C. Mer Industries Ltd. ● 5 Hazoref St. Holon 58856, Israel ● www.mer-group.com

CrossTalk for Agriculture

M2M based decision support solution for Agriculture growers Business

Model

Backed by Phytech knowledge

© C. Mer Industries 2013 – Private and Confidential 2

Table of Contents

The Benefits of M2M for Agriculture ................................................................................................................ 3

CrossTalk for Agriculture ...................................................................................................................................... 3

1. The Smart Sensors ..................................................................................................................................... 4

Soil Sensor .......................................................................................................................................................... 4

Climate Sensor .................................................................................................................................................. 4

Plant Sensor ....................................................................................................................................................... 4

Scale Sensor for Honey ................................................................................................................................. 5

2. Communication Base Station ................................................................................................................ 5

3. CrossTalk Enablement Platform- Cloud Based Decision Support System .......................... 5

4. CrossTalk Decision Support System for Growers ......................................................................... 5

5. Agronomist Guidance and Workshops .............................................................................................. 6

The Value Proposition ............................................................................................................................................ 6

The Benefits ........................................................................................................................................................... 7

For the Grower ................................................................................................................................................. 7

For the Government/Environment/Economy .................................................................................... 7

For the MNO ...................................................................................................................................................... 7

Revenue Calculation ................................................................................................................................................ 7

Benchmark information ......................................................................................................................................... 8

Business Model Background ........................................................................................................................... 8

Market Size ........................................................................................................................................................ 8

Model Analyses Overview ........................................................................................................................... 8

Sensitivity Analyses ............................................................................................................................................ 8

Increase in Yield per Hectare Comparison ........................................................................................... 9

Water Savings per Hectare Comparison ................................................................................................ 9

Premium Value Added Services ....................................................................................................................... 10

Summary ................................................................................................................................................................... 10

Addendum: Business Model Data Sources .................................................................................................. 11

© C. Mer Industries 2013 – Private and Confidential 3

The Benefits of M2M for Agriculture

The rising demand for nutrition in today’s global marketplace will continue to put upward

pressure on all food input costs. This applies particularly to raw materials and energy. Some of

the most effective means to help growers maximize production efficiency and yield is to provide

machine-to-machine (M2M) solutions. M2M for agriculture addresses these issues and allows

farmers to extract the maximum potential out of the crop by reducing expenses (like water

consumption) and optimizing yield thus improving their profit margins.

Over the past few years it has been proven that cultivation techniques have a dramatic impact

on crops as they enable significant increase in yield as well as reduction in input costs.

Numerous studies have shown that irrigated fields can produce 3-4 times higher yields than rain

fed areas for the same crop. The use of sensors for soil and climate status monitoring takes the

control over irrigation to the next level. Monitoring irrigation is a proven means to reduce input

costs and maximize the potential of yield. Studies have shown that water savings could even

reach up to 70%.

The increase in cultivation technique effectiveness also stems from the surge in smartphone and

connectivity availability, enabling a wider spread of monitoring systems.

All these come together to bring a unique opportunity to offer farmers the means to closely

monitor inputs and make educated decisions that would assure better ROI in any crop.

CrossTalk for Agriculture

MER's CrossTalk for Agriculture solution offers a decision support system for farmers based on

smart monitoring capabilities and solutions. MER's CrossTalk for Agriculture is powered by

Phytech, a world renowned and patented agricultural solution.

The system provides ongoing real-time information collected from soil, environmental and plant

sensors over cellular networks. Specifically, this information is collected via on-plant growth

sensors, soil moister sensors and micro-climate sensors.

It is an end-to-end cellular-based communication system that collects and delivers data about

crop growth behavior and behavior history. The system provides data analysis and reports about

plant growth and development, preventive alerts and detection and management of pre-

defined events or abnormalities. Decisions are backed by an agronomist who can also provide

action recommendations.

For applicable crops, CrossTalk can provide unprecedented prediction capabilities at the

beginning of the season for the actual products, with the accurate trend lines allowing to track

and react to changes throughout the season, thereby allowing the grower to better plan its costs

and profits.

© C. Mer Industries 2013 – Private and Confidential 4

Our solution consists of the following:

1. Smart sensors that continuously monitors the soil, climate and the plant

2. Communication Base Station that collects and delivers the sensor data

3. CrossTalk enablement platform that collects all the

sensors’ information and connects to the business and

operational environment

4. Cloud based decision support system

5. Agronomist guidance in implementation and use of

gathered information

1. The Smart Sensors

Soil Sensor - Measures water tension in the soil - Monitors the volumetric water content of the soil - Monitors the electrical conductivity and temperature

of the soil

Climate Sensor - Wind speed meter - Wind direction (optional: Leaf wetness) - Rain meter - Irradiation meter - Air temperature - Air humidity

Plant Sensor - Stem and trunk diameter variation sensors monitor micro-variations of stem diameter in

micron range - Dendrometer sensors monitor micro-variations of trunk radius in micron range - Fruit growth sensors monitor micro-variations of fruit size radius in micron range - Sap flow sensors - The sap flow sensors are designed for monitoring relative variations

of sap flow rate in a leaf petiole or small shoot - Leaf temperature sensor - The sensor is a subminiature touch probe that measures the

absolute temperature of a leaf. The lightweight stainless steel wire clip holds a high precision glass encapsulated thermistor, which is about a millimeter in diameter. Small size of the probe and its special design provide almost negligible disturbance of the natural leaf temperature

- Leaf wetness sensor- the dielectric leaf wetness sensor enables accurate monitoring of leaf wetness

© C. Mer Industries 2013 – Private and Confidential 5

Scale Sensor for Honey Scale sensor to allow the grower to monitor increase or decrease in amount of honey in the beehive and make decision to move it, collect the honey etc.

2. Communication Base Station

The base stations have a physical connection to the sensors and transmit real-time data to the

CrossTalk enablement platform using cellular communication.

3. CrossTalk Enablement Platform- Cloud Based Decision Support System

CrossTalk is a complete enablement platform that includes all business, operation, management

and analytics aspects required to allow the service provider to manage cross-vertical M2M

solutions.

The platform incorporates multiple layers of enablement:

Operations layer supporting the connection to the relevant network elements and support systems for provisioning and control

Business layer supporting connectivity to the MNO and enterprise information systems for billing and customer care

Management layer supporting the connectivity to the sensors including an API layer providing an optional gateway for external device management. In addition, CrossTalk keeps track of the sensor catalog and its functional status

Analytics layer supporting the real-time collection and enrichment of data

4. CrossTalk Decision Support System for Growers

The real-time sensor data collected by CrossTalk analytics layer is processed by the decision

support system, which generates charts for analysis of plant growth and development, sends

notifications when the crops need attention and keeps virtually unlimited growth history:

BI tool that generates both general and specific charts for analysis of plant growth, development, and plant-environmental interaction

Generates both single-axis and multi-axis charts with any combination of recorded and computed values

Allows to create derivative values, based on a single data source (daily average air temperature, for instance) and several data sources (leaf-air temperature difference, for instance)

Offers a list of pre-computed derivatives like VPD (vapor pressure deficit), dew point temperature, reference evapotranspiration by FAO56, stem daily contraction amplitude, etc

Wizard tool for creating user-defined simple derivatives based on summation, subtraction, integration, finding maxima, minima, daily averages, and some other operations

Enables calculating daytime and nighttime characteristics separately

Allows shifting a part of the curve along Y-axis that is very useful for eliminating shifts resulted from accidental movement of growth sensor, for instance

Report generation tool Allows exporting data for presentation in Word, Excel and PowerPoint files

© C. Mer Industries 2013 – Private and Confidential 6

Example of Pepper Growth and Water Consumption Report

Optional prediction tool:

Using CrossTalk, processed information, collected at the beginning of a season, can be analyzed

and utilized to anticipate yield quantities, predict costs, etc.

5. Agronomist Guidance and Workshops

MER partner, Phytech, provides agronomists, who implement and educate the farmers and

growers on site, during select points throughout the monitored season, to ensure that the

gathered information is being put to proper use, enabling the right conclusions to be drawn and

acted upon.

The workshops are conducted on site to ensure optimal sensor set up and knowledge transfer.

The first workshop takes place upon initial project installation and during the first year, 2-3

additional workshops are available to the farmers. After the first year the farmer receives 2

additional workshops per year, up to the end of the 3rd year of the project.

The Value Proposition

Cross talk is offered in a B2B2B model, where MER offers MNOs the service which can then be

offered to a third in line business such as the ministry of agriculture, large agricultural

cooperatives, large farms, etc.

© C. Mer Industries 2013 – Private and Confidential 7

The Benefits

For the Grower

Significant increase in yield and prevention of yield loss

Reduction in input costs and in environmental costs attributed to the use of fertilizers, water, fuel, etc.

Qualified prediction of actual products, allowing better budgetary planning

Increased competitiveness in global markets and profitability

Efficient agronomic support to growers due to remote capabilities

Robust set of premium value added services

For the Government/Environment/Economy

Reduced environmental impact through water savings, reducing contamination, efficient use of land via yield increase, etc.

Reduction in subsidies granted to farmers

Increase in growers’ profits drives the economy

Knowledge sharing which allows more parties to get involved – remote monitoring and collaboration enable consultants to take active part in growing decision

Implementation of advanced agriculture practices

For the MNO

Enhances the MNO's M2M vision by utilizing a new source of data and monetizing on Agricultural vertical

Promotes sustainability on a national level

Enhances MNO's social responsibility by digitizing the agricultural arena

Promotes wide usage of new mobile devices and mobile traffic

Monetizing governmental funds and subsidies for agriculture- reducing the need for subsidies enables reallocation of funds towards technological improvements

Solid business model with a powerful value proposition

Revenue Calculation

The following model is based on calculations made for a large Central American MNO and is

based on various case studies. Numerous customer testimonials indicate that they have

achieved between 20%-30% water saving and an increase in yield of 30% and more. Many

testimonials show how severe yield loss had been prevented due to the ability to identify plant

stress before it affected the yield, or noticing in-time dehydrating conditions due to climate or

even irrigation malfunctions.

This information is invaluable to farmers, enabling them to make real time decisions and act in

an optimal scenario regarding irrigation and harvest.

© C. Mer Industries 2013 – Private and Confidential 8

Benchmark information The following business model was produced based on a sample market in Latin America, as a

basis for benchmark.

Business Model Background

Market Size

Total harvested area - 28 million ha.

Total area equipped for full control irrigation – 6 million ha. Total area equipped for sprinkler/micro irrigation – 0.5 million ha.

Total micro-irrigated area – 0.143 million ha.

Model Analyses Overview

The following table presents the revenue calculation for a selected number of crops in Central

America. Although based on very conservative assumptions when compared to feedback from

growers, it clearly shows that growers can increase their gross profit significantly with Cross Talk

for Agriculture services.

Sensitivity Analyses

The model takes into account very moderate assumptions. To test it, we have conducted some

sensitivity analysis on the percent of yield growth and on the savings in water used.

The following charts provide sensitivity analyses insights for 2 scenarios:

1. Yield is increased by 2%, 5% or 15%

2. Water savings of 10%, 20% and 30%

Caurrent

revenue

($/ha.)

Irrigated

Yield

Increase

(%)

Revenue

increase

($/ha.)

Current

cost

($/ha.)

Saving

ratio (%)

Saving

($/ha.)

Maize 9,349 2,875$ 308$ 2,308$ 2% 46$ 250$ 20% 50$ 96$

Avocado 571 563$ 987$ 10,704$ 2% 214$ 1,500$ 20% 300$ 514$

Cotton 669 455$ 681$ 2,938$ 2% 59$ 625$ 20% 125$ 184$

Lemon 1,262 222$ 176$ 2,621$ 2% 52$ 888$ 20% 178$ 230$

Orange 1,244 199$ 160$ 2,320$ 2% 46$ 808$ 20% 162$ 208$

tomato 3,126 1,087$ 348$ 14,048$ 2% 281$ 313$ 20% 63$ 343$

Green Pepper 2,259 946$ 419$ 8,239$ 2% 165$ 450$ 20% 90$ 255$

Sugarcane 25,599 1,344$ 52$ 4,440$ 2% 89$ 20% -$ n/a

Total/Average 45,889 8,081$ -$ -$

Irrigated

Production

($US

'000,000)

Price

($US/tonne)

Irrigated

Crop

Irrigated

Production

(tonnes

'000)

Yield Increase Water SavingTotal

Increse in

Profit

($/ha.)

© C. Mer Industries 2013 – Private and Confidential 9

Increase in Yield per Hectare Comparison

Water Savings per Hectare Comparison

The sensitivity analyses were conducted to validate the water savings and yield increase

assumptions. The analyses indicate that even under the most moderate assumptions of the

model the farmer gains significant water savings and increase in yield per each and every

hectare in the farm. When multiplied by the number of hectares per farm/ farmer/ cooperation

the numbers add up to a dramatic increase in revenue per season, proving a solid business case.

© C. Mer Industries 2013 – Private and Confidential 10

Premium Value Added Services

MER's CrossTalk for Agriculture offers a holistic approach by bringing premium value added

services to enhance the value for the growers.

1. Data analysis, alerts and recommendations- based on MER's and Phytech agronomists

experience, the grower can receive recommendations to act upon, thus reducing the

need for the grower to be directly exposed to the data arriving from the sensors in the

field.

2. Prediction of growth – based on international best practices, CrossTalk may offer

prediction of products based on data collected at the beginning of the growth season

3. Satellite Imagery

a. Mapping the fields and irrigation infrastructure

b. High resolution and thermic imagery of the fields for detection of bad crops, dry

areas, crop growth rate, exposure to insects, and much more

c. GIS Cloud for safe storage of gathered information for sharing and for future

analysis

4. Leakage detection at massive irrigation systems with multiple sources and outputs

Summary

CrossTalk for Agriculture offers an innovative and unique offering which includes a complete

plant-soil-climate based decision support services.

Numerous customer experiences indicate clearly that the system increases yield and reduces

water required for irrigation and enhances growers' decision making ability.

The business model is based on real-life, field-based evidence and is indicative of the benefits

that stem from using the system: reductions in water used and increase in yield.

© C. Mer Industries 2013 – Private and Confidential 11

Addendum: Business Model Data Sources

1. Production, yield and prices – SIAP, 2012

http://www.siap.gob.mx/index.php?option=com_wrapper&view=wrapper&Itemid=350

2. Water cost

a. Cost studies conducted by UC Davis (California)

http://coststudies.ucdavis.edu/current.php

b. University of Georgia (Corn 2013) http://flacrops.com/wp-

content/uploads/2013/04/2013CompleteCornProductionGuideUGA.pdf

c. Other - http://www.ces.uga.edu/Agriculture/agecon/printedbudgets.htm

3. Water Saving and Yield increase assumptions – conservative assumptions by MER and

Phytech