Finance and Strategy for 2019 NEUROCHAIN

Now that CES 2019 is over, we wanted to take the time to take a retrospective look at 2018 and provide a more detailed view on the future of NeuroChain project. The team has been working intensively and despite the general lack of strength of the crypto market, we intend to maintain our main direction and commitments to the market. Here under you will find a summary of the expense allocation since April 2018 when ICO funds were collected, a reminder on the business model and how its is being adjusted to the current market conditions. Finally, a perspective on the next 12 months highlighting how our Community can contribute to the success of their own investment.

In all cases, the information provided here are facts reported in good faith and are aligned with the transparency mantra that is a key characteristic of the project and a key business ethic value of the management team.

Financial situation

15,497 ETH were raised by April 2018. The funds were kept in ETH until we could find a bank willing to receive the converted funds. Despite numerous requests to European and French banks, we could not find a well-established institution willing to receive our funds. To face our operating expenses, we opened an account in a European Fintech and carefully exchanged monthly the funds required to cover our operating expenses. Changing all the funds at once would certainly have been a good financial decision given the current market situation today, but it also was a major risk since the financial entity we were left to use was unknow to us and presented a risk we were not willing to take.

As of today, the 2018 expenses are broken down as follows:

· Development Team: 30%

· Trading platform fees: 28%

· Marketing and Communication: 19%

· Travel, General expenses: 16%

· Legal and Administration: 8%

This allocation is close to the original spilt projected at the time of the ICO. We had underestimated the fees required by the Trading Platform (Huobi mainly) which were unknow at that time. These additional costs were taken from the Marketing and Communication section to balance the budget.

Adjustments made to adapt to the Q3 &Q4 2018 market conditions

Since Sept 3rd, 2018 all markets plunged in the red. Bitcoin and Ethereum dragged all the market downward and all other coins followed with no exception.

The cost structure of the project was built originally to be agile with mostly contractor engagements. We have been able to quickly reshape the expense structure. The absolute priority has always been to maintain the development team. We delivered the Test net on Oct 31st and funded all activities required to prepare the Main net release in Q1 2019. The prestigious office address in Paris on the Champs Elysées is in fact a deal with the company ADNEOM, one of our initial partners. They moved to the Champs Elysées address in June 2018 and we are now integrated in their office space. The positive impact of being located there is obvious and clearly position the company favorably whenever the topic of the location of our offices is brought to the table.

The marketing expenses were mostly directed to media placement budgets, website maintenance and hiring a digital agency to support content production. All these costs were cut by 50% in October and November. Since December they are reduced to the absolute minimum. We reprioritized the budget to participation to business trade shows, non-crypto specific, to open new business opportunities (Blockchain Day Oct 2018, Blockchain Paris Nov 2018, CES2019 Jan 2019). We had no other options but to use NCC tokens to finance some of these activities. To prepare the Main net announcement, we also have prepared an extensive communication plan based on crypto influencers who will get paid in NCC tokens. These tokens are locked on various dates in the future to avoid impacting too negatively the average price. These decisions must be seen as investments made to build the momentum around the Main net. As we see potential pressure on the price as a result, we also balance it with the positive impact this communication campaign will have on the reputation of the project. We are one of the few survivors of the crypto storm and we will deliver our code as promised. This is to be seen as a real achievement. The NeuroChain project was never positioned as a speculative short-term opportunity.

Listing Strategy

Huobi is our main trading platform today and they have received from us a very significant fee. They also hold a significant retainer fee, reimbursed monthly until July 2019. Our business relationship is very good with them despite the recent note of “potential delisting” that flagged the NCC symbol. We had discussions about this and Huobi management confirmed that they had flagged more than 40 companies to remind them that a minimum of USD 50,000 daily volume was required to remain listed in their platform. They also mentioned that this volume requirement was not the only criteria. Activity, business perspective and code delivery dates compliance were also key. They, therefore, concluded that given the very “legit” nature of our project they should be removing the “ST” delisting tag soon from our NCC symbol. Yet, no date was committed.

Other exchanges were added since the original listing on Huobi: Sistemkoin, and recently IDAX. We generally see the listing to allow our investors to trade easily. Each investor has his own strategy. Short term or long term. We always have been clear on the medium/long term nature of the NeuroChain project. A protocol is a fundamental component of the blockchain economy. It took almost 5 years to Consensys, the company developing Ethereum, to get to the stage of being a worldwide standard. The story of NeuroChain will really start when the Main Net is live, a few weeks from now.

We will consider other listing options once the main net is live and if the listing cost are reasonable.

Priority for 2019

For the next 12 months, the priorities have not changed. The first one is the delivery of the Main net in Q1 2019. The development team is working relentlessly to deliver the milestones and focus on the security and the innovative nature of the consensus.

Big Partners were signed up in 2018: ADNEOM, Hopps Group, AWS, Sigfox, Tai Cloud, Selinko, Interxion, and more recently BiTA (Blockchain in Transportation Alliance, to be fully documented soon). These partnerships do not cost us anything but rather present an opportunity for the future. There is still room for improvement to better leverage the technical collaboration with these partners. Before the code is solid and well documented it is somehow difficult to materialize these partnerships. Yet, business relationships were forged. Each of these partners were selected for a reason and, at the right time, will come into the light with the right complementary profile.

Business Model forward.

The NeuroChain source of revenue is dual. We can collect revenue from development contracts signed with customers wiling to deploy NeuroChain. This activity will mainly be lucrative when the protocol is advanced enough to be customized to the needs of a customer. It is also made possible with the partnership with ADNEOM which provide access to 2,000 IT consultants ready to be deployed and subcontracted on NeuroChain projects. Other resource pools are progressively enabled in Asia and Americas. Recent discussions held at CES opened new fields of opportunities.

The other source of revenue comes from the tokens set aside after the Main net is released (“The Reserve”). This token pool is only to be used taking into consideration the market condition. The plan was originally not to use the Reserve until the funds of the ICO dried up. If $30M had been raised, we could have postponed the necessity to use these funds until late 2020. Given the current cash position, we need to pivot and change our plans. The market will not allow us to use the Reserve in a foreseeable future. That is why we focus on the first source of revenue described above: customer engagements for Application Development.

The objective is now simple: all efforts are redirected to convince customers to test and deploy the NeuroChain nodes. We have focused on Supply Chain management and the Certification of Origin processes to initiate this activity. Two applications were developed and are being presented to customers in business presentations (NeuroChain Tracer™ and NeuroChain Origin™).

Our Marketing and Communication efforts will support this business plan moving forward. Once the Main net is available, all contacts and business decisions will be focusing on acquiring new customers with paid development initiatives. The communication of the success of these deployments will create the condition for the price of the token to go up. In addition, each of these deployments require our customers to acquire tokens to operate the blockchain. Adoption and scale become the key success factor. We believe this is a viable plan. It would certainly have been easier in a more favorable market context, but it remains a solid plan.

As a conclusion, we wanted to reiterate our faith in the power of a Community. As described above, adoption is the key. Therefore, the constructive support of a Community is part of a successful plan. We will continue to be very open and transparent, we will welcome their input and certainly enjoy the days when we can meet some of you personally to get to know you better.

Frederic GOUJON — NeuroChain CEO

Billal CHOULI — NeuroChain CTO