 $

5,810,094 $

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