Start-Up Company- Supplemental Funding through R&D Tax Credits Cash Benefit Opportunity beginning in 2017

New Tax Law for 2016 Tax Year New tax law enacted December 2015 effective with 2016 tax year with R&D credit cash benefit opportunity beginning in 2017 Qualifying start-up companies can elect to apply their R&D Income tax credits against company payroll taxes --- UP TO $250,000 per year -- Properly elected R&D credits are applied dollar for dollar against Company payroll tax liability Election made on 2016 income tax return. Cash credit can be claimed beginning in first quarter after tax return is filed: (as early as 2nd Quarter 2017)

What is the R&D Credit: R&D Tax Credit (Internal Revenue Code Section 41) – Is a Federal Income Tax credit intended to stimulate investment in new or improved technology, products, manufacturing processes and software Historically the R&D Credit has only provided cash benefits for companies with income tax liabilities (generally post start-up, post NOL phase entities) Typical R&D credit ranges from 4% to 7% of eligible spend (example 1,000,000 of qualified development costs can generate 40,000 to 70,000 in R&D credits) New law effective for 2016 tax year can allow eligible start-ups to benefit from the R&D credits. Calculation of the R&D credits is complex and proper documentation is required in case of IRS audit.

What Activities and Costs Qualifies for the R&D Credit Only costs incurred in United States will be eligible Qualifying activities must meet a 4 part test in the tax law Three buckets of costs are generally eligible – Wages, Contract Research and Materials/Supplies (protoypes and consumable –not fixed assets) Qualified expenses typically include broad coverage of the development cycle including concept, design/requirements, development, programming, detailed engineering, testing, QA and validation up to commercial production or release Often many costs incurred by a start-up may be eligible for the R&D Credit

Warner Robinson R&D Study Process Initial Call to determine feasibility Free Phase 1 Review: - gather select financial information related to development and testing efforts - interview with key personnel to ensure qualification - modeling estimated CASH benefit - develop work plan for Phase 2 Phase 2 – prepare detailed calculation and documentation work, and finalize necessary forms and elections into report for IRS audit support. Work with Company tax preparers to properly claim tax credit benefits Cash benefit beginning in first quarter after tax return is filed and election is made Credits applied against Company share of payroll taxes – unused credits carryforward

About Warner Robinson LLC Led by Cedar Robinson & Bruce Warner who were both partners in large firms, each with 24+ years of R&D credit experience including significant software, technology, start-up and IRS audit expertise Warner Robinson works across the US with clients ranging from Fortune 100 to start-ups Our industry experience and IRS audit experience goes across all industries including virtually all sectors of software development to high tech, medical device, manufacturing, engineering and financial services

Warner Robinson Contact Info: Cedar Robinson – Managing Director Direct: (816) 600-6150 email: cedar@warner-robinson.com Bruce Warner – Managing Director Direct: (913) 522-6420 email: bruce@warner-robinson.com Art Merriman – Senior Manager Direct: (913) 800-6566 email: art@warner-robinson.com Angelique Garcia – Manager Direct: (650) 567-5670 email: Angelique@warner-robinson.com Website: ww.warner-robinson.com Tollfree: (800) 792-4861