leading the revolution in urban farming, profitably ... · (vegetables, berries, herbs and leafy...

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Confidential © 2014 Home Town Farms, LLC

®

Leading the revolution in urban farming, profitably

providing high quality, organic, ultra-locally grown food

through application of efficient technology, a radically

streamlined supply chain and a direct business model.

CONFIDENTIAL INVESTMENT MEMORANDUM

Contact: Dan Gibbs, CEO

[email protected]

858-248-9369

mailto:[email protected]

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Table of Contents

Home Town Farms Overview…………………………………3

Broken Food System…………………………………………..4

Home Town Farms Solution…………………………………..5

Streamlined Model Benefits…………………………………..7

Market Potential……………………………………………….9

Experienced Management…………………………………….11

Use of Proceeds……………………………………………….24

Funding and Build out Timeline……………………………...26

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Home Town Farms Overview

Home Town Farms™ is a vertically integrated food growing and retailing system for

urban and city markets. The Home Town Farms model combines proven and profitable

vertical growing technologies with a restructured supply chain that eliminates middle-

men and transportation to capture high margins while drastically reducing the resources

needed to grow and sell organic produce. These growing and distribution efficiencies

create a cost structure that is 50% less than conventional non-organic farms and

traditional distribution systems, using on average 85% less water, 80% less fertilizer,

70% less land and reduces fuel consumption and carbon output by about 90%, compared

to conventional farming. An on-site retail store serves as a permanent farmers market,

providing a fresh and fun consumer experience with the convenience of an urban

neighborhood location. Home Town Farms vertical integration from seed to shelf

provides high margins while offering customers the highest quality healthy, fresh organic

produce at price points they can afford.

The rise of farmer’s markets, which are temporary and inconvenient, is a strong

indication of latent demand for wholesome, farm-fresh produce. Home Town Farms’

model changes the economics of how we grow and distribute high-value produce to

urban consumers. Combining highly efficient growing systems already deployed in arid

regions around the world and the management team’s deep experience at greenhouse

farming, Home Town Farms eliminates most of the inefficiencies of the current farming

and distribution systems, including the costs associated with transporting produce

hundreds or even thousands of miles from farm to consumer. Home Town Farms will

also provide wholesale sales to local farmers markets, restaurants and grocery stores with

a business model that is cash flow rich and highly profitable.

Home Town Farms seeks to establish a chain of Retail Farms in Southern California and

then leverage our brand and market leadership to rapidly develop a national footprint.

While there are over 185 certified farmers’ markets held each week in Los Angles,

Orange and San Diego counties. There are currently no other Retail Farms in the United

States that have this business model. By being the first to combine vertical growing in

densely populated areas with local distribution, we will secure key locations, build brand

recognition and develop critical municipal and distribution relationships in each local

market. The type of produce grown at each location could consist of 28 varieties of high

margin, high-value mainstream vegetables and berries, along with select specialty

vegetables that are specific to the local population needs. Providing high quality, local

food at a savings to the consumer is a recession-proof business proposition.

Each Home Town Farms location is forecasted to be profitable within its first full year of

operation. Even the initial pilot Retail Farm, with approximately 53,000 square feet of

indoor growing area is forecasted to produce $1.05M in revenue and $311k in operating

cash flow in the first full year, and grow from there, resulting in a 48 month return of

capital, and an unlevered 10.5% IRR. Future Retail Farms, ~2 acres in size are expected

to produce $2.2 million in revenue and $1.1 million in operating cash flow, for a 64.7%

IRR at the operating level.

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Broken Food System

Home Town Farms brings a practical and economically compelling solution to well

known intransigent problems with our current food production and distribution systems.

Concerns for the long term viability of our food production system center on three key

issues: increasing population, shifting of weather patterns and shrinking fresh water

supplies.

Population

According to the United Nations, there are currently 7 billion people on the planet, up

from 2.5 billion in 1900. World population is expected to grow to 9.0 billion by 2050.

That’s a 200,000+ net new people added to the earth every day. Compounded with rising

caloric intakes and more tastes for resource-intensive foods such as meats in the

developing world, feeding this burgeoning population represents a significant challenge.

Weather

Weather patterns are changing, which means that crops that grew in certain areas will no

longer grow as well, producing lower yields. These crops will find new locations but this

will take time and crop harvests will be less while populations are growing. Weather

patterns are also becoming more extreme, shortening growing seasons and moving

rainfall distributions and intensity in ways unproductive to agriculture.

Water

Fresh drinking water is becoming less available in larger areas due to changing weather

patterns and increased demand from a growing population. Growing our crops under the

current farming system uses 70% of the fresh water consumed in the United States.

Farming as we know it will not totally change but where we grow certain crops must

change. Home Town Farms will show that high-value; highly perishable produce

(vegetables, berries, herbs and leafy plants) should be grown in the city. Traditional urban

farming can grow 20,000 to 40,000 pounds of produce per acre, vertical urban farming

can grow more than 500,000 pounds per acre. Produce grown in the city provides the

healthiest, lowest cost and is the most environmentally friendly way to grow food for the

masses. Most other crops (Tree, Stalk and Root crops) will continue to be grown out side

the city where large areas of land are required to grow the required quantities needed. The

current food distribution will continue to deliver these commodities but will slowly

transition away from perishable produce.

Why Vertical Farming?

The key to urban farming is utilizing the air space above the ground, to compensate for

the costs of urban land and labor. Vertical farming uses this air space by employing

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highly efficient growing systems, covered growing areas and drip irrigation to maximize

yields and dramatically increases land use efficiency by minimizing the amount of natural

resources needed to grow produce.

The Home Town Farms Solution

The Home Town Farms solution combines highly efficient vertical farming equipment

and facilities (already in use in arid locations worldwide for over 10 years), a limited

distribution footprint and direct to consumer sales to radically streamline the inefficient

conventional supply chain for produce.

Farming Equipment

The high efficient vertical farming operation allows us to yield the volume needed for the

expensive city land and labor costs. This equipment drastically reduces the amount of

resources needed to grow plants, therefore reducing our operational costs, e.g. Home

Town Farms with high efficient growing systems should save approximately $62,000 a

year in water costs and $56,000 a year in fertilizer, pest management and diseases control.

Vertical Farming Knowhow

Home Town Farms management has decades of experience installing and operating these

high efficient growing systems, drastically reduced farming execution risks.

Mike Castro, co-founder and COO of Home Town Farms. Mr. Castro started his first

hydroponic greenhouse in the late 1970’s. Mike was on the initial fact finding tour of

greenhouse operations in Spain, in the early 1990, for a group of Mexican producers that

led to the implementation of high efficient growing systems and greenhouses in Mexico

that now have become the industry standard. Mike has decades of real world experience

and knowledge of these high efficient growing systems plus his relationships in the

industry brings additional knowledge and experience to Home Town Farms.

Roy Peleg, Advisory Board member, was the Chief Agronomist for Netafim Ltd, one of

the world’s largest and most respected companies that specialize in all aspects of high

efficiency growing systems and greenhouses. Mr. Peleg was responsible for the scope

and agronomic planning of TKP (Turn Key Projects) and upgrades world wide,

agronomic support for greenhouse support for all territories; Mr. Peleg also collaborated

with research bodies on crop growing technologies, soil substrates, irrigation in

greenhouses and farm management. Mr. Peleg currently owns two high efficient

greenhouse farms in China.

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Farm Foot Print

Home Town Farms will build Retail Farms to match the demand of each community. The

size of the Retail Farm should be between 1 and 3 acres, scaled to supply a consumer

base residing within a 5-mile radius. When one Retail Farm sells out that Retail Farm

will not be expanded; another Retail Farm will be built 10 to 12 miles away, repeated as

demand requires The single largest cost in the price of produce is the cost and waste

required to deliver the produce from the farm to the store, so by limiting that distance,

Home Town Farms should significantly reduce the end cost of the produce, while earning

superior margins.

Supply Chain value expected to be captured by Home Town Farms

Retail and Wholesale Sales

Home Town Farms has selected locations for its operations which have a minimum of

30,000 people with average household incomes of $40,000 within a five-mile radius of

the site. Retail sales are expected to come from our prime locations that have 10,000+

car views a day. These locations are planned to have a retail store attached to the

greenhouse where the plants are grown, allowing for customers to come into the grocery

store, look through windows in the back of the store to actually see how their produce is

grown. Wholesale sales are expected to come from delivery and pickup services that

Home Town Farms plans to offer to businesses with in a five mile radius of the Retail

Farm. By reducing the distribution radius, we also eliminate the need for brokers and

distributors, further improving the efficiency of the supply chain reducing the end cost of

the produce.

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Streamlined Model Benefits

The Home Town Farms approach reduces cost while providing a healthier, fresher, more

nutritious and better tasting product.

Home Town Farms eliminates all the middlemen typically involved in distribution of

foodstuffs. For produce products, distribution costs and its associated waste can account

for as much as $0.60 of every dollar spent on a piece of produce. Home Town farms

distribution cost for the same produce is expected to be around $0.10 of every dollar

spent.

Under our current farming and distribution system produce must be picked one to two

weeks early so it can ripen on its way to the market. Most of the nutrients in produce are

formed in the last week or two of ripening on the vine. Under the current system produce

is picked early and starts with a lower nutrient content than fully vine ripened produce. A

study done by UC Davis found that most produce loses 35 to 75% of its nutrients with in

1 week of picking. When you combine early picking with time to market you are

providing people with produce that has far less nutrients than it should but all of the

calories, an un healthy combination.

Proven Technologies

Home Town Farms plans to purchase equipment and materials from Netafim and other

well respected companies, therefore leveraging Netafim’s and other’s over 46 years of

experience and knowledge to ensure we are the most efficient Vertical Urban Farming

business in the world.

The types of growing systems Home Town Farms plans to use are available

commercially. Home Town Farms plans to use a combination of 3 types of growing

systems at one location. The three systems will allow maximum yield per sq ft of leafy,

bush and vining plants. The large varieties make it worthwhile for people and businesses

to add our produce to their food purchasing routine. This is especially important in

attracting wholesale customers.

What causes higher yields per acre?

The growing systems produce higher yields per sq ft because they utilize vertical air

space normally unexploited by traditional growing methods. The growing systems

combined with a controlled growing environment allows for more plants per square foot

and increased yields from each plant compared to field farming.

Production comparison; Field vs. High Efficient Greenhouse Greenhouse hydro-organic / hydroponic growing is the most advanced form of farming.

This form of growing allows for large crop sizes on small areas, combining that with our

direct to consumer model plus a small distribution radius, offers the most efficient supply

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chain of fresh produce from farm to consumer. The unusually high return per square foot

is a direct effect of Home Town Farms owning the entire supply chain; farmer, distributor

and retailer. Revenue calculations are a simple equation of taking USDA published data

of greenhouse grown produce volumes and multiplying that by established USDA

published pricing.

Example: Almond farmers will produce ~2,230 pounds of almonds per acre and receive

an average $1.65 a pound (2010 USDA published data) which would give the almond

farmer grosses revenue of $3,680 per acre. If that same farmer could get the public to

come to their farm and sell the almonds direct to the consumer the farmer could of made

$9 a pound, which would of given the farmer gross revenue of $20,070 per acre. If the

almond grower could use growing equipment like the ones that are used for vegetables,

berries and leafy plants then the almond farmer would be able to fit 6 trees in the same

space that one tree currently takes up, then that farmer would be able to produce 6 times

more almonds per sq ft giving the farmer potential revenue of $120,420 per acre. This

demonstrates that vertical growing systems combined with direct to consumer model

offer margins and revenues superior than the current system allows.

Retail Store Comparison

Home Town Farms plans to build retail locations attached to our farms that are located in

high traffic areas. These stores will average 1,200 sq. ft. per acre. Home Town Farms will

average $651 in sales per sq ft annually. This is mid ranged compared to various other

retailers, e.g. Trader Joes $1,000, Whole Foods $757, Safeway $510 and Natural Food

Store at $410.

These sales numbers are based on selling locally grown vine ripened organic produce at

Von’s or Safeway non-organic conventional pricing. There are three models developed

for Home Town Farms to ensure success in the urban and city environment. The three

models are blended, retail only and wholesale only.

Blended Model:

The blended Retail Farm model will be located in or near shopping centers or other high

traffic locations. This model combines retail and wholesale sales from the same Home

Town Farms’ location. Retail sales will come from the store that is attached to the farm.

Wholesale sales will come from delivery and pick up services offered to local small and

medium sized businesses. The first one-acre Home Town Farm will be a blended model.

Retail only:

Retail only stores are best suited for downtown or other densely populated areas, and will

be pursued in a later stage of the Company’s development. The retail locations will

support a small growing area that allows people to see exactly how the food is grown.

The majority of the produce will be supplied by a Home Town Farms’ farm located

within 5 miles of the retail store. This allows us to stay true to our mission and at the

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same time utilize lower cost land maintaining the margins needed to maintain expensive

downtown retail property.

Wholesale only:

Wholesale only stores will be located on low cost land within 5 miles of major wholesale

customers. The farms would be designed around these customers allowing Home Town

Farms to produce specific items needed to ensure satisfied customers. The farms retail

store would be replaced with a mini processing area that could convert the harvested

produce into their desired packaging forms for resale.

Market Potential

The retail sales market of fresh produce and berries are over $35+ billion a year in the

United States, according to PMA (Produce Marketing Association). The market potential

for the types of produce Home Town Farms will grow is over $11 billion. The market

potential described above does not include wholesale and food service, which are each

multi-billion dollar markets. Home Town Farms will capture parts of these markets too.

According to USDA the average American eats $5 a week in produce, which equals $250

annually. Home Town Farms one-acre Retail Farm will provide $1,050,000 in annual

sales. A one-acre Retail Farm will provide the produce needs of approximately 3,200

people. The top 100 cities in the United States have a minimum population of over

50,000 and some over 200,000 people with median annual income of $72,168. These

cities could handle dozens of Retail Farms each. Home Town Farms goal would be to

secure 235 locations or average 2.35 Retail Farms per city. If built as corporate-owned

locations, these 2.35 Retail Farms would have annual sales potential of ~$600 million

with ~$200 million contribution to margin. This does not include the potential Retail

Farms in the other 1,100 cities across the United States.

Home Town Farms’ model changes the economics and creates a lower cost structure

(estimated at 60% of traditional farming and transportation cost) and a more cost-

competitive product offering that has the potential to grow the organic market by

attracting new urban and city consumers. This will be accomplished by selling locally

grown vine ripened organic produce at prices comparable to conventional non-organic

produce.

Consumer demand for fresh locally grown food is growing. Currently 70% of consumers

have expressed a preference for local grown food and 8% prefer organic food. Home

Town Farms produces locally grown organic food providing a potential to capture 78%

of the consumers. The success of Whole Foods and the growing popularity of farmer

markets are a great indication of the increasing market demand for high quality locally

grown organic food.

Strategy for Expansion

Home Town Farms has built important relationships throughout the United States but

especially in Southern California. These relationships give Home Town Farms a

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competitive advantage in both branding and potential sales. Home Town Farms’ strategy

for growth is to build out the Southern California market as corporate owned stores and

expand nationally through licensing/franchising arrangements. Global expansion is also

planned

Corporate Owned Stores

Prior to further expansion, a one-acre pilot Retail Farm will be built in San Diego,

California. In phase 2 of its business plan, Home Town Farms expects to build and

operate 40 corporate owned Retail Farms throughout Southern California, the majority as

2.2 -acre Retail Farms which are expected to generate a combined $85 million revenue

and $38.7 million in EBITDA by the seventh year of operation. This will establish a

strong and profitable base of operation and create an expandable brand to position Home

Town Farms as the national local food solution.

Real Estate Home Town Farms will lease land for its primary business of farming operations. During

its rollout phase, Home Town Farms will organize a separate real estate enterprise that

will consist of the current Unit holders of Home Town Farms LLC, for the purpose of

buying certain desirable properties and leasing them to Home Town Farms LLC for

operations. Home Town Farms’ goal is to purchase or have an option to purchase key

locations. Home Town Farms has the option to purchase the first location in Vista.

Licensing and Franchising Home Town Farms will use a licensing and franchising strategy to expand the brand

across the United States. Licensing and franchising will generate revenue with very little

capital requirements.

Key Customers

Home Town Farms has the support of large Wholesale Customers, City Officials,

Universities, School Districts, Hospitals and Community Groups.

Each one of these large wholesale customers represents a vertical market that can be

duplicated across the United States.

Home Town Farms has received letters of commitment to purchase from:

o Whole Foods – Customer for Retail Farm 1

o Encinitas School District – Customer for Retail Farm 1

o Palomar Pomerado Health System including their hospitals – Customer for Retail

Farm1

o San Diego Zoo Safari Park– Customer for Retail Farm1

o Barona Resort and Casino –Customer for Retail Farm 2 (distance, not demand)

o San Diego Zoo. Customer Retail Farm 2 (distance, not demand)

City Support Home Town Farms has received letters of support from:

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o City of San Diego, by the Clean Tech manager of San Diego, Jacques Chirazi.

Jacques is in charge of all green and renewable energy projects for the City of San

Diego and answers directly to the Mayor.

o County of San Diego, by Ron Roberts, the current San Diego County Supervisor.

Community Support

The following organizations have expressed a high level of interest in working with

Home Town Farms

o Urban League of San Diego

o Boys and Girls Club of San Diego

o Partnerships of Industry San Diego

o California Center of Sustainable Energy

o Food Bank of San Diego

o San Diego Red Cross Women, Infants and Children’s program

o San Diego County Child Obesity Program

University Acknowledgement All are interested in their students learning more about high efficient vertical urban

farming.

o San Diego State University (SDSU) Dan Gibbs CEO of Home Town Farms is a

Advisory Board member of their Advisory Committee for Water and Land Use.

SDSU is developing curriculum for certificate and education programs. SDSU

believes that Vertical Urban Farming is an important part of urban water and land use

and wanted Dan’s input regarding vertical urban farming.

o UCLA, Dan participated as a panelist and speaker at UCLA’s Food 2.0 conference.

o UCSD, Dan as requested by the Director of Sustainability lectured to numerous

classes of Master Students.

o USD, Dan presented at USD Masters of Science in Executive Leadership (MSEL)

conference.

City Planning and Zoning Acknowledgement

o Top San Diego city officials in the planning and zoning departments called upon Dan

Gibbs for input on vertical urban farming to update the San Diego city codes. Home

Town Farms criteria were one of the sources used to update the city codes opening

more areas and opportunities for Home Town Farms.

o San Diego City Council requested Dan present Vertical Urban Farming information

to the Land Use Committee

o Dan Gibbs input and Home Town Farms criteria lead to a new San Diego city code

called “Retail Farm”

Experienced Management

The management team is lead by the two Founders Daniel Gibbs, CEO and Michael

Castro, COO. The management team and Advisory Board members where hand picked

because each person’s expertise represents a specific area needed to create a successful

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vertical urban farming company. We believe we will have no problem recruiting the best

people to complete our management team. Complete team Biography’s follows the

Execution of Strategic Categories section below.

Execution of Strategic Categories

The team members below bring years of hands on experience plus their relationships with

other industry experts.

Farming / Farming Technology

Mike Castro

o Produce Specialists of San Diego went public and became Fresh Choice

part of Dalgety PLC London (9 Years)

Grower procurement and production supervisor - over 20,000 acres

in Mexico went private again and is now called "New Star"

o Rancho Los Pinos, San Quintin Baja Mexico, largest grower in Northwest

Mexico and now the largest hothouse grower (6 Years)

Manager Technical Dept / Grower

o Bruce Church - Guadalupe, California, one of the largest lettuce

companies in the US (2 Years)

(Assistant Manager)

o Mexam Fruit Company - National City, CA. with operations in Latin

America, Oldest Certified Organic Banana producer in the world. (4

Years)

International Operations Manager.

o San Diego Organic Supply (3 Years)

President

Roy Peleg

o Netafim Ltd., World leader in smart irrigation and greenhouse solutions (7

years)

Chief Agronomist Corporate Greenhouse Division , Greenhouse

Division Director and Regional Manager

o Fertilizers & Chemicals Ltd. (5 years)

Agronomist and Regional Manager

o Kibbutz Masada (6 years)

Farm Manager

Roy Wilburn

o Agricola La Canapana SA dc C.V (15 Years)

Grower and Farm Manager

o Island Horticulture Specialist, Inc. (3 years)

Owner, Grower and Farm Manager

o Herb Thyme Farms, Inc. (2 years)

Grower and Farm Manager

o Bandy Canyon Ranch (3 years)

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Agriculture Manager

o Sunshine Care (current)

Director of Horticultural Operations

Tosh Nishiguchi

o Circle Farms (17 years)

Production Manager

o Sea Breeze Farms (5 years)

General Manager

o Vener Farms (2 Years)

Production Manager

Retail / Wholesale

Bruce Peterson

o Wal-Mart Stores (16 years)

Senior Vice President Perishables ( Grocery included)

Tosh Nishiguchi

o Alpha Beta Grocery Stores (7 years)

Produce Manager

Mike Miller

o Wild Oats (1 year)

Chief Financial Officer – Chain of Natural food grocery stores

o Jeltex Holdings (7 years)

Chief Operating Officer - Vertically intergraded food and food

Products Company; essentially a farm, manufacturing to retail

business.

o Thomas Village Market (6 Years)

Co-Owner – Gourmet Grocery Store

Dan Gibbs

o Gold Mine Natural Foods (1 Year)

CEO

o OnTech / Ontro (13.5 Years)

Vice President Business development

Marketing and Branding

Rowland Hanson

o Microsoft Corporation

Vice President of Corporate Communications

o Neutrogena Corporation

Vice President of Worldwide Marketing

o The Nautilus Group (NYSE: NLS)

Business development consultant, branding consultant, and Board

Member

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Team Biographies

Daniel Gibbs, CEO – Founder

Dan brings more than 30 years of experience as an Entrepreneur, Board member, CEO

and VP. Dan was a Co-Inventor of the Self Heating Container technology and served as

Vice President of Business Development for OnTech Inc. Dan played a leading role in

negotiating and closing product development contracts with Procter & Gamble, Kraft and

other multi-national corporations and closed the first $300 million in sales for the

company. While Dan was Vice President of OnTech Inc., Fortune magazine picked

OnTech as one of the top 25 breakout companies of the year. Dan is also named on

numerous utility patent claims issued in over 35 countries.

As CEO of Gold Mine Natural Foods, Dan developed strategic relationships and

implemented and created growth initiatives that lead to the fastest growth in the

Company's 21 year history. Dan was also the Co-Founder and Board member of Predict

Power LLC. Predict power offered real-time energy price and consumption forecast

information systems, specifically-designed for commercial and industrial (C&I) facilities.

Dan is a current Advisory Board member of San Diego State University (SDSU) Water

Conservation Advisory Board, Provide industry expertise in the best use of water and

land in urban and city areas. SDSU will use this information to create new learning

curriculum and certificate programs for college students. Dan is a current Advisory Board

member of Compass Auto Finder LLC. The Compass Auto Finder is a revolutionary

patented product made up of the world's smallest directional antenna. Dan is a past Vice-

Chairman and Board Member of the San Diego Renewable Energy Society, which is the

local chapter of American Solar Energy Society, one of the largest and oldest solar

groups in the US. Dan has been involved in raising over $35 million dollars for various

companies.

Michael Castro, COO – Founder

With over 30 years Agricultural experience, Michael Castro a native of Coachella Valley,

California, has extensive practical and management experience in both conventional and

organic farming, as a Grower and Grower Supervisor. As a winner of the Bank of

America Agricultural Scholarship, he studied Crop Science with a concentration in

Vegetables and graduated with a B.S. from California Polytechnic State University in San

Luis Obispo. Following his graduation he spent 25 years as an owner and manager of

various private, public and multinational produce operations, some as large as 20,000

acres.

His experiences have taken place not only in the USA, but he has also had extensive

program development experience in Mexico, Central America, South America and the

Dominican Republic, in both Organic and Conventional agriculture. He has held all 7

Pest Control Advisor's Licenses in the State of California and is also a Certified Organic

Inspector. His extensive skills as related to this business include Real Estate development,

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Human Resources, Team Building, Budgeting and Tracking, Procurement, Harvesting

and Packaging, Produce Sales and Purchasing, International Import/Export, and

transportation. He has been instrumental in the turn around of various operations by

bringing new technological ideas to these businesses that made them more competitive in

the International marketplace. The initial operation Mike was associated with in Mexico

became very successful and was purchased by an International public company and Mike

was retained as the Growing Operations Supervisor responsible for Contracts, Crop

Scheduling, Quality Control and Operations. He supervised a $20M budget that

generated over $100M in annual sales.

Mike was on the initial fact finding tour of greenhouse operations in Spain for a group of

Mexican producers that led to the implementation of greenhouse growing techniques that

are fast becoming the standard of the industry in Mexico. He has worked with some of

the pioneers of Organic growing, and is a researcher and developer himself, of innovative

organic products for Agriculture and the Home Gardener.

Roy H. Wilburn, Farm Manager/Grower

Mr. Wilburn has more than 20 years, of experience managing and operating vegetable

and berry farms. Immediately after college he became an agriculturalist in the San

Quintin Valley of Baja California Norte. For the next twenty years he was a hands-on

grower and eventually owner of ranches up and down the Baja Peninsula. Mr. Wilburn

has managed over 1000 acres of tomatoes, all types of peppers, peas, beans, cucumbers,

squashes, asparagus, strawberries and other produce annually. All aspects of production

were his responsibility including seed acquisition and varietal selections, greenhouse

growing of all transplants, ground prep, MBr and plastic mulch application, macro and

micro irrigation design and installation, planting, cultural practices, fertilization and pest

control, harvest, hauling, packing and shipping and working daily with the sales team.

Over two million boxes were produced annually and distributed from their sales facilities

in the Otay Valley of Chula Vista, California.

After his Mexico experience, he worked for HerbThyme Farms in Oceanside California

as Grower/Manager of all sixteen herbs, both conventional and organic; again, all aspects

of growing were his responsibility. Besides growing, Organic Registration, Primus

Certification, all audits, Kosher registration and complying with all state, county and

federal regulations were also his responsibility. GAP, food safety regulations, fertilizer

and pesticide application logs were kept daily. No violation of any kind was allowed

under his watch.

Mr. Wilburn worked closely with University of California system, farm advisors all over

the nation, seed companies, irrigation companies, and chemical companies to stay on the

cutting edge of all technological aspects of agriculture. His outfit was the first to bring

drip irrigation and the use of plastic mulch to Baja. He worked with Sun World

International to become the first grower, in Baja, of the LSL tomatoes and seedless

watermelons, galia melons and the now popular La Mouye type of Spanish red pepper.

During his second year of growing strawberries, he received national recognition at the

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United Fresh Fruit and Vegetable Association Convention for the first ever, pre-print

strawberry box.

His research and education led him to many growing areas in the USA, Mexico, Spain,

Israel and the Netherlands. Always looking for an advantage in latest technologies,

varieties and growing practices were crucial to stay on top. He was a member of the

California Tomato Advisory Board; he was an Executive Board member at Peninsula

Vegetable Exchange, Inc. and resident of Island Horticultural Specialists, Inc. Mr.

Wilburn has certificates in Post Harvest Handling and Completion of Vineyard Series

from UC Davis and is a Licensed Private Applicator of Pesticides in California.

Advisory Board Members

Mike Miller

Mr. Miller has held positions as CFO, COO, and CEO of public and private companies.

The range of companies has varied from a Cleantech start-up to a turnaround of a public

company, and in diverse industries from fresh and processed food to aerospace. Mr.

Miller was Chief Operating Officer of Jeltex Holdings, Inc. a vertically integrated fresh

produce and food Ingredients Company. While at Jeltex Mr. Miller was responsible for 6

acquisitions of growing partners in Mexico and California, Import operations, large scale

production of Green Chile and sales to industrial food manufacturers and direct sales to

major retailers such as Kroger, Albertsons and Safeway.

He formerly served as Chief Financial Officer of Wild Oats Markets, Inc. Mr. Miller is a

CPA, spending his formative years with KPMG, and previously held membership to the

New Mexico Bar.

Bruce Peterson

Bruce is the founder and president of Peterson Insights, Inc., a consulting company

specializing in helping fresh food companies successfully navigate through a wide variety

of complex challenges.

Bruce is a 39 year veteran of the produce industry, who began his food career bagging

groceries for a supermarket chain in his hometown of Detroit, Michigan in 1970. Bruce

worked for several notable supermarket chains, as well as owned and operated a

wholesale produce company.

But Bruce is best known for the time he spent as Senior Vice President of Perishables for

Wal-Mart Stores, Inc. Bruce joined Wal-Mart as the Produce Director in 1991 after being

interviewed by none other than Sam Walton himself. During his 17 year career at Wal-

Mart, Bruce saw the company grow from 6 Supercenters to over 2300 Supercenters, 117

Neighborhood Markets, and established 42 food distribution centers. He became Vice

President of Produce/Floral in 1994, and in 1998 was made Senior Vice President of

Perishables. In addition to his Merchandising and Procurement responsibilities, Bruce

17


was the Chairman of the WalPac Advisory Group, which is Wal-Mart's Political Action

Committee (P.A.C). Bruce actively represented Wal-Mart in Washington and lobbied on

a wide variety of agricultural issues. Bruce was a driving force in several industry

changing initiatives including Reusable Plastic Containers ( RPC's), Radio Frequency

Identification ( RFID), Vendor Co-Managed Replenishment, Category Management,

Food Safety/Traceability, and Case Ready Meat, just to name a few.

Bruce retired from Wal-Mart in 2007, and later joined Naturipe Foods LLC as its

President and CEO, where he applied his retail perspective and business acumen to a

grower shipper organization.

During his career, Bruce has been active and recognized in a wide variety of industry

roles.

In 1997, Bruce was honored as Produce Marketer of the Year by "The Packer".

In 2001, he was named Perishable Executive of the Year by "Grocery Business"

magazine.

In 2002, he served as Chairman of the Produce Marketing Association. In that

same year, he was appointed by the Secretary of Agriculture to serve on the

USDA Produce Advisory Committee.

Bruce is a guest lecturer at 6 major Universities, is frequently asked to comment on

timely and relevant industry issues, and is asked to speak at a wide variety of industry

events. He brings a seasoned perspective to virtually every aspect of the supply chain

from the producer straight through to the consumer. He serves as a Board member for

several companies dealing in supply chain logistics, grower/shipping, and Information

Systems.

Bruce's experience and wisdom will help Home Town Farms build the most efficient

retail outlets. Home Town Farms believes that Bruce will also be a great help in

developing strategies for successful growth.

Roy Peleg, M.Sc, Agriculture Science

Mr. Peleg is CEO and partner in AraZim; an Israeli consulting company emphasizing in

Ag-business services. Mr. Peleg was the Greenhouse Division Director, Regional

Manager and Marketing Director for Netafim Ltd. a world leader in smart irrigation and

greenhouse solutions (http://www.netafim.com). Mr. Peleg also served as the Chief

Agronomist Corporate Greenhouse Division. As Chief Agronomist he was responsible

for the scope and agronomic planning of TKP (Turn Key Projects) and upgrades

worldwide, Agronomics support for greenhouse projects for all territories; Mr. Peleg also

collaborated with research bodies on crop growing technologies, soil substrates, irrigation

in greenhouses and farm management.

While Mr. Peleg was Greenhouse Division Director he was responsible for establishing

the greenhouse divisions across; Japan, India, China, Vietnam, Thailand, Philippines,

18


Indonesia and Australia-NZ. He managed the greenhouse division manager in each

country as well as the agronomic work force, Conducted the education and training

programs for Netafim in the field of greenhouse engineering, agronomy, sales and

marketing.

As Regional Manager Mr. Peleg managed the day to day business operations, including

agronomy and business development in several countries including; Saudi Arabia, UAE,

Bahrain, Oman and Qatar. While Marketing Director at Netafim Mr. Peleg was involved

in the development of the Greenhouse solution for Japan and Korean national agriculture

reconstruction (2009) and he was also involved with the development of the regional co-

services company to deliver agronomic and technical services to farmers.

Mr. Peleg has 24 years of experience in the agriculture business including 5 years with

Fertilizers and Chemical (ICL). Mr. Peleg has significant experience and knowledge in

Greenhouses, Growing substrates, Vegetables, Herbs, Fertilization, Irrigation,

Agriculture Marketing, Agriculture Planning and Business Development.

Mr. Peleg is an agronomist and holds a B.Sc and an M.Sc in Agriculture Science both

from the Hebrew University in Jerusalem.

Mr. Peleg will be a great help to us, he will ensure that we are using the right growing

technologies and methodologies to ensure the production of the highest quality and

quantity of vegetable and berries possible.

Rowland Hanson

Mr. Hanson is CEO of Hanson Maslen Group (www.HansonMaslenGroup.com). Prior to

consulting, he was Vice President of Corporate Communications at Microsoft, where he

developed and executed the company's highly acclaimed branding strategy which

included the market introduction of Microsoft's most popular product—a graphical

interface that he named "Windows." Several books published on the history of Microsoft

document the strategies executed that led to the dominance of the Microsoft and

Windows brands. Prior to Microsoft, he served as Vice President of Worldwide

Marketing for Neutrogena Corporation, a skin care and cosmetics company that

registered phenomenal growth thru new product introductions and global partnering

before being acquired by Johnson & Johnson.

Rowland was also a business development consultant, branding consultant, and board

member of The Nautilus Group (NYSE: NLS), the developer and marketer of such

brands as Bowflex, Nautilus, Schwinn Fitness, and StairMaster. See www.nautilus.com.

Rowland is a Managing Partner at the Santa Barbara Wellness Institute which is a source

for creating and maintaining a lifestyle dedicated to wellness. The Institute, led by

internationally-recognized wellness experts, offers education, online communities, and a

wide array of products that are the building blocks for a healthy mind, body, and spirit.

http://www.sbwi.com. He is also a Partner at Montecito Corporation, the company

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leverages their proprietary Market Intelligence Systems, extensive healthcare industry

experience and capital to help our partners identify and qualify the best sites for medical

and senior living ventures in the country. http://www.montecitocorporation.com

Rowland has a BBA from Loyola University (Jesuit Honors Society) and an MBA from

Wharton School of Business (Director's List). Rowland will be instrumental in forming

our Branding strategy to ensure we are perceived as the leading experts on vertical urban

farms and to brand our vegetables and berries as the most "Eco-Friendly" on earth.

Sanford B. Ehrlich, Ph.D.

Sanford B. Ehrlich is the QUALCOMM Executive Director of Entrepreneurship for the

Entrepreneurial Management Center at San Diego State University within the College of

Business Administration. Under Dr. Ehrlich's leadership, the EMC has been recognized

among the top business schools for entrepreneurship by U.S. News and World Report and

is a NASDAQ Center of Entrepreneurial Excellence. His teaching, research, and

consulting is focused on entrepreneur-investor relations, leadership and organization

design of emerging growth companies, corporate entrepreneurship, and technology

commercialization.

His publications have appeared in the Journal of Business Venturing, Organization

Studies, Administrative Science Quarterly, Leadership Quarterly, Academy of

Management Journal, Journal of Technology Transfer, Family Business Review, and the

International Management Journal. For the past 5 years, Dr. Ehrlich has worked with the

Peres Center for Peace in Israel to establish cross-country collaborations in the

agricultural and food industries to commercialize new products. In this regard, Dr.

Ehrlich has been a featured speaker at several conferences in the agricultural sector. At

AgriTech, Israel's major agricultural technology conference, Dr. Ehrlich has presented a

model for commercializing new food products, borrowing development models from

technology-based companies.

Dr. Ehrlich is a member of the Board of Directors for Deep Sky Software Inc. (privately-

held), and has formerly served as a Director of The Healthy Back Store Inc. and Amistar

Corporation. He also serves on the board of advisors for Accenx Technologies, Confirm

BioSciences, and Sullivan International Group. In addition to his involvement with

entrepreneurial companies, he serves as a director and advisor to the following

organizations that promote entrepreneurial development: San Diego MIT Enterprise

Forum and CONNECT. For his work in entrepreneurship, he has received the 2000 Ernst

& Young Entrepreneur of the Year Award and the 2001 Edwin M. and Gloria W. Appel

Award from the Price-Babson Foundation. In 2007, Dr. Ehrlich was named one of the

Top 18 Professors in Entrepreneurship by Fortune Small Business. He is also a Fellow of

the Beyster Institute in the Rady School at University of California, San Diego.

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Toshio Nishiguchi

Mr. Nishiguchi has over 35 years of experience in agriculture, farming, packaging and

selling produce. Tosh has managed farms that had more than 400 employees and was

responsible for the production, harvesting, packing, shipping and sale of strawberries,

tomatoes, bell peppers, green beans, corn and watermelon. Tosh also has experience as a

produce department manager were he was responsible for the staff, training them,

ordering produce, receiving and preparing the produce, display and inventory

management.

Tosh has extensive knowledge regarding all aspects of growing, propagation, plant and

pest identification. Tosh's expertise and knowledge of farming will help us prevent

typical farming issues and ensure a well run efficient farm to market operation. Tosh

speaks fluent Spanish, Japanese and English. Tosh attended Cal Poly San Luis Obispo in

the field of Agricultural and Horticultural field.

Robert Noble Architect, AIA, LEED AP

Mr. Noble is an architect, environmental designer, industrial designer and environmental

technology entrepreneur, and has been the recipient of numerous regional and national

awards for his industrial and architectural designs, and green technology innovations.

Over his 29 year career, he and/or his work has been awarded Entrepreneur Magazine's

Environmental Innovator of the Year, the Edison Award for Environmental Achievement

and "Best of What's New" – Popular Science 100 Best of 1993, and awards from the

American Institute of Architects, the Urban Land Institute and many others.

He attended UC San Diego, UC Berkeley, Harvard Graduate School of Design, Harvard

Business School, and Cambridge University Graduate Department of Architecture. He is

well known in the San Diego area as the past CEO of Tucker Sadler Architects, having

led the turn-around and rebuilding of the 50 year old firm into the leading sustainable

design firm in the region.

He is Founder and CEO of Envision Solar, which is positioned as the leading firm

worldwide at the convergence of the solar photovoltaic, building/real estate and

transportation industries. Envision Solar designs, engineers and installs photovoltaic solar

parking arrays and other commercial and residential Solar Integrated Infrastructure and

Building Systems worldwide, including LifeVillage™ self-sufficient decentralized power

production facilities for developing nation and other markets.

He is Past Chair of the US Green Building Council of San Diego, Past President of the

American Institute of Architects of San Diego, Chairman of the Board of the California

Center for Sustainable Energy, past Chair of the California American Institute of

Architects Committee on the Environment, past Board Member of The Old Globe

Theatre, Advisory Board Member of Clean Tech Institute and past Chairman of the San

Diego Downtown YMCA.

21


He and his work have been published extensively, and he has written over 40 articles

regarding sustainable design, USBGC LEED™ Certification, emergency shelter for

disaster relief, renewable energy and many other subjects. He has been a highly

committed and vocal local, regional and national advocate of environmentally

responsible manufacturing, design and planning, and low-cost, emergency and affordable

housing for over 25 years.

Harvard University Graduate School of Design

Cambridge University Graduate Department of Architecture

Harvard University Graduate School of Business Administration

University of California at San Diego and Berkeley, Undergraduate Studies

Bob will be a great help to us in developing vertical roof top farms as well as the

designing of our BIGS project (Building Integrated Growing Systems; multi story

vertical growing). Bob's entrepreneur and business skills will be a great help too.

Mark Juergensen

Mr. Juergensen has over 20 years of experience in developing, building, managing and

commercializing energy projects including renewable and traditional technologies. This

includes proven technologies such as gas turbines and solid fuel projects as will as

product development in advanced solar, engine technology, and energy software. Mr.

Juergensen specializes in power generation, asset management, project finance, venture

capital, start-ups, technology commercialization, product development, mergers and

acquisitions, clean tech, sustainability, renewable energy.

Mr. Juergensen is on the Board of Directors of CleanTech San Diego, a non-profit 501(c)

6 committed to form and foster energy and environmental technology cluster in the San

Diego region. CleanTech membership consists of City and County governments, research

institutions, industry, professional service providers, and capital providers; Board

member of Clean Ventures, Clean Ventures is a clean technology business accelerator

based in San Diego region; Board member Los Angles Power Association, LAPA is a

non-profit association providing a venue for major organization in Southern California to

discuss energy supply issues. Board member Sterling Energy, one of the original

members of this leading power generation management services firm.

Home Town Farms will utilize Mr. Juergensen's extensive experience in renewable and

traditional power generation technologies to ensure that Home Town Farms uses

renewable energy technologies to maximize energy efficiencies and cost savings.

Steven A. Brody, M.D., Ph.D.

Dr. Brody is a Reproductive Endocrinologist and Medical Director of Reproductive

Endocrine Associates in La Jolla, California. He is an internationally-recognized clinical

specialist, lecturer and researcher in nutritional genomics, anti-aging, menopausal

22


medicine and neuroendocrinology. He also has a special interest in the role of nutrition in

assistant reproduction and developmental biology.

Dr. Brody received his Bachelor's degree from Brown University in Providence, RI and

his medical degree from Washington U. School of Medicine in St. Louis. He is the only

physician in the U.S. who is Board Certified in the following four specialties: Internal

Medicine, Endocrinology & Metabolism, Obstetrics & Gynecology and Reproductive

Endocrinology & Infertility. He trained at Yale-New Haven Hospital, N.I.H., Stanford

University School of Medicine and Baylor College of Medicine, respectively.

In the past Dr. Brody has served in both leadership and advisory capacities. He was

Associate Director of Reproductive Endocrinology at Baylor, Director of GYN Surgery

at Ben Taub Hospital in Houston, Vice Regent of the International College of Surgeons,

and Medical Director of Reproductive Endocrinology at Alvarado Hospital in San Diego.

Dr. Brody served in the military as a Lieutenant Commander (surgeon) in the U.S. Public

Health Service.

Dr. Brody is President of Phi Beta Kappa Epsilon Association in San Diego. At UCSD

School of Medicine in La Jolla, Dr. Brody is an Assistant Clinical Professor in the

Division of Endocrinology & Metabolism. He is a Staff Physician at Alvarado Hospital

and at Scripps Memorial Hospital in La Jolla. Dr. Brody would like to publish papers

based on vine ripened organic produce that has more nutrients than traditionally grown

produce and its' effect on people's over all health.

Chef Gordon Smith

Gordon Smith has over 35 years combined experience in organic food and farming both

as chef and company owner. A California native, after graduation from Sacramento State

with a B.S. in Communications, he entered the restaurant business, training under

legendary chefs including Michel Stroot of the Golden Door. Chef Gordon became a

respected specialist in spa cuisine and was instrumental in opening Deepak Chopra's

Center for Well Being in La Jolla, California. Afterwards, he served as executive chef for

major resorts in California.

During Los Angeles Olympics, he worked as kitchen manager to help plan, organize and

feed healthy meals to 7,000 athletes in addition to catering presidential and mayoral

events. At the Culinary Olympics in Frankfurt Germany, Smith was part of the American

Natural Food Team which won two Silver Medals. A long time advocate of organics, his

company, Gordon's Specialty Produce, serviced independent markets in San Diego with a

wide variety of gourmet vegetables. He was thrice awarded Best Chef of North County

for his own restaurant, Basil Street Cafe in Encinitas where he also owned a full service

catering business. As an accredited teacher for regional occupations program, he gave

demonstrations on the use of fresh herbs in food preparation and taught cooking to

special education students. He has been a private chef for clients that include First Lady

Betty Ford, Michael Eisner, Saudi Prince Fahad and James Garner.

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For 5 years, Gordon was the backstage kitchen manager for Farm Aid. An early

proponent of Community Sponsored Agriculture, he helped launch a CSA at Seabreeze

Organic Farm with farmer/owner, Stephenie Cauglin. His interest in preserving the small

farmer led him to found Slow Food San Diego. He served a four year term as Governor

of Slow Food Southern California and was twice selected as a delegate at the Slow Food

Terra Madre, an international conference of food communities from 150 countries united

by a mutual goal of global sustainability. Currently, Gordon is co-owner of Vale View

Farm in Vista, California which specializes in vertical growing. Chef Gordon's reputation

as a top Chef and local food advocate will be instrumental to Home Town Farms in

developing relationships with top Restaurants, Resorts, Spas, Wellness Centers and "local

food" community groups.

24


Use of Proceeds

Round B Home Town Farms is raising round B funds. Round B is to build a pilot Retail Farm.

Upon completion of Retail Farm 1, round C funding will be triggered. Round C funding

allows for 9 additional Retail Farms to be built in San Diego County.

Home Town Farms is raising $1,575,000 million to complete the pilot Retail Farm in

Vista, CA. These funds will cover all capital and operating costs needed to bring Retail

Farm 1 to profitability.

Pilot Retail Farm CONFIDENTIAL

2013 2014 2015 2016 2017 2018

Revenues -$ -$ 1,011$ 1,046$ 1,067$ 1,088$

Cost of goods sold - 45 303 311 317 323

Gross profit - (45) 709 735 750 765

% 0% 0% 70% 70% 70% 70%

Farm Overhead

Credit card fees - - 7 9 9 9

Utilities - 2 41 41 42 43

Repair and maintenance - - 6 6 6 6

Rent 20 88 85 85 88 90

Site incidentals - 7 23 23 23 24

Insurance - 4 24 26 27 27

Consulting - 1 1 2 2 2

Advertising and promotion - 1 12 12 12 12

Total Farm Overhead 20 102 199 205 209 214

% of Revenues 0% 0% 20% 20% 20% 20%

Corporate Overhead

Salaries and benefits 52 121 160 160 160 160

Consulting - - 6 6 6 6

Legal and accounting 2 4 14 14 14 14

Office expenses 2 2 3 3 3 3

Telephone/internet 0 1 6 5 6 6

Advertising and promotion 2 3 12 12 12 12

Insurance 2 3 7 7 7 8

Licenses and Permits 1 1 1 1 1 1

Other Misc 1 2 2 2 2 2

Total Corporate Overhea 62 136 211 211 212 213

% of Revenues 0% 0% 21% 20% 20% 20%

EBITDA (82) (283) 298 319 329 338

Depreciation - 16 65 97 97 97

Income taxes - - - - - -

Net income (loss) (82)$ (299)$ 233$ 222$ 232$ 241$

% 0% 0% 23% 21% 22% 22%

Cash flows

Invested capital (700) (76) (1,581) - - - -

Net free cash flows AT - (82) (283) 298 319 329 338

Terminal Value - - - - - - 2,029

(700) (157) (1,864) 298 319 329 2,367

Internal Rate of Return (IRR) 5.03%

Internal Rate of Return (IRR) - Adjusted 9.16%

Adjusted for approximately $400k of expenses incurred while pursuing first potential location of farm. These costs would not be incurred for subsequent farms.

25


Invested capital 2,357$

Capital equipment (1,729)

Cash provided by operations 744

Ending cash 1,372$

Home Town Farms plans to raise $11.3 million for round C. Round C will cover all

capital and operating cost needed to bring Retail Farms 2 through 10 to profitability and

implement Home Town Farms license/franchising program.

10 Retail Farm Rollout Model

CONFIDENTIAL

2013 2014 2015 2016 2017 2018

Revenues -$ -$ 1,371$ 9,536$ 20,344$ 20,751$

Cost of goods sold - 45 392 2,433 5,136 5,239

Gross profit - (45) 978 7,103 15,208 15,512

Gross Profit % 0% 0% 71% 74% 75% 75%

Farm Overhead

Credit card fees - - 10 68 144 146

Utilities - 2 49 228 466 479

Repair and maintenance - - 8 49 103 106

Land Lease 20 88 125 1,019 2,199 2,264

Telephones - - 2 42 96 99

Site incidentals - 7 29 167 351 361

Office Expense - - 1 34 77 79

Insurance - 4 28 111 219 226

Consulting - 1 2 15 33 34

Advertising and promotion - 1 34 383 793 816

Total Farm Overhead 20 102 286 2,117 4,479 4,612

% of Revenues 0% 0% 21% 22% 22% 22%

Corporate Overhead

Salaries and benefits 52 121 451 1,194 1,204 1,240

Consulting - - 8 13 13 13

Legal and accounting 2 4 18 30 30 31

Office expenses 2 2 6 11 11 11

Telephone/internet 0 1 9 23 26 27

Advertising and promotion 2 3 10 12 12 12

Insurance 2 3 13 29 32 33

Licenses and Permits 1 1 1 1 1 1

Office Rent - - 15 60 60 62

Research and Development - - - 59 84 87

Other 1 2 2 2 2 2

Total Corporate Overhead 62 136 533 1,435 1,476 1,520

% of Revenues 0% 0% 39% 15% 7% 7%

EBITDA (82) (283) 159 3,551 9,253 9,380

Depreciation and amortization - 16 75 392 803 803

Income taxes - - 12 1,264 3,380 3,431

Net income (loss) (82)$ (299)$ 72$ 1,896$ 5,070$ 5,146$

% 0% 0% 5% 20% 25% 25%

Cash flows

Invested capital (700) (76) (1,581) (3,500) (7,800) - -

Net free cash flows - (82) (283) 147 2,287 5,873 5,949

Terminal Value - - - - - - 56,281

(700) (157) (1,864) (3,353) (5,513) 5,873 62,230

Internal Rate of Return (IRR) 73.40%

26


Invested capital 13,657$

Capital equipment (18,528)

Cash provided by operations 13,716

Ending cash 8,844$

Funding and Build-out Timeline

THIS DOCUMENT CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS

WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS

AND BUSINESS OF THE COMPANY, INCLUDING, WITHOUT LIMITATION,

STATEMENTS CONCERNING THE COMPANY’S STRATEGIC PLANS, THE

SCOPE OF THE COMPANY’S INTELLECTUAL PROPERTY PROTECTION,

ANTICIPATED EXPENDITURES, THE NEED FOR ADDITIONAL FUNDS AND

OTHER EVENTS AND CIRCUMSTANCES DESCRIBED IN TERMS OF THE

COMPANY’S EXPECTATIONS OR INTENTIONS. USE OF THE WORDS

27


"ANTICIPATES," "BELIEVES," "ESTIMATES," "EXPECTS," "INTENDS," "PLANS"

AND SIMILAR EXPRESSIONS HEREIN ARE INTENDED TO IDENTIFY

FORWARD-LOOKING STATEMENTS. SUCH FORWARD-LOOKING

STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES

AND OTHER FACTORS THAT MAY CAUSE ACTUAL RESULTS,

PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY

DIFFERENT FROM THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-

LOOKING STATEMENTS. ALL OF THESE FORWARD-LOOKING STATEMENTS

ARE BASED ON ESTIMATES AND ASSUMPTIONS MADE BY THE COMPANY

WHICH ARE INHERENTLY UNCERTAIN. THEREFORE, RELIANCE SHOULD

NOT BE PLACED UPON SUCH ESTIMATES AND STATEMENTS. NO

ASSURANCE CAN BE GIVEN THAT ANY OF SUCH ESTIMATES OR

STATEMENTS WILL BE REALIZED, AND IT IS LIKELY THAT ACTUAL

RESULTS WILL DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY

SUCH FORWARD-LOOKING STATEMENTS.

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