030503 rha business plan.doc

RH ACQUISITION LLC

BUSINESS PLAN

April 10, 2023

CONFIDENTIAL

RH Acquisition LLCBusiness PlanCONFIDENTIAL

TABLE OF CONTENTS

INTRODUCTION

EXECUTIVE SUMMARY

BUSINESS MODEL

OBJECTIVES

MARKET ANALYSIS, TARGET CUSTOMERS, TARGET PRODUCTS

COMPETITIVE ANALYSIS

OPERATIONAL PLAN

STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS (SWOT)

QUANTITATIVE ANALYSIS

APPENDIX A – FINANCIAL SUMMARYAPPENDIX B – HEADCOUNTAPPENDIX C – COMPENSATION ANALYSISAPPENDIX D – MILESTONES AND TIMELINESAPPENDIX E – REVENUE PROJECTIONSAPPENDIX F – COGS AND SG&A ANALYSISAPPENDIX G – ASSETS, DEPRECIATION AND AMORTIZATIONAPPENDIX H – WORKING CAPITAL ANALYSISAPPENDIX I – OPERATING EXPENSE ANALYSISAPPENDIX J – BALANCE SHEETAPPENDIX K – INCOME STATEMENTAPPENDIX L – STATEMENT OF CASH FLOWS

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INTRODUCTION

This Business Plan for RH Acquisition LLC (the Company) has been prepared to introduce the Company to prospective stakeholders (customers, investors, strategic partners, scientists, research partners, etc.).

THIS DOCUMENT IS CONFIDENTIAL. IT IS PROVIDED ON CONDITION THAT THE INFORMATION IT CONTAINS BE HELD IN CONFIDENCE AND NOT DISCLOSED TO THIRD PARTIES OR USED OTHER THAN FOR THE PURPOSE OF AN EVALUATION OF THE COMPANY AND ITS TECHNOLOGY BY THE RECIPIENT IN CONTEMPLATION OF A BUSINESS TRANSACTION BETWEEN THE RECIPIENT AND THE COMPANY. THE RECIPIENT MAY, HOWEVER, DISCLOSE THE INFORMATION CONTAINED IN THIS BUSINESS PLAN WITH ITS EMPLOYEES WHO HAVE A NEED TO KNOW SUCH INFORMATION FOR THE PURPOSE SET FORTH ABOVE, OR WITH ITS FINANCIAL, LEGAL, BUSINESS OR TECHNICAL ADVISORS PROVIDED THAT THESE PARTIES ARE INFORMED OF THE OBLIGATION TO MAINTAIN THE CONFIDENTIALITY OF THE INFORMATION. THE RECIPIENT SHALL BE RESPONSIBLE FOR THE ACTS OR OMISSIONS OF ALL SUCH PARTIES.

ANY RECIPIENT CONTEMPLATING INVESTMENT IN THE COMPANY IS ADVISED THAT INVESTMENT IN START UP BUSINESSES IS SPECULATIVE AND HIGHLY RISKY. ANY SECURITIES THE COMPANY MAY ISSUE WILL NOT BE REGISTERED UNDER THE SECURITIES LAWS OF ANY JURISDICTION. THERE WILL, THEREFORE, BE NO MARKET FOR THE SALE OR TRADING OF SUCH SECURITIES, AND PURCHASERS OF SUCH SECURITIES WILL BE REQUIRED TO CONFIRM TO THE COMPANY THAT SUCH PURCHASES ARE FOR INVESTMENT ONLY AND NOT IN CONTEMPLATION OF RESALE. ADDITIONALLY, THE CURRENT ORGANIZATIONAL STRUCTURE OF THE COMPANY IMPOSES SIGNIFICANT RESTRICTIONS ON RIGHTS OF INVESTORS TO SELL OR TRANSFER THEIR INTERESTS IN THE COMPANY. THE COMPANY CURRENTLY HAS NO CUSTOMERS AND NO REVENUE, AND MAY NOT HAVE ANY SIGNIFICANT REVENUE FOR THE FORESEEABLE FUTURE.

WHILE THE INFORMATION CONTAINED IN THIS BUSINESS PLAN IS BELIEVED TO BE ACCURATE, NEITHER THE COMPANY NOR ANY OF ITS MEMBERS OR MANAGERS MAKE ANY REPRESENTATION OR WARRANTY AS TO ANY INFORMATION IN THIS DOCUMENT AND SHALL HAVE NO LIABILITY, WHETHER IN TORT, CONTRACT OR ANY OTHER BASIS, PREDICATED ON THE INACCURACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. RECIPIENTS SHALL INDEPENDENTLY VERIFY OR CONFIRM FACTS ON WHICH THEY INTEND TO RELY IN CONNECTION WITH BUSINESS TRANSACTIONS WITH THE COMPANY. RECIPIENTS ARE ALSO STRONGLY ADVISED TO SEEK INDEPENDENT LEGAL, FINANCIAL, BUSINESS AND TECHNICAL ADVICE PRIOR TO ENTERING INTO ANY BUSINESS TRANSACTION WITH THE COMPANY.

THIS BUSINESS PLAN IS STRICTLY INFORMATIONAL AND IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO PURCHASE SECURITIES, WHICH WILL ONLY BE MADE BY PROSPECTUS. FINANCIAL PROJECTIONS CONTAINED IN THIS BUSINESS PLAN ARE FOR ILLUSTRATIVE PURPOSES, ARE NOT FORECASTS, AND – TO BE CLEAR – ARE AMONG THE MATTERS AS TO WHICH THE COMPANY AND ITS MANAGERS AND MEMBERS EXPRESSLY DISCLAIM ALL REPRESENTATIONS AND

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RH Acquisition LLCBusiness PlanCONFIDENTIALWARRANTIES. THE ACTUAL PERFORMANCE OF THE COMPANY MAY BE MORE OR LESS FAVORABLE THAN ILLUSTRATED.

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1. EXECUTIVE SUMMARY

The Company was organized to acquire gold standard inductible gene regulation technology1 and to use this technology as a base for a state-of-the-art bio-therapeutic2

process development and scale-up business that will address an industry-wide capacity shortage and provide enabling technology for the commercial scale manufacture of exciting drug candidates. This business can be established with limited capital and is expected to be profitable quickly.

THE COMPANY’S TECHNOLOGY ALSO HAS APPLICATIONS AS A TOOL IN DRUG DISCOVERY, PROTEOMICS, IMMUNOTHERAPEUTICS AND HUMAN GENE THERAPY.

WHILE THESE APPLICATIONS ARE EXPECTED TO HAVE SUBSTANTIAL VALUE, THIS BUSINESS PLAN FOCUSES SOLELY ON THE COMMERCIALIZATION OF THE TECHNOLOGY FOR BIO-THERAPEUTIC MANUFACTURING BECAUSE THIS IS A BUSINESS THAT CAN BE ESTABLISHED QUICKLY, IS EASILY QUANTIFIED, REQUIRES MINIMAL CAPITAL INVESTMENT, AND IS EXPECTED TO BE PROFITABLE AND CASH FLOW POSITIVE QUICKLY.

ANY ECONOMIC BENEFITS FROM THE COMMERCIALIZATION OF THE TECHNOLOGY FOR OTHER APPLICATIONS (EITHER BY THE COMPANY DIRECTLY OR THROUGH LICENSE TO OTHERS) WOULD SUPPLEMENT THE ECONOMICS OF THE BIO-THERPAEUTIC MANUFACTURING BUSINESS DESCRIBED IN THIS PLAN.

1.1. THE COMPANY’S TECHNOLOGY AND ITS ADVANTAGES .

The Company will acquire (by patent assignment and exclusive license) gold standard, next generation inducible gene regulation technology from a Fortune 500 Company3. The Company also plans to use world-class isolation and purification technology based on research at Purdue University.

1 “inductible gene regulation” involves inserting human genes (for generating a desired protein) into the cells of other organisms, growing large numbers of these cells in nutrient media and then inducing enhanced production of the protein by these cells. The human gene in the cell of another organism is called a "transgene." The cells in which the genes are inserted can be any cell with a nucleus, but the most important cells are those of other mammals – "mammalian" cells. The cells and nutrient mixtures are grown in containers of glass or stainless steel of various sizes called "fermenters" under very carefully controlled conditions.

2 A "bio-therapeutic" is a drug used in humans or animals that is biochemically-based or biochemically manufactured.

3 This technology was developed as part of a successful research effort to identify and commercialize environmentally-friendly pesticides. The Fortune 500 company that funded this work ultimately sold its agricultural chemicals business, but retained rights to the technology for non-agricultural uses. Lacking the personnel or expertise to develop the technology for drug discovery, gene therapy, tissue engineering, proteomics or bio-therapeutic production, the company entered into a joint venture with a small biotechnology company. The joint venture developed the technology, but was not believed capable of fully realizing its commercial potential. The Fortune 500 company acquired all of the equity of the joint venture and now seeks to quickly monetize the technology. This presents a unique opportunity to acquire world-class, next generation technology at minimal cost.

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1.2. KEY DIFFERENTIATORS

An Improved Class of Chemical Inducer Molecules.

The Company uses chemical inducer molecules4 that are non-toxic to mammals and do not have intrinsic pharmacologic activity5.

Tight Regulation of Expression – Ability to "Make the Unmakable."

Since the inducers and "response elements"6 are highly specific and selective, gene expression is undetectable in the absence of the inducer7 and the Company’s technology can, therefore, be used to make certain therapeutic proteins (cytotoxic8 proteins) that cannot be made with current generation technology.

Engineered Inducer / Receptor Pairs.

The inducers and receptors are not of mammalian origin and are engineered in specific, selective pairs, obviating "crosstalk"9 and pleiotropic10 effects.

4 A "chemical inducer molecule" is the chemical molecule used to cause the transgene to make – "express" – the therapeutic protein. the Company's lead inducer chemical family is a chemically diverse proprietary library of small molecules that recognize and bind to specific receptor proteins.

5 A chemical inducer molecule that has "intrinsic pharmacologic activity" is a chemical that itself acts as a drug. The chemical inducer molecules used by the competing technologies include tetracycline (a common antibiotic), progesterone (a hormone with a number of uses, most commonly in contraceptives) and RU-486 (the compound used to induce abortion).

6 Receptors are the control point for precise regulation of gene expression. These engineered receptor proteins bind with high specificity to the target gene's promoter region. Tight regulation ensures that protein expression by the cell does not exceed the cell’s ability to make necessary post-expression modifications.

7 Protein production in the absence of the inducer is referred to as "constitutive expression" or "leakage".

8 A "cytotoxic" protein is a protein that is toxic to the cell in which it is made. An inductible expression system that is “leaky” cannot make cytotoxic proteins at commercial scale because the toxicity of the protein makes it impossible, or economically inefficient, to grow commercial scale cultures of host cells containing the transgene. The cells die as quickly (or almost as quickly) as they reproduce. The advantage offered by the Company’s technology is that a transgene for a cytotoxic protein can be inserted into a host cell and so long as the inducer is not present, the transgene will not express the protein. So, a commercial scale culture of the host cells containing the transgene can be grown before the inducer is introduced.

9 Where other small molecules trigger the receptor to activate gene expression.

10 Where a compound – an inducer, for example – has more than one effect on the organism.

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Improved Bioactive Yield.

Gene expression is closely controlled, allowing gross yield to be optimized without exceeding the post-translational modification11 capacity of the host cell, so the product has maximum fidelity to the desired human protein and bioactive yield is maximized.

Host System Optimization.

The Company’s technology works in a wide range of eukaryotic hosts12, including mammalian cells, yeast and other fungi, and insect cells.

World Class Isolation and Purification Technology.

The Company will use isolation and purification technology based on research at Purdue University modifying and improving a technique known as simulated moving bed liquid chromatography.

1.3. THE COMPANY'S COMPETITIVE ADVANTAGE.

By combining two leading-edge technologies, the Company will significantly increase the customers’ product yields and reduce their costs of goods by enhancing both upstream production and downstream purification processes. And, the Company's next generation technology that can manufacture novel, difficult-to-express, cytotoxic therapeutic proteins13

will provide the Company with exclusive opportunities for some of the most exciting therapeutic protein drug candidates. The technology to be acquired by the Company is protected by a very extensive patent estate.

A summary of the Company’s financial projections (which do not reflect costs of capitalization, see: Section 8 - Quantitative Analysis) is shown on Appendix A.

11 “Post translation modification” refers to the enzymatic changes (that is, changes catalyzed by enzymes) made to the protein after it has been expressed by the transgene. These changes include “folding”, glycosylation and phosphorylation. The closer the host cell is to a human cell, the more accurate the fidelity of post translation modification. So, for example, the post translation modifications of a protein expressed by a human transgene in an insect cell will not be as accurate as those from a mammalian cell (Chinese hamster ovary cells are one type of mammalian cells commonly used). There are two primary consequences of poor post translation modification, either the protein will not be bioactive in humans (that is, it will not serve its therapeutic purpose) or it will induce an adverse immune response (essentially a rejection reaction) when administered to humans.

12 "Eukaryotic hosts" are cells that have a nucleus as contrasted with prokaryotic cells, such as bacteria, which do not.

13 A "protein" is a large biochemical molecule made by the body. A "therapeutic protein" is a protein used as a drug in humans or animals.

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2. BUSINESS MODEL.

The Company’s customers (pharmaceutical and biotechnology companies) will bring to the Company both the target therapeutic protein products and the human genes to be used to make these products. The customers will hold the intellectual property rights to these.

The Company will perform process development, supply pre-clinical and clinical quantities of product during the drug development and approval process, provide technical support on the manufacturing portions of the customer’s regulatory submissions, and transfer the manufacturing technology for the product to the customer – all on a "milestones" basis on terms generally prevailing in the industry.

Upon approval of the customer’s product by regulatory authorities, the Company will license the customer to use the Company’s technology in commercial scale manufacture, either by the customer or a third party contract manufacturer working for the customer. The terms and pricing of the license will be consistent with those generally prevailing in the industry, with the Company receiving a share of the economic benefits achieved with the Company’s technology.

The Company will also sublicense its technology to large biotechnology companies on a product-specific basis or on a therapeutic class basis.14 These licenses would be priced on the same milestones and royalty basis reduced to reflect the Company’s avoided costs such that the Company is indifferent as to whether the customer or the Company performs the development work.

Opportunistically, the Company will seek isolation and purification contract business with fine chemical and pharmaceutical companies. Pricing will be at prevailing rates on a per gram or kilogram basis.

The Company will pursue opportunities to obtain complementary bio-manufacturing and isolation and purification technologies to maintain its leadership position in pharmaceutical bio-manufacturing and isolation and purification.

The Company will seek arrangements with strategic partners on a sales agency basis with the opportunity to earn commissions on sales.

The Company will pursue bio-manufacturing opportunities in generic protein products and other opportunities as may arise.

The Company may also vertically integrate by constructing or acquiring commercial scale mammalian cell bio-manufacturing capacity if the economics of doing so prove compelling.

14 Because of its perceived value, the Company will not license its technology for mammalian cell manufacture other than on a product-specific basis. The Company will license its technology for entire therapeutic classes of products only for non-mammalian cellular systems.

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Advantages of the Company’s Business Model

The diversity of customers limits the Company's risk, as the Company's business will be based on a variety of products from a number of customers. The Company's gold standard, next generation technology, particularly:

Yield improvements, Ability to make cytotoxic proteins, and Non-toxic and non-pharmacologic inducers

will provide significant competitive advantage. The Company plans to continuously build upon and improve its basic technology platforms.

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3. OBJECTIVES.

Obtain at least two products on a milestones basis during year one, four products during year two, six products during year three, eight products during year four and twelve products during year five.

Obtain one new product-specific license with a biotechnology company (where the customer pays a reduced royalty and receives the right to use the Company's technology without support from the Company) each year.

Obtain three general licenses with biotechnology companies for entire therapeutic classes in year one.

Obtain isolation and purification contract business with fine chemical and pharmaceutical companies for 50% of available capacity in year one and 75% of available capacity in year two.

Achieve annual revenues of more than $78 million and net income (net of capitalization costs, see: Section 8 – Quantitative Analysis) of more than $26 million in year five.

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4. MARKET ANALYSIS, TARGET CUSTOMERS, TARGET PRODUCTS

4.1. MARKET ANALYSIS

The pharmaceutical and biotechnology industries have identified a number of promising large molecular weight human protein drug candidates, but commercial scale, mammalian cell bio-therapeutic manufacturing capacity remains a significant bottleneck. Additionally, commercial scale manufacturing costs remain unacceptably high for many, if not most, high molecular weight human proteins.

Based on the large number of biotechnology drugs in the pipeline of pharmaceutical and biotechnology companies, capacity and revenues of biopharmaceutical contract manufacturing companies are expected to double before 2006.15 These companies are rapidly adding to capacity, with ultimate demand expected to reach as much as one million liters.16 At the same time, they are seeking to improve productivity of existing capacity by improving expression systems.17

The value of improved productivity, therefore, is the avoided capital cost of capacity expansion and, in the short term, avoiding the adverse impact insufficient capacity. Currently, a typical commercial-scale, mammalian cell production train for manufacture of a therapeutic protein with a human transgene costs between $100 and $200 million18. Any technology that can improve the productivity of such a facility has substantial value.

Also, some companies are reporting that therapeutic proteins are increasingly competing with small molecule drug products and, in such competitive situations, cost of goods is a major factor affecting sales share.19

There are a variety of factors that contribute to the cost problem. Raw yields in mammalian cell culture manufacturing systems tend to be very low – 250 mg/l to 500 mg/l is common, with the best systems yielding only 1000 mg/l to 1500 mg/l. But, with current generation technology the percentage of the raw yield of acceptable quality can be as low as 40%, because control over protein expression is poor and expression levels exceed the post translation modification capabilities (folding and glycosylation) of the host cell. The result of

15 Therapeutic proteins is a rapidly growing segment of the therapeutics market. The total market for bio-therapeutics in early 2002 was about $16 billion and will grow rapidly as proteomic technologies continue to identify new therapeutic protein candidates to be evaluated. More than 100 antibodies are now in clinical trials and more than 1100 bio-therapeutics are in preclinical testing.

16 Crispin Kirkman, chief executive of the U.K.'s BioIndustry Association., speaking at the "BioLOGIC 2001"

conference in Geneva, said, "Even now, when there isn't a huge demand, U.K. biotech companies are experiencing delays in getting their products manufactured and moved onto the next stage. The U.K. government funded a market survey that indicated a surge of products in Phases I, II, and III, and … the shortfall in manufacturing capacity may lead to failures."

17 "Biopharmaceutical Contract Manufacturing", 22:17 Genetic Engineering News, (October 1, 2002) contains a recent and extensive discussion of the economics of the biotechnology industry and is the basis for this section.

18 A member of the Company’s board of managers is currently CEO of a company constructing several such production trains.

19 "High expression levels can provide a significant contribution to overall reduced costs of goods and can enable biologics to go for markets that they have hitherto been unable to access." Iain Crowder, strategy manager for Avecia Biotechnology quoted in 22:17 Genetic Engineering News, (October 1, 2002).

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RH Acquisition LLCBusiness PlanCONFIDENTIALpoor fidelity of post translation modification is lack of bioactivity or induction of immune response in the patient. Thus, with current technology, the net yield is typically much lower than the raw yield.

The improved control offered by the Company’s technology will dramatically increase bioactive yields in mammalian cell culture systems at raw yields equaling or exceeding those available using current technology. So, the Company will offer its pharmaceutical and biotechnology industry customers a bio-manufacturing system that will significantly reduce manufacturing cost.

Bio-therapeutic production capacity and associated cost has become a critical path item for the pharmaceutical and biotechnology industries. Availability of capacity can either facilitate or block the path to market for biotechnology products with significant sales potential. And, in the case of cytotoxic protein products, there is essentially no capacity without the Company’s technology because these cannot be made with current generation expression systems.

Three ways in which manufacturing bottlenecks can be eased are through increased target protein yield, enhanced biological activity, or reduced culture cycle time. There are, in turn, two ways to pursue these goals: either improve the performance of existing expression systems by better evaluating host strains, improving induction kinetics, optimizing media, better understanding nutritional requirements, etc. or develop a next generation expression system.

There are two barriers to developing improved expression systems. Cost, is of course a significant impediment for most companies. (The Company’s technology is the result of $20 million of development capital.) More importantly, however, much of the science of inductive gene expression – particularly the best-known classes of response elements - is based on research on insect models. A key patent to which the Company will be exclusive licensee for non-agricultural bio-therapeutic production20 is a significant impediment to the development of new expression technology.

4.2. TARGET CUSTOMERS

Large Pharmaceutical Companies

In recent years, there has been a trend for large pharmaceutical companies to outsource manufacturing. As research and development and marketing and distribution costs rise, manufacturing is seen as an unattractive use of capital when compared to the return on investments in these other areas.21

Contributing to this trend is the trend away from so-called "small molecule" drug candidates to those based on biotechnology. Currently, approximately 90% of aggregate sales of pharmaceutical and diagnostic products - $250 billion annually - are either "small molecules" or simple biotechnology products (plant extracts, non-recombinant products from bacterial

20 DuPont is the exclusive licensee for agricultural applications. DuPont also has certain obligations to pay patent maintenance costs. Significant improvements to the scope of the claims of the patent were obtained recently and paid for by DuPont.

21 Joseph A. Dimasi, Grabowski, Henry G., Vernon, John (Duke University, Department of Economics), R&D Costs, Innovative Output and Firm Size in the Pharmaceutical Industry, INTERNATIONAL JOURNAL OF THE ECONOMICS OF BUSINESS, vol. 2, 1995, pp 201-219.

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RH Acquisition LLCBusiness PlanCONFIDENTIALfermentation, etc.). About 75 new biotech drugs, vaccines and indications have been approved since 1999, however, and if this trend continues, sales of biotechnology therapeutics are expected to reach $86 billion annually by 2025.

"Small molecule" drugs are synthetic organic chemical compounds made through chemical reactions, largely with petrochemical raw materials and intermediates. The large pharmaceutical companies have extensive expertise in the synthesis of complex chemical compounds and their manufacture on commercial scale.22

The large pharmaceutical companies' expertise in bio-therapeutic manufacturing techniques is much more limited. The necessary skill sets are different, and capital costs of commercial scale bio-therapeutic manufacturing facilities are very high.

In light of alternative demands for research and development and marketing capital, the large pharmaceutical companies have been reluctant to incur the costs and risks of in-house commercial scale bio-therapeutic production, particularly since it is not a field in which they have a great deal of experience and expertise. There are many contract manufacturers in commercial scale manufacture of bio-therapeutics, and some of the technology is already commoditized.

Large Biotechnology Companies

In contrast to large pharmaceutical companies, some large biotechnology companies have integrated commercial scale bio-therapeutic manufacturing capacity. These customers are not likely to contract with the Company to perform process development or to provide pre-clinical and clinical quantities of target compounds, because the customer has these capabilities in-house.23

Unlike some its competitors, however, the Company's technology is still of significant value to these customers as the Company's technology has certain unique advantages, particularly the potential to make cytotoxic proteins and the favorable characteristics of the Company's response elements and inducers.The Company has also identified opportunities to license its technology for entire therapeutic classes on a non-exclusive basis to some of these customers.24

Small Biotechnology Companies

Small biotechnology companies include those engaged in drug discovery activities based on technology they have developed or in-licensed and "virtual" companies that coordinate drug

22 These manufacturing processes have been well known for decades and patent protection and proprietary

capabilities are very limited and, as a result, pharmaceutical chemical manufacturing is a commodity and is performed by third party contract manufacturers at commodity margins. Recognizing this, large pharmaceutical companies now tend to outsource commercial scale manufacturing.

23 The large biotechnology companies utilize a business model very similar to that of the large pharmaceutical companies and the Company will market its technology to large biotechnology customers similarly to large pharmaceutical company customers.

24 The Company is, however, currently unwilling to license its technology for use in mammalian cell systems other than on a product-specific basis, because the value of the technology is believed to be great, and there is no basis on which to calculate a royalty for rights for entire therapeutic classes that is certain to yield the Company the full value of its technology. The licenses currently under discussion are for use in non-mammalian systems only.

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RH Acquisition LLCBusiness PlanCONFIDENTIALdiscovery, product development and manufacture among a number of suppliers. The Company's relationship with these customers will be similar to its relationship with large pharmaceutical companies, except that pricing will be adjusted to account for the additional credit risk these customers present. The Company may consider taking equity or entering into other alternative compensation arrangements with these customers in appropriate cases, but has no current plans for doing so.

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4.3. TARGET PRODUCTS

Generally, the Company's customers will identify the products to be manufactured. But, there are several general classes of potential products that merit discussion.

Cytotoxic Proteins

The Company believes that its technology and capabilities will have the greatest value in the manufacture of cytotoxic proteins, as is has a distinct competitive advantage in the manufacture of these products.

Non-Cytotoxic Proteins

These are the products that are the backbone of the Company's business plan and financial projections. They are drug candidates in the pipeline of large pharmaceutical or biotechnology companies that are very early in the product development process. The areas of research interest at these prospective customers and the human proteins of potential therapeutic value within those areas of interest are generally well known and there are numerous published sources of this information. 25

Generic Proteins

There are a number of bio-therapeutic products already on the market that can potentially be made using the Company's technology. Some of these products are currently made in bacterial systems (where the Company's technology is not applicable), but could be converted to mammalian cell systems. Ordinarily, manufacturing process changes in commercialized pharmaceuticals are very rare as the regulatory hurdles and associated costs and risks outweigh all but the most significant cost or other benefits of a change. 26

25 One of the Company's managers knows the capabilities, interests and pipelines of pharmaceutical and

biotechnology companies. The Company will develop a marketing plan to target specific companies and target products based on value and the ability of the Company to get the most favorable commercial terms.

26 In the biotechnology area, however, there are a number of products where current manufacturing methods are

unsatisfactory and improved processes are actively being sought. Johnson & Johnson's search for an improved process to make EPO that does not induce immune reactions in the patients is but one example.

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5. COMPETITIVE ANALYSIS

5.1. ALTERNATIVE METHODS OF THERAPEUTIC PROTEIN MANUFACTURE

The size and complexity of human therapeutic proteins make synthesis using synthetic organic chemical processes impractical on commercial scale. These products must be made either in living organisms ("in vivo") or the cells of living organisms ("in vitro").

5.2. IN VITRO SYSTEMS

In vitro bio-therapeutic production can be done using the cells of other mammals, bacteria, yeast, insect cells or plants. The Company's technology can be used in all but bacteria, as bacteria are not eukaryotic cells. Bio-therapeutic production systems using bacteria are referred to as "microbial" systems.

Microbial bio-therapeutic production systems have been used for many years and are the system of choice where they can be used. They are not capable of significant post-translation modifications, a factor that significantly limits their application to therapeutic proteins currently under development. Microbial bio-therapeutic production is essentially a commodity business.

Insect cells and mammalian cells offer the highest levels of post translation fidelity and accuracy. They are the only in vitro technologies suitable for manufacture of therapeutic proteins using human transgenes where post translation modifications are important. Because mammalian cells are genetically closer to human cells, the quality of proteins produced by mammalian cell systems is higher than that of insect cell systems. As discussed in this business plan, there are no current generation mammalian cell systems that allow cost-effective manufacture of cytotoxic proteins at commercial scale.

5.3. IN VIVO SYSTEMS

There are a number of companies offering in vivo systems that use human transgenes in living organisms to produce therapeutic proteins. Yeast and plants face three basic competitive problems. First, post translation modification fidelity and accuracy are poor when compared to other systems. Second, the need to break their more substantial cell walls to recover the therapeutic protein requires the use of aggressive enzymes or chemical compounds in the isolation and purification process. These can have an adverse effect on the ultimate bioactive yield. Finally, and most importantly, the use of plants presents significant public policy and regulatory issues, as unintentional propagation into the environment must be controlled. Yeast and plants do, however, offer very favorable economics because fairly high expression levels can be achieved and costs per batch are much lower than in other in vivo or in vitro systems. In animals, the desired proteins are either expressed into milk (using cows or goats) or eggs (using chickens). If such technologies can be perfected, they promise to be economically attractive relative to most in vitro systems. All of these technologies face substantial regulatory hurdles because of the risk of prion transmission (like that causing BSE – so-called "mad cow disease"). The use of cow or goat milk presents special sterility challenges. Chicken eggs, if the technology can be perfected, might avoid the sterility problem, but

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RH Acquisition LLCBusiness PlanCONFIDENTIALtherapeutic proteins from chickens may have post translation modification problems as chickens are not mammals.

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5.4. APPLICATION OF THE COMPANY’S TECHNOLOGY

The Company’s technology has potential application in the production of therapeutic proteins in all but microbial systems, although the scope of the Company's license to the technology will not permit the Company to use the system in plants (where the license rights are held by DuPont). The Company does not currently believe that therapeutic production in plants offers significant commercial opportunity.

5.5. COMPETING COMPANIES

The Company will compete with a large number of bio-therapeutic contract manufacturing companies that offer pre-clinical and clinical supplies, process optimization, technology transfer and commercial scale bio-therapeutic production.

These bio-therapeutic, contract-manufacturing companies do not, however, have proprietary inductive gene regulation technology. They use technology supplied by their customers or licensed from other companies. So, their services compete with the Company's services, but they do not independently offer competitive technology.

They seek to differentiate themselves and create value by increasing target protein yield, enhancing biological activity, or reducing culture cycle time by focusing on the technical performance issues common to all inductive gene regulation technologies: better evaluation of host strains, improvement of induction kinetics, media optimization, better understanding of nutritional requirements, etc. They are also adding to capacity.

To date, bio-therapeutic contract manufacturing companies have not developed next generation systems due to the significant R&D cost and the intellectual property barriers to the most promising response elements, particularly the key patent to which the Company will be exclusive licensee for non-agricultural bio-therapeutic production.

5.6. COMPETING MAMMALIAN CELL EXPRESSION SYSTEMS

Abbott Laboratories – tetracycline system – research scale only. This system is "leaky" and cannot be used for manufacturing cytotoxic products. Tetracycline systems are widely known, but do not provide optimal yields and do not have good expression control.

Cytos Biotechnology – temperature inducible system for cytotoxic protein production. This is a technology that the Company will have to watch. To date there has been no demonstration that it is either feasible or practical at manufacturing scale. No commercial contracts are known.

Gala Design – multicopy insertion using retroviral vectors. Cannot be used for production of cytotoxic products. Expression levels are very high and not well controlled and are very likely to exceed the cell's ability to properly process protein that is produced, so bioactive yield is expected to be low.

Lonza Biologics – GS ™ System. Rapid selection of high expression lines, but random insertion of target gene in chromosomes provides poor "hit" rate. Process has high variability and has not demonstrated ability to produce high yields. Cannot be used for production of cytotoxic proteins. The Lonza process is

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considered costly and Amgen and Genentech have so far refused to license it for that reason. Lonza has recently licensed the Chroma Magnos artificial chromosome delivery process in an attempt to increase performance of the GS ™ system.

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6. OPERATIONAL PLAN

6.1. MANUFACTURING FACILITY

The Company will locate its operations in a technology incubator in Indiana in space built to suit. An Indiana location is necessary as the isolation and purification technology that the Company will use is available only from an Indiana company that has licensed it from Purdue University. Initially, the Company contemplates leasing two small offices with common area for its office staff and two laboratory areas.

The Company will acquire two 500 liter bio-manufacturing units. These are standard sized, skid-mounted units. Based on discussions with design engineering specialists in the biotechnology field, the Company believes that a capital budget of $15 million is more than adequate for the acquisition and installation of these units.

The Company anticipates acquiring simulated moving bed (SMB) liquid chromatography systems for product isolation and purification. The Company believes it could obtain and install this equipment for $5 million.

6.2. HUMAN RESOURCES

Management.

Richard Boehner – Managing Director. Richard "Dick" Boehner is Vice President, Corporate Development for MacDermid Corporation in Waterbury, Connecticut where he is responsible for corporate development, strategy, and investor relations. Dick has had a long and distinguished career in the pharmaceutical, chemical, and electronic industries. His accomplishments include helping plan and implement over 20 acquisitions and divestitures with a total value in the billions of dollars for a varied group of companies including Rhone-Poulenc, Allied-Signal, and Great Lakes Chemical. In addition, Dick was an executive Managing Director in the software, silicones, and polyester films industries. Dick's background is international in scope including several acquisitions and licensing arrangements in Europe and Asia.

Michael D. Scott – Manager. Mr. Scott is an entrepreneur residing in Indianapolis. He was formerly Senior Counsel to Ice Miller, a national law firm based in Indianapolis, Indiana with offices in Washington, D.C. and Chicago Illinois. He joined Ice Miller from Great Lakes Chemical Corporation where he was Vice President & General Counsel – Performance Chemicals. Previously, he was Associate General Counsel at GAF Corporation / International Specialty Products, Inc., Wayne, New Jersey and spent a number of years in private law practice at a large East Coast law firm. Before practicing law, Mr. Scott worked in research administration at a major pharmaceutical company and was Director of Corporate Development for a consulting engineering and analytical services firm. He received his B.A. from New York University in 1982 and his J.D. from Rutgers University in 1986.

Jerry Caulder – Manager. Dr. Caulder is Chief Executive Officer and Chairman of the Board of Akkadix, and the Chairman Emeritus of Mycogen. He has been President and Chief Executive Officer and Chairman of the Board at Xyris Corporation. Dr. Caulder also serves as a director of the Biotechnology Industry Organization (BIO), and served or chaired several committees of the U.S. Office of Technology

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Assessment. He has given expert testimony before both houses of Congress; advised foreign governments on agriculture and biotechnology; and has been a consultant or speaker to numerous organizations including: The Brookings Institute, The Keystone Group, and the World Economic Forum. Caulder serves on the board of directors of Cilcorp Incorporated and is a member of the Advisory Council on Small Business and Agriculture of the Federal Reserve Board of San Francisco.

John Nine – Manager. Dr. John Nine is Interim President & CEO, Bioprocessing Technology Centre, Singapore. Formerly, he was Executive Vice President at Schering Plough and director of that company's pharmaceutical manufacturing operations. He is also currently heading the establishment of a Pharmaceutical Clinical Manufacturing Facility at Purdue University and a university-related Contract Research Facility in Georgia.

Robert Miotke – Manager. Mr. Miotke is a consultant to the pharmaceutical and biotechnology industry. He ran the Aerojet General Corporation fine chemicals business, has a long background in the manufacture of pharmaceutical active ingredients and intermediates, and holds several patents.

[Members discussed in italics will not be employees of the Company, but will serve on the Board of Managers.]

Scientific Advisory Board.

Aaron J. Shatkin, Ph.D. (Chairman of SAB)Director of the Center for Advanced Biotechnology and Medicine, Piscataway, N.J.

Jeffrey M. Trent, Ph.D.Scientific Director of the National Human Genome Research Institute (NHGRI) of the National Institutes of Health (NIH)

Michael Ashburner, FRSProfessor of Biology, University of Cambridge, Cambridge, UK and Visiting Group Leader, EMBL - European Bioinformatics Institute, Hinxton, Cambridge

Leroy Hood, M.D., Ph.D.Founder, President, and Director of the Institute for Systems Biology in Seattle, Washington

Headcount and Compensation.

The Company’s line headcount is based on industry benchmarks for bio-therapeutic manufacturing, taking into consideration both the necessary technical employees for each product and an industry-standard utilization rate. For the isolation and purification business, the headcount is based on consultation with the Indiana company that has licensed the Purdue technology. Salary benchmarks were obtained through interviews with employers in the industry and industry benchmarks.

Anticipated headcount is shown on Appendix B. Compensation analysis is shown on Appendix C.

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6.3. RESEARCH & DEVELOPMENT

The Company will research customized systems for use in bio-therapeutics production based on its core technology. This will include research programs in small molecule design and optimization and receptor design and optimization.

Research and development has not been quantified in this business plan for two reasons. First, under the Company’s business model, much of the necessary research and development work will be done in the course of specific projects funded by customers. Second, this business plan does not address the commercialization of the Company’s technology for use as a tool in drug discovery, proteomics, immunotherapeutics and human gene therapy, and significant research and development work will likely be performed (and funded) as the Company’s technology is applied in these areas.

Small Molecule Design and Optimization.

Work will continue on a major program in ligand optimization, synthesis, and development that generates new and improved inducer ligands. The proprietary inducer library consists of more than 3,000 compounds on which the Company will hold composition of matter and use and method patents. The objectives of the small molecule research program are to:

Optimize inducer/receptor binding and create new ligand/receptor pairs for our gene regulation system;

Continuously expand the range of physical/chemical properties represented in our inducer library; and

Develop new chemistries matched with our receptors to advance the gene expression system to manage the precise regulation of multiple genes.

Receptor Design and Optimization

A Receptor Design and Optimization program will continue development of a family of receptors and biological applications to meet a broad range of performance criteria. This program will involve multiple approaches including engineering of novel receptors, three-dimensional structural modeling, and virtual inducer docking.

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7. STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS (SWOT)

7.1. STRENGTHS

World-class bio-manufacturing technology.

The Company's technology allows close regulation of transgene expression in eukaryotic cells over a wide range using demonstrably non-toxic inducers. The Company's technology has the further advantage of being suitable for the manufacture of cytotoxic proteins that cannot be cost-effectively manufactured using competitive technologies.

World-class isolation and purification technology.

The Company will supplement its bio-therpaeutic production technology with simulated moving bed (SMB) liquid chromatography isolation and purification technology modified and improved at Purdue University and believed by the Company to be the gold standard for the separation of high molecular weight proteins from complex biomass matrices.

Strong management and Scientific Advisory Board teams.

See: Management and Scientific Advisory Board, above.

Limited capital requirements for start up based on locating in a technology incubator in Indiana.

Indiana has several technology incubators suitable for the Company's operations. These are available to the Company at favorable rentals and, in addition, come with support services and specialized utilities. The Company’s financial projections reflect rental rates and other terms quoted by these technology incubators.

7.2. WEAKNESSES

Limited proof of concept of bio-manufacturing technology.

Research and development work is being completed, both internally and with outside universities, to develop specific data on the manufacture of several specific proteins with the objective of generating a comprehensive proof of concept data set. The proof of concept work completed to date, however, shows that the Company’s technology can be used successfully to make diphtheria toxin at commercial scale, so the Company is optimistic that the proof of concept data set will be compelling.

Short term negative contribution margin consequence of "milestone" terms prevailing in the industry.

The Company's business model for bio-therapeutic manufacturing assumes that it will operate on the milestones basis generally prevailing in the industry under which customers will pay the Company as specified milestones are achieved. Some of these milestones are within the Company's control, but some will not be as the pharmaceutical and biotechnology industries are increasing attempting to have supply chain vendors share the inherent risks of the drug development process.

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Essentially, the milestone payment system prevailing in the industry is "back end loaded" so that supply chain vendors like the Company are compensated retroactively as the customer's drug candidate achieves success at key points in the drug development and approval process and risk of failure declines. This means, of course, that milestone payments early in the process are not intended to fully compensate the vendor and this is how the customers shift the inherent risks of the drug development process to the vendors.

The consequence for the Company is that projected contribution margin on new customer projects is significantly negative and projected break-even revenue for the traditional pre-commercialization supply, process development and technology transfer portion of the Company's business significantly exceeds fixed cost during each of the first two years of operation. This is an acute short-term risk during the Company's early stages.27

On the other hand, milestone payments do not necessarily correlate with the level of effort required by the Company. In fact, to the extent the Company will be paid as milestones are achieved over which it has no control (such as successful completion of Phase I, Phase II or Phase II studies), the Company will receive payments without having supplied to the customer any additional goods and services.

Once the Company has a number of projects in later stages of the process or had earned substantial royalties from a number of commercialized products, it will be better able to bear the economic effect of negative early-stage contribution margin.

This issue has been carefully considered and evaluated by the Company in its preparation of its financial projections. Very conservative milestone payment amounts have been used and in its financial models the Company has adjusted projected milestone revenues to take into account the risk of failure of the customer's product.

Difficulties in developing an effective marketing plan for cytotoxic therapeutic proteins.

The Company's technology is unique in its ability to manufacture cytotoxic therapeutic proteins on commercial scale. But, the manufacture of cytotoxic proteins presents a marketing challenge. While the Company can generally identify prospective non-cytotoxic product customers through the published literature on the pipeline products and interests of pharmaceutical and biotechnology companies, the same is not true for cytotoxic product customers. Since the compounds are believed to be incapable of being manufactured, they are not among the published research interests of the Company's customers. The Company has identified contacts at the National Institutes of Health and the National Cancer Institute who know of the cytotoxic compounds of potential therapeutic value and the companies that would be interested in pursuing them were they capable of being manufactured. The Company will identify opportunities to make cytotoxic products through these contacts.

Reliance on the success of the customers' products.

The Company's earnings will come from royalty payments from customers who use the Company's technology to manufacture commercial quantities of pharmaceutical products. While the Company anticipates receiving milestone payments for pre-commercialization

27 Note that the Company's revenue projections are based on milestone payments at prevailing rates that have been reduced to reflect the risk of failure of the customers' products.

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RH Acquisition LLCBusiness PlanCONFIDENTIALsupply, process development and technology transfer (but, see a discussion of this issue, above), realizing the maximum value of the technology is dependent on the success of the customer's products.

The Company will perform substantial due diligence on each customer target product and the therapeutic class of which the product is a part to attempt to assess the risk that the product milestones will not be met and will negotiate agreements with the customer accordingly. And, as discussed above, the Company has taken the risk of failure of the customers' products into account in preparing its financial projections.

7.3. THREATS

Alternative technology provides comparable or superior performance.

Even if the Company's technology remains cost-competitive, availability of competitive technology would enable the customers to push the pre-commercialization process development costs back onto the Company and its competitors and would erode achievable margins.

There are many companies that are manufacturing human proteins in eukaryotic cell systems, including a number that are doing so using mammalian cells. The Company believes its technology is superior for the reasons discussed above.

The Company will develop and implement research initiatives to maintain its technological lead in eukaryotic cell protein manufacture and simulated moving bed liquid chromatographic isolation and purification of high molecular weight proteins.

General market failure of high molecular weight human proteins.

It is currently believed that the efficacy and safety of pharmaceutical products increases as those products become more similar, or identical to, molecules that exist naturally in the human body.

The problem with many therapeutic proteins, however, is that they induce an immune response in the patient. This is currently hypothesized to be the result of improper glycosylation. While the Company's technology holds promise for the manufacture of higher quality protein product, including through more accurate glycosylation, the improvement in glycosylation accuracy may be insufficient to ameliorate the immunogenicity problem.

The consequence would be some limitation in the scope of the protein products that would be commercially viable. Immune response induced by therapeutic proteins can be addressed through administration of immunosuppressant drugs. The commercialization potentials of therapeutic proteins for serious or life-threatening conditions without viable alternative therapies, such as many cancers, are unlikely to be significantly affected by the need for concomitant immunosuppressant therapy, as the benefit of the therapeutic protein would outweigh the risks and inconvenience of such therapy. On the other hand, therapeutic proteins requiring concomitant immune system suppression would not be attractive commercial candidates for the treatment of disorders where alternative therapies are available or for non-serious or non-life threatening disorders.

There is a risk that therapeutic proteins products could fail generally in clinical trials, or alternative products could be developed having comparable safety and efficacy, but that are easier to manufacture or administer (currently most proteins have to be administered by

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RH Acquisition LLCBusiness PlanCONFIDENTIALinjection because they would be digested if administered orally), or that do not have immunogenicity potential.

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7.4. OPPORTUNITIES

More advantageous commercial terms for cytotoxic protein products.

The Company's technology can manufacture cytotoxic proteins that cannot be made using any competitive system. The value of the technology for this application could prove to be materially greater than the Company currently anticipates. The commercial terms for such products might be much more favorable than the commercial terms generally prevailing in the industry and on which the Company's financial projections are based.

Independent commercialization of isolation and purification technology.

The Company may pursue further development of SMB isolation and purification technology. Isolation and purification of proteins from complex biomass matrices is a very significant technical problem facing the pharmaceutical industry and improvements to existing technology would have significant value.

Expand vertically to the large scale manufacture of bio-therapeutics.

The Company's currently plans to license its technology to its customers for commercial scale manufacture of therapeutic protein products upon commercialization. The capital investment necessary for construction of a commercial scale mammalian cell bio-manufacturing facility is very high and well beyond the Company's capabilities in the short term. Longer term, however, the Company may expand its operations to commercial scale mammalian cell bio-manufacturing if the economics are compelling (that is, if the prospective economic return justifies the capital investment when compared to the return earned by the Company on its licensing strategy).

Manufacture of protein polymeric materials for use in medical device applications (prosthetics, implants, etc.).

In addition to pharmaceutical active ingredients, the Company's technology may have application in the manufacture of other high molecular weight proteins, including those used in medical device and implant applications.

License of the technology to non-pharmaceutical manufacturers for use in eukaryotic (non-mammalian) cell systems to make other biotech products.

In addition to using the technology in eukaryotic cell systems for pharmaceutical product manufacture, the technology may have application in the manufacture of other biologic products and the Company will consider licensing its technology to others for such applications.

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8. QUANTITATIVE ANALYSIS

8.1. KEY ASSUMPTIONS

Milestone Payments and Timeline and Isolation and Purification Capacity

The Company has based its bio-therapeutic manufacturing business plan and its financial projections on the milestones and projected timeline shown on Appendix D.

The Company’s financial projections use the Risk Adjusted Values for each milestone. These Risk Adjusted Values adjust the contract fee for the risk that the product will fail, or be abandoned by the customer, before the milestone is reached.

Industry specialists with whom we have consulted advise that both the proposed fees and the timeline are conservative and that the risk adjustment factors are reasonable.

Revenue Projections

The Company’s revenue projections are shown on Appendix E.

Milestone Revenues. Milestone Revenues for Years 1-5 are based on the timeline and Risk Adjusted Value for each milestone fee shown on Appendix D. These are standard contracts under which the Company will perform the development and pre-commercial bio-manufacturing services. The Company has assumed that it will enter into two contracts in Year 1, four contracts in Year2, six contracts in Year 3, eight contracts in Year 4, and twelve contracts in Year 5.28

License Revenues. There are two types of License Revenues, but both contemplate a customer that licenses the Company’s technology for use without support or services from the Company. These customers are biotechnology companies that have bio-therapeutic manufacturing capability and desire a license to the Company’s technology because of economic and technical advantages the technology offers.

Biotechnology companies that desire to license the Company’s technology for application in mammalian cell systems will pay license fees on a product-specific basis. The license fees will be the Biotechnology Industry standard operating margin (24% for Q4 2002) on the Company’s standard milestone fees. The intent is that the Company should be indifferent as to whether the customer or the Company does the development and pre-commercial manufacturing. The Company assumes it will obtain one such contract during each of Years 1-5.

Biotechnology companies that desire to license the Company’s technology for application in non-mammalian systems will pay license fees for an entire

28 Currently, demand for bio-therapeutic manufacturing equipment exceeds supply and the two 500 liter units that the Company anticipates acquiring may not be readily available. Any delay in acquiring these units would, of course, affect the revenue projections. Since the availability – or lack of availability – of process equipment is not quantifiable and will depend in part on the identity of investors or strategic partners backing the Company (a pharmaceutical or biotechnology company may have equipment readily available, while a consortium of venture capitalists would rely on the Company’s procurement skills), the Company has chosen to prepare its financial projections without regard to possible procurement delays.

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therapeutic class rather than for each specific product. The Company has assumed that it will obtain three such contracts in Year 1 and that the license fees payable for each contract will approximate the license fees the Company would receive from a biotechnology company licensing the Company’s technology on a product-specific basis for use in a mammalian cell system.

Future Revenues. Development and approval of pharmaceuticals has a very long lead-time as evidenced by the milestone timeline on Appendix D. Most of the value of the Company’s technology, however, will come from licenses for commercial manufacture of successful customer products. The “NPV Future” figures on Appendix E are based on the Company receiving 25% of the economic benefit to the customer based on the following assumptions: average annual customer product sales of $300 million, a 40% productivity improvement attributable to the Company’s technology, and a customer average gross profit margin of 65.22% (based on published data for public pharmaceutical and biotechnology companies for Q3 2002). These assumptions and the milestones timeline have been incorporated into a monthly model extending over ten years. The license fees payable to the Company after Year 5, whether on a milestones basis or as the Company’s share of the economic benefit to the customer, have been reduced to present value at 20%. Upon commercialization, the Company’s share was computed as a perpetuity using 10% as the customer’s weighted average cost of capital. This is consistent with industry data.

Isolation and Purification Revenues. The isolation and purification, contract-manufacturing portion of the business plan is based on calculations of capacity (in kilograms) using the throughput of the process equipment and anticipated feed solution concentrations. The theoretical capacity is then reduced to account for equipment downtime, etc.

The basic productivity and capacity assumptions are a throughput of 750 ml/min, a feed concentration of 2.5 gm/l for non-bio-therapeutic products and 500 mg/l for bio-therapeutic products, two daily nine hour shifts operating five days a week and 50 weeks a year, and a price of $10/gm.

The necessary isolation and purification capacity to support the Company’s primary bio-therapeutic manufacturing business was calculated. This was subtracted from the theoretical isolation and purification capacity (derived from the assumptions discussed above) to yield the isolation and purification capacity available for sale on a contract basis. The business plan assumes sale of 50% of isolation and purification capacity in Year 1, 75% in Year 2 and 100% thereafter. As the bio-therapeutic production business progresses, the available isolation and purification capacity for contract sale declines dramatically, so the "100%" assumption in the out years is reasonable.

Inventory, Accounts Receivable and Work in Process

Since the Company is essentially a service company, the financial presentation in this business plan uses work in process in lieu of inventory. Also, since all of the work done by the Company will be under contract, there will be no work in process for which there is not also an ultimate customer payment obligation. See: Appendix H, Working Capital Analysis.

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RH Acquisition LLCBusiness PlanCONFIDENTIALThe customers' payment obligations will arise only as milestones are met. The figures in the financial statements in this business plan are based on a 60-month cash flow model that assumes a DSO of 60 days. See: Appendix H, Working Capital Analysis.

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Other Key Assumptions

Intangibles Valuation. For purposes of preparing the balance sheet, the technology value was based on the $7 million license fee originally sought by the licensor. Obviously, the Company will attempt to acquire the technology rights for less than $7 million and will attempt to negotiate a royalty arrangement rather than a single payment. The presentation of the technology acquisition cost as a capital expenditure in Year 1 is very conservative. See: Appendix G.

Tax Distribution. The Company is currently organized as an Indiana limited liability company. The financial projections assume that the Company will make a tax distribution in any year in which net income is positive at a rate of 40%. To be conservative, the financials do not utilize net operating loss carry forwards, or provide for the distribution of losses, although the Company could, and probably would choose to, distribute losses annually.

Individual Items.

The figure for supplies is based on the experience of the Company’s licensor, pro-rated on a per-employee basis. Raw material benchmarks came from industry interviews.

The Company expects that negotiation of agreements with customers will cause it to incur legal fees of $25 thousand per product.

Rent is allocated between cost of goods sold and SG&A based on headcount proportions.

Utilities are calculated at $50 thousand per year allocated between cost of goods sold and SG&A based on headcount.

The Company has budgeted $50 thousand per year for consulting advice it might need.

Industry memberships are calculated at $15 thousand per year each and the Company expects to join two organizations.

Advertising and promotion costs are calculated at $50 thousand per Director of Business Development per year. Exhibit costs and brochure and literature costs are $20 thousand and $2 thousand, respectively, per Director of Business Development per year.

The Company has assumed insurance costs of $15 thousand per million of revenue.

An analysis of COGS and SG&A is shown on Appendix F.

An analysis of assets, depreciation and amortization is shown on Appendix G. The financial presentation assumes an average useful life of 7 years. The figures for straight-line depreciation shown on Appendix G are for comparative purposes only. The financial projections use the figures for depreciation based on the declining sum of the years basis.

A working capital analysis is shown on Appendix H.31

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An operating expense analysis is shown on Appendix I.

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8.2. PRO-FORMA FINANCIAL STATEMENTS

Presentation Net of Capitalization Costs.

The Company is soliciting financing and support from a number of sources from traditional “angel” and venture capitalists to corporate strategic partners. The ultimate capitalization of the Company (which is currently owned equally by Mr. Boehner and Mr. Scott) is likely to vary significantly depending on the identity of the enterprise that supports the Company. Additionally, the Company’s technology has applications in drug discovery, proteomics, immunotherapeutics and human gene therapy that are believed to have substantial value and commercialization of the Company’s technology in these area might affect the capitalization of the Company’ bio-therapeutic manufacturing business described in this business plan.

Consequently, the Company has chosen to prepare its financial statements net of capitalization. This means that debt and equity are consolidated into one figure and there is no separate line item for equity, debt or interest. The Company is assumed to have no cash. There are no assumptions as to opening equity or debt.

ACTUAL RESULTS WILL BE MATERIALLY DIFFERENT DEPENDING ON HOW THE COMPANY IS ULTIMATELY CAPITALIZED. The intended effect of the presentation is to show how the enterprise is expected to perform generally, without influence from any assumed capitalization structure.

Pro-Forma Financial Statements.

The pro-forma balance sheet – net of capitalization - for each of the first five years of operation is shown on Appendix J.

The pro-forma income statement – net of capitalization – for each of the first five years of operation is shown on Appendix K.

The pro-forma statement of cash flows – net of capitalization – for each of the first five years of operations is shown on Appendix L.

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APPENDIX_A

RH Acquisition LLCSummary

Years 1 to 5($ in thousands)

Year 1 Year 2 Year 3 Year 4 Year 5

Summary Financials ($)

Revenue $4,436 $9,924 $23,536 $46,568 $78,084

Gross Profit $1,230 $412 $8,536 $26,510 $52,834

EBIT($1,406

)($2,983

) $3,617 $19,886 $44,831

Net Income($1,406

)($2,983

) $2,170 $11,932 $26,898

Net Cash: Operating Activities $2,013 $318 $3,925 $14,105 $24,925

Capital Expenditures$19,500 $7,500 $0 $0 $0

Distributions $0 $0 ($1,447

)($7,954

)($17,932

)

Cash $0 $0 $0 $0 $0

Total Equity/Debt$16,080 $20,981 $20,631 $20,565 $25,348

Growth

Revenue Growth Rate 124% 137% 98% 68%

Net Income Growth Rate: -112% 173% 450% 125%

Profitability

Gross Profit % 27.7% 4.2% 36.3% 56.9% 67.7%

Operating Income % -31.7% -30.1% 15.4% 42.7% 57.4%

Net Income % -31.7% -30.1% 9.2% 25.6% 34.4%

Returns

Return on Assets -6.9% -10.6% 6.7% 33.1% 59.8%Return on Capital (Debt +

Equity) -8.7% -14.2% 10.5% 58.0% 106.1%

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APPENDIX B

RH Acquisition LLC

HR Headcount AnalysisYears 1 to 5


CEO 1 1 1 1 1

COO 1 1 1 1 1

Dir Bus Dev 1 1 2 3 3

Admin 1 1 2 4 8

Senior Scientist 4 6 10 12 12

Scientist 4 8 15 20 25

Senior Tech 4 8 10 12 15

Tech 4 10 15 20 30


APPENDIX C

RH Acquisition LLCHR Compensation Analysis



Revenues $4,436 $9,924 $23,536 $46,568 $78,084

Sales & Marketing

Salary

Director of BD $145 $151 $313 $487 $505

Total Salary $145 $151 $313 $487 $505

Bonus

Percent (%) 10% 10% 10% 10% 10%

Amount $15 $15 $31 $49 $50

Benefits

Percent (%) 30% 30% 30% 30% 30%

Amount $44 $45 $94 $146 $151

Total S & M Comp. $203 $211 $438 $682 $706

% of Revenue 4.6% 2.1% 1.9% 1.5% 0.9%

General & Administration

Salary

Chief Executive Officer $200 $208 $216 $224 $232

Administrative $30 $31 $65 $134 $278

Total Salary $230 $239 $281 $358 $510

Bonus

Percent (%) 10% 10% 10% 10% 10%

Amount $23 $24 $28 $36 $51

Benefits

Percent (%) 30% 15% 17% 20% 20%

Amount $69 $36 $48 $72 $102

Total G & A Compensation 322 $299 $357 $466 $664

% of Revenue 7.3% 3.0% 1.5% 1.0% 0.8%

Cost of Goods Sold

Salary

Chief Operating Officer $200 $208 $216 $224 $232

Senior Scientist $640 $998 $1,728 $2,150 $2,227

Scientist $320 $666 $1,296 $1,792 $2,320

Senior Tech $160 $333 $432 $538 $696

Technician $120 $312 $486 $672 $1,044

Total Salary $1,320 $2,205 $3,672 $4,704 $5,475

Bonus

Percent (%) 10% 10% 10% 10% 10%

Amount $132 $220 $367 $470 $548

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Benefits

Percent (%) 30% 30% 30% 30% 30%

Amount $396 $661 $1,102 $1,411 $1,643

Total COGS Compensation $1,848 $3,087 $5,141 $6,586 $7,665

% of Revenue 41.7% 31.1% 21.8% 14.1% 9.8%

Total Salary $1,695 $2,595 $4,266 $5,550 $6,490

% of Revenue 38.2% 26.1% 18.1% 11.9% 8.3%

Total Benefits $509 $743 $1,243 $1,629 $1,896

% of Revenue 11.5% 7.5% 5.3% 3.5% 2.4%

Total Bonus $170 $259 $427 $555 $649

% of Revenue 3.8% 2.6% 1.8% 1.2% 0.8%

Total Compensation $2,373 $3,597 $5,936 $7,734 $9,035

% of Revenue 53.5% 36.2% 25.2% 16.6% 11.6%

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APPENDIX D

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RH Acquisition LLCPre-Commercialization Milestone Payments

($ in thousands)

Product Risk Adj.

Fee Success % Value TimelineInitial payment upon contract

signing. $100 100% $100

Company establishes a stable cell line with the desired transgene. $250 100% $250 6 months after project start

Company successfully demonstrates product expression

at lab scale $500 100% $5006 months after stable cell

line is availableCompany successfully

demonstrates isolation and purification of product at lab

scale. $1,000 100% $1,0006 months after product expression at lab scale

Company delivers a batch of product for stability and

preliminary toxicity testing. $2,000 100% $2,000

6 months after isolation and purification has been

perfected.Company delivers documentation

of cGMP manufacturing procedures for incorporation in

customer's regulatory submissions. $500 66% $330

6 months after delivery of initial batch.

Company delivers product manufactured to cGMP standards

for clinical and toxicity testing. $3,000 50% $1,500

6 months after the regulatory documentation

is delivered.

Company transfers the bio-therapeutic manufacturing

technology to the customer. $500 50% $250

Completed contemporaneously with

delivery of cGMP material.

Company transfers the isolation and purification technology to the

customer. $500 50% $250

Completed contemporaneously with

delivery of cGMP material.

Product successfully completes Phase I trials. $1,000 50% $500

One year after cGMP material is delivered.

Product successfully completes Phase II trials. $2,000 33% $660

Three years after Phase I trials are complete.

Product successfully completes Phase III trials. $5,000 25% $1,250

Three years after Phase II trials are complete.

Product receives regulatory approval. $5,000 25% $1,250

One year after Phase III trials are complete.

TOTAL $9,840


APPENDIX E

RH Acquisition LLCRevenue Projections


Year 1 Year 2 Year 3 Year 4 Year 5 NPV Future

Milestone Revenue $450 $3,525 $15,155 $38,505 $72,895 $308,343

License Revenue $336 $1,524 $2,681 $3,163 $1,889 $19,974

Isolation & Purification $3,650 $4,875 $5,700 $4,900 $3,300

Revenue $4,436 $9,924 $23,536 $46,568 $78,084 $328,317

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APPENDIX _F

RH Acquisition LLCCOGS and SG&A



Revenues

Milestone Revenue $450 $3,525 $15,155 $38,505 $72,895

License Revenue $336 $1,524 $2,681 $3,163 $1,889 Isolation & Purification

Revenue $3,650 $3,650 $3,650 $3,650 $3,650

Revenue $4,436 $9,924 $23,536 $46,568 $78,084

Cost of Goods

Raw Materials $1,152 $1,920 $2,976 $3,936 $5,184

Labor $1,364 $3,232 $5,527 $7,244 $8,877

Supplies $320 $640 $1,000 $1,280 $1,640

Legal $150 $125 $175 $225 $325

Insurance $67 $149 $353 $699 $1,171

Consulting $50 $50 $50 $50 $50

Subtotal Variable COGS $3,103 $6,116 $10,081 $13,434 $17,247

% of Revenue 69.9% 61.6% 42.8% 28.8% 22.1%

Rent $31 $33 $38 $45 $58

Utilities $43 $45 $46 $45 $45

Memberships $30 $30 $30 $30 $30

Subtotal Fixed COGS $104 $108 $114 $120 $133

% of Revenue 2.3% 1.1% 0.5% 0.3% 0.2%

TOTAL COGS $3,206 $6,224 $10,195 $13,554 $17,380

% of Revenue 72.3% 62.7% 43.3% 29.1% 22.3%

SG&A

Labor $805 $837 $1,136 $1,504 $1,761

Supplies $80 $80 $120 $180 $260

Utilities $7 $5 $4 $5 $5

Advertising & Promotion $50 $50 $100 $150 $150

Exhibits $20 $20 $40 $60 $60

Brochures and Lit $2 $2 $4 $6 $6

Subtotal Variable SG&A $964 $994 $1,404 $1,905 $2,242

% of Revenue 21.7% 10.0% 6.0% 4.1% 2.9%

Rent $5 $3 $4 $5 $7

Depreciation/Amortization $702 $1,405 $2,107 $2,810 $3,512

Debt Payment $0 $0 $0 $0 $0

Subtotal Fixed SG&A $708 $1,408 $2,111 $2,814 $3,519

404/10/2023


% of Revenue 15.9% 14.2% 9.0% 6.0% 4.5%

Total SG&A $2,636 $3,396 $4,919 $6,624 $8,003

% of Revenue 59.4% 34.2% 20.9% 14.2% 10.2%

Total Costs

Total Costs $5,739 $9,512 $15,000 $20,058 $25,250

% of Revenue 129.4% 95.8% 63.7% 43.1% 32.3%

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APPENDIX G

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RH ACQUISITION LLCAssets and Dep/Amort

Years 1 to 5

($ in thousands) Year 1 Year 2 Year 3 Year 4 Year 5

Revenues $4,436 $9,924 $23,53

6 $46,56

8 $78,08

4

Capital Expenditures

Bio-Therapeutic Production $7,500 $7,500 $0 $0 $0

Isolation & Purification $5,000 $0 $0 $0 $0

Intellectual Property License $7,000 $0 $0 $0 $0

Total Capital Expenditures$19,50

0 $7,500 $0 $0 $0

% of Revenue 439.6% 75.6% 0.0% 0.0% 0.0%

Depreciation

Depreciation Term (Years) 7 7 7 7 7 Depreciation (Dec Sum of

Years) $702 $1,405 $2,107 $2,810 $3,512

Depreciation (Straight Line) $2,810 $2,810 $2,810 $2,810 $2,810

Total Depreciation $702 $1,405 $2,107 $2,810 $3,512

% of Revenue 15.8% 14.2% 9.0% 6.0% 4.5%

Net Fixed Assets

Gross Asset Value$12,50

0 $20,00

0 $20,00

0 $20,00

0 $20,00

0

Accumulated Depreciation $536 $1,071 $1,607 $2,143 $2,679

Net Plant and Equipment$11,96

4 $18,92

9 $18,39

3 $17,85

7 $17,32

1

% of Revenue 269.7% 190.7% 78.1% 38.3% 22.2%

Intangible Assets

Gross Asset Value $7,000 $7,000 $7,000 $7,000 $7,000

Accumulated Amortization $167 $333 $500 $667 $833

Net Plant and Equipment $6,833 $6,667 $6,500 $6,333 $6,167

% of Revenue 154.0% 67.2% 27.6% 13.6% 7.9%


APPENDIX H

RH Acquisition LLCWorking Capital Analysis

Years 1 to 5


Revenues $4,436 $9,924 $23,536 $46,568 $78,084

Total Costs $5,739 $9,512 $15,000 $20,058 $25,250

Accounts Receivable

% of Revenue 16.4% 16.4% 16.4% 16.4% 16.4%

Days Outstanding 60.0 60.0 60.0 60.0 60.0

Receivable Value $729 $1,631 $3,869 $7,655 $12,836

Change from Prev. Period $729 $902 $2,238 $3,786 $5,181

Work in Process

Amount $729 $976 $3,472 $4,183 $8,653

% of Revenue 16.4% 9.8% 14.8% 9.0% 11.1%

Inventory Turns 6.1 10.2 6.8 11.1 9.0

Inventory Days 60 36 54 33 40

Inventory Value $729 $976 $3,472 $4,183 $8,653

Change from Prev. Period $729 $247 $2,496 $711 $4,470

Accounts Payable

% of Revenue 94.1% 72.8% 49.3% 33.2% 25.1%

Accounts Payable & ST Debt $4,176 $7,221 $11,603 $15,464 $19,629

Change from Prev. Period $4,176 $3,046 $4,381 $3,861 $4,165

434/10/2023


APPENDIX I

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RH Acquisition LLCOperating Expense Analysis


Year 1Year 2 Year 3 Year 4 Year 5

Revenues $4,436 $9,924 $23,53

6 $46,56

8 $78,08

4

Sales & Marketing

Salaries and Fringes $203 $211 $438 $682 $706

Supplies (inc tel, fax, IT) $20 $20 $40 $60 $60

Travel and Entertainment $20 $21 $44 $68 $71

Advertising and Promotion $50 $50 $100 $150 $150

Exhibitions $20 $20 $40 $60 $60

Brochures and Literature $2 $2 $4 $6 $6

Total Sales and Marketing $315 $324 $666 $1,026 $1,053

% of Revenue 7% 3% 3% 2% 1%

General & Administration

Salaries and Fringes $322 $299 $357 $466 $664

Rent $5 $3 $4 $5 $7

Utilities $7 $5 $4 $5 $5

Travel and Entertainment $32 $30 $36 $47 $66

Insurance $67 $149 $353 $699 $1,171

Supplies (inc tel, fax, IT) $80 $80 $120 $180 $260

Total General & Administration $513 $566 $873 $1,401 $2,173

% of Revenue 12% 6% 4% 3% 3%

Total Operating Expenses $828 $890 $1,540 $2,427 $3,227

% of Revenue 18.7% 9.0% 6.5% 5.2% 4.1%

Operating Expense

Allocation

Variable $83 $89 $154 $243 $323

Fixed $745 $801 $1,386 $2,184 $2,904

Total $828 $890 $1,540 $2,427 $3,227


APPENDIX J

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RH Acquisition LLCBalance Sheet

Years 1 to 5

($ in thousands)

Begin Year 1 Year 2 Year 3 Year 4 Year 5

ASSETS

CURRENT ASSETS

Cash $0 $0 $0 $0 $0 $0

Accounts Receivable $729 $1,631 $3,869 $7,655 $12,836

Inventories $729 $976 $3,472 $4,183 $8,653

Total Current Assets $0 $1,458 $2,607 $7,341 $11,838 $21,489

OTHER ASSETS

Net Fixed Assets $11,964 $18,929 $18,393 $17,857 $17,321

Intangible Assets $6,833 $6,667 $6,500 $6,333 $6,167

TOTAL ASSETS $0 $20,256 $28,203 $32,234 $36,028 $44,977

LIABILITIES & EQUITY

CURRENT LIABILITIES

Debt $0 $0 $0 $0 $0 $0

A/P $4,176 $7,221 $11,603 $15,464 $19,629

Total Current Liabilities $0 $4,176 $7,221 $11,603 $15,464 $19,629

LTD (less cur portion) $0 $0 $0 $0 $0 $0

TOTAL LIABILITIES $0 $4,176 $7,221 $11,603 $15,464 $19,629

EQUITY & DEBT $0 $16,080 $20,981 $20,631 $20,565 $25,348

TOTAL LIABILITIES & EQUITY $0 $20,256 $28,203 $32,234 $36,028 $44,977


APPENDIX K

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RH Acquisition LLCIncome Statement

Years 1 to 5


REVENUES $4,436 $9,924 $23,53

6 $46,56

8 $78,08

4

COGS $3,206 $9,512 $15,000 $20,058 $25,250

% of Revenues 72.3% 95.8% 63.7% 43.1% 32.3%

GROSS PROFIT $1,230 $412 $8,536 $26,51

0 $52,83

4

% of Revenues 27.7% 4.2% 36.3% 56.9% 67.7%

SG&A $2,636 $3,396 $4,919 $6,624 $8,003

% of Revenues 59% 34% 21% 14% 10%

Op Earnings ($1,406)($2,983) $3,617 $19,88

6 $44,83

1

% of Revenue -31.7% -30.1% 15.4% 42.7% 57.4%

EBIT ($1,406)($2,983) $3,617 $19,88

6 $44,83

1

INTEREST $0 $0 $0 $0 $0

EBT ($1,406) ($2,983) $3,617 $19,886 $44,831

DIST FOR TAXES $0 $0 $1,447 $7,954 $17,932

NET INCOME ($1,406)($2,983) $2,170 $11,93

2 $26,89

8

% of Revenue -31.7% -30.1% 9.2% 25.6% 34.4%


APPENDIX L

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RH Acquisition LLCCash Flow Statememt

Years 1 to 5

($ in thousands) Begin Year 1 Year 2 Year 3 Year 4 Year 5

OPERATING ACTIVITIES

Net Income ($1,406) ($2,983) $2,170 $11,932 $26,898

Dep/Amort $702 $1,405 $2,107 $2,810 $3,512

Working Capital Changes

(Increase)/Decrease A/R ($729) ($902) ($2,238) ($3,786) ($5,181)

(Increase)/Decrease WIP ($729) ($247) ($2,496) ($711) ($4,470)

Increase/(Decrease) A/P $4,176 $3,046 $4,381 $3,861 $4,165

Net Cash: Operating Activities $2,013 $318 $3,925 $14,105 $24,925

INVESTING ACTIVITIES

Net Fixed Assets ($12,500) ($7,500) $0 $0 $0

Intellectual Property ($7,000)

Net Cash: Investing Activities ($19,500) ($7,500) $0 $0 $0

FINANCING ACTIVITIES

Increase/(Decrease) Equity/Debt $0 $16,080 $4,901 ($350) ($67) $4,783

Distributions $0 $0 ($1,447) ($7,954) ($17,932)

Net Cash: Financing Activities $16,080 $4,901 ($1,797) ($8,021) ($13,149)

INCREASE/(DECREASE) IN CASH ($1,406) ($2,281) $2,128 $6,084 $11,776

BEGINNING CASH $0 $0 ($1,406) ($3,687) ($1,559) $4,525

CASH AT END OF YEAR ($1,406) ($3,687) ($1,559) $4,525 $16,301


484/10/2023

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