2016 Review Prepared for the Chronos Board of Directors April 23, 2014

Agenda 2016 Summary Finance Marketing Operations 2017 Overview and Future Outlook Compensation Plan Game Wrap-Up

2016 Summary Products Sprout: High End Evergreen: Low End Business Sales: 1st in world 4, 2nd in all worlds Profits: 3rd in world 4, 4th in all worlds

Competition Landscape C3 & C5 specializing in P2 C1 in the middle ground for P1 & P2 C4 is closely positioned but inferior to Chronos

Items that require Board Approval Dividend policy: $3MM/quarter Debt policy: $1MM/quarter

Jason Chen Finance

2016 Financial Performance Annual Sales$161MM$178MM$200MM Economic Profit$10MM$12.7MM$15.9MM Ann. Net Income$9.8MM$15MM$17.7MM Ann. Net Income % of Total Rev 6.1%8.4%8.9% Ann. ROIC30%36%44% Avg Contr. Margin29.87%38%42% Annualized ROE38%60%55% Avg Market Share20% 21%

Balance Sheet

Income Statement

Cash Flow Statement

Value created 3 yr annuity of NI: $35.5MM 3 yr annuity of Econ Profit: $32.5MM 3 year annuity of NOPAT: $44MM Perpetuity of business: $147.5MM Perpetuity of net income: $4.3B

2017 Financial Goals Annual Sales$161MM$178MM$200MM$236MM$244MM$253MM Economic Profit$10MM$12.7MM$15.9MM$20MM$20.6MM$21.5MM Ann. Net Income$9.8MM$15MM$17.7MM$20.5MM$21.5MM$22.5MM Ann. Net Income % of Total Rev 6.1%8.4%8.9%9% Ann. ROIC30%36%44%51%56%62% Annualized ROE38%60%55%62% 63%

Madison Rabson & Eric Bae Marketing

Goals for 2016 Push Sprout as a winning product Increase marketing consulting by 15% by Q4 Continue to occupy the lower quality market for product 2 with Evergreen Increase marketing expenses in Europe and the U.S. in order to increase market share Adjust marketing expenses every quarter so as to stay above 20% in Japan Focus on winning government contracts

Notable Achievements of 2016 Won ¾ Government contracts for Sprout Evergreen green value 98.73% Highest quality for P1 across all companies Gained 26% of P1 market share in Japan 2nd highest overall total sales across all companies

Sprout Sales and Marketing JapanMexicoChinaU.K.GermanyU.S. Sprout Sales 26%14%21%18%21%19% Contribution Margin 46%29%41%35%43%27% Marketing 22%19%20%19% 18%

Evergreen Sales and Marketing JapanMexicoChinaU.K.GermanyU.S. Evergreen Sales 18%14%21%17%20%19% Contribution Margin 54%44%50%43%49% Marketing 16% 22%15%16%19%

Sprout Quality and Green v World Averages

Product Positioning for Sprout High Quality Low Quality Least Green Most Green SSSS

2016 Sprout is High-End Product

Evergreen Quality and Green v World Averages

Product Positioning for Evergreen High Quality Low Quality Most Green Least Green E E E E

2016 Evergreen is Low-End Product

Characteristics of Competition Company 3 o Highest overall sales (Chronos #2) o Lowest prices in most countries for product 1 (C5) o Lowest quality in product 1 (76.7% below Chronos) o Highest prices in every country for product 2 o Highest quality in product 2 (21.4% above Chronos) o Spending well over $6 million for quality of product 2 o Have essentially abandoned quality of product 1 o Green values are unknown

Characteristics of Competition Company 4 o Unstable sales record, although currently in 3rd place o Highest quality of product 1 (0.4% above Chronos) o Prices very competitive with Chronos in P1 o Low quality of product 1 (7.8% above Chronos) o Prices competitive with Chronos in P2 o Never wins government contracts o Green values are unknown

Chronos v. Competition

Long Term Plans for Future Management Build up Evergreen and develop the product through more R&D Maintain competitive advantage of Sprout through marketing and green Continue to invest in marketing consultants Promote Chronos as an environmentally friendly and green brand

Lisa Cherkassky & Sophy Chu Operations

Goals for 2016 Inventory control: 15% goal Production consulting: gradual increase Sprout: 80% Evergreen: 20% Purchase more shipping containers to stay at 110% of sales Capacity utilization: 100% capacity goal

2016 Strategy Results Inventory control: o No stockouts o Sprout jumps at Q4 Production consulting increased to 600,000: o Variable costs minimally affected o For Sprout: variable cost correlated with Quality Shipping capacity with respect to demand: o No emergency purchases Capacity utilization: Closer to 100% utilization

2016 Inventory

Higher Quality ⇒ Higher Variable Costs

Higher Quality for Evergreen

Shipping Containers

Capacity Utilization Recap ( ) SproutEvergreen

Production Budget Projections YearSproutEvergreen 2017$18$ $17$ $16$20.0 Variable Cost Assumptions: (Holding fixed costs constant) Total Production Costs: $266,523,000 Total Construction Costs: $2,812,385

Operations Recommendations Prevent Stockouts: Spend on production and construction costs to prevent stockouts Capacity Control: Do not decrease units of capacity unless capacity utilization is significantly low Shipping Containers: 110% of demand; prioritize shipping destinations based on higher opportunity Consultants: Countries with variable costs that depend on the quality have variable costs correlated positively with quality

Germany for Thought Consider expanding Evergreen to Germany: R&D efficiency High quality Advantage in German and UK markets (no tariffs) Great profit margin

Jason Chen Future Outlook

Defendable Position? Sprout has no competitors with a similar position Evergreen occupies a profitable market segment

Possible Merger Merge with Company 3 o Company 3  Premium P2 product  Possibly consider dropping economy P1 product o Chronos: Premium P1 product

Items that require Board Approval Dividend policy: $3MM/quarter Debt policy: $1MM/quarter

Jason Chen 2016 Compensation

Salary Increase

Bonus

Modifications and Improvements

Financial measures: LT vs. ST o Fwd looking/predictive vs. backward looking Alternative strategy o Golden strategy: High quality/price/profit margin premium product strategy o Strategically wage price war in economy market Trade payables: Operating Costs Super cheap P1: max profit in contracts Modifications and Improvements

Appendices

3 year forward income statement

3 year forward balance sheet

3 year forward cash flow statement

Stock Price