BUSINESS
CAUTION CONCERNING "FORWARD-LOOKING" STATEMENTS
This prospectus contains forward-looking statements. Such forward-looking
statements include statements regarding, among other things, (a) our projected
sales and profitability, (b) our growth strategies, (c) anticipated trends in
our industry, (d) our future financing plans, and (e) our anticipated needs for
working capital. Forward-looking statements, which involve assumptions and
describe our future plans, strategies, and expectations, are generally
identifiable by use of the words "may," "will," "should," "expect,"
"anticipate," "estimate," "believe," "intend," or "project" or the negative of
these words or other variations on these words or comparable terminology. This
information may involve known and unknown risks, uncertainties, and other
factors that may cause our actual results, performance, or achievements to be
materially different from the future results, performance, or achievements
expressed or implied by any forward-looking statements. These statements may be
found under "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business," as well as in this prospectus generally.
Actual events or results may differ materially from those discussed in
forward-looking statements as a result of various factors, including, without
limitation, the risks outlined under "Risk Factors" and matters described in
this prospectus generally. In light of these risks and uncertainties, there can
be no assurance that the forward-looking statements contained in this prospectus
will in fact occur. In addition to the information expressly required to be
included in this prospectus, we will provide such further material information,
if any, as may be necessary to make the required statements, in light of the
circumstances under which they are made, not misleading.
OVERVIEW
AeroGrow, formed on July 2, 2002, is a consumer products company. Our
principal business is the research, development, and marketing of advanced
hydroponic garden products designed for indoor use and priced to appeal to the
mass-consumer kitchen, home, and office markets worldwide.
Our principal products are a line of "Smart Garden(TM)" indoor growing
systems that allow consumers, with or without gardening experience, to grow
fresh herbs, lettuces, vegetables, tomatoes and flowers easily, in their homes,
offices and kitchens, year-round. Our "Smart Garden" systems are designed to be
easy-to-use, affordable, and to provide an almost fool-proof growing experience
as a result of the many technological developments we have pioneered. Based upon
our review of the market, we believe that our products are the first of their
kind.
We have filed thirteen patents to protect our core hydroponic inventions as
well as our companion products and technologies. Many of our patent-pending
companion technologies are based upon our innovations in the fields of biology,
plant physiology, chemistry, physics, mechanics, electronics and adaptive
learning computer science. In addition, we have developed certain trade secrets
regarding simplifying, combining, and integrating our core technologies into our
indoor gardening products that we believe are fundamental to providing the mass
consumer market with a simple, consistently successful, and rewarding growing
experience.
AeroGrow's proprietary technologies include:
o Our core hydroponic nutrient delivery system;
o The integration of full-spectrum lighting into our systems;
o Pre-seeded bio-grow domes that provide faster germination and a
consumer friendly "plug-and-grow" planting experience;
o Automated microprocessor control of lighting, watering and
nutrient delivery cycles;
o Adaptive learning technology that automatically adjusts light and
nutrient cycles based on plant variety and maturity;
o Time-release nutrient tablets for simple bi-monthly plant feeding
that includes a proprietary buffering formula which automatically
adjusts and regulates pH levels from sub-optimal or poor
municipal water sources to a level that supports healthy plant
growth.
We believe that our inventions and combined technologies will allow
virtually anyone, from consumers who have no gardening experience to
professional gardeners, to enjoy consistent, year-round harvests of vine-ripened
vegetables, herbs, tomatoes, lettuces and decorative and aromatic flowers
regardless of season, weather, or lack of
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natural light. Our "Smart Garden" systems' unique and attractive design makes
them appropriate for use in almost any location including kitchens, bathrooms,
living areas, offices and more.
AeroGrow's core products are projected to retail at prices ranging from $99
to $149 based on the channel of distribution in which the product is sold and
the specific product features. We plan our initial product launch in the U.S.
with our flagship $99 AeroGrow Kitchen Garden.
THE EXISTING HYDROPONIC INDUSTRY - BACKGROUND AND OPPORTUNITY
Hydroponics is the science of growing plants in water instead of soil. Used
commercially worldwide, hydroponics is considered an advanced and often
preferred crop production method. It is typically used inside greenhouses, where
it gives growers the ability to better regulate and control nutrient delivery,
light, air, water, humidity, pests and temperature. Hydroponic growers benefit
by producing crops faster with significantly higher crop yields per acre, more
consistently and predictably than traditional, soil-based farming.
Our informal market research, consumer interviews and focus groups lead us
to believe that that there is a sizeable national and international market for
attractive, affordably-priced, countertop-sized, soil-less "Smart Garden"
systems for indoor use in kitchens, living rooms, family rooms, bedrooms,
bathrooms, and in offices, lobbies, etc. Further, our analysis of existing
technologies leads us to believe that until now, significant technical barriers,
consumer-interface complexities, and user-unfriendly system design issues have
prevented hydroponic technology from being incorporated into mainstream,
mass-marketed consumer products.
These complexities and barriers include:
o Consumers generally lack the specialized knowledge required to
select, purchase, set up, operate and maintain the various
components that make up a typical hydroponic system: growing
trays, irrigation channels, growing media, nutrient delivery
systems (consisting of electronic timers, pumps, motors, tubing
and nozzles), nutrient reservoirs, etc;
o Knowledge of the many and varied indoor lighting systems and how
to purchase, set up, operate and maintain them in the absence of
adequate indoor natural light;
o Consumers generally lack the knowledge required to properly mix
and measure hydroponic nutrient formulas, including the problems
of nutrient precipitation and spoilage, and the different
nutrient requirements for different plant varieties at different
stages of growth;
o The pH of the water in many large cities is too high for
hydroponic growing and requires chemical treatments to lower the
pH into the proper range. Consumers generally lack any knowledge
of the pH level in their area and also lack the know-how and
equipment for adjusting the pH into the proper ranges for plant
growth;
o Current systems generally require users to have knowledge of and
access to specialized monitoring equipment for measuring water pH
levels and nutrient concentration.
These complexities have been accepted in the existing hydroponic market
channels because hydroponic manufacturers have generally focused their product
development and marketing efforts on satisfying the needs of the commercial
greenhouse and dedicated hobbyist markets. These users are motivated to gain the
specialized knowledge, equipment and experience currently required to grow
successfully with these products.
We believe that the complexities of currently available commercial
hydroponic products fail to address the needs and wants of the mass consumer
market, leaving that market unserved. We further believe that our trade secrets
and patent-pending inventions and companion technologies have advanced,
simplified, and improved hydroponic technology, enabling us to create the first
indoor, hydroponic gardening system appropriate for the mass consumer market.
AeroGrow has conducted focus groups and informal marketing research that
indicates consumer satisfaction with the ease-of-use, design aesthetics and
overall benefits provided by our "Smart Garden" products.
AEROGROW'S PROPRIETARY TECHNOLOGY
AeroGrow has spent more than two years innovating, simplifying, combining,
and integrating numerous proprietary technologies and inventions into a family
of turnkey, "plug-and-grow," hydroponic "Smart Garden" systems specifically
designed and priced for the mass consumer market.
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Thirteen patents have been filed to protect our inventions. Following is a
partial list of our proprietary technologies and inventions and the conditions
and challenges that they address:
1. THE RAIN-FOREST SYSTEM - AN INNOVATIVE HYDROPONIC NUTRIENT DELIVERY
TECHNOLOGY
Our patent-pending Rain-Forest(TM) system incorporates features from
several advanced hydroponic methodologies, NFT, Drip, and Deep Water Culture
technologies, into a proprietary system designed to provide the benefits of
accelerated, hydroponic plant growth in a system that is simple, reliable,
quiet, and affordable.
2. PRE-SEEDED BIO-GROW DOMES PROVIDE FASTER GERMINATION AND A SIMPLE
"PLUG AND GROW" EXPERIENCE
Our patent-pending Bio-Grow pods include pre-planted, specially-selected
seeds, bio-sponge grow medium, and removable bio dome covers (see Figure 1).
A. BIO GROW DOME
B. PRE-IMPLANTED SEEDS
C. BIO SPONGE
D. GROW BASKET
[FIGURE 1: BIO-GROW SEED PODS OMITTED]
Seeds (see Figure 1(b)) have been pre-selected through an extensive
two-year research process. This process included:
o Analyzing thousands of seed varieties;
o Growing and testing of several hundred varieties of plants in our
greenhouse and in our R&D grow labs; and
o Conducting consumer research trials for taste and appearance.
We pre-plant our selected seeds in a peat-based bio-sponge growing medium
(see Figure 1(c)), principally developed for rapid germination and enhanced root
growth. The bio-sponge helps facilitate and regulate oxygen, moisture, and
nutrition, and supports plant roots from germination through maturity and
harvest.
Our Bio-Grow Domes (see Figure 1(a)) create a mini-greenhouse environment,
encapsulating the grow surface to create a temperate, near 100% humidity
chamber, which is considered close to optimum for most plant germination and
initial growth. The Bio-Grow Domes address common germination problems
associated with planting seeds in an environment having too much or too little
moisture, and/or too low a temperature. When combined with the bio-sponge in an
AeroGrow system, seeds typically germinate faster than seeds planted in dirt.
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3. MICROPROCESSOR-BASED "SMART GARDEN" CONTROL PANELS AND ADVANCED
"ADAPTIVE LEARNING" TECHNOLOGY
We believe that certain common problems face both experienced gardeners and
beginning gardeners alike. These include:
o Over-watering or under-watering plants;
o Over-feeding or under-feeding plants, or feeding at improper
intervals;
o Failing to provide plants with sufficient light needed for
healthy growth.
To assist consumers, especially those with little to no gardening
experience, we have developed two, patent-pending, microprocessor-based, "Smart
Garden" technologies that address these common problems. These technologies:
o Regulate the lighting system;
o Automatically alert users when it is time to add water and
nutrients;
o Help simplify and reduce the time and involvement ordinarily
required of consumers;
o Reduce variables and errors often made by consumers;
o Enhance plant growth.
AeroGrow has developed both "basic" and "advanced" "Smart Garden" controls.
They are as follows:
BASIC "SMART GARDEN" TECHNOLOGY:
o Regulates the on/off times for the integrated lighting controls;
o Regulates the nutrient flow timing cycles; and
o Automatically alerts consumers when it is time to add water and
nutrients
"ADVANCED" "SMART GARDEN" WITH ADAPTIVE LEARNING TECHNOLOGY:
o Provides the benefits of the basic "Smart Garden" technology;
and, in addition,
o Provides a smart panel interface that enables consumers to select
the specific type of plants to be grown (lettuce, herbs, tomatoes
or flowers), and then automatically analyzes, adjusts and
optimizes the nutrient, water and lighting cycles based on the
plant variety selected and its stage of growth (germination,
initial growth, or advanced growth).
Our Adaptive Learning Technology was developed through extensive research
and testing in our grow lab. Our plant scientists determined that better growth
could be achieved when nutrients, moisture and lighting were adapted and
customized to each plant variety, and that growth could be further improved by
adjusting the nutrients, moisture and lighting to the specific stages of the
plants' growth (germination, initial growth, advanced growth).
4. FIRST TIME-RELEASE NUTRIENT TABLETS FOR SIMPLIFIED SOIL-LESS
GARDENING:
For optimal growth, plants require a balanced mixture of macro- and
micro-nutrients. Certain nutrient combinations, including calcium nitrate and
magnesium sulphate, generally cannot be combined, mixed or stored in the same
container due to specific chemical reactions that bind them together, rendering
them useless to plants. Hydroponic growers seek to solve this problem by
packaging various nutrient concentrations in up to four separate containers
which are individually measured and added as needed by the consumer.
These nutrient complexities require consumers using hydroponic systems to
have an understanding of these plant nutrient mixtures and knowledge of
professional EC meters to properly monitor nutrient levels. Such knowledge and
expertise includes:
o Understanding of the blends of nutrient fertilizer that are best
suited for the specific variety of plants they are growing;
o Understanding the nutrient requirements of a specific plant
variety at each of three stages of its growth and maturity;
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o Measuring and blending nutrients from up to four different
concentrated solutions and adding them to specific measured
quantities of water;
o Monitoring nutrient fertilizers over time and adjusting them as
necessary, often requiring the nutrients to be dumped and
re-mixed on a weekly or bi-weekly basis.
We believe that current plant nutrition regimes and processes required for
successful hydroponic growing are cumbersome and complex, and have thus created
barriers to mass consumer use and acceptance.
To help overcome these barriers, we have spent two years developing
proprietary, time-release nutrient tablets designed specifically to deliver the
proper nutrients to the plants, while offering the consumer a simple,
user-friendly nutrient regime. The consumer simply adds the nutrient tablets,
usually once every two weeks, when instructed to do so by the
microprocessor-based nutrient reminder system.
Nutrient tablets include organic seaweed that supplies multiple micro- and
macro-nutrients, amino acids, and minerals like calcium, magnesium, and iron to
create an effective formula customized for specific plant varieties at different
stages of their growth.
5. AUTOMATED PH WATER BALANCING SYSTEM
Typical garden and house plants grow well in hydroponic systems when the pH
level of the water is maintained in a 5.0 to 6.5 range. Many varieties of plants
exhibit retarded growth or cannot be grown hydroponically in water having a pH
level of 7.0 and above. (High pH water is much less a problem when growing
plants in dirt as the dirt helps neutralize the negative effects of high pH
levels.) Many U.S. municipal water systems have higher pH levels than the
desirable range for hydroponic growing. These include major cities such as: Los
Angeles with a recently published pH range of 7.5 to 8.5; Boston reported at
9.0; the San Francisco Bay Area at 7.5 to 9.7; St Louis: 9.0 to 9.2; and
Washington DC at 7.7 to 8.5.
To address these conditions, most hydroponic growers monitor and chemically
adjust water pH levels as needed on an ongoing basis, sometimes weekly or even
daily. This generally requires both the purchase of a professional meter for
monitoring pH as well as the purchase of various pH-adjusting chemicals.
We believe that the problems associated with the wide-range of pH levels
which are found throughout the United States (and possibly internationally), as
well as the complexities involved in monitoring and regulating pH levels, are
significant further barriers limiting the use of hydroponic gardening by the
general public.
AeroGrow has developed a patent-pending buffering formula that
automatically adjusts and balances the water's pH to a level capable of
sustaining healthy plant growth, optimally in the 5.5 to 6.5 range. This
buffering formula is pre-mixed into our time-release nutrient tablet, thus
eliminating any need for knowledge of water chemistry or the equipment required
to monitor and regulate pH levels.
We believe that our automated pH buffering system is an important step
forward in our creation of a simple, plug-and-grow system that will have mass
consumer market appeal.
6. INTEGRATED AND AUTOMATED LIGHTING SYSTEM
Hydroponic systems typically do not incorporate built-in lighting systems.
Ordinarily, lighting systems must be purchased as separate, add on components to
the systems. Hydroponic lighting systems generally consist of a ballast,
reflector hood, metal halide or high pressure sodium lights, and an electronic
timer. The consumer ordinarily is required to suspend the lighting system,
usually with chains, over the hydroponic unit, and then continually raise the
lights as the plants grow. Complete lighting systems often cost hundreds of
dollars, which is considerably more than the cost of our entire "Smart Garden"
growing system.
In contrast to the typical lighting system, we have designed and will
include built-in adjustable grow lights (including ballast, reflector hood,
lights, and electronic timer) as an integral part of our "Smart Garden" systems.
Our integrated lighting systems include cost effective, high-output, compact
fluorescent lights that deliver a spectrum and intensity designed to help
optimize plant growth. In addition, the lighting system is fully automated and
controlled by our proprietary "Smart Garden" microprocessor.
TECHNOLOGY SUMMARY
We believe that the above six technologies, which are integrated into
AeroGrow's "Smart Garden" systems, create a significant industry first:
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A line of simple, easy to use, inexpensive, indoor, hydroponic gardening
systems that allow consumers, with or without gardening experience, to grow
almost anything, in their own homes, year-round.
The "Smart Garden" systems generally eliminate the need for gardening
experience, plant knowledge, seed selection, seed germination, plant nutrition,
water pH levels, and light requirements.
In addition, our gardening systems overcome many of the obstacles involved
in outdoor gardening, including the need for land, time, work, and tools as well
as the kneeling, bending, weeding, pests and pesticides.
We further believe that our easy-to-use, micro-processor-based, turnkey
systems, with their consumer friendly features and benefits, have the potential
to create an entirely new product category.
"SMART GARDEN" PRODUCTS
AeroGrow is developing a variety of indoor "Smart Garden" growing systems
designed to meet a wide range of consumer needs. Anticipated retail price points
of our "Smart Garden" systems are projected to range from $99 to $149, depending
on features and model selected, and the channels of distribution through which
they are marketed. These products are designed to be attractive and appropriate
for use on kitchen and bathroom countertops, in living rooms, bedrooms, family
rooms, offices, cubicles, waiting rooms and lobbies.
THE BASIC AEROGROW KITCHEN "SMART GARDEN"
Our planned initial product includes our hydroponic Rain-Forest Nutrient
Delivery technology, integrated grow light systems, and the customer's choice of
one of four pre-packaged, pre-planted, plug-and-grow seed kits (lettuce,
tomatoes, herbs or flowers) which include the Company's time-release nutrient
tablets and pH buffering system. The system is projected to retail at a price of
$99.
We plan to offer a "Smart Garden" electronic control panel as an optional
accessory for this system, which includes a microprocessor to control the timing
of the lights and a nutrient reminder system. The control panel is projected to
retail for $19.
THE DELUXE, AEROGROW KITCHEN "SMART GARDEN"
The Deluxe "Smart Garden" is our most technologically advanced and
automated system. It includes our patent-pending hydroponic Rain-Forest
Technology and Adaptive Growth Nutrient Delivery system, an electronic water
level indicator, and integrated, automated light system. The Deluxe also
includes the customer's choice of one of four pre-packaged, pre-planted,
plug-and-grow seed kits (lettuce tomatoes, herbs or flowers) which include our
time-release nutrient tablets specifically customized to enhance the growth of
the selected plants. This product is projected to retail at a price of $149.
OTHER PRODUCTS AND ACCESSORIES
We also plan to market a number of replacement products, accessories, and
consumable products, and supplies that have the potential to generate additional
ongoing, recurring revenues for AeroGrow. These products are being designed to
work interchangeably with any of our "Smart Garden" systems and include:
PRE-PACKAGED TOMATO, LETTUCE, HERB, AND FLOWER SEED KITS
These seed kits include pre-seeded germination grow pods with bio-domes to
facilitate germination and specialized plant-specific nutrients. Retail price
points are projected to range from $9.99 to $14.99. Potential future seed kits
include a variety of "concept" salad kits such as Oriental, Caesar and
Mediterranean salad kits, Master Gardener kits enabling the growing and
transplanting from cuttings, seasonal flower kits, a variety of children's
gardens, science kits, etc.
We also plan to introduce a water reservoir as an after-market attachment
that will hold sufficient water to enable plants to remain healthy without the
user having to add water for about 3 weeks, making the unit "vacation friendly."
AeroGrow also plans to offer "a la carte" nutrients, replacement light
bulbs, and seed germination pods to consumers.
LONG-TERM PRODUCT DEVELOPMENT PLANS
We believe that substantial markets may exist for a number of additional
products. We intend to evaluate these future product developments through
consumer and market research. Among potential future products, in early stages
of development, are:
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AEROGROW'S DECORATOR OFFICE "SMART GARDEN"
AeroGrow is developing a small, low-cost product designed specifically for
use in offices and work stations as a means to introduce into the workplace
decorative, fragrant living flowers that require minimal care.
THE PROFESSIONAL AEROGROW "SMART GARDEN" SYSTEM
We are considering incorporating our patented Aeroponic MIST technology
into a professional growing system, designed for larger-scale, economical
gardening for small businesses, florists, restaurants, large families and
gardening enthusiasts who want to grow larger quantities of vegetables, herbs
and flowers. We are also considering the use of this technology for inclusion in
new home construction.
FUTURE POTENTIAL PRODUCTS
We plan to research consumer interest levels in: a solar-powered system for
outdoor use; educational units specifically designed for use in schools; and
tiered "farm" units that will contain a number of AeroGrow "Smart Garden"
systems designed to produce a larger quantity of crops.
MARKETS
Based on our informal marketing research, we believe that our "Smart
Garden" systems, at their projected price points, are likely to appeal to a
broad spectrum of the population in the U.S. and major international markets,
including Europe, Japan and China. We believe that our products will appeal to
at least four major market segments both nationally and internationally. These
include: (1) experienced gardeners; (2) novice gardeners and gardener
"want-to-be's;" (3) those interested in cooking and healthy eating; and, (4) the
office and home decor markets. Further, based on discussions with distributors
and others, we believe that our "Smart Garden" systems also present
opportunities in specialized markets, such as the toy, education, gift, and
hydroponic hobbyist markets.
AEROGROW'S CONSUMER MARKET SEGMENTS
THE GARDENER MARKET
The gardening market in the U.S. is large, arguably the #1 hobby in America
(A University of Vermont Study). Gardeners spend billions of dollars each year
for the fun, satisfaction and rewards of growing their own vegetables, herbs and
flowers. It is estimated that in 2001 approximately 85 million households
participated in gardening activities. Approximately 23 million Americans grew
vegetables in their gardens, or almost one of four households; approximately 11
million households grew herbs; and approximately 57 million households purchased
seeds and bulbs each year (Source: National Gardening Association's 2002
Consumer Gardening Study conducted by Harris Interactive).
Our research indicates that our "Smart Garden" indoor garden systems and
aftermarket consumable products, have the potential to offer those already
engaged in gardening, whether expert or novice gardeners, a number of major
benefits not readily available through traditional gardening methods. These
include:
o The ability to grow fresh herbs, lettuces, vegetables, tomatoes
and flowers year-round, regardless of indoor light levels or
seasonal weather conditions;
o The ability to easily get a head start on the outdoor growing
season by starting plants indoors during colder months and then
transplanting them outdoors at the onset of the outdoor growing
season;
o The ability to use stem cuttings from desirable plants, roses,
shrubs, and trees to propagate multiple reproductions of the
desired plants;
o The reasonable assurance that crops will grow successfully by
significantly reducing potential obstacles; i.e., uncertain
weather, garden pests, etc.;
o The ease of growing in contrast to the toil associated with
gardening, i.e., preparing the soil, planting, watering, weeding,
thinning, continual monitoring, etc.
In interviews we have conducted, gardeners have expressed enthusiasm for
our "Smart Garden" products at the proposed price points.
THE "WANT-TO-BE" GARDENER MARKET
We believe that a large segment of the population have an interest in
gardening but lack the knowledge, confidence, available space, equipment, and/or
time to garden. We believe if these barriers to successful gardening
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can be overcome, many of these "Want-To-Be" gardeners would enter and further
expand the gardening market. Current barriers to be overcome include:
o The ongoing time commitment to planting and maintaining the
ongoing garden (tilling, hoeing, weeding, pest control, etc.),
which is a deterrent for many, including working singles or dual
member working families;
o Insufficient space available for a garden, which excludes
apartment, high-rise, and condo dwellers;
o The physical work often associated with gardening, which can be a
significant barrier to people of advanced years or those with
limited mobility or health issues;
o The expense involved in buying or acquiring the necessary
equipment to garden, i.e., shovels, hoes, soil amendments, hoses,
trellises, etc;
o The knowledge and level of expertise to deal with the numerous
unpredictable factors that may lead to an unsuccessful gardening
experience for even seasoned gardeners, including:
o Unpredictable weather conditions, temperature variances, early or
late frost, too much or too little rain, or similar impediments.;
o Garden pests such as cutworms, moles, bugs, rabbits, squirrels,
deer, and birds that may require the use of chemical pesticides
to control;
o Proper soil preparation, amendment and maintenance, including the
weeding, tilling and the optimal fertilization required by
specific plant varieties at their various stages of growth.
In interviews, "want-to-be" gardeners have expressed enthusiasm for the
features, benefits, and price points of the products we plan to offer. Many of
these same consumers, when testing the gardens in their homes, have been
satisfied by the results achieved and the ease-of-use of our "Smart Garden"
systems.
OFFICE AND HOME DECOR MARKET
Flowers are frequently used to brighten the decor of homes and offices
around the world. Until now, it has not been possible to readily grow flowers in
offices or indoor home environments due to a lack of sufficient light and the
growing knowledge needed. As a result, cut flowers, which are expensive,
short-lived, and require ongoing maintenance, are often used.
Our "Smart Garden" systems enable colorful, fragrant flowers, to be grown
indoors year-round, easily and conveniently, thus, potentially creating an
entirely new market for home and office decor. Flowers grown with our "Smart
Garden" systems will, with minimal care and maintenance, last for months, and
can then be quickly re-grown. Flowers can be grown in a wide variety of indoor
locations, including kitchen and bathroom countertops, as well as living rooms,
bedrooms, family rooms, offices, work stations, waiting rooms, and lobbies.
Because of their relatively low cost and ease of maintenance, professional plant
caretakers may be motivated to include our "Smart Garden" systems among their
traditional plant options, offering another potential market opportunity.
MARKET FOR HEALTHY EATING AND GOURMET COOKING
AeroGrow "Smart Gardens" are capable of growing renewable harvests of fresh
culinary herbs and vine-ripened produce year-round. Interviews with consumers
having an interest in cooking with fresh herbs and vegetables, as well as those
interested in eating healthy, pesticide-free foods, indicate that a large
potential market exists for a product that will grow healthy, pesticide-free
herbs and vegetables year-round in the kitchen. Consumers in this market
include:
o Those interested in cooking who would appreciate the convenience
and satisfaction of having a plentiful, ongoing supply of
fresh-cut herbs, such as basil, cilantro, parsley, chives, mint,
sage, oregano, etc., readily at hand to flavor soups, salads, and
any other dishes. Our "Smart Garden" systems ensure the
convenient availability of fresh herbs and spices when needed for
food preparation, and avoid both the expense of buying costly
fresh herbs, and the waste involved in having the unused portion
spoil.
o Those appreciating the distinctive texture and taste of freshly
picked, vine-ripened lettuces, tomatoes and other vegetables but
who are now forced to rely on days or often weeks-old supermarket
produce.
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o Those interested in healthy, pesticide-free foods for themselves
and their families, reflecting both the rapidly growing interest
in naturally and organically grown foods, and the increasing
number, who for health or weight concerns, include salads and
fresh vegetables as part of their families' diets.
SPECIALTY MARKETS: INCLUDING GIFT, TOY, EDUCATION, AND HYDROPONIC GARDENING
In addition to the markets described above, our market research and
consumer feedback indicate that a number of specialized markets potentially
exist for our "Smart Garden" systems, which include:
THE TOY MARKET
We believe that our indoor "Smart Garden" systems will appeal to children
because of the novelty of the indoor garden, its simplicity and ease of
operation, and the "magic" of seeing the plants and roots as they grow.
THE EDUCATION MARKET
AeroGrow's "Smart Garden" systems present the unique opportunity to
experience seed germination and root growth visually. Teachers and students will
have the ability to isolate and change factors pertaining to growth, such as
nutrients, light, temperature, etc., and closely study the resulting differences
in growth. Because of these factors, we believe that our products could be used
in schools to educate students in the basics of botany and plant growth.
THE GIFT MARKET
Many people we have interviewed have expressed interest in giving the
products to friends or relatives as gifts. The Company believes that the
uniqueness, fun, entertainment, decorative and practical value of our "Smart
Garden" systems, along with their attractive retail price points, will make them
attractive gift items.
THE HYDROPONIC ENTHUSIAST MARKETS
With more than 400 hydroponic stores and suppliers in the U.S., hydroponic
specialty stores provide an additional channel of distribution for our products.
We believe hydroponic enthusiasts will find our products to be novel and
advantageous.
INTERNATIONAL MARKET OPPORTUNITIES
We believe that a sizeable market will exist for AeroGrow's "Smart Garden"
systems throughout the developed world, especially in large cities with dense
populations where the ability to garden is limited (Japan, Europe, etc.).
Following the launch and establishment of our product line in the U.S., we plan
to expand distribution internationally through the development of exclusive
distribution and marketing partnerships in many large countries.
Our plan is to partner with successful companies that possess both direct
and retail marketing experience. Partnerships are most likely to take the form
of exclusive distributor or licensing agreements tied to performance criteria.
Currently, we are exploring opportunities in a number of countries.
MARKETING AND SALES STRATEGY
We plan to introduce two versions of our "Smart Gardens" (Basic and Delux)
in the United States in the second quarter of 2005 via a limited regional
test-marketing program, to be followed by a national product launch in the third
and fourth quarters of 2005. International expansion is planned once our product
line has been successfully launched and established in the U.S.
Our marketing strategy is to launch the Basic AeroGrow "Smart Garden"
through a direct marketing program, and the Deluxe AeroGrow "Smart Garden"
through distribution to major retail channels. Our proposed direct marketing
activities include a national Public Relations rollout, 60-second TV spots and
infomercials, home shopping networks, and print and web-based advertising. Our
rollout plan is designed to create widespread awareness of our "Smart Garden"
systems as well as generate direct sales in key target markets, including the
experienced gardener market, the gardener "want-to-be" market, the healthy
eating and gourmet cooking markets, and the office and home decor markets.
We also intend to expand distribution of the product line into major retail
channels. Our management has extensive experience in both direct-to-consumer
marketing and in marketing through major retail channels. On a combined basis,
our management team has brought to market more than 200 products employing
similar marketing and distribution strategies.
Our marketing strategy is summarized below:
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MARKETING RESEARCH
AeroGrow has conducted an independent market research study, consisting of
more than 50 individual consumer interviews and six focus groups among different
target markets to help determine the potential market size for, and interest in
its "Smart Garden" systems. This research was intended to identify:
o Specific market segments that are most receptive to our products;
o The potential size of these markets;
o Optimum means of reaching and motivating consumers in each target
market; and,
o Product interest and purchasing receptivity at various price
points.
We believe that our research has demonstrated significant consumer interest
in our proposed products at the planned retail price points. Research also
indicates that our "Smart Garden" systems have the potential to be marketed
directly to the consumer, as well as through traditional retail distribution
channels, including specialty retailers, cataloguers and mass-market retailers.
AeroGrow plans to continue to improve its products and marketing methods
through an ongoing marketing research program, which is scheduled to include
additional focus groups, individual interviews, a product beta-tester program,
consumer councils, and feedback through our customer service program.
REGIONAL MARKETING ROLLOUT
During the second quarter 2005, we intend to test our advertising and sales
communications as well as our internal and external systems (direct sales, order
processing, upsells, promotional matrix, multi-pay programs, customer service,
shipping, etc.) to assure their effectiveness and cost-efficiency prior to our
national product launch. As planned, testing activities will be conducted in a
number of markets in a variety of geographic locations. Also during this phase,
we intend on presenting the Deluxe AeroGrow `Smart Garden" to strategically
selected retail candidates for initial in-store product distribution
opportunities.
PUBLIC RELATIONS LAUNCH
As a prelude to our national product launch, we plan a major Public
Relations program. Our purpose is to announce to the news media, gardening and
food columnists, and the public that our "Smart Garden" systems have now made it
possible for anyone, with or without prior gardening experience, to garden
indoors, year-round, simply, easily, and cost-effectively.
Our public relations campaign will be designed to gain broad exposure for
AeroGrow and our "Smart Garden" systems through news stories in print, on radio
and TV, and in articles in food and gardening sections of newspapers, in food
and garden magazines, on the internet, and elsewhere. The AeroGrow "Smart
Garden" systems will be sent to selected major food and gardening editors, other
recognized gardening and cooking authorities, and celebrities, to inform and
educate them about our firm, its scientific breakthroughs, and new product line.
NATIONAL DIRECT-TO-CONSUMER MARKETING ROLLOUT
Direct-to-consumer marketing is the selling of products directly to
consumers via various channels (print, TV, Web, mail, phone, etc.). In direct
marketing, we receive the full retail selling price for our products, which
yield higher gross profit margins than do sales made at wholesale prices. We
plan to offer our "Smart Garden" products directly to consumers by means of
60-second TV and radio commercials, infomercials, magazine and newspaper
advertising, internet marketing, and our web site.
Our direct marketing program will enable us to build a dynamic database of
customer names and their interests, which provides the opportunity to create
targeted aftermarket product and related sales to these customers, thus,
generating a highly profitable recurring revenue stream. We plan to offer these
customers opportunities to purchase additional "Smart Garden" systems as well as
our "consumable" products, including seed pods, time-release nutrient tablets,
replacement light bulbs, and a variety of pre-packaged growing kits, including
the "Salad Bar," "Herb Garden," "Veggie Patch," "Tomato Factory," "Flower
Garden" and "Rose Garden." We plan to market a fee-based membership program to
consumers, whereby members enroll for a fee, and are then, at regular intervals,
sent a different grow kit which includes seed pods and time-release nutrient
tablets, as well as a periodic newsletter providing gardening tips, recipes, and
growing contests.
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RETAILERS, CATALOG COMPANIES, AND OTHER DISTRIBUTORS
We plan to expand the distribution of our "Smart Garden" systems and
aftermarket products to additional channels including TV shopping networks,
catalog companies and specialty and mass retailers.
TV SHOPPING NETWORKS
We plan to sell select our "Smart Garden" systems through television
shopping networks such as QVC and the Home Shopping Network. Much like an
infomercial, this highly visible and successful specialty sales channel allows
in-depth demonstrations of the Company's products along with a description of
their capabilities and benefits.
CATALOGUE COMPANIES
We plan to expand distribution of our product line through major catalogue
merchants, such as The Sharper Image, Brookstone, William Sonoma, Chef's
Catalog, Gardener's Supply Company, Smith & Hawkins, etc. Appearances in these
catalogues will further expand awareness and lend additional credibility to our
products. Our aftermarket companion products may also be offered through these
merchants.
MASS MARKET MAJOR RETAILERS
At a time deemed advantageous, we plan to expand distribution to major
retail channels. These may include mass retailers such as Wal-Mart, Target,
K-Mart, Costco, Sam's etc., home improvement centers such as Home Depot, Lowe's,
Hardware Stores, etc., and some of the more than 40,000 specialty gardening,
florist, landscape and nursery stores in the U.S.
MARKETING INTERNATIONALLY
In addition to sales from international markets arising directly via phone,
internet and other referrals, we intend to establish a number of international
distributors. Our goal is to partner with successful distribution companies that
possess both direct and retail marketing experience. These partnerships are most
likely to take the form of exclusive distributor or licensing agreements tied to
performance criteria. Currently, opportunities are being explored in a number of
these countries.
FUTURE GROWTH STRATEGIES
Depending on the success of our initial product launch, we see potential
future revenue growth from several areas, including:
o The development of a broader line of consumer indoor gardening
products, which we plan to market through the same distribution
channels. This includes development and sales of new "Smart Garden"
growing systems having different features, benefits, styles, designs
and price points, as well as a variety of seed kits, seedpods,
lighting systems, accessories, and related gardening and home decor
products.
o The development of a line of larger commercial products based on our
patent-filed technologies, targeted toward the restaurant industry
(for restaurateurs wanting to offer fresh vine ripened herbs grown on
their premises), and the commercial indoor gardening (greenhouse)
industry.
o These products and others that we may develop may be sold through
existing distribution channels, or through newly developed channels,
such as an AeroGrow-developed catalog offered to existing customers
and new prospects. We also plan to utilize database marketing to offer
new and existing products to the customer list which will be built
from our direct-to-the-consumer marketing activities. As planned, this
database will include purchasing histories and demographics that will
enable AeroGrow to target its future product development, marketing
and sales activities to the specific needs and interests of its
customers.
o AeroGrow plans to replicate and/or modify and apply these long-term
strategies in international markets as appropriate.
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COMPETITION
To date, hydroponic technologies have generally been limited to ardent
hobbyists and commercial growing facilities worldwide. We believe that AeroGrow
is the first to offer an easy-to-use, soil-less, microprocessor-based "Smart
Garden" indoor growing system, with pre-planted seeds, growing pods and an
integrated lighting system, that is designed, priced, and marketed specifically
for the mass consumer market.
We further believe that our proprietary and patent-pending technologies,
trade secrets, research knowledge base, user-friendly interfaces, and direct
marketing expertise offer certain barriers to entry for potential competitors.
Typical hydroponic manufacturers offer a range of equipment and accessories
through distributors or small, independent "hydro-shops" in a trade-oriented
manner similar to plumbing or electrical suppliers. Purchasers typically mix and
match equipment from various suppliers in an a-la-cart fashion to individually
customize a system that they then assemble on their premises. A typical system
is likely to include hydroponic growing trays, irrigation channels, a nutrient
delivery system, consisting of electronic timers, pumps, motors, tubing and
nozzles, and a nutrient reservoir. Ordinarily, monitoring equipment is also
needed for measuring water, pH and nutrient levels.
Additional items and accessories required for a complete system generally
include (1) an indoor lighting system with electronic timer and ceiling chains
for anchoring the lights above the plants; (2) a nutrient formula to be custom
blended by the purchaser, depending on the plant variety and plant maturity; and
(3) the sub-structure and growing media for seed germination and plant support.
Specialized seeds would typically be purchased separately from a different
supplier in a different industry. The cost of purchasing these items separately
can range from approximately $500 to many thousands of dollars.
We believe that our simplified, integrated and complete "Smart Garden"
systems, and planned methods of distribution offer a significant and beneficial
break from these traditional industry practices; thus enabling a wide variety of
consumers, with little or no specialized skills or knowledge, to inexpensively
enjoy the benefits of indoor, hydroponic gardening.
However, we recognize that there are companies that are both better funded,
and have greater experience in producing hydroponic products than AeroGrow.
These include, but are not limited to, companies such as General Hydroponics and
American Hydroponics, which could potentially begin to focus on the consumer
market with competing products. In addition, we could potentially be faced with
competition from large, well-funded, soil-based gardening companies such as the
Burpee Seed Company, Gardener's Supply Company, and others, as well as from
gardening wholesalers.
Nevertheless, we believe that our AeroGrow indoor "Smart Garden" systems
and related products can compete effectively in the marketplace on the basis of
their affordable cost, user-friendly design, and the benefits offered by our
numerous proprietary and patent-pending technologies. The latter include our
indoor "Smart Garden" systems, unique time-release nutrient systems, seedpods,
and cost-effective, full-spectrum, integrated lighting systems.
Further, to the best of our knowledge, none of the growing systems
currently available for use in the home at our projected retail price points
provide an integrated grow lighting system. Thus, they are unsuited for the
indoor growing of fresh herbs, vegetables and flowers without the additional
purchase of a separate, relatively expensive and bulky lighting system. We
believe that these products are too large, noisy, and unattractive for indoor
home kitchen or office use, and none offer the ease-of-use afforded by
AeroGrow's indoor "Smart Garden" systems.
MANUFACTURING
We plan to manufacture our products using contract-manufacturing sources to
be supervised by our internal engineering and manufacturing teams. Components to
be manufactured and assembled to our specifications and quality control
standards include our custom-designed, plastic, injection-molded housing, our
integrated lighting system, an encapsulated UL-approved micro-pump motor, and
other components.
Recently, we agreed to, and are in the process of finalizing, a contract
with Mingkeda (MKD), a mainland China manufacturing source. MKD is an ISO 9002
designated factory, the industry's highest quality standard, and has won
numerous awards for its high quality standards from the Chinese government.
Tooling will be built by MKD to our specifications and drawings, and owned by
AeroGrow. In addition, we have identified a second factory, whose principal
office is in Hong Kong, as a potential back-up source should sales volumes
require added production. Following due diligence examination by our staff,
including the gaining of competitive bids, inspections of a number of factories,
and the establishment of rigorous quality control standards and inspection
procedures, we believe that our products will be manufactured to the highest
quality standards, at acceptable costs.
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COPYRIGHTS, PATENTS AND TRADE SECRETS
We have filed the following thirteen patent applications to date to protect
our technologies and products. Eleven of these patent filings are with the U.S.
Patent and Trademark Office, and two are foreign applications for international
coverage. Our first patent was issued effective on October 26, 2004, and the
remainder are pending. These issued patents and pending applications include:
o Centrifugal force, fractionating, aeroponic nutrient delivery system
for potential use in our MIST "Professional" indoor growing system
(filed September 2002, issued October 26, 2004 as U.S. Patent No.
6,807,770);
o Low pressure MIST aeroponic growing apparatus, PCT International
application (filed September 2003, pending);
o Seed germination pods that transport, support and germinate seedlings
in aeroponic or hydroponic devices and support the growth of the plant
to maturity (filed November 2003, pending);
o Use of infrared beams to measure plant roots, creating a basis for the
regulation of nutrients, oxygen and plant growth (filed December 2003,
pending);
o PONDS (Passive, Osmotic Nutrient Delivery System) technology, a
nutrient delivery system using no moving parts (filed March 2004,
pending);
o RAIN System technology, which hyper-oxygenates and ionizes plant roots
and is to be used in our Kitchen "Smart Garden's" (filed March 2004,
pending);
o Grow light system, which allows for the use of high intensity, full
spectrum compact fluorescents (filed April 2004, pending);
o Oxygenating terrace system, which increases the amount of dissolved
oxygen and negative ions available to plant roots (filed April 2004,
pending);
o Devices and methods for growing plants, PCT International application
(filed September 2004, pending);
o Liquid Fractionation System Useful for Growing Plants, for use in our
MIST "Professional" indoor growing system (filed October 2004,
pending);
o Devices and methods for growing plants by measuring liquid or nutrient
usage rate, the adaptive growth learning technologies (filed December
2004, pending);
o Time-release, oxygen generating nutrient compositions and methods for
growing plants (filed December 2004, pending); and
o pH buffered plant nutrient compositions and methods for growing plants
(filed December 2004, pending).
Our patent advisors believe that the pending patent applications described
above include inventive technologies that are novel in their respective fields
and that patents are likely to be granted.
PERSONNEL AND FACILITIES
Currently, we employ 21 persons, 15 full-time and 6 on a part-time basis.
In addition, we contract for the services of a number of consultants. We believe
that our employee relations are good. We intend to conduct our business using
the services of its own employees, and to contract for the services of
consultants, professionals, and experts such as attorneys, auditors, tax
planning experts, etc., as required and/or cost-justified. Some activities such
as manufacturing, telemarketing, fulfillment, and shipping, in whole or part,
are planned to be outsourced.
Our offices are located in Boulder, Colorado. Presently, we occupy 3,075
square feet, rented from a related party, on a month-to-month basis. We are
currently negotiating a long term lease for this space. We also rent in Boulder:
(1) a 918 square foot space that includes a grow room, lab and research
facility, under a lease expiring December 31, 2005; (2) an 1,800 square foot
prototyping facility in Longmont, Colorado on a month-to-month basis; and, (3) a
240 square foot greenhouse facility, used for testing of seed and plant
varieties, of which more than 300 have been grown and tested to date, on a
month-to-month basis.
While our facilities appear adequate for the foreseeable future, we may add
space to meet future growth as needed. Upon expiration of our current leases, we
believe that we will be able to either renew our existing leases or arrange new
leases in nearby locations on acceptable terms.
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MANAGEMENT
DIRECTORS AND OFFICERS
The following table shows the names and ages of our directors and officers
and the positions they hold with AeroGrow.
Name Age Position(s)
---- --- -----------
Michael Bissonnette 56 Chief Executive Officer, President and Director
Jerry L. Gutterman 62 Chief Financial Officer , Secretary and Director
Randy Seffren 47 Chief Marketing Officer
Frederic Wiedemann 56 Vice President Human Resources & Special Projects
Richard A. Kranitz 61 Director
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MICHAEL BISSONNETTE has served as Chief Executive Officer, President and a
director of the Company from its inception in July 2002 to present.
Concurrently, he has served as Chief Executive Officer, President and a director
of our former parent, Mentor Capital Consultants, Inc., from its founding in
January 1998 to the present. Over the last 25 years, Mr. Bissonnette has been
founder and Chief Executive Officer of three multi-million dollar consumer
product companies, two of which became sizeable national and international
corporations, specializing in the funding, development and marketing of
breakthrough, technology-based consumer products. His ventures have raised more
than $25 million both privately and publicly to help fund their growth and
development. He has taken two of his companies public and has negotiated the
multi-million dollar acquisition of a third company. Mr. Bissonnette's extensive
consumer marketing experience encompasses retail sales distribution and
direct-to-the-consumer marketing, including direct mail, radio, television and
long form infomercials. He brings hands-on skill in the use of broadcast media
having conceived, developed and produced numerous successful radio and
television commercials.
JERRY L. GUTTERMAN has been Chief Financial Officer, Secretary and a
director of the Company from inception in July 2002 to present. Concurrently, he
has served as Chief Financial Officer, Secretary and a director of our former
parent, Mentor Capital Consultants, Inc., from January 2002 to the present. Mr.
Gutterman has more than 30 years of senior management experience. From January
1995 to December 2001 he was the principal of J.L Gutterman & Associates, a
consulting firm. He has been Chief Executive Officer of a $15 million dollar
international consumer security products company, the Chief Financial Officer of
a $23 million dollar international consumer electronics company (which he was
instrumental in taking public), and Director of Operations and Chief Financial
Officer of a $36 million dollar national home health care retailer of medical
products and services. Prior to that, Mr. Gutterman was the Treasurer and
Controller of a $90 million dollar retailer. Mr. Gutterman is a certified public
accountant licensed in California. He was awarded a Bachelor of Science degree
by the University of California at Los Angeles in 1965.
RANDY SEFFREN has been Chief Marketing Officer of the Company since April
2004. Mr. Seffren has 25 years of senior executive level marketing experience
with ad agencies, Ogilvy and Mather and Orbis Broadcast, and in direct response
marketing as Vice President Marketing with Life Fitness a $150 million dollar
company and Executive Vice President with Reebok Home Fitness and Body By Jake a
$150 million dollar company. Mr Seffren has introduced over 200 consumer
products on a global scale from product development through marketing and
communications. He leveraged the direct response marketing of these products
through distribution into specialty and mass retail channels. Mr. Seffren has
introduced more than 50 unique direct response TV products for Chef Tony,
Richard Simmons and others. Some of his Fortune 500 clients included Procter &
Gamble, Marriott, Sears, Novartis, Aventis and Johns Hopkins Medicine. He was
awarded a Masters of Science Degree in Integrated Marketing from Northwestern in
1979 and a Bachelor of Science Degree from Southern Illinois University in 1978.
FREDERIC WIEDEMANN has been Vice President of Business Development of the
Company since April 2003. He was Executive Director of Unifying Fields
Foundation from January 1994 to March 2003. Mr. Wiedemann was awarded his Ph.D.
degree by Georgia State University in 1983, his M.A. degree by Georgia
University in 1980, and his B.A. degree by Swarthmore College in 1971.
RICHARD A. KRANITZ has been a director of the Company since inception in
July 2002. He has also served as a director of our largest shareholder, Mentor
Capital Consultants, Inc., from January 2002 to the present. He has been an
attorney in private practice since 1970, emphasizing securities, banking and
business law. Prior to establishing Kranitz & Philipp (formerly the Law Offices
of Richard A. Kranitz) in 1984, he was with the Milwaukee law firms of Fretty &
Kranitz (1982 to 1983), Habush, Gillick, Habush, Davis, Murphy, Kraemer &
Kranitz (1977 to 1978), McKay, Martin & Kranitz (1973-1976) and Reinhart,
Boerner, Van Deuren, Norris & Reiselbach, s.c. (1970 to
26
1973). Mr. Kranitz served as Law Clerk to the Honorable Myron L. Gordon, in the
U.S. District Court (E.D. Wisconsin) from 1969 to 1970. He was awarded his J.D.
degree by the University of Wisconsin Law School in 1969. Mr. Kranitz has served
as a director of the Grafton State Bank from 1990 to present. He served as a
venture capital consultant to, and director of, various companies and he has
served at various times as a director of various professional, civic or
charitable organizations.
All of our directors hold office until the next annual meeting of
stockholders and the election and qualification of their successors. Officers
are elected annually by our board of directors and serve at the discretion of
the board.
See "Principal Stockholders" for information concerning ownership of our
common stock by our directors and officers.
MANAGEMENT COMPENSATION
DIRECTORS. Directors currently receive from AeroGrow 10,000 shares of our
common stock for each year they serve as Directors.
SUMMARY COMPENSATION TABLE. The following table provides information
concerning compensation earned by our Chief Executive Officer for services
rendered to AeroGrow, in all capacities, during the fiscal year ended December
31, 2004. Compensation has been reported for the year ended December 31, 2004.
We are required to disclose in the table the compensation we paid to our Chief
Executive Officer and to any other executive officer of our company who was paid
in excess of $100,000. These persons are referred to in this prospectus as
"named executive officers." Only our chief executive officer was paid more than
$100,000 for the year ended December 31, 2004, and, accordingly, only
compensation paid by us to him is included in the table.
Twelve Months Compensation All Other
Name and Principal Positions Year Salary ($) Bonus ($) Compensation($)
---------------------------- ---- ---------- --------- ---------------
Michael Bissonnette 2004 134,428 -- --
Chief Executive Officer, President, 2003 123,046 -- --
and Director 2002 -- -- --
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OPTION GRANTS IN THE LAST FISCAL YEAR. No options were granted to our Chief
Executive Officer, our only named executive officer, for the year ended December
31, 2004.
OPTION EXERCISES IN 2004 AND AGGREGATE OPTION VALUES AT DECEMBER 31, 2004.
No options have been exercised by our Chief Executive Officer, our only named
executive officer, during the year ended December 31, 2004 . As of December 31,
2004, no unexercised options were held by our Chief Executive Officer.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Pursuant to Nevada law, we are required to indemnify any officer, director
and affiliated person who was or is a party, or who is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he or she is or was a member, director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a member,
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including attorneys fees,
and against judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such action, suit or
proceeding if he acted, or failed to act, in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. In some instances,
a court must approve indemnification
As to indemnification for liabilities arising under the Securities Act of
1933 for directors, officers or persons controlling AeroGrow, we have been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy and unenforceable.
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SCIENTIFIC ADVISORY BOARD
AeroGrow has organized a world-renowned Scientific Board of Advisors who
are experts in Hydroponics and soil-less growing. This Board of Advisors helped
us in the development of our revolutionary nutrient delivery system and offers
ongoing feedback, testing and guidance us in our development process.
DR. HENRY A. ROBITAILLE, PH.D. Dr. Henry Robitaille is known world wide for
his contributions to the science of hydroponics, primarily through his work at
the Disney's Future World exhibit, called "The Land," at Epcot Center, and his
work on the world-renowned Biosphere project. Dr. Robitaille worked with
Disney's Epcot Center for 20 years. As Epcot's Director of Science and
Technology and Agricultural Manager for "The Land," Dr. Robitaille was one of
the primary individuals responsible for the design and development of Disney's
"The Land" exhibit. "The Land" is a 2-acre, working greenhouse, demonstrating
cutting edge, "future world" hydroponic plant growing techniques. As the
agricultural manager for "The Land", Dr. Robitaille was also responsible for all
facets of management of this space age farm and crop production research and
demonstration facility. This included all the research and development of new
soil-less growing technologies and its ongoing maintenance and troubleshooting.
"The Land" receives millions of visitors each year while producing more than
20,000 pounds of vegetables and herbs annually for use in Disney's upscale
restaurants. In addition, it provides a valuable research laboratory for new and
improved soil-less growing methodologies for leading scientists from around the
world, exploring alternative technologies and methods for increasing food
production in impoverished regions of the world. Dr. Robitaille was also a
consultant involved with the research and development of Biosphere 2 (Biosphere
1 is our earth), the largest enclosed, controlled environment growth and
measurement facility available for earth systems research. The Biosphere
encloses a complete ecosystem, complete with a rainforest, an ocean with a coral
reef, desert, savannah and marshland. Dr. Robitaille has a Ph.D, in Horticulture
and Plant Physiology from Michigan State University.
DR. HOWARD RESH, PH.D. Dr. Howard Resh, a Ph.D in Plant Science, is an
international leader on soil-less growing technologies. Dr. Resh has written
more books about growing plants without soil than anyone in the world, having
authored four books and dozens of scientific and popular papers on the subject.
His best selling published books include what is considered the "Bible" of
soil-less food production, the 500+ page HYDROPONIC FOOD PRODUCTION (now in its
6th edition). Dr. Resh was pictured on the cover of the world's leading magazine
for soil-less gardening, "The Growing Edge" (September, 2002), for his work in
the design, development and management of a hydroponic greenhouse that grows
gourmet food for a CuisinArt hotel, resort and spa complex in Anguilla, BWI.
Prior to this, Resh worked for decades as Technical Director and Manager of a
variety of vegetable and herb, hydroponic crop production facilities around the
world, in the US, Canada, Taiwan, Venezuela and the British West Indies.
MIKE MORTON. Mike Morton is the owner and president of HGI Worldwide, Inc.
(Hydro Gardens), an international horticultural nutrient development and
greenhouse supply company. For the past 30 years, Mr. Morton has been at the
leading edge of hydroponic nutrient development and biological pest control
methods. He has directed the construction and installation of major greenhouse
projects and indoor growing systems in the United States and internationally.
Mr. Morton is also the inventor of several new, cutting edge technologies for
accelerated plant growth and seedling production. Since the early 1980's, he has
worked jointly with the USDA and many Universities and customers across the U.S.
in the research and hands on use of biological pest controls. Mr. Morton is a
frequent guest speaker at Universities and Conferences across the country.
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