FREQUENTLY ASKED QUESTIONS FOR INVESTORS

Leonhardt’s Launchpads by Cal-X Stars Business Accelerator, Inc.
Investor Relations

Q: Where is Leonhardt’s Launchpads headquarters?

A:  12655 W Jefferson Blvd, Los Angeles, CA 90066

Q: When was Leonhardt’s Launchpads formed?

A:  Accelerator/incubator operations for organ regeneration and recovery focused startups began in Northern California in 2008, in Southern California in 2012 and in Utah in 2015.   Cal-X Stars Business Accelerator, Inc. DBA Leonhardt’s Launchpads was incorporated in California in 2013, Leonhardt’s Launchpads Utah, Inc. was incorporated in 2016 in Utah.   Leonhardt Ventures LLC began in 1982 in Minneapolis, Minnesota as HJ Leonhardt & Co. a sole proprietorship and was converted to Leonhardt Vineyards LLC in 2005 and DBA Leonhardt Ventures in Los Angeles in 2013 and Leonhardt Ventures LLC in 2018.  Leonhardt Ventures LLC the parent of Leonhardt’s Launchpads was founded in Minneapolis, Minnesota in 1982 originally as H.J. Leonhardt & Co., moved to Savannah, Georgia in 1983, to Miami/Ft. Lauderdale in 1985, to Geyserville/Santa Rosa, California in 2000 and to Santa Monica/Los Angeles, CA in 2008 with a branch office opened in Salt Lake City, Utah in November 2015. Leonhardt Ventures LLC headquarters today is at 12760 Millennium Drive, A213, Playa Vista, California 90094 which is in the Los Angeles metro area.

Q: Where does Leonhardt’s Launchpads operate?

A:  Los Angeles (Playa Vista), Santa Monica and Pasadena in Southern California at WeWork and at 12760 Millennium Drive, Unit 213, Los Angeles, CA the Leonhardt Ventures LLC headquarters.  Petaluma at the University of Northern California in Northern California and at the C&S Business Incubator and BioInnovations Gateway in Salt Lake City, Utah.  We have technology development, testing and manufacturers collaborations with Biomerics in Utah, Biomerics Advanced Catheter in Minneapolis, Mettler Electronics in Anaheim, CA, Prizm Medical in Modesto, Ca, QIG Greatbatch in Santa Clarita, CA, Nelson Labs in Utah, Minnetronix in Minnesota, U of Louisville in Kentucky, Caltech, UCLA and USC in the Los Angeles area, Forysth Institute and Tufts University in Boston, the University of Utah in Salt Lake City, Los Angeles Biomedical Research Institute in Torrance, CA and the Pacific Neurosciences Institute in Santa Monica, CA.

Q: Where do Leonhardt’s Launchpads startups conduct their research?

A:  We have access to our own lab research space at these locations:
1.  BioInnovation Gateway, South Salt Lake City, Utah.
2.  Pacific Neuroscience Institute, Santa Monica, CA
3.  University of Northern California Science & Technology Innovation Institute.

We have access to additional research facilities via Scientific Advisory Board with more than 37 members.

We conduct research at numerous universities including the University of Utah, UCLA, USC, Caltech, Tufts University, Forsyth Institute, University of Buenos Aires, Queenland University, University of Louisville, Ohio State, University of Arizona, University of Georgia, University of Miami, Texas Heart Institute.   We have access to the Los Angeles Biomedical Research Institute (LA Biomed) for pre-clinical studies and core labs at UCLA and University of Utah for numerous support services including small animal studies.

We conduct research at these technology partnership facilities.

1.  Biomerics Advance Catheter, Minneapolis, Minnesota.
2.  Biomerics Utah, Salt Lake City, Utah
3.  Fluid Synchrony LLC, Pasadena, California.
4.  Mettler Electronics, Anaheim, California
5.  QIG Greatbatch, Santa Clarita, California.
6.  Prizm Medical, Modesto, California.

Q: Who currently owns Leonhardt’s Launchpads by Cal-X Stars Business Accelerator, Inc.?

A:  Cal-X Stars Business Accelerator, Inc. DBA Leonhardt’s Launchpads currently has approximately 165 stakeholders.  50.1% is owned by Leonhardt Ventures LLC and 49.9% is held by 164 other stakeholders the lions share of whom are involved with the company as advisors in addition to being investors.

Q: What is the Leonhardt’s Launchpads business model?

A:  We focus on organ regeneration and recovery innovations and startups. We accelerate approximately 30 to 35 innovations and their corresponding startups in any given portfolio class year.  Most of the startups are based on the same Leonhardt patented and patent pending technology platform of bioelectric stimulation + micro infusion pump + mixed stem cell based regeneration composition just directed towards different organs.   The business model is to accelerate each innovation through first-in-man clinical study results and then seek out a strategic partner/buyer to carry the development the rest of the way to market leadership.  The accelerator strives to arrange a 3% royalty on net sales for all products forward when possible.   We have a small portfolio of three regenerative economy startups that are designed to generate short term revenues and profits which are intended to re-invested in organ regeneration and recovery research non-dilutive to shareholders.

Q: What is the 2:1 accelerator investment deal for early stage investors?

A:  This means if you invest as example $30,000 you receive $30,000 value worth of stock shares certificate in Cal-X Stars Business Accelerator, Inc. DBA Leonhardt’s Launchpads AND a warrant giving you the right to acquire $30,000 worth of shares of any of the startups in the accelerator at no additional charge.  So you receive 2:1 $60,000 worth of shares in exchange for a $30,000 investment.   You can wait until Dec. 31 of the year you invested to decide your allocation or you can apply it immediately.  You can for example allocated $1000 each into all 30 startups OR you can decide to allocated $10,000 each into only 3 of your most favorite startups.  In all cases the conversion of cash warrants into shares is at the prevailing market price of the shares at the time of executing the warrant.

Q: How is our private placement filed?

A:  Under 506D part C in California and other states which permits public solicitation and is restricted to verified accredited investors only.  The original accelerator PPM was created and filed in 2013 with the help of Methven & Associates and is updated annually with our Annual Report or Newsletter.

Q: Where can I find current shares prices and valuations for each startup to know the number of shares I would receive when I convert my held 2:1 warrant into shares?

A:  Current share prices and valuations may be found at https://leonhardtventures.com/our-companies/#toggle-id-2 and by writing to investorrelations@leonhardtventures.com or investorrelations@calxstars.com requesting that information by email

Q: What is the advantage of applying my 2:1 warrant into startup shares immediately instead of waiting until Dec. 31st of the year I invest?

A:  If you allocate your warrant immediately into a startup’s shares the advantage is that you get that current lower strike price.  During the course of the year the per share price will be increased in increments as the startups achieves major development milestones.

Q: What is the advantage of waiting to apply my 2:1 warrant into startup shares until the last possible day December 31st of the year I invested?

A:  The advantage of waiting is you get sit back and watch and monitor the progress of each startup during the course of the year and can decide to allocate to startups that have reduced risk by gathering more data, gaining more talented team members or more protective patents or may be on the brink of securing a strategic partnership.   If your goal is to minimize risk not strike price and to only choose to allocate to those startups most close to securing a strategic partnership, then this waiting strategy may be right for you.

Q: How exactly do I get a return on my investment?

A:  In earliest launch stages the startups are all valued between $2.3 million and $5 million and the goal is to sell them after first-in-man results for $230 million to $980 million with a 3% royalty forward on net sales ideally.   We have a goal to have at least 6 startups in position to be ripe to secure a strategic partner/buyer each year over the next 5 years totaling 30 over 5 years.  Upon the close of each sale the proceeds are distributed immediately to all stakeholders.  Royalty checks will be distributed pro-rata on a quarterly basis as the royalties are received.  The target long term 5 year plus goal for ROI for accelerator shares is 23X your original investment and for individual startup shares 63X your original investment.  Of course these lofty goals will be very difficult to reach with many obstacles and risks in the way.

Q: What percentage ownership does Cal-X Stars Business Accelerator, Inc. DBA Leonhardt’s Launchpads have in each startup?

A:   Cal-X Stars starts off with 9% ownership in each startup in exchange for startup launch support services.  As money comes into the accelerator and is allocated into the startups their ownership stake increases.  Cal-X Stars has a pre-emptive right to acquire up to 20% ownership in each startup during the full course of acceleration within the accelerator.  Dilution from direct investors, advisor and direct management server to lessen the percentage of ownership.   It is expected at the time of exit Cal-X Stars on average will hold somewhere between 8% and 20% ownership of each startup but in some cases this could be lower and in some cases higher.

Q: Can you show an example of what I would get if you reach your goal to sell 12 startups two year with a 3% royalty forward on sales?

As a hypothetical example let’s say you invested $120,000 in Cal-X Stars Accelerator Inc. on 2:1 terms in early 2018 and immediately applied your warrant allocation as below in even increments of $10,000 each in our top 12 startups progressing towards strategic partnerships/buyers.

You would receive…

$120,000 shares of Cal-X Stars Business Accelerator, Inc. at $0.36585 a share = 328,004 shares

You would receive 2:1 $120,000 worth of startup shares as follows….

Top 6 startups in our accelerator ripe for finding a strategic buyer in 2018…
1. OrthodontiCell > $10,000 at $2 per share = 5,000 shares
2. VascuStim > $10,000 at $4.34 per share = 2,305 shares 
3. Second Heart Assist, Inc. >  $10,000 at $2 per share = 5,000 shares. 
4. Stem Cell Bra > $10,000 at $1 per share = 5,000 shares 
5. HairCell > $10,000 at $1 per share = 10,000 shares 
6. BioLeonhardt > $10,000 at $3 per share = 3,334 shares 
Top 6 startups in our accelerator ripe for finding a strategic partner/buyer in 2019..
1. CancerCell > $10,000 at $1 per share = 10,000 shares. 
2. CerebraCell > $10,000 at $4.35 per share = 2,299 shares 
3. MyoStim ED > $10,000 at $1 per share = 10,000 shares 
4. SkinStim > $10,000 at $1 per share = 10,000 shares 
5. PancreaCell > $10,000 at $1 per share = 10,000 shares 
6. PressureStim > $10,000 at $1 per share = 10,000 shares 
Let’s say in our hypothetical example that each startup sells for $78 a share coming close to the goal of 63X ROI for the entire group on average. 
You would receive…
For your Cal-X Stars Business Accelerator, Inc. 328,004 shares assuming Cal-X Stars owned 20% of each of the 12 startups at time of exit would be $940,000
Top 6 startups in our accelerator ripe for finding a strategic buyer in 2018…
1. OrthodontiCell > $10,000 at $2 per share = 5,000 shares x $78 = $390,000
2. VascuStim > $10,000 at $4.34 per share = 2,305 shares x $78 = $179,790
3. Second Heart Assist, Inc. >  $10,000 at $2 per share = 5,000 shares x $78 = $390,000
4. Stem Cell Bra > $10,000 at $1 per share = 5,000 shares x $78 = $390,000
5. HairCell > $10,000 at $1 per share = 10,000 shares x $78 = $780,000
6. BioLeonhardt > $10,000 at $3 per share = 3,334 shares  x $78 = $260,052
Top 6 startups in our accelerator ripe for finding a strategic partner/buyer in 2019..
1. CancerCell > $10,000 at $1 per share = 10,000 shares x $78 = $780,000
2. CerebraCell > $10,000 at $4.35 per share = 2,299 shares x $78 = $179,322
3. MyoStim ED > $10,000 at $1 per share = 10,000 shares x $78 = $780,000
4. SkinStim > $10,000 at $1 per share = 10,000 shares x $78 = $780,000
5. PancreaCell > $10,000 at $1 per share = 10,000 shares x $78 = $780,000
6. PressureStim > $10,000 at $1 per share = 10,000 shares x $78 = $780,000 
Assuming all these 12 startups together are achieving $1 billion in annual sales the 3% royalty to Cal-X Stars Annually would be $30 million.  With $15 million of that going to 164 shareholders about evenly divided = $91,464 in annual royalties per shareholder. 
So your total 24 month return on a $120,000 investment in this hypothetical example would be…
$7,592,092 and you would still have exit opportunity forward on at least 18 more startups.

Q: How much is the company raising, what does that give the investors and where does that capital take us?

A:  We are raising $15 million through the accelerator which gives the buyers close to 49% ownership of the accelerator before advisor and management options are exercised and about 20% ownership of all 30 (32) startups.  It is estimated that advisor and management option exercises will dilute accelerator ownership holdings by 15 to 30% and startup holdings by 10 to 15% over time if ALL eligible stock options are exercised.  This amount of capital is deemed sufficient to take us to exit after first-in-man results for all 30 startups assuming investors will voluntarily re-invest some of their winnings of early exits into later exits.  Our plan is 6 exits a year starting in 2018 for the next 5 years to reach 30 exits after 5 years of acceleration.  As startups exit new ones will come forward to take their positions in the accelerator.

Q: What is the basic development plan for the startups over the 5 year course of acceleration with the accelerator.

Year 1 = Build basic starter web site, build launch team, build slide deck, build related scientific articles list, build executive summary, build first test prototypes.
Year 2 = File patents, build advisory board, get lab data, raise capital, create animations video, upgrade web site, seek out research partners, secure vendors. 
Year 3 = Finalize design, completed animal studies, publish and present data, build opinion leader support, get positive press, start presenting at trade meetings. 
Year 4 = Prepare final safety data and regulatory filings to enter clinical studies. 
Year 5 = Complete first-in-man pilot studies OUS first 5 patients followed by U.S.A. 5 to 25 patients and then seek strategic buyer.

Q. What are the basic budget costs for each stage of development of the startups in the bootstrapping mode?

> Product development, web site development, building team = $300,000
> Patents, lab data, animation, trade shows, capital raising = $500,000
> Animal studies = $200,000 to $500,000
>.Prep for first clinical studies = $100,000 to $2,000,000 depending on product. 
> First-In-Man Clinical Studies = $100,000 to $1,500,000
 
Note – Vascustim has completed 70 pilot clinical cases OUS at under $50,000 cost due to collaborations and support from others and is now moving to clinical studies in the USA for diabetic foot ulcer treatment.  Vascustim published their first pre-clinical animal study in CIRCULATION for a cost of only $20,000.   Patent costs have been about $3000.  We also have costs shared across all 30 startups so the cost per startup is substantially lower as a result especially for common overhead items and common technology base development ie; stimulators.  So the above is over estimated for some and under estimated for others and averages out to about the above.   Warning:  Most traditional biotech and biomedical firms spend substantially more to get to these milestones and we indeed may have to spend more as well.

Q: What happens for Cal-X Stars Business Accelerator, Inc. DBA Leonhardt’s Launchpads shareholders when exits occur?

A:  Their pro-rata portion of that asset sale is distributed to them the day after closing.  Example > if OrthodontiCell sells for $780 million and Cal-X Stars Business Accelerator, Inc. DBA Leonhardt’s Launchpads shareholders hold 20% ownership at time of sale then the day after the closing $156 million would be distributed pro-rata to each shareholder according to their ownership position in the accelerator and if any of those Cal-X Stars Business Accelerator, Inc. DBA Leonhardt’s Launchpads stakeholders also had a stake, lets say 10% directly in OrthodontiCell as an example, they would also receive $78,000,000 more.  Each investor gets one distribution from the accelerator and another directly from the startup itself, if they have a direct stake in that startup separate from their accelerator ownership.

Q: What are management’s ROI goals for the accelerator and the startups?

A:  Our goal is to secure an exit for each startup in the accelerator before their 6th year anniversary in the accelerator.  ROI goals are clear…
23X for accelerator shares.
63X for individual startup shares. 
The above ROI goals factor in the intention for a 3% royalty on net sales for products over time that we will strive to always secure if possible.

Q: What are the biggest risks?

A:  These are early stage developments in high risk sectors.  The risks are numerous including…
 
1.  Not enough capital to bring products through first-in-man studies. 
2.  There may be unforeseen side effects to products.
3.  Lack of focus with so many startups under one umbrella. 
4.  Patents issued may not defend against competitors.  Patents pending may not be issued. 
5.  Company may not be able to meet all financial and other obligations to keep patent licenses or other contracts active. 
6.  Competition with greater resources may pass the companies up in progress. 
7.  Our startups depend on outside vendors for manufacturing and nearly all services and these relationships may not deliver the results intended or may breakdown for a variety of reasons.

Q: What exactly does the core bioelectric technology patents do and why is it important?

A:  Precise bioelectric signals and sequences communicate with the DNA and membranes of cells to control specific protein expressions for specific purposes.   Some examples are listed below….
 
1.  SDF-1 = stem cell homing.
2.  VEGF, SDF1, PDGF, HIF1a, HGF, Tropoelastin and PDGF = growing a new network of mature large inner diameter blood vessels for improving circulation. 
3.  Follistatin = growing new contractile muscle in previous scar tissue. 
4.  Tropoelastin = improving elasticity of arteries, skin, heart, ligaments, tendons, aorta and more. 
5.  IGF-1 = DNA repair. 
6.  CXCL5 = plaque prevention in arteries and on heart valves and cancer prevention.

Q: How are patent licenses handled amongst accelerator startup portfolio companies?

A:  If a startup is accepted into the accelerator they automatically get exclusive rights to any patents held by the accelerator for the organ they serve ie; eye for EyeCell, liver for LiverCell.  If any startup that has not yet graduated from the accelerator makes a new discovery that converts into a new patent the other organ specific startups within the accelerator automatically get an exclusive license to their organ.  There are rare exceptions to this rule.  Howard Leonhardt and other Leonhardt;s Launchpads associated inventors have agreed to give startups within the accelerator exclusive rights organ by organ to their patents in exchange only for their equity stake in those companies with no further fees or royalties due other than those associated with every shareholder.

Q: Does Cal-X Stars Business Accelerator, Inc. DBA Leonhardt’s Launchpads have any debt?

A:  Howard J. Leonhardt forgave $2.7 million debt owed to him by U.S. Stem Cell, Inc. to get certain patent rights to key patents licensed free of charge onto startups within the accelerator.  He also invested over $8 million of his own money to get the core technologies developed and off the ground. The Board of Directors of Cal-X Stars Business Accelerator, Inc,. agreed in 2014 in light of the above to record on the books $2 million owed to Howard Leonhardt at a 13% annual interest rate that is un-secured.  The company will only pay this debt when cash reserves permit.  Leonhardt has no collateral interest to protect the repayment of this loan.  In 2014, 2015, 2016 the average interest and principal paid down on these loans annually was about $14,000.  In 2017 this increased to about $60,000.   There is another debt owed to Bruce Methven our securities attorney of about $38,000 and certain management team officers have recorded deferred salary on our books.

Q: How can I get a copy of the company financials for the most recent closed year?

A:  Write to Brittany Brown our CPA and interim CFO at bbrown@ledgergurus.com copied to leonhardt@ledgergurus.com

Q: How much capital did the company raise for its startups in 2017?

A;  $1. 6 million.

Q: Approximately how much did our micro bioelectric stimulator partner invest in the development of the implantable device?

A:  $50 million.

Q: Approximately how much in National Science Foundation Small Business Innovation Research Grant support did our micro infusion pump technology partner Fluid Synchrony LLC receive to help develop the pump for our combination device?

A:  $2.3 million