CORPORATE STRATEGY

Strategic Transformation at CubicFarms Systems Corporation
In late 2022 and early 2023, CubicFarms Systems Corporation new management team undertook a comprehensive and in-depth review of its core business vision and strategic objectives. This thorough examination led to several significant changes designed to enhance the company’s ability to execute existing technologies more effectively in the marketplace, while paving a clearer pathway to long-term shareholder value creation.

Comprehensive Cost Structure Analysis
One of the primary focuses of this strategic overhaul was a meticulous analysis of the combined companies’ cost structures, which included employee headcount, counterparty agreements, and every operational cost. The aim was to identify areas where expenses could be reduced, and efficiencies maximized across CubicFarms and HydroGreen.

In early 2023, the company launched a rigorous cost reduction program that sought to streamline operations and improve financial health. This initiative was completed in early 2024, resulting in a significant reduction in operating costs. These improvements have been transparently reflected in the company’s financial filings over this period, demonstrating a commitment to financial discipline and operational improvement.

Evolution of Business Strategy
Beyond cost optimization, a more profound transformation involved reimagining the company’s business strategy to adapt to changing market dynamics. Historically, HydroGreen Inc. focused on selling its patented equipment to small farm owners in the U.S. These farmers typically relied on loans to finance their purchases, making them vulnerable to fluctuations in interest rates and tightening credit markets. Consequently, sales became unpredictable and sporadic, despite the clear advantages of HydroGreen’s sprouted grains for livestock nutrition.

A New Two-Pronged Strategic Approach
Recognizing these challenges, the new management team implemented a two-pronged approach to sales and operational strategy:

1. Targeting Subsidized Agricultural Markets: The first aspect of this strategy involves a concerted effort to focus capital equipment sales on markets that benefit from government subsidies. Regions such as Canada, Oceania, and the European Union have established agricultural subsidy programs designed to support farmers in adopting innovative technologies. By capitalizing on these subsidies, HydroGreen aims to make it easier for farmers to invest in capital equipment without the encumbrance of high-interest loans. This strategic pivot not only enhances the predictability of sales but also opens new avenues for growth in markets that value sustainability and technological advancement in agriculture.

2. Feed as a Service (FaaS): The second major shift in strategy was the development of a recurring revenue model through the sale of sprouted grains directly to farmers and livestock operators. This will be achieved by building, owning, and operating HydroGreen-owned feed centers in areas with high concentrations of beef and dairy cattle. By developing the Feed as a Service (FaaS) model, HydroGreen aims to offer long-term consistent and reliable feed solutions to its customers. The FaaS model is designed to bring predictability to sales, improve profit margins, and enable better financial modeling, ensuring HydroGreen’ s stability and growth for years to come.

Market Opportunity and Initial Success
The demand for livestock feed is enormous, not only within the U.S. but also globally. This growing market provides HydroGreen with a unique opportunity to be a first to market with its innovative feed solutions. Since identifying this market opportunity, HydroGreen has successfully signed numerous feed agreements and established new partnerships across the U.S. This early success has been communicated to investors, reinforcing confidence in the company’s new direction and strategic focus.