SQUARE SON, LP

CHAD ANDERSON

GREGORY PAPALEXIS

MICHIGAN FRUIT JUICE: MOST NUTRIENT-DENSE FRUIT JUICE WORLDWIDE

GRANT NUMBER: 791N4300420 (Formerly: 791N4300260)

INDEX: 10277

FINAL PERFORMANCE REPORT

JUNE 30, 2015

Project Activities Square Son, LP (“Square Son”) and the Project Partners, The Product Center at Michigan State University (“MSU”) and Coloma Frozen Foods, Inc. (“Coloma”), collectively administered the Project: Michigan Fruit Juice: Most Nutrient-Dense Fruit Juice Worldwide. The Project’s premise was the commercialization of a proprietary process innovation that removes up to 95% of the natural sugars from traditional fruit juice. The De-Sugared™100% Fruit Juice is both low in sugar and calories but still maintains its naturally occurring vitamins, antioxidants, and phytonutrients. As a result of the Project, Square Son has formally established its fruit juice processing operations at 3100 Keystone Road, Traverse City, MI 49686, and the De-Sugared™100% Fruit Juice produced therefrom is being marketed nationwide directly to consumers and will soon be available for purchase in Michigan and Midwest food retailers. Square Son collaborated with the Project Partners, MSU and Coloma, in accordance with the Grant Agreement’s (revised) Work Plan; and also with the Traverse City Area Chamber of Commerce, MDARD, and MEDC regarding Square Son’s processing operations, regulatory (state and local), and workforce needs. Square Son also established supplier/vendor relationships with numerous Michigan-based fruit & fruit juice suppliers including at least four (4) fruit growers, and currently one (1) Michigan-based contract bottle filler; and, is exploring distribution relationships with multiple Michigan headquartered food product distributors, and is considering vendor relationships with multiple Michigan-based corrugated case suppliers. Furthermore, Square Son is engaged with multiple Michigan-based food retailers for the marketing of De-Sugared™100% Fruit Juice, all of which were introduced to Square Son at the Pure Michigan Agriculture Summit during the Buyer-Supplier Matchmaking and Walk-up Table “Stroll”. The Project’s purpose was to substantially increase the economic impact and production of the Michigan Food and Agricultural Industry (the “Industry”) through the commercialization of an innovative value-added process that converts conventional fruit juice into the most nutrient-dense (high in nutrients but low in calories) fruit juice worldwide. At the Governor’s Summit on Production Agriculture on August 3, 2011, Governor Snyder implored the Industry to embrace innovation and entrepreneurship opportunities in order to increase its agricultural processing capabilities and the consumption of Michigan agricultural products. The commercialization of this Project’s proprietary process innovation in Traverse City now provides a unique opportunity for the Industry to differentiate its products from commoditized imports, and to potentially increase its products’ economic value and overall market share. Even though the Industry is the third largest Apple product purveyor and the largest Tart Cherry, Blueberry and Niagara Grape product purveyor in the United States, it can substantially increase its share of the US fruit juice market, including the $16.2 billion per year retail consumer market. The Industry currently utilizes a substantial portion of its annual production for juice processing, but the consumption of the Industry-produced juices is declining due to foreign imports. For example, US Apple Juice consumption

from domestic sources has declined from 42.7% in 1990 to 17% in 2011 as Apple Juice Concentrate imports more than doubled from 217.5 million gallons in 1992 to 500.1 million gallons valued at $4.3 billion in 2011. Furthermore, the Industry’s Apple Juice market price fluctuates based on commoditized import prices and not on the actual cost to produce and process Michigan-grown and processed Apples. The Project’s proprietary De-Sugared™100% Fruit Juice enables the Industry to further differentiate itself from competing commodities and substitutes because De-Sugared™100% Fruit Juice is being marketed as being derived from Michigan and the Industry, and features nutrient-dense (high in nutrients but low in calories) qualities that are not currently available in the fruit juice marketplace. Furthermore, the “watered down”, reduced calorie ready-to-drink “fruit drinks” now offered by beverage companies has created a severe structural threat to world fruit juice demand; in the United States the 2005 to 2010 CAGR for reduced calorie “juice drinks” (the calories are reduced via the addition of water) is 15%. These reduced-calorie “juice drinks” only contain between 15% and 50% of actual fruit juice (the remainder is water, texturizers and sweeteners). Therefore as the consumption of these “watered-down” beverages increases and thus displaces traditional fruit juice demand, the overall demand and consumption of traditional fruit juice will decrease. However, this Project’s proprietary process innovation mitigates this structural threat because it yields 100% of the fruit juice after sugar removal. Furthermore, De-Sugared™100% Fruit Juice is substantially lower in sugar and calories as compared to the “juice drink” offerings. In fact, the total sugar content of De-Sugared™100% Fruit Juice is ONLY 1 gram per ten-ounce portion, which equates to between fifteen and thirty calories, while delivering the goodness and benefits naturally found in traditional fruit juice. Accomplishments One of the most important Project impacts was to directly create permanent, full-time, high-skilled, competitive-wage employment positions as a result of the Project. During the Facility Planning and renovation Project phase, Square Son utilized the services of multiple former employees of a Michigan-based fruit processor who had been laid off due to a lack of work. Square Son paid these valuable contributors an aggregated total wage of over $30,000, and it’s important to note that these wages are solely the responsibility of Square Son and are not subject to reimbursement under this Grant. These valuable contributors have subsequently been offered permanent, full-time, high-skilled, competitive-wage operations and mechanics positions with Square Son. Overall, the processing facility’s initial employment needs include seven (7) permanent, full-time, competitive-wage employment positions, and with a nominal capital investment, is projected to increase to over twenty (20) permanent, full-time, competitive-wage employment positions that will include significant technical and operational training that will contribute to overall workforce development. A similar Project impact was to indirectly create additional employment opportunities during the completion of the Project and contribute to statewide economic activity. During the Facility Planning and renovation Project phase, Square Son utilized the

services of numerous Michigan-based vendors including electricians, plumbers, architects, facility/housing lessors, and Michigan-based companies for the following services: engineering, waste management, equipment rental, and component supply, equating in aggregate to over $200,000 in expenditures to date. Another of the most important Project impacts was to create for the Industry an efficient communication conduit to various target market segments c/o De-Sugared™100% Fruit Juice’s exclusive value-added proposition, for which the Industry can increase Michigan-derived agricultural products’ “brand” awareness and position. As a result, the Industry can differentiate its products from lower-quality/lower price competing options such as commodity imports and available substitutes (i.e. other fruit juices, “fruit drinks”, functional beverages, water, etc.), and increase its products’ overall market value and market share. Square Son, through its consumer retail brand: Edit™, has incorporated numerous Michigan-specific content such as the “Pure Michigan” and Cherry Marketing Institute logos as well as Michigan “-grown” and “-pressed” language into its retail package labels and industry trade copy, and is incorporating Michigan grower & processor content into its digital marketing platform. Please see examples included herein. Goal/Objective #1: Create employment and internship positions in the Michigan and the Industry. Result #1: The Project exceeded the Benchmark threshold by directly creating multiple permanent, full-time, high-skilled, competitive-wage employment positions to produce low-sugar, low-calorie fruit juice, and Square Son is on track to achieve the Goal/Objective #1’s Target as further described herein. It’s important to note that the budgeted funds for Goal/Objective #1 is comprised solely of Matching Funds and not Grant Funds. Goal/Objective #2: Determine geographic location, facility infrastructure, and manufacturing process layout for a scalable production facility that will subsequently be constructed to produce low sugar, low calorie fruit juice derived from and produced in Michigan. Result #2: Square Son considered numerous locations throughout Michigan for its initial processing facility, but after conferring with MDARD, MEDC, Traverse City Area Chamber of Commerce, and Coloma, Square Son determined that the former masonry warehouse located at 3100 Keystone Road, Traverse City, MI 49686 was the optimal location and infrastructure to lease, renovate, and commission in order to develop a scalable processing facility; this facility is now government approved and ready for scalable operations. The multiyear facility lease commenced on December 1, 2014, and Square Son has invested $200,000 in converting the warehouse facility from a masonry into an MDARD-approved food & beverage production facility; Ms. Nancy Nyquist, Ms. Jodi Gruner, Mr. Tino Breithaupt, Mr. James Padden, Ms. Karla Horne, Ms. Laurel Sorenson, Ms. Laura Galbraith, and Mr. Mike DiBernardo have been invaluably

instrumental in facilitating this process. Square Son also utilized the consulting services of the former Director of Quality Assurance for a global fruit & fruit juice purveyor to design the optimal production facility layout and to develop standard operating procedures, and the services of numerous Michigan-based vendors including electricians, plumbers, and architects. Square Son committed to this facility in November 2014 after Square Son initially intended to commission its processing operations in Antrim County, MI, but Square Son subsequently selected the Traverse City location due to multiple reasons including certain agricultural property restrictions in Antrim County. Square Son is continuing to consider southwestern Michigan locations for additional processing facility capacity, but the Traverse City facility has substantial capacity for scalable production expansion. Square Son achieved this Goal/Objective’s Benchmark of constructing a processing facility that is capable of producing “low sugar, low calorie 100% fruit juice . . . on an industrial level”. Goal/Objective #3: Conduct a Feasibility Assessment to determine market price implications if there is a substantial change in supply and/or demand within the next five (5) years. Result #3: Square Son collaborated with Ms. Mollie Woods, Horticultural Markets Analyst at MSU. MSU collected data on global apple and tart cherry supply and also compiled market reports on fruit juices for Square Son, which have been made routinely available to Square Son. Results of this work suggest there will be little if any impact on global fruit markets based on Square Son’s projections for production. However, a key factor to consider is the fluctuations in raw product availability for Montmorency Tart Cherries and processing Apples, especially in so far as Square Son expects to capture market advantage through adjacency to production areas in Michigan. For Montmorency Tart Cherries the most current analysis uses an average U.S. crop size of 220 million lbs. of production, however, in 2002 and 2012 there have been complete crop disasters in Michigan with impacts country wide, and for 2015 production is forecast at about 60% of average. For Apples in Michigan, the state is rapidly transitioning away from processing to a fresh orientation. For Square Son this means that the composition of concentrate (flavor profile/brix) could easily change over the next five (5) years as more and more apples in processing are rejected fresh varieties. The company must be flexible in its processing to adapt to Michigan’s changing apple processing profile. From a production capacity perspective, Michigan currently has a maximum production capacity estimated at 43 million bushels (about 1,935 million lbs.) and has traditionally processed 50-60% of the crop in any given year. Square Son achieved this Goal/Objective’s Benchmark courtesy of the deliverables provided by Ms. Mollie Woods. Goal/Objective #4: Determine target market and subsequent segments for a low sugar, low calorie fruit juice derived from and produced by the Michigan Food and Agricultural Industry.

Result #4: Square Son conducted extensive market research in collaboration with Ms. Mollie Woods and Dr. Janice Harte of MSU, including industrial, wholesale, and consumer retail market segments and distribution channels. Furthermore, Addis Group Inc. in July 2014 conducted a Market Feasibility Assessment to identify the initial target consumer segment and the product positioning connected thereto. Square Son has identified the digital marketing and e-commerce distribution channel, and certain Michigan food retailers, for the retail market introduction of Square Son’s De-Sugared™ 100% Fruit Juice. Square Son achieved this Goal/Objective’s Benchmark by identifying, planning and forecasting for the target segments and distribution channels for the “sales of low sugar, low calorie 100% fruit juice derived from and produced in Michigan”. Goal/Objective #5: Develop and execute an integrated marketing plan that includes the development and production of product packaging and labeling, web and social media platform development and management, and in-person sales meetings. Result #5: Square Son interviewed various marketing and branding professionals/experts, including industry leaders from academia, healthcare product consulting, and national food product brand consulting, in order to develop an integrated marketing plan to optimally communicate that the most nutrient-dense fruit juice is derived from and produced by the Michigan Food and Agricultural Industry; the interviews included visits to the fruit orchards in northern Michigan and the sampling of various Michigan-derived products. Square Son ultimately retained marketing agency, Addis Group Inc., in July 2014; Addis’ client list includes Kashi®, Revolution Foods®, and PopChips®. Square Son and Addis collectively developed Square Son’s consumer retail brand: Edit™, that included the development and production of the Edit™ logo/trademark, product packaging and labeling, and the web and social media platform design. Square Son achieved this Goal/Objective’s Benchmark by identifying the target segments for the “sales of low sugar, low calorie 100% fruit juice derived from and produced in Michigan” and then developing the logo/trademark, product packaging and labeling, and the web and social media platform to engage with those target segments. Square Son’s integrated marketing plan will continue to be funded by equity capital and possibly other sources of financing. Continuation of the Project Square Son continues to collaborate with the Project Partners, MSU and Coloma, and with the Traverse City Area Chamber of Commerce, MDARD, and MEDC regarding Square Son’s processing operations, regulatory (state and local), and workforce needs. Square Son will indefinitely continue its supplier/vendor relationships with Michigan-based fruit & fruit juice suppliers, food product distributors, and food retailers, and will continuously strive to both expand the size and increase the quantity of those relationships within Michigan. Square Son will also continue to utilize the products and

services of Michigan-based vendors and companies including electricians, plumbers, architects, facility/housing lessors, and for engineering, waste management, equipment rental, and component supply. Square Son plans to indefinitely employ over twenty (20) permanent, full-time, competitive-wage employment positions described herein, and also employ an “Ambassadors” Program whereby high school and college students that are interested in agricultural product marketing and development will be commissioned to conduct in-store product presentations. The students will be recruited through local FFA chapters and school career development programs to conduct presentations after school and/or on weekends. Square Son will continue to incorporate Michigan-specific content into its marketing communications. Long Term Impact The Project’s effects are expected to have an indefinite impact on the state of Michigan, the Industry, and the entire fruit juice market nationally and eventually globally. The Project’s proprietary process innovation is protected by a twenty (20) year international patent that is exclusively owned by a wholly-owned Square Son subsidiary. Furthermore, Square Son has secured a real property fixed purchase-option within the Traverse City area in order to be able to immediately expand its processing capacity, and Square Son continues to consider southwestern Michigan locations for additional processing capacity. The Industry is more than capable of supplying Square Son with a substantial portion of Square Son’s supply needs given that the Industry is an abundant source of processing apples, tart cherries, blueberries, grapes, cranberries, and their respective juice concentrates. The symbiotic relationship between Square Son and Michigan & the Industry provides a mutually beneficial opportunity for Square Son to efficiently expand its processing capabilities within Michigan, while Michigan & the Industry increase their visibility, market share, and market value courtesy of Edit™’s continued expansion through national distribution and export. Furthermore, the increased overall economic activity and related direct and indirect job growth will contribute to workforce development and a reduced unemployment rate. The Project’s results will hopefully lead to additional Strategic Growth Initiatives whereby various innovative, value-added ventures can take advantage of all of the resources and capabilities that Michigan and the Industry regularly provide.

Funding Expended Square Son has incurred the following costs and certain Grant reimbursable costs as of May 31, 2015: Reimbursable: Cost Budget Costs Reimbursed Cost Balance Goal/Objective #1: $ 0.00 $ 0.00 N/A Goal/Objective #2: $148,128.00 $ 32,297.29 $ 115,830.71 Goal/Objective #3: $ 5,324.00 $ 0.00 $ 5,324.00

Goal/Objective #4: $ 34,232.00 $ 24,150.00 $ 10,082.00 Goal/Objective #5: $ 62,316.00 $ 58,316.61 $ 3,999.39 Total $250,000.00 $ 114,763.90 $ 135,236.10 Additional Information Please see the following tangible deliverables as a result of the Project: 1. Retail Labels: Apple; Tart Cherry; Grape; Cranberry

2. Sell Sheet

3. Business Card

4. Traverse City Processing Facility, Exterior (2)

5. Traverse City Processing Facility, Interior (1)