S-1 1 v373405_s1.htm FORM S-1

As filed with the Securities and Exchange Commission on April 17, 2014

Registration No.        

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



 

FORM S-1
REGISTRATION STATEMENT
under
The Securities Act of 1933



 

TAGGARES AGRICULTURE CORP.

(Exact name of registrant as specified in its charter)



 

   
Delaware   0139   46-4708132
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (IRS Employer
Identification No.)

7601 W. Clearwater Ave.
Box 16
Kennewick, WA 99336
(509) 590-2443
Fax: (509) 590-2241

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)



 

Registered Agent Solutions, Inc.
1679 South Dupont Hwy, Suite 100
Dover, DE 19901

(Name, including zip code, and telephone number, including area code, of agent for service)



 

Copy to:

 
Andrew W. Shawber
Laura A. Bertin
  Michael T. Raymond
Bradley J. Wyatt
Summit Law Group, PLLC
315 Fifth Avenue South, Suite 1000
Seattle, WA 98104-2682
(206) 676-7000
Fax: (206) 676-7118
  Dickinson Wright PLLC
2600 W. Big Beaver Rd., Suite 300
Troy, MI 48084
(248) 433-7200
Fax: (248) 433-7274


 

Approximate Date of Commencement of the Proposed Sale to the Public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

     
Large accelerated filer o   Accelerated filer o   Non-accelerated filer o
(Do not check if a smaller reporting company)
  Smaller reporting company x

CALCULATION OF REGISTRATION FEE

   
Title of Each Class of Securities to be Registered   Proposed Maximum Aggregate
Offering Price(1)(2)
  Amount of
Registration Fee(3)
Common Stock, $0.0001 par value per share   $ 48,300,000     $ 6,222  

(1) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(2) Includes the aggregate offering price of additional shares that the underwriters have the right to purchase from the Registrant, if any.
(3) Calculated under Section 6(b) of the Securities Act of 1933 as .00012800 of the proposed maximum aggregate offering price.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.

 

 


 
 

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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the SEC is effective. This preliminaryv prospectus is not an offer to sell and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED            , 2014

PROSPECTUS

7,000,000 Shares of Common Stock

[GRAPHIC MISSING]

This is an initial public offering of common stock of Taggares Agriculture Corp. Prior to this offering, there has been no public market for our common stock. It is currently estimated that the initial public offering price per share will be between $     and $    . We have applied for the common stock to be listed on the NASDAQ Capital Market under the symbol “TAG”.

We are an “emerging growth company” and a “smaller reporting company” under the federal securities laws and, accordingly, will be subject to reduced public company reporting requirements. In addition, investing in shares of our common stock involves significant risks. See “Risk Factors” beginning on page 21 for factors you should consider before buying our securities.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION (“SEC”) NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

   
  Per Share   Total
Initial public offering price   $     $  
Underwriting discount(1)   $     $  
Proceeds to us, before expenses   $     $  

(1) For a description of the compensation to be received by the underwriters, see “Underwriting,” beginning on page 93.

The underwriters have the option to purchase up to an additional 1,050,000 shares of common stock at the initial public offering price, less the underwriting discount, for up to 45 days from the date of this prospectus.



 

 
Janney Montgomery Scott   ROTH Capital Partners


 

 
 
 
 
 

The date of this Prospectus is         , 2014.


 
 

TABLE OF CONTENTS

TABLE OF CONTENTS

 
  Page
Prospectus Summary     1  
Risk Factors     21  
Dividend Policy     33  
Forward-Looking Statements     34  
Use of Proceeds     35  
Capitalization     36  
Dilution     37  
Unaudited Pro Forma Financial Information     38  
Management's Discussion and Analysis of Financial Condition and Results of Operations     43  
Business     54  
Industry and Market Opportunity     69  
Management     76  
Related Party Transactions and Structure of the Company and Related Parties     87  
Principal Stockholders     89  
Description of Securities     90  
Shares Eligible for Future Sale     92  
Underwriting     93  
Legal Matters     96  
Experts     96  
Where You Can Find More Information     96  
Index to Financial Statements     F-1  

Until            , 2014 (25 days after the commencement of this offering), all dealers that buy, sell or trade our shares of common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the shares of common stock offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. No action is being taken in any jurisdiction outside the United States to permit a public offering of our securities or the possession or distribution of this prospectus in any such jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside of the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus applicable in that jurisdiction.

The information in this prospectus may only be accurate as of the date appearing on the cover page of this prospectus, regardless of the time this prospectus is delivered or our shares of common stock are sold.

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. It does not contain all of the information you should consider before purchasing our shares of common stock. Therefore, you should read the prospectus in its entirety, including the risk factors and the financial statements and related footnotes appearing elsewhere in this prospectus. References to “we,” “us,” “our,” “Taggares Agriculture Corp.,” “TAG” or “the company” generally refer to Taggares Agriculture Corp., a Delaware corporation, and, except as otherwise indicated, includes the business and assets of Snake River Vineyards, which we will be acquiring immediately following the closing of this offering.

Our Company

Taggares Agriculture Corp. was formed in January 2014 to leverage the well-established Taggares family name and farming expertise to acquire, re-develop and operate profitable farmland in the Pacific Northwest (the region encompassing Washington, Oregon and Idaho). Our primary focus is on acquiring farmland with the necessary characteristics to grow differentiated permanent crops that are profitable to our business such as tree fruit (e.g. apples), stone fruit (e.g. cherries, nectarines and pears) and grapes (e.g. concord and wine grapes). Such characteristics include an established permanent crop, secure water rights, re-development potential, large contiguous area, existing operations and consistent yields. In addition, we plan to use value-enhancing farming techniques to increase the yield of our crops, such as advanced pruning and thinning techniques, frost prevention such as ponds and wind machines, and other infrastructure improvements. Our management, consultants and advisors have extensive experience in these advanced techniques. Further, we plan to establish partnerships to add to our economies of scale, such as those with Valicoff Fruit Company, Inc. (“Valicoff”), the apple packing shed that will pack, store, distribute, market and sell our apples, in which we will earn favorable pricing terms.

We have an established team of managers, directors and outside advisors, all of whom are committed to our business and the creation of long-term value for our stockholders. Our President and Chief Executive Officer is Peter “Pete” Taggares IV, a fourth-generation member of the Taggares family which has been farming in the Pacific Northwest since the 1920s and has a well-established name with a deep history among farmers and members of the Pacific Northwest agriculture community. Pete Taggares IV’s grandfather, Peter J. Taggares II, established a unique branding strategy in the Pacific Northwest by painting all of his farm infrastructure white, from the buildings to the electrical poles, across his portfolio of farm holdings which at one time included over 40,000 aggregate acres of farmland in the Pacific Northwest. Pete Taggares IV will be supported by Peter J. Taggares III, his father and the current Vice President and co-owner of The P.J. Taggares Company and Snake River Vineyards (“SRV”), an apple and concord grape farm on the Snake River in Burbank, Washington that encompasses a total of approximately 3,200 acres.

To date, we have identified and negotiated a large farm acquisition, entered into new strategic partnerships, developed farm acquisition and re-development strategies and established a high-quality board of directors. We have negotiated purchase and sale agreements to acquire SRV, a 3,200 acre farm in the Pacific Northwest; negotiated a five-year contract with Tree Top, Inc. to sell all concord grapes produced on such farm subject to a minimum and maximum price per ton, thus reducing market price risk; and negotiated a three-year contract with Valicoff to pack the apples grown on the farm in exchange for a rebate on each apple bin packed. We have developed the acquisition and re-development strategies described in more detail below, which include the acquisition of desirable farmland and the re-development of such land to diversify the crops we grow and to grow more profitable permanent crop varieties. We intend to improve farm operations on SRV, the farm we plan to acquire immediately following this offering, which involves optimizing resources to increase yields and infrastructure improvements to reduce weather-related risks. We have also established a board of directors with significant experience and expertise in real estate, investing and agriculture. See “Management” beginning on page 76.

We believe we have a significant opportunity in the Pacific Northwest to acquire and improve farmland matching our acquisition criteria. We anticipate an increase in the supply of Pacific Northwest cropland available to be acquired or leased over the next several years. In 2007, in the Pacific Northwest, there were 47,425 farms in operation, of which approximately 88.2%, or 41,844 farms, were family-owned and approximately 57.0%, or 27,052 farms, were primarily operated by individuals over 55 years of age. Further,

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of the 2,204,792 farms in the United States as of 2007, approximately 94.0% were family-owned. In addition, the fastest growing group of farm operators in the United States is those 65 years and older. We believe this data strongly indicates the fragmented nature of the agriculture industry in general and the aging demographics of farm owners in the Pacific Northwest specifically. Based on this data and our experience, we believe that a large number of farms in the Pacific Northwest are currently or will soon become available to be acquired or leased over the next several years.

We intend to use a substantial portion of the proceeds of this offering to acquire the real property, certain personal property, business operations, water and other rights related to the real property (the “Business and Assets”) of SRV immediately following the closing of this offering. SRV is an apple and concord grape farm on the Snake River in Burbank, Washington that encompasses approximately 3,200 acres and has been owned and operated for almost 35 years by various members of the Taggares family. The purchase price for the Business and Assets of SRV is an aggregate of $30.0 million, as documented in the purchase and sale agreements governing the transaction that have been negotiated and executed by the parties. The SRV farm is a prime example of a property that meets or exceeds all of our acquisition criteria. For example, SRV has a contiguous area of approximately 3,200 acres, secure water rights to pump water directly from the Snake River, established farming operations that have lasted over 30 years, consistent yields, and established tree fruit plantings with high potential for re-development into more diverse and higher-profit fruit. As such, we believe the acquisition of SRV will greatly advance our business strategy.

We currently anticipate that in connection with this offering, Peter J. Taggares III and Peter J. Taggares IV will re-invest approximately $500,000 each of their proceeds from the sale of the Business and Assets of SRV for shares of our common stock, or 83,334 shares of common stock each, at an assumed public offering price of $6.00 per share. These purchase amounts constitute approximately 20% and 100% of the proceeds we expect Peter J. Taggares III and Peter J. Taggares IV, respectively to receive following the sale of the Business and Assets of SRV. See “Related Party Transactions and Structure of the Company and Related Parties” beginning on page 87, “Company History and Company Information” beginning on page 10, and in particular the diagram on page 11 showing the purchase of the Business and Assets of SRV and the corporate structures and ownership percentages of the parties involved.

Following our acquisition of SRV, we plan to re-develop approximately 1,000 acres of SRV’s land over the next five years to grow more diverse and higher-profit permanent crop varieties such as new high-density apple varieties, wine grapes and cherries. We believe this strategy will enable us to maximize our profits and diversify crop risk. Our forecasts show that our apple profits could be increased by replacing some of our lower-profit concord grape vines and apple trees with high-density apple trees that grow high-profit apple varieties, or by re-grafting some of our older apple trees with new, higher-profit apple varieties. “High-density” apple plantings involve planting specialized apple trees at closer intervals in the orchard rows, which brings trees into production faster, reduces labor cost, time and materials, and permits greater yield per acre. For example, a farmer may be able to plant 1,000 high-density apple trees per acre, as compared to 200 trees per acre for conventional spacing free-standing apple trees. Examples of higher-profit apple varieties currently include Honeycrisps, Pink Lady and Buckeye Gala. Examples of other higher-profit crops we may consider producing include stone fruit (such as cherries, nectarines and pears) and wine grapes. Further, diversifying our crops will reduce the impact to our business of the potential weather-related and market risks associated with any one type of crop we grow. See “Re-development Strategy” beginning on page 9.

Upon completion of this offering, we believe we will be well-positioned to offer to potential sellers of farmland a unique value proposition. We believe that at present, buyers of cropland fall into two broad categories. One is the typical owner-operator who acquires cropland to farm it themselves. The other is the institutional buyer, such as Hancock Agricultural Investment Group (HAIG), that acquires cropland to build portfolios of properties generally operated by third parties. Typical owner-operators tend to have the farming expertise to farm the land they acquire, but unlike institutional buyers, tend to have limited financial resources and access to capital. Institutional buyers, on the other hand, have greater financial resources and access to capital but tend not to have the desire and expertise necessary to operate the farm properties they acquire. We hope to combine the advantages of both of these types of buyers and be a unique buyer of cropland in the marketplace. We possess the farming expertise to effectively operate the cropland we acquire, and following

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this offering we expect to have broad financial resources and access to capital as compared to typical owner-operators. Further, we believe the Taggares family name, reputation and long-standing relationships in the farming community will help us identify attractive acquisition and leasing opportunities in the Pacific Northwest before such opportunities are listed by a selling agent and known by our competitors. See “Acquisition Opportunity and Strategy” beginning on page 4.

Our Market Opportunity

Global Demand for Crops.  The world is experiencing an increase in the demand for crops as a result of increased world demand for food. The rate of global population growth, along with the rate of per-capita growth in gross domestic product (“GDP”), are the major drivers behind increased demand for crops. The United Nations projects that global population will grow by 11.6% from 6.9 billion people in 2010 to 7.7 billion people in 2020. The International Monetary Fund (the “IMF”) forecasts that GDP per capita (on a purchasing power parity basis) in emerging market and developing economies will increase by 34.0% from 2013 to 2018, from $7,285 per capita to $9,764 per capita. Over the longer term, the Organisation for Economic Co-operation and Development (the “OECD”) forecasts that GDP per capita in non-OECD countries, which are largely located in less developed regions of the world, will grow over 400% from 2013 to 2060.

Global Supply of Crops.  In the past two decades, there has been a decrease in the rate of growth of the global supply of crops. Crop supply is the product of two factors: the amount of farmland in use and the productivity of that farmland. Over the past 20 years, the growth of both of these factors has slowed. According to the Food and Agriculture Organization of the United Nations (the“UN FAO”), from 1961 – 63 through 1997 – 99 the expansion of arable land in developing countries totaled approximately 70 million acres, an increase of 25%, whereas the UN FAO expects only a 13% increase, or approximately 49 million acres, over the period from 1997 – 99 to 2030. Moreover, according to the United States Department of Agriculture (the “USDA”), U.S. cropland area declined from 464 million acres in 1987 to 408 million acres in 2007. According to the UN FAO, the rates of global yield growth for most crops have been decelerating in recent decades, while yields continue to increase. We believe additional factors, such as groundwater depletion, will continue to have a negative impact on farmland availability and productivity.

Trends in the Global Apple Market.  According to the 2012 World Apple Review, as of 2011, total global apple production was about 75.2 million metric tons, approximately 46.5% of which, or 35.0 million metric tons, was produced in the People’s Republic of China, which is currently the world’s largest apple market. The United States is the world’s second largest producer of apples at approximately 4.2 million metric tons, approximately 71% of which was produced in Washington State. Poland, Turkey and Italy rank third, fourth and fifth, respectively. Approximately one out of every four fresh apples grown in the United States is exported and fresh apple exports from the 2011 U.S. apple crop totaled a record 44.0 million bushels, with a record value $987.1 million. In 2011, the People’s Republic of China imported roughly 78,000 metric tons of apples, which represents more than a 100% increase from the amount imported in 2003. This shows that domestic demand for fresh apples in China has grown faster than total production. In addition, the estimated per capita consumption of fresh apples rose 147.5% from the period between 1991-1993 to 2000-2002 and 45.9% over the period between 2000-2002 and 2009-2011. We believe this rise in consumption has been stimulated by the rise of a more affluent middle class and the spread of modern retailing that has made items like fresh apples available in good condition year round. Further, the Chinese domestic apple market is heavily reliant on a single variety of apple, Fuji. We believe these trends indicate that as the People’s Republic of China imports more apples to match increasing domestic demand for greater quantities and different varieties of apples, there is an increasing opportunity for U.S.-based apple growers to market and sell apples in China. As an illustration of this opportunity, an increase by only 10% of Chinese fresh apple demand would constitute approximately 3.5 million metric tons, which is equivalent to approximately 83% of the amount of the entire U.S. apple production in 2011. We also believe this trend is beginning in other developing countries, such as India, and will create long-term global demand for high-quality fresh apples.

Global Competitiveness of U.S. Apple Market.  In 2013 the United States was ranked by Belrose, Inc. second overall (up from third in 2012) in the competitiveness of its apple industry as compared to the top 30 apple producing countries. Overall competitiveness is a measure of production efficiency (planting density, yield per hectare, etc.), industry infrastructure and inputs (adequacy of storage, distribution efficiency,

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availability of land, water, labor and capital, costs, etc.), and financial and market factors (interest, exchange and inflation rates, security of property rights, percent of production exported, etc.).

U.S. Cropland as an Asset Class.  As an asset class, U.S. cropland has traditionally offered attractive, stable returns through both current income and value appreciation. Farmland real estate returns, as measured by the National Council of Real Estate Investment Fiduciaries, (the “NCREIF”), Farmland Index, have averaged 12.2% annually from 1992 through 2013. Over that time period, the NCREIF Farmland Index has not posted a negative return in any single year. The NCREIF Farmland Index is a composite return measure of investment performance of a large pool of individual agricultural properties acquired in the private market for investment purposes only. Properties in the NCREIF Farmland Index have been acquired, in part, on behalf of tax-exempt institutional investors. We believe the NCREIF Farmland Index to be a reasonable proxy for farmland investment returns in general, because of the consistency and reliability of its disclosure. However, the index measures performance of actual properties, rather than performance of companies that invest in farmland, and may not be representative of the agricultural investment market as a whole. Farmland returns also have low or negative correlation with other asset classes. An analysis from the University of Illinois found that from 1970 to 2012, U.S. farmland returns had a correlation of -26% with the S&P 500 and -10% with Baa-rated corporate bonds.

Acquisition Opportunity and Strategy

The Taggares family has been farming in the Pacific Northwest since the 1920s and has a well-established name with a deep history among farmers and members of the agriculture community. Our acquisition strategy is to capitalize on the Taggares name, reputation and long-standing relationships in the farming community and to leverage our experience and access to capital to identify attractive acquisition and leasing opportunities, including, but not limited to, those opportunities that can be identified before such opportunities are listed by a selling agent and known by our competitors. We believe that these relationships and expertise are a key aspect of our competitive advantage in the Pacific Northwest. Following our acquisition of the Business and Assets of SRV, we plan to acquire other properties with secure water rights in the Pacific Northwest to farm permanent crops (such as tree fruit). In addition, we intend to enter into long-term leasing and other contractual arrangements to diversify and scale rapidly into other profitable crop varieties. While we intend to exercise our contractual right to purchase the Business and Assets of SRV immediately following the closing of this offering, we expect to complete other strategic acquisitions in the next two to five years.

We believe that competition for acquisitions will come from companies and investment funds who are also seeking to acquire agricultural properties in the Pacific Northwest. Some of our competitors are significantly larger than we are and have substantially greater financial and other resources at their disposal, including, for example, institutional investors like HAIG that manage investments in row and permanent cropland throughout the United States and the world. However, while HAIG and other companies may be better capitalized than us, we believe that these competitors do not have our established family relationships and reputation. Additionally, many have different acquisition strategies and lack our operational expertise. We have observed that these competitors tend to avoid farms that have old infrastructure or other land that requires time and farm expertise to operate. In addition, many of these competitors tend to buy properties and lease them back to the sellers or other operators who actually run the farming operations. We also compete with other local farms and companies who may have similar reputations, relationships and experience as us, but do not have the same access to capital and other resources to enable them to complete acquisitions and scale their operations. Therefore, since we have the expertise and experience to operate under many challenging farming conditions, as well as access to a range of capital sources, including through this offering and from banks and other financial lending institutions, we believe we will be well positioned to identify and complete acquisitions as compared with our competitors.

We intend to finance our acquisition strategy through a combination of the proceeds from this offering, re-investment of earnings for the near-term, and by traditional debt financing from banks and other financial lending institutions, such as a line of credit to be established following the closing of the offering. Specifically, we intend to utilize $30.0 million of the proceeds from this offering to purchase the Business and Assets of SRV. In addition, we are currently in discussions with a financial institution with significant agribusiness lending experience regarding a $15.0 million line of credit for future acquisitions, which we

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expect to formalize after the closing of the offering. Moreover, we anticipate that we will utilize approximately $4.8 million of the proceeds from this offering for future acquisitions and, for the near term, we intend to re-invest any earnings that we generate to support our acquisition strategy. Finally, we plan to incur additional debt from banks and other financial lending institutions as needed in order to help fund our future acquisitions. However, as described elsewhere in this prospectus, the additional financing required to finance our acquisition strategy may not be available to us on commercially reasonable terms or at all, and any significant debt we incur in the future will increase our costs of debt service and the risks associated with our business.

Snake River Vineyards

With a substantial portion of the proceeds of this offering, we will acquire the Business and Assets of SRV, a property located on the Snake River in Burbank, Washington that encompasses a total of approximately 3,200 acres of land, of which approximately 2,400 acres of land are used to grow concord grapes, approximately 440 acres of land are used for apple production, approximately 200 acres of land contain infrastructure, roads and facilities, and 75 acres of land with water rights are reserved for future agricultural development.

Historically, the owners of SRV focused on maximizing the cash returns from the business and chose not to invest significantly to expand or improve their operations. These owners intentionally elected to maintain the same scale of operations rather than making capital contributions to diversify crop varieties or enhance crop yield and profits, or engaging in new, potentially value-enhancing sales activities and strategic alliances. Instead, the business relied largely on crop results and existing customer relationships. As part of our strategy, we intend to (i) re-develop portions of the SRV property to grow new, diverse and profitable crop varieties, (ii) deploy enhanced farming techniques to promote crop yield optimization, (iii) make infrastructure improvements and (iv) enter into strategic partnerships with third parties such as other growers, packing sheds and sales and marketing companies to help reduce market risk and maximize profits per acre.

SRV is known in the local community as the largest contiguous concord grape farm in the State of Washington, and SRV’s primary product is concord grapes. Under a long-term contract, SRV sells all of its concord grapes to Tree Top, Inc. (“Tree Top”), which processes and uses the grapes as concentrate in various consumer beverages and food products. Tree Top is a grower-owned fruit processor headquartered in Selah, Washington with approxiamtely $400 million in annual revenue. SRV does not sell its grapes directly to consumers. SRV recently renegotiated its contract with Tree Top, which now extends until December 2018, and provides for certain pricing, payment and delivery terms as described in the “Business” section of this prospectus. In fiscal 2013 and 2012, SRV earned net sales of $2.6 million and $6.5 million, respectively, and gross margin of $(0.4 million) and $3.7 million, respectively, from its sales of concord grapes. Because of the highly seasonal nature of SRV’s grape business, virtually all of its sales take place in the fourth fiscal quarter.

SRV’s other product is apples, all of which it sells to one or more apple “packing sheds,” which pack the apples for distribution and resale to retailers, distributors or export companies. In fiscal 2013, SRV delivered all of its apples to Monson Fruit Company. In fiscal 2012, SRV delivered all of its apples to three packing sheds in Washington: Monson Fruit Company, Roche Fruit, Ltd. and Douglas Fruit Company. Following the completion of this offering, we intend to enter into a long-term contract with Valicoff, based on the non-binding letter of intent with Valicoff, under which we will receive a rebate of up to $35.00 per apple bin packed, and the flexibility to “run,” or release for sale, our apples when we believe market conditions are preferable. We believe this arrangement with Valicoff is preferable to SRV’s previous relationships with its packing sheds because it will give us more control over when our apples are “run.” In the past, SRV had very little or no control over when its apples were sold in the market. In addition, our contract with Valicoff will contain a per-bin rebate on apple packing, which SRV’s contracts with its packing sheds did not contain.

SRV does not sell its apples directly to consumers. Its apples are delivered to the apple packing shed where they are cleaned, sorted and packed for distribution, and then they are “run” along with other apples held by the packing shed. SRV currently grows the following apple varieties: Fuji, Golden Delicious, Gala, Braeburn, Pink Lady, Red Chief, Cameo and Scarlet. In fiscal 2013 and 2012, SRV earned revenue of $5.0 million and $3.4 million, respectively, and gross margin of $2.2 million and $1.5 million, respectively, from its sales of apples. Because of the highly seasonal nature of SRV’s apple business, virtually all of its

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apple deliveries to the packing sheds took place in the second half of its fiscal year. SRV recognizes almost all of its apple revenue in the third and fourth quarter of the year following the year in which each apple crop was harvested and delivered to our packing sheds. SRV’s recognition of apple revenue coincides with when the apples are delivered to the purchasers and payment for such deliveries is received. We expect this trend to continue following our acquisition of SRV.

Details Regarding the SRV Acquisition

The purchase of the Business and Assets of SRV involves a related party transaction in that SRV is owned by certain persons and entities that are affiliated with Taggares Agriculture Corp. Consequently, certain of our officers, directors and stockholders, including, without limitation, Peter J. Taggares IV and Peter J. Taggares III, have a minority financial interest in the proposed acquisition by Taggares Agriculture Corp. of the Business and Assets of SRV. Specifically, SRV is owned by Snake River Vineyards, a Washington joint venture (“SRV J.V.”), and Bubby T, LLC (“Bubby T”), a Washington limited liability company. SRV J.V. is jointly owned by P.J. Taggares Company, a Washington corporation (“PJTCO”) and Taggares Farms, Inc., a Washington corporation and a wholly-owned subsidiary of P.J. Taggares Company (“TFI”). PJTCO is owned by several members of the Taggares family and various estate planning trusts, including Peter J. Taggares IV, our President, Chief Executive Officer, a director and the beneficial owner of 2,517,461 shares of our common stock (or approximately 87% of our outstanding common stock before this offering), and Peter J. Taggares III, a non-voting board observer, one of our management advisors and the beneficial owner of 299,519 shares of our common stock (or approximately 10.3% of outstanding common stock before this offering). Bubby T is wholly owned by an estate planning trust for the benefit of various members of the Taggares extended family. See “Related Party Transactions and Structure of the Company and Related Parties” beginning on page 87, “Company History and Company Information” beginning on page 10, and in particular the diagram on page 11 showing the purchase of the Business and Assets of SRV and the corporate structures and ownership percentages of the parties involved.

The purchase price for the Business and Assets of SRV is $30.0 million. This purchase price was negotiated with the current owners of SRV, and was based on an indication of interest to purchase the Business and Assets of SRV for $30.0 million that these owners had previously received from a third party. In addition, we have subsequently received an appraisal of the Business and Assets of SRV from an independent agriculture appraiser which valued the land at approximately $34.0 million and the equipment at approximately $1.4 million.

We currently anticipate that in connection with this offering, Peter J. Taggares III and Peter J. Taggares IV will re-invest approximately $500,000 each of their proceeds from the sale of the Business and Assets of SRV for shares of our common stock, or 83,334 shares of common stock each, at an assumed public offering price of $6.00 per share. These purchase amounts constitute approximately 20% and 100% of the proceeds we expect Peter J. Taggares III and Peter J. Taggares IV, respectively to receive following the sale of the Business and Assets of SRV.

In determining how to fund the purchase of the Business and Assets, we considered a range of potential financing alternatives, including utilizing the proceeds of an initial public offering as well as traditional debt financing from banks and other financial lending institutions. We decided that utilizing the proceeds of a public offering would provide us with a better opportunity to accelerate the growth of our business. Specifically, we determined that we could raise more capital through the public market than through traditional debt financing. A larger amount of capital allows us to complete our acquisition and re-development plan more quickly and provides us with sufficient working capital to ease the seasonality of our business and mitigate potential fluctuations due to inclement weather or other unforeseen conditions. Moreover, we determined that going public would help us create a type of currency in the form of our common stock, which we could potentially utilize in the future to complete additional acquisitions. As a public company, we anticipate that we will have access to capital markets for future financing needs and we believe that our equity capitalization post offering will allow us to obtain more favorable loan terms from lenders if we seek debt financing in the future. Further, we believe that the well-financed and flexible capital structure that we expect to have following the completion of this offering makes us appealing to the owners of potential acquisition targets.

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SRV Water Rights

SRV’s water resources include water rights, including usage rights and pumping rights, to the waters of the Snake River. SRV’s water rights permit SRV to pump water directly from the Snake River through a pumping station located in the main flow of the Snake River. SRV’s water rights, to which we will succeed in connection with our acquisition of SRV, are certificated by the State of Washington Department of Ecology under Certificate of Surface Water Rights No. 11864 issued on April 25, 1972 and modified November 23, 2004, and Certificate of Surface Water Rights No. 9729 issued August 30, 1966 and modified November 23, 2004.

In general, water rights attach to real property on which they are put to beneficial use, and the transfer of real property automatically transfers the water rights attaching to such land. The sources of water rights are as follows: certificates of water rights issued by the Washington State Department of Ecology, change decisions by the Department of Ecology, and land vesting deeds which confirm ownership of the land to which the water rights attach. Water rights permit the owner of land to draw certain amounts of water on annual (amount per year) and instantaneous (amount at any given time) bases from an authorized point of diversion (from where the farm owner is drawing water out) on an authorized point of use (the parcel of land on which such water may be used). If a land owner desires to change any of the authorized amounts, point(s) of diversion or point(s) of use, it must apply to the Washington State Department of Ecology and request a change decision. As an example of a change decision, in 2004, SRV’s water rights were granted change decisions by the Washington State Department of Ecology regarding the extension of the point of use under such rights to include the irrigation of the parcels of land owned by Bubby T by water sourced from SRV’s point of diversion in the Snake River. In the State of Washington, water rights constitute vested property rights of the land owners to which the water rights attach and we believe any material legislative or regulatory threat to water rights would be highly controversial. As such, there are no imminent threats to SRV’s water rights of which we are aware.

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Note: images above not to scale.

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Re-development Strategy

Our re-development strategy centers on crop yield optimization, infrastructure improvements and entering into strategic partnerships. With respect to yield optimization, we plan to re-develop approximately 1,000 acres of the SRV property over the next five years to diversify into additional crop varieties, such as new high-density apple varieties, wine grapes and stone fruits (e.g. cherries, nectarines and pears). We believe this strategy will enable us to maximize our profits and diversify crop risk. For example, our forecasts show that our apple profits could be increased by replacing some of our lower-profit concord grape vines and apple trees with high-density apple trees that grow high-profit apple varieties, or re-grafting some of our older apple trees with new, higher-profit apple varieties. In order to replace our grape vines and lower-profit apples, we expect to cultivate new plantings of higher-profit apple varieties by grafting young shoots (or “scions”) of the desired variety onto newly acquired “mature” rootstock (i.e., rootstock that is at least two years old). There may not be a sufficient supply of “mature” rootstock available to us on commercially reasonable terms or at all. If we are unable to acquire mature rootstock for these new plantings, we anticipate purchasing new rootstock and allowing it to grow for at least two years until it is sufficiently mature and suitable for budding. We currently estimate that re-grafted apples will require approximately two years, new apple varieties require approximately five years, wine grapes will require approximately three years, and cherries will require approximately three years before they are in full production, respectively.

As noted above, we intend to increase our use of “high-density” apple trees. “High-density” apple plantings involve planting specialized apple trees called “dwarf trees” at closer intervals in the orchard rows, which brings trees into production faster, reduces labor cost, time and materials, and permits greater yield per acre. For example, a farmer may be able to plant 1,000 high-density apple trees per acre, as compared to 200 trees per acre for conventional spacing free-standing apple trees. Specifically, to improve harvest efficiency in the picking operation and to increase yield per acre, dwarf to semi-dwarf trees are planted at close intervals in rows. This process provides a continuous tree wall of fruit-bearing surface to be sprayed and picked, thus reducing ladder work and other labor, and saving time and materials. In addition, dwarf trees do not take as long to bear fruit and, therefore, these new plantings are designed to allow growers to respond more rapidly to changing consumer demand and to capitalize on higher-profit apple varieties.

Examples of higher-profit apple varieties currently include Honeycrisps, Pink Lady and Buckeye Gala. However, the popularity and profitability of any apple variety depends on a number of factors, including consumer demand, economic and weather conditions, worldwide supply of such varieties and other factors that are outside of our control. While we intend to monitor these factors and incorporate strategies that will help enable us to react quickly to changing consumer preferences, any failure to accurately predict consumer preferences and to match our sales to the demand of our customers would adversely impact our business.

With the proceeds of this offering, we also intend to enhance the SRV property through the use of pruning and thinning techniques, frost prevention such as ponds and wind machines, and other infrastructure improvements to enhance the yield of fruit we are able to produce. We believe our farm management techniques will also give our farm manager the flexibility to take steps to increase yield in response to changing conditions. We further intend to enter into strategic partnerships, including joint ventures with growers or buyers, distribution agreements and sales and marketing contracts (such as those with Valicoff). These arrangements are designed to enhance the profitability of the farm and help reduce market risk. For example, our agreement with our packing shed will give us a rebate per apple bin packed and provides us with greater control over when our apples are sold to market.

We estimate that we will use approximately $1.0 million of the proceeds from this offering for the re-development of portions of the land acquired from SRV to cultivate new apple varieties, including purchasing new apple plants, and for plant infrastructure improvements, such as installing trellising posts. However, we will require additional funds in the future to complete our long-term re-development plans. We intend to finance our long-term re-development strategy primarily through the re-investment of earnings over the next five years, and we may consider seeking traditional debt financing from banks and other financial lending institutions in the future.

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Company History and Corporate Information

In the late 1960s, Snake River Vineyards was formed as a partnership among three entrepreneurs, including Pete Taggares II as the managing partner. The partnership purchased approximately 3,000 acres and water rights on the Snake River in the southeastern part of Washington State near the Tri-Cities (Pasco, Kennewick and Richland). By the 1970s, the vineyard became known as the largest contiguous concord grape farm in the State of Washington, with approximately 2,400 acres of concord grapes. In 1979, SRV J.V. was formed to own and operate all of the land, water rights, equipment and business operations of SRV. Since then, ownership of SRV J.V. has consolidated under the Taggares family and SRV J.V. has been 100% owned by members of the family and related entities for over 20 years.

We incorporated in Delaware in January 2014 as Taggares Agriculture Corp. for the purpose of purchasing the Business and Assets of SRV. Upon completion of this offering, we will use a portion of the proceeds of this offering to acquire substantially all of the Business and Assets of SRV, and we will operate this business under the name Taggares Agriculture Corp. The plan for our acquisition of the Business and Assets of SRV upon completion of this offering is as follows:

On November 25, 2013, our affiliate T3 Ag Investments, LLC, a Washington limited liability company (“T3 Ag”), entered into agreements (the “Purchase and Sale Agreements”) to purchase the Business and Assets of SRV J.V. and Bubby T, for an aggregate purchase price of $30.0 million. Bubby T, an affiliate of SRV J.V. owns approximately 141 acres of agricultural land on which SRV operates; SRV J.V. owns the remainder.
On January 29, 2014, T3 Ag assigned to Taggares Agriculture Corp. all of T3 Ag’s rights under the Purchase and Sale Agreements.
The Purchase and Sale Agreements provide that the purchase and sale of the Business and Assets is contingent upon and will occur immediately following the completion of this offering.

As a result of the final closing of the transactions contemplated by the Purchase and Sale Agreements, the Business and Assets will be owned and operated by us.

SRV J.V., is jointly owned by PJTCO and TFI, a wholly-owned subsidiary of PJTCO. PJTCO is owned by several members of the Taggares family and various estate planning trusts, including Peter J. Taggares IV, our President, Chief Executive Officer, a director and the beneficial owner of 2,517,461 shares of our common stock (or approximately 87% of our outstanding common stock before this offering), and Peter J. Taggares III, a non-voting board observer, one of our management advisors and the beneficial owner of 299,519 shares of our common stock (or approximately 10.3% of outstanding common stock before this offering). Bubby T is wholly owned by an estate planning trust for the benefit of various members of the Taggares family.

T3 Ag is wholly owned by Peter J. Taggares IV. T3 Ag was formed for the purpose of acquiring the Business and Assets, and has assigned to us its rights under several existing agreements, including the agreements to purchase the Business and Assets. T3 Ag has also advanced to us approximately $360,000 as of March 31, 2014, to use for legal, advisory, accounting and consulting expenses and employee compensation prior to the completion of this offering. We will repay the amounts borrowed from T3 Ag plus interest at a rate of 4.0% per annum, which is T3 Ag’s borrowing cost, as soon as practicable following completion of this offering out of the proceeds of this offering. This loan from T3 Ag is the sole source of funding for our pre-filing activities.

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The following is a diagram of the purchase of the Business and Assets of SRV and the corporate structures and ownership percentages of the parties involved. Except for the change in the ownership percentages of Taggares Agriculture Corp resulting from this offering (as described elsewhere in this prospectus, including in the “Principal Stockholders” section on page 89 of this prospectus), the corporate structures and ownership percentages of the parties involved will not change as a result of the acquisition of the Business and Assets of SRV.

[GRAPHIC MISSING]

(1) Percentages based on total legal ownership and voting control over the respective legal entities. Includes ownership interests held in trust accounts for the benefit of the respective individuals or his or her immediate family. Totals may not sum due to rounding.
(2) SRV J.V. is 94% owned by PJTCO, and 6% owned by a wholly-owned subsidiary of PJTCO, TFI.
(3) Bubby T, LLC owns approximately 141 acres of agricultural land on which SRV operates, to be acquired in connection with the offering.
(4) Shows post-offering ownership of Taggares Agriculture Corp. based on the sale of 7,000,000 shares of common stock in connection with this offering and 9,904,425 total shares of common stock outstanding following the completion of this offering. These ownership percentages assume that in connection with this offering, Peter J. Taggares III and Peter J. Taggares IV will re-invest approximately $500,000 each of their proceeds from the sale of the Business and Assets of SRV for shares of our common stock, or 83,334 shares of common stock each, at an assumed public offering price of $6.00 per share. Totals may not sum due to rounding.
(5) Includes shares of common stock held by (a) T3 Ag Investments, LLC, which is wholly owned by Peter J. Taggares IV, (b) Peter J. Taggares IV Irrevocable Trust, of which Peter J. Taggares IV may be deemed to be beneficial owner, (c) Peter and Julie Taggares Extended Family Irrevocable Trust, of which Peter J. Taggares IV may be deemed to be beneficial owner, and (d) Peter J. Taggares IV GST Trust, an estate

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planning vehicle for the benefit of Peter J. Taggares IV, assuming the purchase by such entity of shares of common stock in this offering from proceeds of the sale of the Business and Assets of SRV.

Our principal place of business is 7601 W. Clearwater Ave., Box 16, Kennewick, WA 99336. Our telephone number is (509) 590-2443 and our fax number is (509) 590-2241. Our web address is http://www.taggaresag.com. Information contained in or accessible through our website is not part of or otherwise incorporated into this prospectus. The TAG logo and other trademarks or service marks of Taggares Agriculture Corp. appearing in this prospectus are the property of Taggares Agriculture Corp. All other brand names or trademarks appearing in this prospectus are the property of their respective owners.

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Industry and Market Data

We have obtained the industry, market and competitive position data used throughout this prospectus from industry journals and publications, data on websites maintained by private and public entities, including independent industry associations, general publications and other publicly available information. We believe that all of these sources are reliable, but we have not independently verified any of this information and cannot guarantee its accuracy or completeness. In particular, we have based much of our discussion of the apple and grape industry, the market for alternative sources of apples and grapes, the market for alternative fruits and forecasted growth and demand on information published by industry sources.

Industry publications and surveys generally state that they have obtained information from sources believed to be reliable, but do not guarantee the accuracy and completeness of such information. Further, because certain of these organizations are trade organizations, they may present information in a manner that is more favorable to the industry than would be reported by an independent source. In addition, forecasts are particularly likely to be inaccurate, especially over long periods of time.

References in this prospectus to research reports or articles should not be construed as depicting the complete findings of the entire referenced report or article. The information in each report or article is not incorporated by reference into this prospectus.

The Offering

Securities offered    
    7,000,000 shares of common stock excluding the 1,050,000 shares issuable upon full exercise of the underwriters’ over-allotment option
Common stock outstanding after
this offering
   
    9,904,425 shares, 10,954,425 shares if the underwriters’ over-allotment option is exercised in full
Use of proceeds    
    We intend to use the net proceeds from this offering to finance the acquisition of the Business and Assets, re-develop portions of the property, help finance the acquisition of additional properties, upgrade our equipment, facilities and infrastructure, repay approximately $360,000, plus interest, borrowed from T3 Ag, a related party, to fund our start-up costs and certain expenses related to this offering and for general corporate and working capital purposes. As described in more detail elsewhere in this prospectus, the purchase of the Business and Assets of SRV involves a related party transaction in that SRV is owned by certain persons and entities that are affiliated with Taggares Agriculture Corp.
NASDAQ Capital Market Symbol
for the common stock issued in
this offering
   
    TAG

The number of shares of common stock outstanding after this offering is based on 2,904,425 shares outstanding as of the date of this prospectus. The number of shares of common stock outstanding after this offering assumes no exercise of the underwriters’ over-allotment option to purchase up to 1,050,000 shares and does not include an aggregate of 657,266 shares of common stock that may become outstanding upon exercise of stock options to purchase common stock that may be granted after the date of this prospectus pursuant to our 2014 Equity Incentive Plan.

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Summary Financial Information

In the tables below, we provide the following summary financial information, derived from our audited, unaudited and pro forma financial statements, included elsewhere in this prospectus:

Summary Statements of Income Data and Balance Sheet Data of Snake River Vineyards, a Washington joint venture (“SRV J.V.”), for the fiscal years ended on and as of November 30, 2012 and November 30, 2013, derived from audited financial statements.
Summary Statements of Income Data and Balance Sheet Data of SRV J.V., for the three months ended on and as of February 28, 2013 and February 28, 2014, derived from its unaudited financial statements.
Summary Unaudited Results of Operations Data of SRV J.V., for each of the twelve fiscal years ended on November 30, 2013.
Summary Pro Forma Balance Sheet Data for Taggares Agriculture Corp., reflecting (a) the historical balance sheet for SRV J.V. at November 30, 2013, (b) pro forma adjustment of SRV J.V. balance sheet items not being acquired by Taggares Agriculture Corp. (c) the sale of 7,000,000 shares of common stock at an assumed initial public offering price of $6.00 per share, for a gross offering of $42,000,000, which results in the receipt of net proceeds from the offering of approximately $38,175,000, after deducting the underwriting discount and estimated offering expenses of $3,825,000, (d) the acquisition of the Business and Assets of SRV as though it had occurred on November 30, 2013, and (e) pro forma balance sheet for Taggares Agriculture Corp. to reflect the business combination at the fair values of the tangible and intangible assets acquired, consistent with acquisition accounting.
Summary Pro Forma Balance Sheet Data for Taggares Agriculture Corp., reflecting (a) the pro forma balance sheet of Taggares Agriculture Corp. at November 30, 2013, (b) the first historical balance sheet for Taggares Agriculture Corp. as of February 28, 2014, (c) adjustments required in order to (1) correctly reflect the business combination at the fair values of the tangible and intangible assets acquired consistent with acquisition accounting, (2) reflect the payoff of debt owed to T3 Ag as of the completion of our stock offering, and (3) apply real estate deposits held in escrow against the total outflow of cash for acquisition of the Business and Assets of SRV.
Summary Pro Forma Statement of Income for Taggares Agriculture Corp., reflecting (a) the historical statement of income for Taggares Agriculture Corp for the year ended November 30, 2013, (b) the acquisition of the Business and Assets of SRV as though it had occurred as of December 1, 2012, (c) a provision for federal income tax attributable to the status of SRV J.V. as a partnership for tax purposes, and (d) “as adjusted” to reflect depreciation and amortization of the assets acquired, income tax expense, calculated at an assumed statutory tax rate of 34%, which consists only of 34% federal income taxes, and elimination of interest expense for debt of SRV J.V. that we are not assuming in the acquisition.
Summary Pro Forma Statement of Income for Taggares Agriculture Corp., reflecting (a) the historical statement of income for SRV J.V. for the three months ended February 28, 2014, (b) the first historical income statement for Taggares Agriculture Corp. for the period from inception through February 28, 2014, (c) adjustments to add or remove those items that will differ in the accounting between SRV J.V. as a joint venture and Taggares Agriculture Corp. as a corporation; namely, increased depreciation on a higher asset base, interest on debt not being acquired, and a provision for federal income taxes.

We are presenting the financial information of SRV J.V. for informational purposes only because it was the operating entity of SRV prior to the completion of this offering. Following the acquisition of the Business and Assets of SRV in connection with the completion of this offering, Taggares Agriculture Corp. will become the operating entity of all of the Business and Assets of SRV, and is the registrant that filed the registration statement of which this prospectus is a part. The purchase of the Business and Assets of SRV involves a related party transaction in that the Business and Assets of SRV are owned by certain persons and entities that are affiliated with Taggares Agriculture Corp. Consequently, certain of our officers, directors and stockholders,

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including, without limitation, Peter J. Taggares IV and Peter J. Taggares III, have a minority financial interest in the proposed acquisition by Taggares Agriculture Corp. of the Business and Assets of SRV.

The financial statements of SRV J.V. presented in this prospectus reflect the fact that SRV J.V. leases and jointly operates the 141 acres of agricultural land owned by Bubby T with the land and other assets of SRV J.V. that are included in the Business and Assets of SRV. As such, any reference in this prospectus to the financial statements of SRV or SRV J.V. includes the financial statements of SRV J.V. with respect to the farming operations on the land owned by Bubby T that is being acquired by Taggares Agriculture Corp. immediately following the closing of this offering.

Historical results are not necessarily indicative of the results that may be expected for any future period. Note in particular that limited liability company and partnership accounting vary in certain material respects from corporation accounting under U.S. GAAP, including, in particular, accounting for the treatment of owners’ equity compared to stockholders’ equity, accounting for income taxes and the accounting and reporting of earnings per share. When you read this historical summary financial information, you should also consider the historical financial statements and related notes and the section entitled Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Snake River Vineyards, a Washington joint venture
Summary Statements of Income Data:

       
  Fiscal year ended   Three months ended
(unaudited)
     November 30,
2013
  November 30,
2012
  February 28,
2014
  February 28,
2013
Net sales   $ 7,678,382     $ 9,918,659     $ 825,199     $ 531,815  
Cost of sales     5,875,819       4,777,330       209,667       140,537  
Gross profit     1,802,563       5,141,329       615,532       391,278  
Selling, general and administrative expenses     153,589       165,853       58,680       52,580  
Income from operations     1,648,974       4,975,476       556,852       338,698  
Other income (expense)
                                   
Interest expense     (108,017 )      (184,867 )      (13,946 )      (33,491 ) 
Other     (1,008 )      (1,355 )      4,470       (3,511 ) 
Total Other Expense     (109,025 )      (186,222 )      (9,476 )      (37,002 ) 
Net income   $ 1,539,949     $ 4,789,254     $ 547,376     $ 301,696  

Snake River Vineyards, a Washington joint venture
Summary Balance Sheet Data:

     
  November 30,
2013
  November 30,
2012
  February 28,
2014
(unaudited)
Current assets   $ 3,500,529     $ 5,168,799     $ 3,344,332  
Land and water rights     4,505,000       4,505,000       4,505,000  
Property and equipment, net     1,410,227       1,648,980       1,342,257  
Other assets     53,473       34,533       53,473  
Total assets   $ 9,469,229     $ 11,357,312     $ 9,245,062  
Total liabilities   $ 2,341,437     $ 4,531,802     $ 2,084,166  
Members’ equity     7,127,792       6,825,510       7,160,896  
Total liabilities and members’ equity   $ 9,469,229     $ 11,357,312     $ 9,245,062  

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Snake River Vineyards, a Washington joint venture
Summary Unaudited Results of Operations Data

                       
  Fiscal Year Ended November 30,
     2013   2012   2011   2010   2009   2008   2007   2006   2005   2004   2003   2002
     (In Thousands)
Net income (loss)   $ 1,540     $ 4,789     $ (1,270 )    $ 2,686     $ 2,643     $ 1,856     $ 3,763     $ (565 )    $ (1,389 )    $ (244 )    $ 2,624     $ 2,062  
Interest expense     108       185       256       328       352       409       463       514       597       1,054       1,150       1,246  
Depreciation expense     305       292       295       284       288       281       281       286       298       454       929       941  
EBITDA(1)   $ 1,953     $ 5,266     $ (719 )    $ 3,298     $ 3,283     $ 2,546     $ 4,507     $ 235     $ (494 )    $ 1,264     $ 4,703     $ 4,249  

(1) To supplement the summary financial statements presented in accordance with generally accepted accounting principles in the United States, or GAAP, we consider certain financial measures that are not prepared in accordance with GAAP, including EBITDA. We define EBITDA as net income (loss) adjusted to exclude interest expense and depreciation of property and equipment. The preceding table presents a reconciliation of net income (loss) to EBITDA for each of the periods indicated.

We use the non-GAAP financial measure of EBITDA in evaluating our operating results and for financial and operational decision-making purposes. We believe that EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in EBITDA. We believe that EBITDA provides useful information about our operating results, enhance the overall understanding of our past performance and future prospects and allow for greater transparency with respect to key metrics used by our management in its financial and operational decision-making. We use these measures to establish budgets and operational goals for managing our business and evaluating our performance. We are presenting the non-GAAP measure of EBITDA to assist investors in seeing our operating results through the eyes of management, and because we believe that these measures provide an additional tool for investors to use in comparing our core business operating results over multiple periods with other companies in our industry.

This non-GAAP financial measure should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. There are a number of limitations related to the use of these non-GAAP financial measure rather than net income (loss), which is the nearest GAAP equivalent of this financial measure. Some of these limitations are:

These non-GAAP financial measures exclude certain recurring charges such as interest expense and depreciation of property and equipment;
EBITDA excludes depreciation expense and, although this is a non-cash charge, the property and equipment being depreciated may have to be replaced in the future; and
The expenses that we exclude in our calculation of this non-GAAP financial measure may differ from the expenses, if any, that our peer companies may exclude from similarly-titled non-GAAP measures when they report their results of operations.

We have attempted to compensate for these limitations by providing the nearest GAAP equivalent of this non-GAAP financial measure and describing this GAAP equivalent under the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations.”

Taggares Agriculture Corp., a Delaware corporation
Summary Unaudited Pro Forma Balance Sheet Data
(in $ thousands, except data in footnotes):

         
  November 30, 2013
     Historical SRV J.V.   Pro Forma Adjustment(1)   Pro Forma Offering(2)   Pro Forma Acquisition(3)   Pro Forma(4)
Cash and Cash Equivalents   $ 34     $ (34 )    $ 38,175     $ (30,000 )(5)    $ 8,175  
Other Current Assets     3,467       (3,467 )                   
Long-Term Assets     5,968       (53 )            29,485 (6)      35,400  
Total Assets   $ 9,469     $ (3,554 )    $ 38,175     $ (515 )    $ 43,575  
Total Liabilities   $ 2,341     $ (2,341 )    $     $ 1,836 (7)    $ 1,836  
Equity     7,128       (1,213 )      38,175       (2,351 )(8)      41,739  
Total Liabilities and Equity   $ 9,469     $ (3,554 )    $ 38,175     $ (515 )    $ 43,575  

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(1) Adjustments represent those items that existed on the SRV J.V. balance sheet as of November 30, 2013 that are not being acquired by Taggares Agriculture Corp. through the acquisition of Business and Assets of SRV as described above.
(2) Assumes the sale of 7,000,000 shares of common stock at an assumed initial public offering price of $6.00 per share, for a gross offering of $42,000,000. This results in the receipt of net proceeds from the offering of approximately $38,175,000, after deducting the underwriting discount and estimated offering expenses of $3,825,000.
(3) Reflects the acquisition of the Business and Assets of SRV at fair value as though it had occurred on November 30, 2013.
(4) Reflects adjustments resulting from the business combination at the fair values of the tangible and intangible assets acquired, assumed to be $35.4 million, consistent with acquisition accounting.
(5) Reflects $30 million cash paid to acquire the Business and Assets of SRV.
(6) Reflects the utilization of acquisition accounting for the Business and Assets of SRV and recording of assets at fair market value.
(7) Adjustment represents a deferred tax liability on the temporary difference between the capitalized book value of the Business and Assets acquired in excess of the basis of the assets for Federal income tax purposes.
(8) Adjustment represents gain on bargain purchase to acquire the Business and Assets, net of deferred tax liability described in (6) above.

       
  February 28, 2014
     Pro Forma
Nov. 30, 2013
  TAG
Feb. 28, 2014(1)
  Pro Forma
Adjustment
  Pro Forma
Cash and Cash Equivalents   $ 8,175     $     $ (883 )(2)(6)    $ 7,292  
Other Current Assets           505       439 (3)(6)      944  
Long Term Assets     35,400       2       (80 )(5)      35,322  
Total Assets   $ 43,575     $ 507     $ (524 )    $ 43,558  
Total Liabilities   $ 1,836     $ 529     $ (524 )(4)(6)    $ 1,841  
Equity     41,739       (22 )            41,717  
Total Liabilities and Equity   $ 43,575     $ 507     $ (524 )    $ 43,558  

(1) Represents the balance sheet of Taggares Agriculture Corp. as of February 28, 2014, which is the first date for which financials have been prepared for the Company since its inception in January 2014.
(2) Adjustment represents the net impact to cash of (a) applying real estate deposits held in escrow for the purchase of the Business and Assets of SRV on Taggares Agriculture Corp.'s balance sheet against the purchase, therefore adding $133,000 back to cash, (b) adjusting for $280,000 which will be paid to T3 Ag for principal and interest repayment on its loan to Taggares Agriculture Corp, and (c) reimbursing SRV J.V. for unharvested crop costs for the 2014 harvest, which approximates $864,000 at February 28, 2014.
(3) Adjustment to reflect the application of Taggares Agriculture Corp.'s escrow deposit of $133,000 against its purchase of the Business and Assets of SRV, acquisition of $864,000 of unharvested crop costs, as described in (2) above, and $80,000 of additional depreciation, capitalized in unharvested inventory costs, pertaining to the increase in fair value basis of farming equipment and other assets acquired.
(4) Adjustment reflects the net impact of paying down principal and interest of $280,000 on the loan from T3 Ag.
(5) Adjustment represents $80,000 of additional depreciation pertaining to the increase in fair value basis of farming equipment and other assets acquired.
(6) Because offering costs of $3,825,000 have already been netted against gross offering proceeds of $42.0 million in the November 30, 2013 pro forma balance sheet, adjustments are necessary to remove the otherwise doubling impact of any offering costs in this pro forma balance sheet by (i) removing $372,000 of deferred offering costs from current assets, (ii) removing $244,000 of accrued offering costs from accrued expenses, and (iii) adding back the difference of $128,000 to cash, since all projected costs of the offering have already been subtracted from cash.

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The following table sets forth, for the fiscal year ended November 30, 2013 (i) the actual historical statements of income for Taggares Agriculture Corp. for the year ended November 30, 2013, (ii) pro forma statements of income for Snake River Vineyards J.V. (“SRV J.V.”) reflecting the acquisition of the Business and Assets as though it had occurred as of December 1, 2012, (iii) a provision for federal income tax attributable to the status of Taggares Agriculture Corp. as a taxable corporation as opposed to SRV J.V. as a partnership for tax purposes, and (iv) adjustments to reflect depreciation and amortization of the assets acquired, income tax expense, calculated at an assumed statutory tax rate of 34%, which consists of only 34% federal income taxes, and elimination of interest expense for debt of SRV J.V. that we are not assuming in the acquisition.

Summary Unaudited Pro Forma Statements of Income Data

       
  November 30, 2013
     Historical TAG   Historical SRV J.V.(1)   Pro Forma Adjustments   Pro Forma
     (in thousands, except share and per share data)
Net sales   $  —     $ 7,678     $     $ 7,678  
Cost of sales           5,875       321 (2)      6,196  
Gross profit           1,803       (321 )      1,482  
Selling, general and administrative expenses           (154 )            (154 ) 
Income from operations           1,649       (321 )      1,328  
Other income (expense)           (109 )      108 (3)      (1 ) 
Net Income before income taxes           1,540       (213 )      1,327  
Income tax provision                       (451 )(4)      (451 ) 
Net income   $     $ 1,540     $ (664 )    $ 876  
Basic and diluted earnings per share                     $ 0.09  
Weighted average number of common shares outstanding                       9,904,425 (5) 

(1) Reflects the acquisition of the Business and Assets as though it had occurred as of December 1, 2012 and includes all of the historical SRV J.V. income statement in order to project a pro forma income statement for Taggares Agriculture Corp.
(2) Due to the increase in asset basis as a result of recording assets at their fair market values, as determined by an independent appraisal of the land and farming equipment, additional depreciation and amortization must be recognized in this pro forma income statement. The allocation of fair market value amongst assets will result in an increase in the value of each category of fixed asset for Taggares Agriculture Corp., such that equipment with a 10 year depreciable life will increase from a net book value on SRV J.V.’s books of $155,000 to approximately $900,000 on Taggares Agriculture Corp.’s books; the value of buildings with a 20 year depreciable life will increase from a net book value on SRV J.V.’s books of $36,000 to approximately $500,000 on Taggares Agriculture Corp.’s books; and the value of plantings in vineyards and orchards with a 15 year depreciable life will increase from a net book value on SRV J.V.’s books of $36,000 to approximately $500,000 on Taggares Agriculture Corp.’s books. All of the remaining purchase price is attributable to the fair value of land that will be acquired.
(3) The outstanding debt and related interest expense of SRV J.V. will not be assumed by us in connection with our acquisition of the Business and Assets.
(4) Represents income tax expense, calculated at an assumed statutory tax rate of 34%, which consists of only 34% federal income taxes because Washington state has no corporate income taxes.
(5) Assumes the sale of 7,000,000 shares of common stock in this offering plus 2,904,425 shares issued by us prior to the date hereof.

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The following table sets forth, for the three month period ended February 28, 2014 (i) the actual historical statement of income for Snake River Vineyards J.V. (“SRV J.V.”) for the three months ended February 28, 2014, (ii) the actual historical statement of income for Taggares Agriculture Corp. from inception on January 10, 2014 through February 28, 2014, (iii) a provision for federal income tax attributable to the status of Taggares Agriculture Corp. as a taxable corporation as opposed to SRV J.V. as a partnership for tax purposes, and (iv) adjustments to eliminate interest expense related to debt of SRV J.V. that we are not assuming in the acquisition and income tax expense calculated at an assumed statutory rate of 34%, which consists of only 34% federal income taxes.

       
  February 28, 2014
     Historical
SRV J.V.(1)
  Historical
TAG(2)
  Pro Forma
Adjustments
  Pro Forma
Net sales   $ 825     $     $     $ 825  
Cost of sales     210                   210  
Gross profit     615                   615  
Selling, general and administrative expenses     59       22             81  
Income (loss) from operations     556       (22 )            534  
Other income (expense)     (9 )            14 (3)      5  
Net income before income taxes     547       (22 )      14       539  
Income tax provision                 (183 )(4)      (183 ) 
Net income   $ 547     $ (22 )    $ (169 )    $ 356  
Basic and diluted earnings per share                     $ 0.04  
Weighted average number of common shares outstanding                       9,904,425  

(1) The entire income statement of Snake River Vineyards is included in pro forma results, as Taggares Agriculture Corp. will be taking over the entirety of SRV J.V.'s business operations once the acquisition of the Business and Assets is complete.
(2) Represents the income statement of Taggares Agriculture Corp. as of February 28, 2014, which is the first date for which financials have been prepared for Taggares Agriculture Corp. since its inception in January 2014.
(3) Adjustment represents removal of interest expense of SRV J.V., as the related debt will not be assumed by us in connection with our acquisition of the Business and Assets.
(4) Represents income tax expense, calculated at an assumed statutory rate of 34%, which consists of only 34% federal income taxes because Washington state has no corporate income taxes.

We based the pro forma information on available information and assumptions that management believes are reasonable and that reflect the effects of these transactions. We provide the pro forma information for informational purposes only, and this information should not be construed to be indicative of our financial position or results of operations had these transactions been completed on the dates assumed. This information does not represent a projection or forecast of our financial position or results of operations for future dates or periods.

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Jumpstart Our Business Startups Act of 2012

As a company with less than $1.0 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise generally applicable to public companies. These provisions include:

exemption from the auditor attestation requirement on the effectiveness of our internal controls over financial reporting;
reduced disclosure about our executive compensation arrangements; and
no non-binding advisory votes on executive compensation or golden parachute arrangements.

We may take advantage of these provisions for up to five years following the completion of this offering or until such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.0 billion in annual revenue, have more than $700 million in market value of our capital stock held by non-affiliates, or issue more than $1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these reduced reporting burdens. We have taken advantage of these reduced reporting burdens in this prospectus and, accordingly, the information that we provide stockholders may be different than you may receive from other public companies in which you hold equity interests. Under Section 107(b) of the JOBS Act, “emerging growth companies” may take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We are choosing to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards as required when they are required to be adopted by an issuer. This decision to opt out of the extended transition period under the JOBS Act is irrevocable. In addition, as a smaller reporting company, we have taken advantage of certain reduced reporting obligations available to smaller reporting companies which include reduced disclosure about our executive compensation arrangements and an exemption from the auditor attestation requirement on the effectiveness of our internal controls over financial reporting, among others.

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RISK FACTORS

An investment in our securities involves a high degree of risk and many uncertainties. You should carefully consider the specific factors listed below, together with the cautionary statement that follows this section and the other information included in this prospectus, before purchasing our shares of common stock in this offering. If one or more of the possibilities described as risks below actually occur, our operating results and financial condition would likely suffer, and the trading price of our securities could fall, causing you to lose some or all of your investment in the securities we are offering.

Risks Relating to Our Business and Industry

We may not be able to successfully consummate the acquisition of the Business and Assets of SRV, which would have a material adverse effect on our business, operating results and financial condition.

We currently have no business operations or assets other than the right to purchase the Business and Assets of SRV. Although our agreement with the current owners of SRV gives us the right to purchase the Business and Assets on or before November 15, 2014, unforeseen circumstances outside of our control could prevent us from closing the transaction which we expect to occur immediately following completion of this offering. For example, if a third party makes an ownership claim to any of the property, such claim could disrupt our proposed acquisition. If we are unable to consummate the acquisition of the Business and Assets of SRV, then we will need to identify and acquire other suitable properties that will enable us to execute our business strategies. There is no assurance that such properties would be available on reasonable terms or at all. In addition, if we are unable to acquire the Business and Assets of SRV, our business operations would be materially delayed and we will have to significantly revise our business forecast, budgets and plans. Any failure to purchase the Business and Assets of SRV would have a material adverse effect on our business, operating results and financial condition.

We may not be able to successfully execute our future acquisition plans effectively.

We expect to grow our historical business by acquiring new properties and increasing our production. These efforts will require the addition of employees, expansion of existing facilities and greater management oversight. If we are unable to manage our growth, we may not be able to effectively execute our acquisitions strategy and take advantage of market opportunities, or respond to competitive pressures, and we may have difficulties maintaining and updating the internal procedures and the controls necessary to meet the planned expansion of our overall business.

As we acquire new properties, our management team will also be required to maintain and expand our arrangements with our strategic partners, customers, suppliers and third parties as well as attract new strategic partners, customers and suppliers. We expect that our general and administrative costs will increase as we acquire new properties and diversify our crops. There is no assurance that our current and planned operations, personnel, systems and internal procedures and controls will be adequate to support our future growth.

If we fail to re-develop portions of our Snake River Vineyards property to grow new varieties of apples or other higher margin crops and/or to introduce and commercialize such varieties, our business will suffer.

We cannot guarantee that we will be able to successfully re-develop the portions of Snake River Vineyards (“SRV”) property to introduce and commercialize new crop varieties. The success of redevelopment and crop variety purchasing decisions are uncertain due to several factors, many of which are beyond our control. These include changing consumer preferences, competitive price pressures, our ability to find a large enough supply of new-variety trees in the market to plant, our failure to develop new varieties to meet the evolving demands of consumers, the development of higher-demand products by our competitors and general economic conditions. The process for new products to gain market recognition and acceptance is long and has uncertainties. If we fail to re-develop portions of our property to grow new crop varieties or introduce and commercialize new crop varieties that satisfy consumer preferences, or if our competitors develop products that are favored by consumers, our growth prospects may be materially and adversely affected and our revenue may decline. In addition, sales of our new crops will replace sales of some of our existing products, partially offsetting the benefit of even a successful new crop introduction.

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We require all of the proceeds from this offering to execute our business strategies and we will require additional funds in the future.

We require the proceeds from this offering in order to execute our business strategies. Most of the proceeds from this offering will be used to acquire the Business and Assets of SRV and we may need additional funds to acquire new properties, re-develop portions of SRV, upgrade our equipment and infrastructure and build new facilities. Any failure to re-develop portions of our property, upgrade our equipment and infrastructure or build new facilities would adversely impact our business strategy and could have a material adverse effect on our business, results of operations and financial condition. The proceeds from this offering may not be sufficient to meet all of our working capital needs in the future. We plan to incur debt to finance some or all of our future acquisition plans, and we may require additional funds to finance our re-development strategy and equipment and infrastructure upgrades. Such additional financing may not be available to us on commercially reasonable terms or at all. If we cannot raise additional funds on acceptable terms, we may not be able to develop or enhance our business, take advantage of future opportunities or acquisitions, and our ability to conduct our business may be adversely affected. Moreover, if we incur additional debt, our costs of debt service and the risks associated with our business could increase.

We intend to incur debt to finance our business plan and any significant indebtedness could harm our business.

We intend to use $30.0 million of the proceeds from this offering to purchase the Business and Assets of SRV and plan to incur debt to finance our future acquisition plans following the completion of the SRV acquisition. Specifically, we are currently in discussions with a financial institution with significant agribusiness lending experience regarding a $15.0 million line of credit for future acquisitions, which we expect to formalize after the closing of the offering. Moreover, we plan to incur additional long-term debt from banks and other financial lending institutions as needed in order to help fund our future acquisitions over the next five years. Any significant indebtedness could have material consequences on our business. For example, it could:

make it more difficult for us to satisfy our debt obligations;
increase our vulnerability to general adverse economic and industry conditions;
impair our ability to obtain additional financing in the future for working capital needs, capital expenditures, acquisitions and general corporate purposes;
require us to dedicate a substantial portion of our cash flows from operations to the payment of principal and interest on our indebtedness, thereby reducing the availability of our cash flows to fund working capital needs, capital expenditures, acquisitions and other general corporate purposes;
limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and
place us at a disadvantage compared to our competitors that have less indebtedness.

Any of these risks could impact our ability to fund our operations or limit our ability to expand our business, which could have a material adverse effect on our business, financial condition and results of operations.

Our acquisition strategy may not be successful.

Our business strategy is based in large part on growth through acquisitions, which poses a number of risks. We may not be successful in identifying appropriate acquisition candidates, consummating acquisitions on satisfactory terms or in a timely manner, or integrating any newly acquired or expanded business with our current operations. Even if we identify a company that complements our strategy, we may be unable to complete an acquisition of such company for many reasons, including:

failure to agree on the terms necessary for a transaction, such as the purchase price;
incompatibility between our operational strategies or management philosophies with those of the potential acquisition target;
competition from other potential purchasers of farm properties as discussed below;

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lack of sufficient capital to acquire suitable properties; or
unwillingness of the employees of a potential farm property to work with our management.

Moreover, future acquisitions entail numerous risks, including diversion of management’s attention to other business concerns, risks of entering markets in which we have limited prior experience, including the growth and distribution of new crop varieties, and the potential loss of key employees of acquired organizations. An unsuccessful material acquisition could result in operating difficulties and could have a material adverse effect on our business, financial condition and results of operations.

We face competition from a number of other potential purchasers of farm properties, which may increase the price that we are required to pay to acquire such properties.

There is a high level of competition among companies seeking to make strategic acquisitions of farm properties in the Pacific Northwest. We believe that competition for acquisitions will come from companies and investment funds who are seeking to acquire properties in the Pacific Northwest as well as other local farms and companies who may have similar reputations, relationships and experience as us. Some of our competitors are significantly larger than we are and have substantially greater financial and other resources at their disposal, including, for example, institutional investors like Hancock Agricultural Investment Group that manage investments in row and permanent cropland throughout the United States and the world. Consequently, we may be at a competitive disadvantage in negotiating and executing possible acquisitions of these businesses. Even if we are able to successfully compete with these entities, this competition may adversely affect the terms of potential acquisitions, including increasing the purchase price. Any significant increase in the purchase prices we pay for additional farm properties will have a material adverse effect on our business, financial condition and results of operations.

We may not be able to optimize the yield of our crops and/or to engage in strategic partnerships.

We cannot guarantee that our yield optimization efforts, including the farming and management techniques and infrastructure improvements we plan to implement, will result in an increased yield from our crops. A variety of factors, including, but not limited to, the effect of weather, labor availability, and cost of equipment, all of which we do not control, may cause us to be unable to achieve enhanced yield optimization. Further, except for our partnerships with Tree Top and Valicoff with whom we have long-term contracts, we may not be able to enter into new strategic partnerships with buyers and growers under terms favorable to us. The opportunity to enter into these strategic partnerships is due in part to the extent and nature of our relationships in the Pacific Northwest farming community and our negotiating power, only some of which we can control. If we are unable to optimize our yield and/or engage in strategic partnerships, our business prospects and financial condition may be adversely affected.

Because we depend on a core group of significant customers, our sales, cash flows from operations and results of operations may be negatively affected if our key customers reduce the amount of products they purchase from us.

Tree Top is the exclusive buyer of our concord grapes, which it processes for use in consumer beverages and food products. Tree Top accounted for approximately 38% of our gross sales in fiscal 2013. SRV recently renegotiated and renewed its contract with Tree Top, which now extends until December 31, 2018, and which we will assume in connection with our acquisition of SRV. Our results of operations are significantly impacted not only by the quantity of grapes purchased by Tree Top, but also by the timing of its purchases, a factor over which we do not have any control. Timing of purchases has in the past impacted our financial results. We expect that a small number of customers will continue to account for a substantial portion of our sales for the foreseeable future. Because our largest customer accounts for such a material portion of our sales, the loss of, or a significant adverse change in, our relationship with Tree Top, or any other major customer, could have a material adverse effect on our business, financial position, results of operations and operating cash flows. The loss of, or a reduction in orders from any significant customers, losses arising from customers’ disputes regarding shipments, product quality or related matters, or our inability to collect accounts receivable from any major customer, could have a material adverse effect on us.

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We are particularly dependent upon the exclusive packer and distributor of our apples.

Beginning with the 2014 growing season, we expect that we will be relying exclusively upon Valicoff Fruit Company, Inc. to pack, store and distribute our apples. We also expect we will be relying exclusively on Sage Marketing, a subcontractor of Valicoff, to sell and market our apples on our behalf. We intend to enter into a long-term contract with Valicoff in part to manage this relationship, but we cannot guarantee that we may be able to exercise the same level of control over the sales and marketing efforts of Sage as if such activities were performed by our own employees. If our relationship with Valicoff is adversely affected in any way, we would have substantial difficulty in getting our apples to market, which could adversely impact our plans and our results of operations. Factors that impact the ultimate prices of our products include consumer preferences and consumer demand at the time they become available and other conditions described in this prospectus.

The prices we are able to charge customers for our products are inherently uncertain and cannot be determined in advance.

The prices for our products, particularly for our apples, cannot be estimated at the time we harvest and deliver our products to our customers. The price paid by Tree Top for our grapes is based on the average local market price as determined by two large producers in the area, the J.M. Smucker Company and affiliated entities and Milne Fruit Products, Inc. and affiliated entities subject to a minimum and a maximum price in accordance with our long-term contact with Tree Top. The sales price for our apples is determined based on the volume, size, variety and grade of the apples sold, and the average market price for all apples of similar size, variety and grade pooled together in what are known as “inventory pools” managed by each packing shed, less the packing shed’s charges to pack and market the apples. The final price is determined upon settlement of the inventory pool, which is when the apples have been delivered to the purchasers and the purchase price has been paid. As such, we cannot guarantee that we will be able to charge any particular price for our products.

Adverse weather conditions, natural disasters, crop disease, pests and other natural conditions can impose significant costs and losses on our business.

Grapes and apples, our primary products, are vulnerable to adverse weather conditions, including frost, hail, windstorms, floods, drought and temperature extremes, which are somewhat common but difficult to predict. In addition, grapes and apples are vulnerable to crop disease and to pests, which may vary in severity and effect, depending on the stage of production at the time of infection or infestation, the type of treatment applied and climatic conditions. Other unfavorable growing conditions can reduce both crop size and quality. These factors can directly impact us by decreasing the quality and yields of our products, reducing our inventory and supply of the products we sell to our customers, increasing our costs and decreasing revenue and gross margins, which may have a material adverse effect on our business, results of operations and financial condition. For example, we experienced a decrease in net sales in 2013 as a result of a lower concord grape yield due to a vineyard frost in spring 2013 which impacted our 2013 harvest. We have obtained crop insurance to reduce the risk of the adverse effects of such conditions on our business, results of operations and financial condition, but the amount and number of claims covered by such insurance is limited and may not be sufficient to compensate for all adverse conditions.

Our earnings will be sensitive to fluctuations in market prices and demand for our products.

Growing conditions, particularly weather conditions such as frost, hail, windstorms, floods, droughts and freezes, as well as diseases and pests, are primary factors affecting market prices because of their influence on the aggregate market supply and quality of product. In addition, demand for our products could decline, whether because of supply and quality issues or for any other reason, including products of competitors that might be considered superior by consumers. An increase in the supply of similar products in the marketplace driven from new domestic and foreign growers will lead to lower market prices, something over which we have no control. A decrease in the selling price received for our products, a decline in demand for our products, and an increase in market supply of similar products could have a material adverse effect on our business, results of operations and financial condition.

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Because our business is highly seasonal, our revenue, cash flows from operations and operating results will fluctuate on a seasonal and quarterly basis.

Our business is highly seasonal. The seasonal nature of our operations results in significant fluctuations in our working capital during the growing and selling cycles. Our grape sales occur toward the end of the fiscal year of harvest, but the majority of cash is not collected until the first quarter of the following fiscal year. We deliver our apples to the packing sheds toward the end of the harvest year but the majority of the cash is collected toward the end of the following fiscal year. As a result of the seasonal nature of our business, our working capital requirements are typically greatest in our third and fourth fiscal quarters since labor costs are highest during this time. We have experienced, and expect to continue to experience, significant variability in net sales, operating cash flows and net income on a quarterly basis due to the seasonality of our business.

We engage in related party transactions, which could result in conflicts of interest and could harm our business.

Potential conflicts of interest can exist if a related party director, officer, stockholder or employee is presented with a transaction or relationship that may have adverse implications for either us or the related party. We intend to engage in a significant related party transaction with respect to our purchase of the Business and Assets from SRV. Specifically, as described elsewhere in this prospectus, SRV is owned by certain persons and entities that are affiliated with Taggares Agriculture Corp. Consequently, certain of our officers, directors and stockholders, including, without limitation, Peter J. Taggares IV and Peter J. Taggares III, have a minority financial interest in the proposed acquisition by Taggares Agriculture Corp. of the business and assets of SRV. We currently anticipate that in connection with this offering, Peter J. Taggares III and Peter J. Taggares IV will re-invest approximately $500,000 each of their proceeds from the sale of the Business and Assets of SRV for shares of our common stock, or 83,334 shares of common stock each, at an assumed public offering price of $6.00 per share. These purchase amounts constitute approximately 20% and 100% of the proceeds we expect Peter J. Taggares III and Peter J. Taggares IV, respectively to receive following the sale of the Business and Assets of SRV.

Although we believe that the purchase price to be paid by us for the business and assets of SRV is at or below fair market value, we cannot assure you that the terms of the proposed transaction with these various related parties are on terms as favorable to us as those that could have been obtained in arm’s-length transactions with third parties. Moreover, we may receive inadequate disclosure from the related party regarding the nature and quality of the business and assets, and thus such related party transaction could result in related parties receiving more favorable treatment than an unaffiliated third party would receive.

We may engage in additional related party transactions in the future. Our Board of Directors and the Audit Committee intend to review on an ongoing basis related party transactions for various issues related to the effect on our business. We cannot assure you that the terms these policies and procedures will be sufficient to identify and completely address conflicts of interest that may arise. In addition, related party transactions present difficult conflicts of interest, could result in significant and minor disadvantages to our company and may impair investor confidence, which could materially and adversely affect our business. Related party transactions could also cause us to become materially dependent on related parties in the ongoing conduct of our business, and related parties may be motivated by personal interests to pursue courses of action that are not necessarily in the best interests of our company and our stockholders. If a dispute arises in connection with any of these related party transactions, which is not resolved to our satisfaction, our business could be harmed. There can be no assurance that the above matters or any potential future conflicts of interest will be resolved in our favor, which could have a material adverse effect on our business results of operations and financial condition. For more information, see the “Related Party Transactions and Structure of the Company and Related Parties” section of this prospectus beginning on page 87.

A lack of availability of water in Washington’s Columbia Basin, any materially adverse change to our rights to use water on our properties, or any change in the quantity of water we have rights to access, could adversely impact our business.

Adequate quantities and correct timing of the application of water are vital for our crops to thrive. The availability and cost of water are also important factors in the planting of the plants that produce our products. If we cannot get an adequate supply of water, or if the cost of water makes it uneconomical for us to grow

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certain crops, such as fruit, we may not have as many products to sell, which could have a material adverse impact on our results of operations. We cannot predict if any future water shortage in Washington’s Columbia Basin will impact our business in the future. We own water rights that permit us to pump water directly from the Snake River. If our rights to access and use this water are compromised in any material manner, for example, as a result of changing political or regulatory circumstances, we will experience a material adverse effect on our business and results of operations. In addition, if the existing dams on the Snake River are removed or damaged, or if the runoff from the dams is changed significantly for environmental or other reasons, the water line of the river would be reduced and our pump station would not be able to pump water out of the river. As a result, we would need to build a new pumping station at the new water level, for which we would need to incur substantial cost.

We face intense competition, and our inability to compete effectively for any reason could adversely affect our business.

The fruit market is highly competitive, and our products face competition from a number of small farming businesses, as well as large agricultural companies. We compete primarily on the basis of our relationships with customers and suppliers, consistency of product quality and product availability. Many of our competitors are, or are affiliated with, large diversified companies that have substantially greater financial resources than we have, including, for example, J.M. Smucker Company and Milne Fruit Products, Inc. with respect to our concord grape business. These resources give our competitors greater operating flexibility that, in certain cases, may permit them to respond better or more quickly to changes in the industry or to adverse conditions on their properties, or to introduce new products more quickly and with greater marketing support. Increased competition could result in lower profit margins, substantial pricing pressure, reduced market share and lower operating cash flows. Price competition, together with other forms of competition, could have a material adverse effect on our business, financial position, results of operations and operating cash flows. We expect that as new producers enter the market domestically and internationally, in particular in the South American and Asian markets, competition will increase, and we expect that it will be difficult to compete with some of these new market entrants on price. In addition, as costs of international transportation and storage decrease, we may face increased competition from international producers.

If we are unable to estimate consumer preferences for our apples accurately and to match our sales to the demand of consumers, our business, financial condition and results of operations may be adversely affected.

We will sell our apples primarily to processors and wholesalers through our packing shed, Valicoff. The purchasers of our apples generally make purchasing decisions for our products based on consumer demand, market prices, economic and weather conditions and other factors that we and our customers may not be able to anticipate accurately in advance. If we fail to accurately estimate the volume and types of products sought by consumers and otherwise adequately manage and time our sales, we may release to market apples of varieties and types that our customers do not want, resulting in reduced revenues and gross margins. Our inability to accurately predict consumer preferences and to match our sales to the demand of the purchasers of our apples directly may adversely affect our business, financial condition and results of operations.

Our primary crop does not currently permit us to spread our business risks among different crops and, thus, a disruption in our grape production would harm us more immediately and directly than if we were diversified.

Our exclusive grape production is currently limited to concord grapes, and we do not expect this to change materially in the foreseeable future until we complete our re-development plans. However, even as we re-develop portions of our property to produce more apples and other fruit, we will still primarily rely on only two crops (grapes and apples) for a substantial portion of our revenue for the foreseeable future. Without crop diversity, we will not be able to spread the risk of our operations. A decline in the price of these crops, whether due to competition or otherwise, or our inability to increase sales of these crops, would harm our business and operating results more seriously than it would if we derived significant revenue from a variety of different crops. Therefore, our business opportunities, revenue and income could be more immediately and directly affected by disruptions from such things as weather, drought and disease or widespread problems

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affecting the industry, payment disruptions and customer rejection of our grapes and/or apples. If there is a disruption as described above, our revenue and income will be reduced, and our business operations may have to be scaled back.

The capital-intensive nature and long growth cycle of fruit and other crops make it difficult for us to quickly diversify our product offerings.

We expect that new plantings of fruit and other crops will require at least three to five years before the plants will grow fruit that can be harvested. In addition, growing new fruit and crop varieties is capital intensive. While we plan to diversify our product offerings to include different varieties of fruit and crops, we will need to expend significant capital resources to develop those new products and it could take at least three to five years before we begin to recognize revenue from those new products. If we are unable to obtain sufficient financing to adequately cover these capital requirements or we must cease our re-development efforts for any other reason before we are able to recognize revenue from our new products, our ability to diversify our product offerings may be materially compromised.

Certain of our infrastructure is aging and in need of replacement.

Certain of our equipment, buildings, irrigation pipe and trellis infrastructure is outdated and we will need to replace old equipment and infrastructure, build new facilities and upgrade to newer farming technology in the near future. We expect to use approximately $1.0 million over the next two years to make these updates to our equipment and infrastructure. However, if we must reallocate such funds for other necessary expenditures and are unable to update or replace our equipment and infrastructure, our business operations will be adversely affected.

If we are unable to produce sufficient finished product, we will not be able to meet the demands of our customers.

We must continuously grow enough fruit to satisfy our customers’ demands. The failure to maintain sufficient crop yields not only could adversely impact our financial results but could harm our reputation.

The use of herbicides, pesticides and other potentially hazardous substances in our operations may lead to environmental damage and result in increased costs to us.

We use herbicides, pesticides and other potentially hazardous substances in the operation of our business. We may have to pay for the costs or damages associated with the improper application, accidental release or the use or misuse of such substances. Our insurance may not be adequate to cover such costs or damages or may not continue to be available at a price or under terms that are satisfactory to us. In such cases, payment of such costs or damages could have a material adverse effect on our business, results of operations and financial condition.

We are subject to the risk of product contamination and product liability claims.

The sale of food products for human consumption involves the risk of injury to consumers. Although we do not sell products directly to consumers, we still bear the risk that such injuries may result from tampering by unauthorized third parties, product contamination or spoilage, including the presence of foreign objects, substances, chemicals other agents, or residues introduced during the growing, storage, handling or transportation phases. While we are subject to governmental inspection and regulations and believe our facilities comply in all material respects with all applicable health and safety laws and regulations, we cannot guarantee that consumption of our products will not cause a health-related illness in the future or that we will not be subject to claims or lawsuits relating to such matters. Even if a product liability claim is unsuccessful or is not fully pursued by a claimant, the negative publicity surrounding any assertion that our products caused illness or injury could adversely affect our reputation with existing and potential customers and consumers. Moreover, claims or liabilities of this sort might not be covered by our insurance or by any rights of indemnity or contribution that we may have against others. We maintain product liability insurance; however, we cannot be sure that we will not incur claims or liabilities for which we are not insured or that exceed the amount of our insurance coverage. In addition, we contract with a chemical application company

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to treat our non-organic plants, and we are named as an additional insured on its insurance policy. However, we cannot guarantee that we will not incur claims or liabilities for which we are not insured under the chemical application company’s insurance policy or that exceed the amount of such insurance coverage.

We retain the risk of loss for our crops while they are being stored and we have no control over the conditions in which they are maintained.

Consistent with industry standard practices, we bear the risk of loss for our concord grapes until they are delivered to, and unloaded at, the processing facility of our customer (currently Tree Top). In addition, after our apples are picked and distributed to packing sheds, we bear the risk of loss for the apples until they are finally delivered to the customer to which the packing shed delivers the apples. We have no control over the conditions in which our grapes and apples are stored, which exposes us to a variety of risks related to such storage, including contamination, spoilage and/or theft. Any material damage incurred by grapes or apples during storage and distribution would have a material adverse impact on our business, financial condition and operating results.

The loss of key employees or the failure to attract qualified personnel could have a material adverse effect on our ability to run our business.

The loss of any of our current executives, key employees or key advisors, and in particular Peter J. Taggares IV, our Chief Executive Officer, and Jose Contreras, SRV’s Farm Manager, or the failure to attract, integrate, motivate and retain additional key employees, including farm managers for new properties that we may acquire in the future, could have a material adverse effect on our business. We do not have “key person” insurance on the lives of any of our management team. Also, as we become a public company and develop additional capabilities, we may require more skilled personnel who must be highly skilled and have a sound understanding of our industry, business or processing requirements. The failure to attract or retain qualified personnel could have a material adverse effect on our business. Recruiting qualified personnel is highly competitive.

We face risks associated with our labor force.

We employ both full-time and seasonal employees. Following this offering, we will anticipate that we will employ approximately 72 full-time employees and approximately 350 seasonal employees during harvest. The current availability of seasonal labor in Washington State is limited and dependent on economic factors and immigration policies at the state and federal levels, all of which are outside our control. Any changes to U. S. immigration labor laws that make it more difficult or more costly to hire our seasonal labor would make it harder for us to find qualified workers to harvest our fruit in a cost-effective manner, which would adversely impact our business and results of operations. We are also subject to increased costs as a result of increasing health care costs and the number and value of workers’ compensation claims and any future increases in the minimum wage at the local, state or federal levels. Although the State of Washington currently has one of the highest state minimum wages at the rate of $9.32 per hour (which is over $2.00 per hour higher than the current federal minimum wage of 7.25 per hour), there is at least one city in the State of Washington that has a minimum wage of $15.00 per hour. Any significant increase in any minimum wage law applicable us would have an adverse impact on our expenses. Moreover, our inability to find qualified workers to harvest our fruit, increasing health care costs and the number and value of workers’ compensation claims could have a material adverse effect on our business, results of operations and financial condition.

Changes in government policies and laws could adversely affect international sales and therefore, our financial results.

We believe that sales to the purchasers of our apples who, in turn, sell our products outside the U.S., constitute a significant percentage of our annual revenue, in an amount we cannot determine and which sales are outside of our control. However, we anticipate that these sales will continue to represent a substantial portion of our total sales volume and that continued growth and profitability will require further international expansion, particularly in Asia. As such, our financial results could be affected by changes in trade, monetary and fiscal policies, laws and regulations, or other activities of U.S. and non-U.S. governments, agencies and similar organizations. These conditions include but are not limited to changes in a country’s or region’s

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immigration policies and laws, economic or political conditions, trade regulations affecting production, pricing and marketing of products, local labor conditions and regulations, reduced protection of intellectual property rights in some countries, changes in the regulatory or legal environment, burdensome taxes and tariffs and other trade barriers. International risks and uncertainties, including changing social and economic conditions as well as terrorism, political hostilities and war, could lead to reduced distribution of our products into international markets and reduced profitability associated with such sales.

Insurance covering weather and crop disease may become unavailable or be inadequate.

Adverse weather conditions and crop disease can adversely affect production and the quality of our fruit. Although we carry crop insurance to cover claims related to weather conditions and crop disease, such coverage may become unavailable or be inadequate, since it is extended to us pursuant to the Agricultural Act of 2014 (the “Farm Bill”). To the extent the crop insurance portion of the Farm Bill does not provide coverage for claims we may have in the future, we may need to obtain crop insurance on the private insurance market. Even if we are able to obtain private crop insurance, it may be at a price and on terms not acceptable to us. If claims exceed coverage limits, or if insurance is not available to us, the occurrence of significant crop claims relating to our properties could have a material adverse effect on our business, results of operations and financial condition.

We may be exposed to product quality claims, which may cause us to incur substantial legal expenses and, if determined adversely against us, may cause us to pay significant damage awards.

We may be subject to legal proceedings and claims from time to time relating to our fruit quality. The defense of these proceedings and claims can be both costly and time consuming and may significantly divert efforts and resources of our management personnel. An adverse determination in any such proceeding could subject us to significant liability and damage our market reputation and prevent us from achieving increased sales and market share. Protracted litigation could also result in our customers or potential customers deferring or limiting their purchase of our products.

Capital and credit market issues could negatively affect our liquidity, increase our costs of borrowing and disrupt the operations of our growers and customers.

The capital and credit markets have experienced increased volatility and disruption over the past six years, making it more difficult for companies to access those markets. Although we believe that our operating cash flows, access to capital and credit markets will permit us to meet our financing needs for the foreseeable future, there can be no assurance that continued or increased volatility and disruption in the capital and credit markets will not impair our liquidity or increase our costs of borrowing. Our business could also be negatively impacted if our growers or customers experience disruptions resulting from tighter capital and credit markets or a continued slowdown in the general economy.

Risks Relating to this Offering and Our Securities

There is no public market for our common stock and an active market may not develop or be maintained, which could limit your ability to sell our securities.

Before this offering, there has not been a public market for our common stock. Although we have applied to list these securities on the NASDAQ Capital Market in connection with this offering, an active public market for our securities may not develop or be sustained after this offering. The initial public offering price will be determined by negotiations between the underwriters and us and may not be representative of the market price at which our common stock will trade after this offering. In particular, we cannot assure you that you will be able to resell our common stock at or above the initial public offering price.

Our largest stockholder and entities affiliated with him will retain a controlling interest in our company after this offering and may have interests that differ from our other stockholders.

Upon completion of this offering and assuming the underwriters do not exercise their over-allotment option to purchase additional common stock and that Mr. Taggares purchases 83,334 shares of common stock in this offering, Peter J. Taggares IV and affiliated individuals and entities of Mr. Taggares will own 2,600,795

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shares of common stock, or approximately 26.3% of our outstanding common stock. Mr. Taggares could, for the foreseeable future, have significant influence over our management and affairs and will be able to influence virtually all matters requiring stockholder approval, including the election of directors and significant corporate transactions such as mergers or other sales of our company or assets, and its interests could differ from ours and those of our other stockholders. In addition, the concentration of ownership may have the effect of delaying, preventing or deterring a change in control of our company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately affect the market price of our common stock.

Future sales or the potential for future sales of shares of our common stock may cause the trading price of our common stock to decline and could impair our ability to raise capital through subsequent equity offerings.

Approximately 30.9% of our outstanding common stock will be held by our current stockholders following this offering (approximately 27.9% if the over-allotment option is exercised in full). If our existing stockholders sell a large number of shares of our common stock following this offering and expiration of the applicable lock-up period, the market price of our common stock could decline significantly. In addition, the perception in the public market that our existing stockholders might sell shares of common stock could depress the market price of our common stock, regardless of the actual plans of our existing stockholders. These sales could also make it more difficult for us to sell shares of our common stock or equity-related securities in the future.

Immediately after this offering, 9,904,425 shares of our common stock will be outstanding, or 10,954,425 if the underwriters’ over-allotment option is exercised in full. All of the shares held by our existing stockholders are subject to a lock-up agreement restricting the sale of those shares for six months from the date of this prospectus. However, the underwriters may waive this restriction, in whole or in part, and allow the stockholders to sell shares at any time.

After this offering, we intend to register 657,266 shares of common stock that will be reserved for issuance directly or pursuant to the exercise of options under our equity incentive plan. Once we register these shares, they can be sold in the public market upon issuance, subject to restrictions under the securities laws applicable to resales by affiliates.

Anti-takeover provisions and our right to issue preferred stock could make it difficult for a third party to acquire us.

Our certificate of incorporation contains provisions that would make it more difficult for a third party to acquire control of us, including the following provisions:

our board of directors may issue preferred stock without stockholder approval, with rights and privileges determined solely by the board of directors;
our board of directors is divided into three classes, with each class serving a staggered three-year term;
removal of directors by stockholders only for cause and by a vote of at least a majority of the voting power of the issued and outstanding capital stock;
prohibitions on our stockholders that prevent them from acting by written consent and limitations on calling special meetings; and
advance notice provisions for stockholders to propose business at an annual meeting of stockholders or director nominations at annual or special stockholder meetings.

In addition, certain anti-takeover provisions of Delaware law could make it more difficult for a third party to acquire control of us, even if such change in control would be beneficial to our stockholders.

The price of our common stock could be volatile.

The overall market and the price of our common stock may fluctuate greatly. The trading price of our common stock and public warrants may be significantly affected by various factors, including:

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economic status and trends in the fruit industry, which underlies domestic demand for our products;
quarterly fluctuations in our operating results;
termination of lock-up agreements or other restrictions on the ability of our existing stockholders to sell their shares after this offering;
our ability to meet the earnings estimates and other performance expectations of investors or financial analysts (at such time as analysts begin following our company);
fluctuations in the stock prices of our peer companies or in stock markets in general; and
general economic or political conditions.

We may issue options to purchase common stock to our directors and employees that could dilute your interest in us.

We have an aggregate of 657,266 shares of common stock reserved under our 2014 Equity Incentive Plan for issuance of grants and awards to our directors, executive officers, employees and consultants. As of the date of this prospectus, we have not issued any stock options or other equity grants or awards under our 2014 Equity Incentive Plan. Following the completion of this offering, we expect to grant stock options to our non-employee directors and stock options and restricted stock to our Chief Financial Officer. Issuances of common stock pursuant to the exercise of stock options or other stock grants or awards under our 2014 Equity Incentive Plan will dilute your interest in us.

Purchasers in this offering will experience immediate and substantial dilution in net tangible book value.

The initial public offering price per share of our common stock is expected to be substantially higher than the net tangible book value per share of our outstanding common stock. Purchasers of shares in this offering will experience immediate dilution in the net tangible book value of their shares. Based on an assumed initial public offering price of $6.00 per share, dilution per share in this offering will be $2.11 per share (or approximately 35.2% of the assumed per share price of shares to be sold in the offering). Further, if we issue additional equity securities to raise additional capital, your ownership interest in our company may be diluted and the value of your investment may be reduced.

We do not expect to pay any dividends until the third or fourth quarter of 2015, at the earliest.

We do not anticipate paying any dividends to our stockholders until the third or fourth quarter of 2015, at the earliest. We currently plan to re-invest our earnings for use in accordance with our acquisition strategy and the re-development of portions of Snake River Vineyards. Accordingly, you may have to sell some or all of your common stock in order to generate cash flow from your investment. You may not receive a gain on your investment when you sell our common stock and may lose some or all of your investment. However, we may consider paying cash dividends after we recognize revenue from our 2014 apple crop, which we expect to be in the third or fourth quarter of 2015 in accordance with our revenue recognition policy for apples. Any determination to pay dividends in the future will be made at the discretion of our board of directors and will depend on our results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant.

We will incur increased costs as a result of being a publicly traded company.

As a public company, we will incur significant legal, accounting and other expenses that SRV did not incur as a private company. The Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), as well as rules subsequently implemented by the Securities and Exchange Commission (the “SEC”) and the NASDAQ Capital Market, have required changes in corporate governance practices of public companies. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time consuming and/or costly. For example, we are adopting additional internal and disclosure controls and procedures, retaining a transfer agent and adopting corporate governance policies, as well as upgrading our computer system and software. In addition, as a public company, we will incur the internal and external costs of preparing and distributing periodic public reports in compliance with our obligations under the

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securities laws. We also expect these new rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance. These rules and regulations could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee, and qualified executive officers. Further, our current executives, including our CEO, have limited public company experience. Our CFO, while she has public company experience, has no experience in the agriculture industry.

Section 404 of Sarbanes-Oxley requires us to include an internal control report with our annual report on Form 10-K. That report must include management’s assessment of the effectiveness of our internal control over financial reporting as of the end of the fiscal year. We will be required to include this assessment beginning with our annual report on Form 10-K for the fiscal year ending November 30, 2014. The material weaknesses and any other deficiencies in internal control that we may identify in the future will need to be addressed as part of the evaluation of our internal control over financial reporting and may impair our ability to comply with Section 404. If we are not able to successfully implement internal controls over financial reporting, we may not be able to accurately and timely report on our financial position, results of operations or cash flows, which could adversely affect our business and investor confidence in us.

For so long as we qualify as an “emerging growth company” under the JOBS Act, which may be up to five years following this offering, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b). Once we are no longer an emerging growth company or, if prior to such date, we opt to no longer take advantage of the applicable exemption, or at such time as we become an accelerated filer, we will be required to include an opinion from our independent registered public accounting firm on the effectiveness of our internal controls over financial reporting.

As an emerging growth company within the meaning of the Securities Act of 1933, as amended (the “Securities Act”), we will utilize certain modified disclosure requirements, and we cannot be certain whether these reduced requirements will make our securities less attractive to investors.

We are an emerging growth company within the meaning of the rules under the Securities Act. We have in this prospectus utilized, and we plan in future filings with the SEC to continue to utilize, the modified disclosure requirements available to emerging growth companies, including reduced disclosure about our executive compensation and omission of compensation discussion and analysis, and an exemption from the requirement of holding a nonbinding advisory vote on executive compensation. In addition, we will not be subject to certain requirements of Section 404 of the Sarbanes-Oxley Act, including the additional testing of our internal control over financial reporting as may occur when outside auditors attest as to our internal control over financial reporting. As a result, our stockholders may not have access to certain information they may deem important.

We could remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenue exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three-year period.

There can be no assurance that an active trading market for shares of our common stock will develop

In connection with this offering, we have applied to have our common stock approved for listing on the NASDAQ Capital Market. We cannot be certain that a more active public market for our common stock will develop or, if developed, the extent to which investor interest in our common stock will sustain active trading or how liquid such a market might be in the future. It is possible that an active trading market, if established, will not continue, and there can be no assurance as to the price at which our common stock will trade.

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Our quarter-to-quarter performance may vary substantially, and this variance, as well as general market conditions, may cause our stock price to fluctuate greatly and potentially expose us to litigation.

Our business is highly seasonal because it is tied to the growing and harvesting seasons. Typically, a substantial portion of our cash collections occur during our first and fourth fiscal quarters. We generally collect less cash during our second and third fiscal quarters. Cash collections in the first and fourth fiscal quarters accounted for a majority of our cash collections for the fiscal year ended November 30, 2013. If cash collections in these quarters are lower than expected, expenses may not be offset, which would adversely affect our operating results, and would have a disproportionately large impact on our operating results for that fiscal year.

In one or more future quarters, our results of operations may fall below the expectations of investors and the trading price of our securities may decline as a consequence. We believe that quarter-to-quarter comparisons of our operating results will not be a good indication of our annual performance and future performance and should not be relied upon to predict the future performance of our stock price. In the past, companies that have experienced volatility in the market price of their stock have often been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.

DIVIDEND POLICY

We have never declared or paid any dividends on our capital stock. For the near term, we intend to re-invest any earnings that we generate to support our business. However, we may consider paying cash dividends after we recognize revenue from our 2014 apple crop, which we expect to be in the third or fourth quarter of 2015 in accordance with our revenue recognition policy for apples. Any future decision to pay or declare cash dividends will be at the discretion of our board of directors and will be dependent upon our financial condition, results of operations, capital requirements and other factors our board of directors may deem relevant. There are currently no restrictions that limit our ability to pay dividends on our capital stock.

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FORWARD-LOOKING STATEMENTS

This prospectus contains statements which, to the extent that they do not recite historical fact, constitute forward-looking statements. These statements can be identified by the fact that they do not relate strictly to historical or current facts and may include the words “may,” “will,” “could,” “should,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan” or other words or expressions of similar meaning. We have based these forward-looking statements on our current expectations about future events. The forward-looking statements include statements that reflect management’s beliefs, plans, objectives, goals, expectations, anticipations and intentions with respect to our financial condition, results of operations, future performance and business, including statements relating to our business strategy and our current and future development plans.

The potential risks and uncertainties that could cause our actual financial condition, results of operations and future performance to differ materially from those expressed or implied in this prospectus include:

economic status and trends in the fruit industry, which underlies domestic and international demand for our fruit;
weather conditions that affect the production, transportation, storage and export of tree fruit;
our production capacity and availability and pricing of raw materials;
trends and consumer preferences, particularly with respect to the use of and consumer demand for particular varieties of fresh apples, and the use of grapes in beverages and food products;
changes with respect to legal and regulatory matters;
decisions made by our competitors;
loss of key customers;
our production capacity and availability and pricing of raw materials;
labor disruptions, strikes or work stoppages;
loss of important water rights;
international conflict or acts of terrorism;
general economic conditions; and
other factors disclosed in this prospectus.

In addition, this prospectus contains industry data related to our business and the markets in which we operate. This data include projections that are based on a number of assumptions. If these assumptions turn out to be incorrect, actual results could differ from the projections.

We urge you to review carefully this prospectus, particularly the section “Risk Factors,” for a more complete discussion of the risks of an investment in our securities.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Many factors discussed in this prospectus, some of which are beyond our control, will be important in determining our future performance. Consequently, actual results may differ materially from those that might be anticipated from the forward-looking statements. In light of these and other uncertainties, you should not regard the inclusion of a forward-looking statement in this prospectus as a representation by us that our plans and objectives will be achieved, and you should not place undue reliance on such forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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USE OF PROCEEDS

We estimate that the net proceeds from the sale of the 7,000,000 shares of common stock that we are selling in this offering will be approximately $    , or $    if the underwriters exercise their over-allotment option in full, based on an assumed public offering price of $     per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discount of $     and estimated offering expenses (including the non-accountable expense allowance) of approximately $     payable by us, together totaling approximately $    .

We currently expect to allocate the net proceeds of this offering as follows:

   
Acquisition of Business and Assets of SRV (See “Related Party Transactions and Structure of the Company and Related Parties” beginning on page 87)   $ 30,000,000       78.6 % 
Future acquisitions of agricultural properties consistent with our business strategy     4,775,000       12.5 % 
Re-development of portions of our land for new apple varieties, including the purchase of new apple plants     1,000,000       2.6 % 
Repayment of debt owing to a related party (See “Related Party Transactions and Structure of the Company and Related Parties” beginning on page 87)     400,000       1.1 % 
Replacement of equipment, building new facilities and upgrading technology     1,000,000       2.6 % 
General corporate and working capital purposes     1,000,000       2.6 % 
Total   $ 38,175,000       100.0 % 

The purchase of the Business and Assets of SRV involves a related party transaction in that SRV is owned by certain persons and entities that are affiliated with the registrant, Taggares Agriculture Corp. Consequently, certain of our officers, directors and stockholders, including, without limitation, Peter J. Taggares IV and Peter J. Taggares III, have a minority financial interest in the proposed acquisition of the Business and Assets of SRV. Specifically, SRV is owned by Snake River Vineyards, a Washington joint venture (“SRV J.V.”), and Bubby T, LLC (“Bubby T”), a Washington limited liability company. SRV J.V. is jointly owned by P.J. Taggares Company, a Washington corporation (“PJTCO”) and Taggares Farms, Inc., a Washington corporation and a wholly-owned subsidiary of P.J. Taggares Company (“TFI”). PJTCO is owned by several members of the Taggares family and various estate planning trusts, including Peter J. Taggares IV, our President, Chief Executive Officer, a director and the beneficial owner of 2,517,461 shares of our common stock (or approximately 87% of our outstanding common stock before this offering), and Peter J. Taggares III, a non-voting board observer, one of our management advisors and the beneficial owner of 299,519 shares of our common stock (or approximately 10.3% of outstanding common stock before this offering). Bubby T is wholly owned by an estate planning trust for the benefit of various members of the Taggares family.

The purchase price for the Business and Assets of SRV is $30.0 million. This purchase price was negotiated with the current owners of SRV, and was based on an indication of interest to purchase the Business and Assets for $30.0 million that these owners had previously received from a third party. In addition, we have subsequently received an appraisal of the Business and Assets of SRV from an independent agriculture appraiser which valued the land at approximately $34.0 million and the equipment at approximately $1.4 million.

The portion of proceeds allocated to land re-development will be used for plant infrastructure improvement, such as trellising posts, and the purchase of new apple plants over the next two years.

The portion of proceeds allocated to the replacement of equipment, building new facilities and upgrading technology will be expended over the next two years. This amount is in addition to the $1.0 million for land re-development described above.

As of March 31, 2014 we had borrowed approximately $360,000 from T3 Ag, a related party, to fund our start-up costs and certain expenses related to this offering. This amount, plus interest at the rate of 4% per annum, which is T3 Ag’s borrowing cost, will be paid to T3 Ag out of the proceeds of this offering.

Our general corporate expenses include general and administrative salaries, accounting, legal and consulting fees, facilities expenses and other working capital needs.

Pending the uses described above, we intend to invest the net proceeds of this offering in short-term, investment-grade, interest-bearing securities.

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CAPITALIZATION

The following table sets forth the actual capitalization of Taggares Agriculture Corp. at February 28, 2014, and pro forma immediately following the acquisition of the Business and Assets of SRV from SRV J.V. and Bubby T. The column captioned Pro Forma As Adjusted gives effect to:

the acquisition of the Business and Assets of SRV; and
the sale of 7,000,000 shares of common stock in this offering by us at an assumed initial public offering price of $6.00 per share, after deducting the underwriting discount and estimated offering expenses payable by us.

As described in more detail elsewhere in this prospectus, the purchase of the Business and Assets of SRV involves a related party transaction in that SRV is owned by certain persons and entities that are affiliated with Taggares Agriculture Corp. Consequently, certain of our officers, directors and stockholders, including, without limitation, Peter J. Taggares IV and Peter J. Taggares III, have a minority financial interest in the proposed acquisition by Taggares Agriculture Corp. of the Business and Assets of SRV.

You should read this capitalization table together with the sections of this prospectus entitled “Summary Consolidated Financial Data,” “Use of Proceeds” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with our consolidated financial statements and accompanying notes included elsewhere in this prospectus.

       
  February 28, 2014
     TAG
Historical
  TAG
Pro Forma
Offering(1)
  TAG
Pro Forma
Acquisition(2)
  Pro Forma(3)
     (in thousands)
Stockholders’ equity:
                                   
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding   $     $     $     $  
Common stock, $0.0001 par value; 100,000,000 shares authorized; 2,904,425 shares issued and outstanding actual; 9,904,425 shares issued and outstanding pro forma offering; 9,904,425 shares issued and outstanding pro forma as adjusted           1 (4)            1  
Additional paid-in capital           38,174 (5)            38,174  
Retained earnings     (22 )            3,564 (6)      3,542  
Total stockholders’ equity   $ (22 )    $ 38,175     $ 3,564     $ 41,717  

(1) Assumes the sale of 7,000,000 shares of common stock at an assumed initial public offering price of $6.00 per share, for a gross offering of $42,000,000. This results in the receipt of net proceeds from the offering of approximately $38,175,000, after deducting the underwriting discount and estimated offering expenses of $3,825,000. Also assumes the application of $30.0 million of these proceeds to purchase the Business and Assets of SRV immediately following the closing of this offering.
(2) Assumes the acquisition of the Business and Assets of SRV as though the transaction had occurred on November 30, 2013.
(3) Reflects adjustments resulting from the business combination at the fair values of the tangible and intangible assets acquired, assumed to be $35.4 million, consistent with acquisition accounting.
(4) Reflects 7,000,000 shares of common stock of Taggares Agriculture Corp. available through our initial public offering, without considering the underwriters’ over-allotment of 1,050,000 shares, plus 2,904,425 shares issued by us prior to the date hereof, multiplied by the per-share par value of $0.0001.
(5) Assumes the sale of 7,000,000 shares of common stock in this offering by us at an assumed initial public offering price of $6.00 per share, after deducting the underwriting discount and estimated offering expenses payable by us, and then deducting par value of those shares described in (4) above.
(6) Adjustment represents gain on bargain purchase to acquire Business and Assets of SRV, net of deferred tax liability on the temporary difference between the capitalized book value of the Business and Assets of SRV acquired in excess of the basis of the assets for Federal income tax purposes.

The information in the table above excludes 657,266 shares of common stock available for issuance pursuant to our 2014 Equity Incentive Plan but as to which no grants or awards had been made at April 11, 2014.

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DILUTION

Our pro forma net tangible book value at April 11, 2014 was negligible, or $0.0001 per share, based on the par value of shares issued prior to the date hereof. Pro forma net tangible book value per share before the offering has been determined by dividing pro forma net tangible book value (total book value of tangible assets less total liabilities) by the number of shares of common stock outstanding at April 11, 2014.

For purposes of the dilution calculation and the following tables, after giving effect to the sale of our common stock in this offering at an assumed initial public offering price of $6.00 per share, and after deducting the underwriting discount and estimated offering expenses of $3,825,000, our adjusted pro forma net tangible book value at April 11, 2014 would have been $38,175,000 or $3.85 per share. This represents an immediate increase in pro forma net tangible book value per share of $3.85 to the existing stockholders and dilution in pro forma net tangible book value per share of $2.15 to new investors who purchase shares of common stock in the offering.

The following table illustrates this per share dilution:

   
Assumed initial public offering price per share            $ 6.00  
Pro forma net tangible book value per share at April 11, 2014   $ 0.0001           
Increase in pro forma net tangible book value per share attributable to new investors     3.85        
Pro forma as adjusted net tangible book value per share after this offering           3.85  
Dilution in pro forma net tangible book value per share to new investors         $ 2.15  

If the underwriters’ over-allotment option is exercised in full, dilution per share to new investors would be $1.46 per share of common stock. The as adjusted information discussed above is illustrative only and will adjust based on the actual initial public offering price and other terms of this offering.

The following table summarizes as of April 11, 2014 the differences between our existing stockholders and new investors with respect to the number of shares of our common stock issuable as a component of the shares of common stock being sold in this offering, the total consideration paid and the average price per share paid. The calculations with respect to shares purchased by new investors in this offering reflect an assumed initial public offering price of $6.00 per share, before deducting the estimated underwriting discount and offering expenses payable by us:

         
  Shares Purchased   Total Consideration   Average
Price Per Share
     Number   Percent   Amount   Percent
Existing stockholders     2,904,425       29.3 %    $ 290       0.0 %    $ 0.0001  
Common stock purchased by existing stockholders in this offering(1)     166,668       1.7       925,008       2.2     $ 6.00  
New investors     6,833,332       69.0       41,074,992       97.8     $ 6.00  
Total     9,904,425       100.0 %    $ 42,000,290       100.0 %       

(1) Assumes that in connection with this offering, Peter J. Taggares III and Peter J. Taggares IV will re-invest approximately $500,000 each of their proceeds from the sale of the Business and Assets of SRV for shares of our common stock, or 83,334 shares of common stock each, at an assumed public offering price of $6.00 per share.

If the underwriters exercise their over-allotment option in full, our existing stockholders would own approximately 26.5% and our new investors would own approximately 72.1% of the total number of shares of our common stock outstanding after this offering.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION

Taggares Agriculture Corp. will be acquiring the business and assets of SRV from Snake River Vineyards, J.V. (“SRV J.V.”) and Bubby T, collectively referred to as “SRV” (the “Business and Assets”) in connection with this offering. Prior to this offering and the acquisition of the Business and Assets, Taggares Agriculture Corp. has no meaningful business operations. As such, the following table sets forth (i) the actual historical balance sheet for SRV J.V. at November 30, 2013, (ii) pro forma adjustment of SRV J.V. balance sheet items not being acquired by Taggares Agriculture Corp., (iii) pro forma balance sheet for Taggares Agriculture Corp. reflecting the sale of 7,000,000 shares of common stock at an assumed initial public offering price of $6.00 per share, for a gross offering of $42,000,000. This results in the receipt of net proceeds from the offering of approximately $38,175,000, after deducting the underwriting discount and estimated offering expenses of $3,825,000, (iv) pro forma balance sheet for Taggares Agriculture Corp. reflecting the acquisition of the Business and Assets of SRV as though it had occurred on November 30, 2013, and (v) pro forma balance sheet for Taggares Agriculture Corp. to reflect the business combination at the fair values of the tangible and intangible assets acquired, consistent with acquisition accounting.

Taggares Agriculture Corp. will record fair value of the assets acquired at $35.4 million, based on the results of an independent appraisal of the real property and farming equipment to be acquired. This determination of fair value includes the identification of any intangibles acquired in the process of applying acquisition accounting for business combinations. In doing so, Taggares Agriculture Corp. has determined the value of any such intangible assets to be insignificant. The potential intangible assets included name recognition, assembled workforce, customer relationships, and production contracts. Taggares Agriculture Corp. is recognizing a gain on bargain purchase on its acquisition of the Business and Assets of SRV, when comparing the fair values of the assets acquired at $35.4 million to the purchase consideration to be paid of $30.0 million. This results in a net gain on bargain purchase of $3.6 million, after recognition of a deferred tax liability related to the bargain purchase of $1.8 million which is included in the equity section of the pro forma balance sheet, but is not included in the income statement because it does not have a continuing impact on the business.

The financial statements of SRV J.V. presented in this prospectus reflect the fact that SRV J.V. leases and jointly operates the 141 acres of agricultural land owned by Bubby T with the land and other assets of SRV J.V. that are included in the Business and Assets of SRV. As such, any reference in this prospectus to the financial statements of SRV or SRV J.V. includes the financial statements of SRV J.V. with respect to the farming operations on the land owned by Bubby T that is being acquired by Taggares Agriculture Corp. immediately following the closing of this offering.

As described in more detail elsewhere in this prospectus, the purchase of the Business and Assets of SRV involves a related party transaction in that SRV J.V. is owned by certain persons and entities that are affiliated with Taggares Agriculture Corp. Consequently, certain of our officers, directors and stockholders, including, without limitation, Peter J. Taggares IV and Peter J. Taggares III, have a minority financial interest in the proposed acquisition by Taggares Agriculture Corp. of the Business and Assets of SRV.

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UNAUDITED PRO FORMA BALANCE SHEET   November 30, 2013
     Historical
SRV J.V.
  Pro Forma
Adjustment(1)
  Pro Forma Offering(2)   Pro Forma Acquisition(3)   Pro Forma(4)
     (in thousands)
Assets
                                            
Current Assets
                                   
Cash and Cash Equivalents   $ 34     $ (34 )    $ 38,175     $ (30,000 )(5)    $ 8,175  
Trade Receivables     1,320       (1,320 )                   
Inventory     2,083       (2,083 )                   
Prepaid Expenses and Other     64       (64 )                   
Total Current Assets   $ 3,501     $ (3,501 )    $ 38,175     $ (30,000 )    $ 8,175  
Long-Term Assets     5,968       (53 )               29,485 (6)      35,400  
Total Assets   $ 9,469     $ (3,554 )    $ 38,175     $ (515 )    $ 43,575  
Liabilities and Members’ Equity
                                   
Current Liabilities
                                            
Accounts Payable, Trade   $ 34       (34 )    $     $        
Advances from Customers on Inventory Pools     717       (717 )                   
Accrued Liabilities     76       (76 )                   
Related Party Payable     25       (25 )                   
Current Maturities of Note Payable     1,489       (1,489 )                   
Total Current Liabilities     2,341       (2,341 )                   
Long-Term Liabilities                       1,836 (7)      1,836  
Total Liabilities     2,341       (2,341 )            1,836       1,836  
Equity     7,128       (1,213 )    $ 38,175       (2,351 )(8)      41,739  
Total Liabilities and Equity   $ 9,469     $ (3,554 )    $ 38,175     $ (515 )    $ 43,575  

(1) Adjustments represent those items that existed on the SRV J.V. balance sheet as of November 30, 2013 that are not being acquired by Taggares Agriculture Corp. through the acquisition of Business and Assets of SRV as described above.
(2) Assumes the sale of 7,000,000 shares of common stock at an assumed initial public offering price of $6.00 per share, for a gross offering of $42,000,000. This results in the receipt of net proceeds from the offering of approximately $38,175,000, after deducting the underwriting discount and estimated offering expenses of $3,825,000.
(3) Reflects the acquisition of the Business and Assets of SRV at fair value as though it had occurred on November 30, 2013.
(4) Reflects adjustments resulting from the business combination at the fair values of the tangible and intangible assets acquired, assumed to be $35.4 million, consistent with acquisition accounting.
(5) Reflects $30 million cash paid to acquire the Business and Assets of SRV.
(6) Reflects the utilization of acquisition accounting for the Business and Assets of SRV and recording of assets at fair market value and the step-up in basis for land, water rights and equipment based on a fair value appraisal of $35.4 million.
(7) Adjustment represents a deferred tax liability on the temporary difference between the capitalized book value of the Business and Assets acquired in excess of the basis of the assets for Federal income tax purposes.
(8) Adjustment represents gain on bargain purchase to acquire the Business and Assets of SRV, net of deferred tax liability described in (7) above.

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  February 28, 2014
     Pro Forma
Nov. 30, 2013
  TAG
Feb. 28, 2014(1)
  Pro Forma
Adjustment
  Pro Forma
Assets
                                   
Current Assets
                                   
Cash and Cash Equivalents   $ 8,175     $     $ (883 )(2)(6)    $ 7,292  
Other Current Assets           505       439 (3)(6)      944  
Total Current Assets   $ 8,175     $ 505     $ (444 )    $ 8,236  
Long-Term Assets     35,400       2       (80 )(5)      35,322  
Total Assets   $ 43,575     $ 507     $ (524 )    $ 43,558  
Liabilities and Stockholders' Equity
                                   
Current Liabilities
                                   
Total Current Liabilities   $     $ 529     $ (524 )(4)(6)    $ 5  
Long-Term Liabilities     1,836                   1,836  
Total Liabilities     1,836       529       (524 )      1,841  
Equity     41,739       (22 )            41,717  
Total Liabilities and Equity   $ 43,575     $ 507     $ (524 )    $ 43,558  

(1) Represents the balance sheet of Taggares Agriculture Corp. as of February 28, 2014, which is the first date for which financials have been prepared for Taggares Agriculture Corp. since its inception in January 2014.
(2) Adjustment represents the net impact to cash of (a) applying real estate deposits held in escrow for the purchase of the Business and Assets of SRV on Taggares Agriculture Corp.'s balance sheet against the purchase, therefore adding $133,000 back to cash, (b) adjusting for $280,000 which will be paid to T3 Ag for principal and interest repayment on its loan to Taggares Agriculture Corp., and (c) reimbursing SRV J.V. for unharvested crop costs for the 2014 harvest, which approximates $864,000 at February 28, 2014.
(3) Adjustment to reflect the application of Taggares Agriculture Corp.'s escrow deposit of $133,000 against its purchase of the Business and Assets of SRV, acquisition of $864,000 of unharvested crop costs, as described in (2) above and $80,000 of additional depreciation, capitalized in unharvested inventory costs, pertaining to the increase in fair value basis of farming equipment and other assets acquired.
(4) Adjustment reflects the net impact of paying down principal and interest of $280,000 on the loan from T3 Ag.
(5) Adjustment represents $80,000 of additional depreciation pertaining to the increase in fair value basis of farming equipment and other assets acquired.
(6) Because offering costs of $3,825,000 have already been netted against gross offering proceeds of $42.0 million in the November 30, 2013 pro forma balance sheet, adjustments are necessary to remove the otherwise doubling impact of any offering costs in this pro forma balance sheet by (i) removing $372,000 of deferred offering costs from current assets, (ii) removing $244,000 of accrued offering costs from accrued expenses, and (iii) adding back the difference of $128,000 to cash, since all projected costs of the offering have already been subtracted from cash.

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The following table sets forth, for the fiscal year ended November 30, 2013 (i) the actual historical statements of income for Taggares Agriculture Corp. (“TAG”) for the year ended November 30, 2013, (ii) pro forma statements of income for Snake River Vineyards J.V. (“SRV J.V.”) reflecting the acquisition of the Business and Assets of SRV as though it had occurred as of November 30, 2013, (iii) a provision for federal income tax attributable to the status of Taggares Agriculture Corp. as a taxable corporation as opposed to SRV J.V. as a partnership for tax purposes, and (iv) adjustments to reflect depreciation and amortization of the assets acquired, income tax expense, calculated at an assumed statutory tax rate of 34%, which consists of only 34% federal income taxes because Washington state has no corporate income taxes, and elimination of interest expense for debt of SRV J.V. that we are not assuming in the acquisition.

       
UNAUDITED PRO FORMA INCOME STATEMENT   November 30, 2013
     Historical
TAG
  Historical
SRV J.V.(1)
  Pro Forma Adjustment   Pro Forma
     (in thousands, except share and per share data)
Net sales   $  —     $ 7,678     $     $ 7,678  
Cost of sales           5,875       321 (2)      6,196  
Gross profit           1,803       (321 )      1,482  
Selling, general and administrative expenses           (154 )            (154 ) 
Income from operations           1,649       (321 )      1,328  
Other Income (Expense)           (109 )      108 (3)      (1 ) 
Net Income before income taxes           1,540       (213 )      1,327  
Income tax (provision) benefit                       (451 )(4)      (451 ) 
Net income   $     $ 1,540     $ (664 )    $ 876  
Basic and diluted earnings per share                     $ 0.09  
Weighted average number of common shares outstanding                       9,904,425 (5) 

(1) Reflects the acquisition of the Business and Assets of SRV as though it had occurred as of December 1, 2012 and includes all of the historical SRV J.V. income statement in order to project a pro forma income statement for Taggares Agriculture Corp.
(2) Due to the increase in asset basis as a result of recording assets at their fair market values, as determined by an independent appraisal of the land and farming equipment, additional depreciation and amortization must be recognized in this pro forma income statement. The allocation of fair market value amongst assets will result in an increase in the value of each category of fixed asset for Taggares Agriculture Corp., such that equipment with a 10 year depreciable life will increase from a net book value on SRV J.V.’s books of $155,000 to approximately $900,000 on Taggares Agriculture Corp.’s books; the value of buildings with a 20 year depreciable life will increase from a net book value on SRV J.V.’s books of $36,000 to approximately $500,000 on Taggares Agriculture Corp.’s books; and the value of plantings in vineyards and orchards with a 15 year depreciable life will increase from a net book value on SRV J.V.’s books of $36,000 to approximately $500,000 on Taggares Agriculture Corp.’s books. All of the remaining purchase price is attributable to the fair value of land that will be acquired.
(3) The outstanding debt and related interest expense of SRV J.V. will not be assumed by us in connection with our acquisition of the Business and Assets.
(4) Represents income tax expense, calculated at an assumed statutory tax rate of 34%, which consists of only 34% federal income taxes because Washington state has no corporate income taxes.
(5) Assumes the sale of 7,000,000 shares of common stock in this offering plus 2,904,425 shares issued by us prior to the date hereof.

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The following table sets forth, for the three month period ended February 28, 2014 (i) the actual historical statement of income for Snake River Vineyards J.V. (“SRV J.V.”) for the three months ended February 28, 2014, (ii) the actual historical statement of income for Taggares Agriculture Corp. from inception on January 10, 2014 through February 28, 2014, (iii) a provision for federal income tax attributable to the status of Taggares Agriculture Corp. as a taxable corporation as opposed to SRV J.V. as a partnership for tax purposes, and (iv) adjustments to eliminate interest expense related to debt of SRV J.V. that we are not assuming in the acquisition and income tax expense calculated at an assumed statutory rate of 34%, which consists of only 34% federal income taxes.

       
  February 28, 2014
     Historical
SRV J.V.(1)
  Historical
TAG(2)
  Pro Forma
Adjustments
  Pro Forma
Net sales   $ 825     $     $     $ 825  
Cost of sales     210                   210  
Gross profit     615                   615  
Selling, general and administrative expenses     59       22             81  
Income (loss) from operations     556       (22 )            534  
Other income (expense)     (9 )            14 (3)      5  
Net income before income taxes     547       (22 )      14       539  
Income tax provision                       (183 )(4)      (183 ) 
Net income   $ 547     $ (22 )    $ (169 )    $ 356  
Basic and diluted earnings per share                     $ 0.04  
Weighted average number of common shares outstanding                       9,904,425  

(1) The entire income statement of SRV J.V. is included in pro forma results, as Taggares Agriculture Corp. will be taking over the entirety of SRV J.V.'s business operations once the Business and Assets acquisition is complete.
(2) Represents the income statement of Taggares Agriculture Corp. as of February 28, 2014, which is the first date for which financials have been prepared for Taggare Agriculture Corp. since its inception in January 2014.
(3) Adjustment represents removal of interest expense of SRV J.V., as the related debt will not be assumed by us in connection with our acquisition of the Business and Assets of SRV.
(4) Represents income tax expense, calculated at an assumed statutory rate of 34%, which consists of only 34% federal income taxes because Washington state has no corporate income taxes.

We based the pro forma information on available information and assumptions that management believes are reasonable and that reflect the effects of these transactions. We provide the pro forma information for informational purposes only, and this information should not be construed to be indicative of our financial position or results of operations had these transactions been completed on the dates assumed. This information does not represent a projection or forecast of our financial position or results of operations for future dates or periods.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and related notes to the financial statements included elsewhere in this prospectus. This discussion contains forward-looking statements that relate to future events or our future financial performance. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks and other factors include, among others, those listed under “Forward-Looking Statements” and “Risk Factors” and those included elsewhere in this prospectus.

Introduction

We were incorporated in January 2014 for the purpose of acquiring the Business and Assets of Snake River Vineyards, including real property of approximately 3,200 acres on the Snake River near Burbank, Washington (“SRV”). Prior to the completion of this offering, SRV was owned by Snake River Vineyards, a Washington joint venture (“SRV J.V.”) and Bubby T, LLC, a Washington limited liability company. Immediately following the completion of this offering, we will acquire substantially all of the Business and Assets of SRV, and we will operate our business under the name Taggares Agriculture Corp. As such, the discussion and analysis of financial condition and results of operations in this section will be based on the financial statements of SRV J.V.

As described in more detail elsewhere in this prospectus, the purchase of the business and assets of SRV involves a related party transaction in that SRV is owned by certain persons and entities that are affiliated with Taggares Agriculture Corp. Consequently, certain of our officers, directors and stockholders, including, without limitation, Peter J. Taggares IV and Peter J. Taggares III, have a minority financial interest in the proposed acquisition by Taggares Agriculture Corp. of the Business and Assets of SRV.

Overview

SRV is in the business of producing concord grapes and several apple varieties, and selling them to a processing company and apple packing companies in Washington State. The SRV business has been operated for almost 35 years as a joint venture between a number of entities related to the Taggares Family. SRV and its business has been relatively consistent for many years: (i) SRV grows concord grapes and apples; (ii) SRV sells all of its concord grapes to Tree Top, Inc. (“Tree Top”), which processes them for use in consumer products; and (iii) SRV sells all of its apples through apple packing companies, or “packing sheds,” many of which been SRV’s packing sheds for many years, which pack the apples for distribution and sell them to retailers, processing companies, and export companies. With the exception of only two years, fiscal 2005 and 2011, with respect to which SRV received crop insurance payouts that offset net losses in those years, SRV has been profitable every year for the past 13 years. Historically, the owners of SRV focused on maximizing the cash returns from the business and chose not to invest significantly to expand or improve their operations. These owners intentionally elected to maintain the same scale of operations rather than making capital contributions to diversify crop varieties or enhance crop yield and profits, or engaging in new, potentially value-enhancing sales activities and strategic alliances. Instead, the business relied largely on crop results and existing customer relationships.

Our management team plans to make significant changes to SRV’s business and investments to enhance stockholder value. We are raising capital in this offering in order both to grow the existing SRV business and to expand through acquisitions. We intend to capitalize on the Taggares name, reputation and long-standing relationships in the farming community and to leverage our experience and access to capital to identify attractive acquisition and leasing opportunities before such opportunities are listed by a selling agent. In addition, we intend to re-develop portions of the SRV land to enhance yield optimization, improve SRV’s infrastructure, enter into strategic partnerships, produce more profitable fruit and crop varieties, and extend the breadth and depth of our product offerings, such as new high-density apple varieties, stone fruits (such as cherries, nectarines and pears), and wine grapes. Although we believe a real opportunity exists to materially expand our business without substantially overhauling our operations, we could nevertheless encounter unforeseen problems. These could include, by way of example, a change in market preferences for the apple

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varieties we grow. Our land could also experience severe weather, insects, disease and drought, which is always a distinct possibility in the farming business. We could also fail to implement, or accurately anticipate the impact of, our acquisition efforts and our re-development plans, and not see a material increase in revenue after we acquire new properties and re-develop portions of our land. We expect to incur substantial additional expenses during the 2014 Fiscal Year (as defined below) and the following five fiscal years as we engage in strategic acquisitions consistent with our business plans, re-develop portions of our land to grow new crop varieties, hire new employees, enhance yield optimization, improve our infrastructure and engage in strategic partnerships. We intend to finance our acquisition strategy through a combination of the proceeds from this offering, re-investment of earnings for the near term, and by traditional debt financing from banks and other financial lending institutions, such as a line of credit to be established following the closing of the offering. Specifically, we intend to utilize $30.0 million of the proceeds from this offering to purchase the Business and Assets of SRV. In addition, we are currently in discussions with a financial institution with significant agribusiness lending experience regarding a $15.0 million line of credit for future acquisitions, which we expect to formalize after the closing of the offering. Moreover, we anticipate that we will use approximately $4.8 million of the proceeds from this offering for future acquisitions and, for the near term, we intend to re-invest any earnings that we generate to support our acquisition strategy. Finally, we plan to incur additional long-term debt from banks and other financial lending institutions as needed in order to help fund our future acquisitions.

We estimate that we will utilize approximately $1.0 million of the proceeds from this offering for the re-development of portions of the land acquired from SRV to cultivate new apple varieties, including purchasing new apple plants, and for infrastructure improvements, such as installing trellising posts. In addition, we intend to use approximately $1.0 million of the proceeds from this offering to replace old equipment and infrastructure, build new facilities and upgrade to newer growing and harvesting technology over the next two years.

The SRV business is seasonal, with sales concentrated exclusively in the months of August to November when SRV’s employees pick and distribute its fruit to its customers. SRV’s costs associated with its grape business are concentrated in the months of December through May, during which time SRV employees prune, trim and fertilize its grape vines, and in the months of September through November, during which SRV hires seasonal labor to harvest the grapes and deliver them to Tree Top, SRV’s costs associated with its apple business are concentrated in the months of August through November, during which time SRV hires large numbers of seasonal employees to pick apples for distribution to its packing shed customers.

The supply and demand for grapes and apples, and consequently our revenue and margins, will be difficult to project. SRV has a long-term contract with Tree Top that provides some predictability into anticipated demand and selling cost for the grapes that we will produce, which will be our primary product in the near-term. Nevertheless, yields are subject to agriculture risk, such as weather, insects and crop disease. Additionally, depending upon market prices for apples and grapes, the availability of water, the natural cycle of the related plants and the market prices for alternative crops, our revenue and margins will be subject to wide variation from season to season.

SRV’s grape business is exclusively dependent upon its sales to Tree Top, and the price paid by Tree Top for SRV’s grapes is based on the average local market price as determined by two large producers in the area, The J.M. Smucker Company and affiliated entities and Milne Fruit Products, Inc. and affiliated entities, subject to a minimum and a maximum price in accordance with SRV’s contract with Tree Top. We will assume all rights and responsibilities under SRV’s current agreement with Tree Top, and other suppliers and vendors, in connection with our acquisition of the Business and Assets of SRV as part of this offering.

Historically, all of SRV’s sales of apples were made through packing sheds located in Washington and marketed and sold further to retailers, processing companies and export companies that determine the market price for the apples that SRV sells. Going forward, we expect to enter into a long-term agreement with Valicoff Fruit Company, Inc. to be our exclusive packing shed partner, based on the non-binding letter of intent which is included as an exhibit to this prospectus. The price SRV is paid for its apples will be determined by supply and demand in the local market, which is subject to significant cycles of over-supply and under-supply. Consequently, although SRV is subject to the volatility of local markets, the breadth of our

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market and the quality niche of SRV’s apples have resulted in relatively stable demand. However, the supply of apples in the marketplace is subject to substantial swings.

We anticipate higher fruit yields in fiscal 2014, beginning December 1, 2013 (the “2014 Fiscal Year”) as compared to fiscal 2013, beginning December 1, 2012 (the “2013 Fiscal Year”). This prediction is based on the fact that we have not yet experienced a freeze in winter 2013 or 2014 to impact our 2014 harvest, and the fact that the 2014 crop is not an “alternate bearing” crop year. Higher concord grape yield in 2014 Fiscal Year will result in higher net sales from concord grapes in that same year; higher apple yield in 2014 Fiscal Year will result in higher net sales from apples in the following fiscal year, based on our revenue recognition policies. The outlook for fruit yields in fiscal 2015 and future years is difficult to predict given the variability in year-over-year results resulting from weather, disease, insects and the other uncertainties described elsewhere in this prospectus. We also plan to re-develop portions of our land to produce newer high-density apple varieties which we anticipate will minimize the risks associated the market for any specific apple variety.

Information Presented

Financial information in this prospectus consists of:

Balance Sheets of SRV J.V. as of November 30, 2013 and November 30, 2012, and February 28, 2014;
Statements of Income of SRV J.V. for the fiscal years ended November 30, 2013 and November 30, 2012 and the three months ended February 28, 2014 and February 28, 2013;
Statements of Members’ Equity of SRV J.V. for the fiscal years ended November 30, 2013 and November 30, 2012 and the three months ended February 28, 2014;
Statements of Cash Flows of SRV J.V. for the fiscal years ended November 30, 2013 and November 30, 2012 and the three months ended February 28, 2014 and February 28, 2013;
Balance Sheet of Taggares Agriculture Corp. as of February 28, 2014;
Statement of Income of Taggares Agriculture Corp. for the period from inception to February 28, 2014;
Statement of Stockholders’ Deficit of Taggares Agriculture Corp. for the period from inception to February 28, 2014;
Statement of Cash Flows of Taggares Agriculture Corp. for the period from inception to February 28, 2014; and
Notes to the foregoing financial statements.

Our business was operated as Snake River Vineyards beginning in 1979. On November 25, 2013, SRV J.V. and Bubby T entered into agreements with T3 Ag Investments, LLC, a Washington limited liability company (“T3 Ag”), our affiliate, for the purchase of the real property, certain personal property, business operations, water and other rights related to the real property of SRV J.V. and Bubby T (the “Business and Assets”) by T3 Ag, which purchase is contingent upon, and will occur immediately following the completion of this offering.

Taggares Agriculture Corp. was incorporated in Delaware on January 10, 2014 for the purposes of succeeding to the rights of T3 Ag under the purchase agreements with SRV J.V. and Bubby T, and acquiring the Business and Assets of SRV in connection with the completion of this offering. T3 Ag has assigned to us all of T3 Ag’s rights under the purchase agreements with SRV J.V. and Bubby T.

Despite the legal consequences intended by the purchase agreement and its amendments, which provide for the purchase of certain specific assets of SRV J.V. and Bubby T, the accounting rules applicable to the agreement mandate that the purchase will be accounted for as a business combination using the acquisition method of recording all assets acquired at their respective fair market values.

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The historical financial information contained in this prospectus has been derived from the financial statements of SRV J.V., which is taxed as a partnership. As such, all tax effects of income or loss of SRV J.V. are passed through to its members individually and these financial statements include no income tax expense or benefit for SRV J.V. The pro forma financial statements of Taggares Agriculture Corp. include a provision for federal income tax, since Taggares Agriculture Corp. is a taxable corporation for federal income tax purposes.

The financial statements of SRV J.V. presented in this prospectus reflect the fact that SRV J.V. leases and jointly operates the 141 acres of agricultural land owned by Bubby T with the land and other assets of SRV J.V. that are included in the Business and Assets of SRV. As such, any reference in this prospectus to the financial statements of SRV or SRV J.V. includes the financial statements of SRV J.V. with respect to the farming operations on the land owned by Bubby T that is being acquired by Taggares Agriculture Corp. immediately following the closing of this offering.

Both because immediately following the completion of this offering we will have acquired all or substantially all of our business and assets from a third party, and because we are entering a new growth mode that we have not historically pursued, we do not believe that our historical financial results are indicative of future results.

Results of Operations

The following discussion and analysis of our results of operations compares the results of operations of SRV J.V. for the fiscal year ended November 30, 2013 compared to the results of operations of for the fiscal year ended November 30, 2012 and for the three months ended February 28, 2014 compared to February 28, 2013. Due to the seasonality of our business and our arrangements with our customers, our results of operations in any given year relates to the harvest of our fruit from the prior year. For example, our 2013 results of operations relates to our 2012 harvest.

Comparison of Years Ended November 30, 2013 and 2012

Net Sales

SRV J.V.’s total revenues were $7.7 million and $9.9 million in the years ended November 30, 2013 and 2012, respectively. Fiscal 2012 benefited from the receipt of a crop insurance claim of $2.0 million which resulted from a vineyard freeze in 2010 which impacted the 2011 harvest. Excluding the positive impact of the crop insurance proceeds, 2013 revenues were lower than 2012 revenues by $0.2 million, or 2.5%, making the two years’ net sales comparable.

Cost of Sales

SRV J.V.’s cost of product sales increased by $1.1 million to $5.9 million in the year ended November 30, 2013 compared to the year ended November 30, 2012. The increase in cost of product sales was attributable to a larger apple crop in 2012, requiring additional labor, which was realized as revenue and related cost of product sales in 2013. The 2012 harvest (to which our 2013 apple revenues are related), produced 32,000 bins of apples, as compared to 17,000 in the 2011 harvest (to which our 2012 apple revenues are related). In addition, the 2011 apple crop was lower due to the fact that not only was 2011 an “alternate bearing” crop year, but also a freeze occurred in November 2010, reducing yields in 2011.

Selling, General and Administrative expenses

SRV J.V.’s selling, general and administrative (“SG&A”) expenses decreased by $12,264 to $153,589 in the year ended November 30, 2013 compared to the year ended November 30, 2012. This decrease was attributable to lower expenses for liability insurance and accounting fees. We expect an increase in legal, accounting, investor relations and consulting SG&A expenses, associated with operations as a reporting public company. In line with the expanded scope of our operations, we also anticipate a modest increase in the number of personnel that we employ over time.

Interest Expense, Net

Interest expense decreased by $76,850 to $108,017 in the year ended November 30, 2013 compared to the year ended November 30, 2012. This decrease was primarily due to the reduction in principal loan amounts outstanding in Fiscal 2013 as compared to Fiscal 2012.

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Net Income

Net income decreased from $4.8 million in the year ended November 30, 2012 to $1.5 million in the year ended November 30, 2013. This decrease is largely attributable to the decrease in net sales and increase in product cost of sales, as described above.

Comparison of Three Month Periods Ended February 28, 2014 and 2013

Net Sales

SRV J.V.’s total revenues were $825,199 and $531,815 in the three months ended February 28, 2014 and 2013, respectively. The increase in net sales in 2014 was due primarily to the late closure of 2012 apple pools in late calendar 2013, and the subsequent collection in the three months ended February 28, 2014 of more apple revenue from the 2012 crop than was collected in the three months ended February 28, 2013 from the 2011 crop. The apple yields in the 2012 crop were significantly higher than the 2011 crop.

Cost of Sales

SRV J.V.’s cost of product sales were $209,667 anf $140,537, respectively, in the three months ended February 28, 2014 and 2013. This increase in 2014 as compared to the 2013 quarterly period is the result of a higher crop yield in 2012, which were mostly recognized into sales and cost of sales in fiscal 2013, but there was late closure of certain pools, which resulted in revenue and cost of sales recognized into early fiscal 2014.

Selling, General and Administrative expenses

SG&A expenses increased only slightly to $58,680 in the three months ended February 28, 2014 compared to $52,580 in the three months ended February 28, 2013. This increase was attributable to a general increase in administrative utilities and services.

Interest Expense, Net

Interest expense decreased by $19,545 to $13,946 in the three months ended February 28, 2014 compared to three months ended February 28, 2013. This decrease was primarily due to the reduction in principal loan amounts outstanding in Fiscal 2014 as compared to Fiscal 2013.

Net Income

Net income increased from $301,696 in three months ended February 28, 2013 to $547,376 in the three months ended February 28, 2014. This increase is largely attributable to an increase in the collection of apple proceeds from the previous two crop years and an overall larger crop yield in 2012 that in 2011, which had trailing pools that closed in early fiscal 2014 and 2013, respectively.

Liquidity and Capital Resources

SRV J.V.’s working capital and working capital requirements fluctuate from quarter to quarter depending on the phase of the growing and sales cycle that falls during a particular quarter. SRV J.V.’s need for cash is highest in the third and fourth fiscal quarters (August through November) because its labor costs are highest during the harvest season. The concord grape harvest occurs during the fourth fiscal quarter (September through November). The apple harvest occurs during the end of the third and fourth fiscal quarters (August through November). Therefore, the value of unsold fruit is the highest in the fourth quarter(s), as are SRV J.V.’s labor costs. But SRV J.V. also generates the greatest amount of cash during the dormant season in the first quarter, when SRV J.V. receives the largest portion of payments for its concord grape sales. SRV J.V. also recognizes almost all of its apple revenues in the third and fourth quarter of the year following the year in which each apple crop was harvested and delivered to the packing sheds. SRV J.V.’s recognition of apple revenue coincides with when the apples are delivered to the purchasers and payment for such deliveries is received. Due to the concentration of sales to Tree Top, SRV J.V.’s sole concord grape customer, representing approximately 34% of sales in the 2013 Fiscal Year, SRV J.V.’s month-to-month and quarter-to-quarter sales and associated cash receipts are highly dependent upon the timing of deliveries to and payments from Tree Top, which typically occur in the fourth and following first fiscal quarters. The concentration of sales has also resulted in a concentration of credit. At November 30, 2013, this customer accounted for 99% of SRV J.V.’s trade receivables. However, SRV J.V. has a long-standing relationship of over seven years with this customer, and we believe that all of SRV J.V.’s outstanding accounts receivable balances from Tree Top are fully

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collectible. SRV J.V. has continuously monitored and evaluated its credit policies with all of its customers based on historical collection experience, current economic and market conditions and a review of the current status of the respective trade accounts receivable balance. SRV’s relationships with its customers do not include a right of return.

SRV J.V.’s principal working capital components include cash, trade receivables, inventory, prepaid expense and other current assets, accounts payable, accrued liabilities, advances from customers on inventory pools, and current maturities of notes payable. For most of its history, SRV J.V. generated sufficient operating cash flow throughout the year to fund its operations and to distribute surplus annually to the owners of SRV J.V..

Summary of Cash Flows

The following table shows a summary of SRV J.V.’s cash flows for the fiscal years ended November 30, 2013 and 2012, and the three months ended February 28, 2014 and 2013:

       
  Fiscal Year Ended
November 30,
  Three Months Ended
February 28,
(unaudited)
     2013   2012   2014   2013
Net cash flows provided by operating activities   $ 2,730,888     $ 2,739,706     $ 1,254,094     $ 3,601,717  
Purchases of property, buildings and equipment     (63,071 )      (99,513 )            (48,028 ) 
Net cash used by financing activities     (2,700,288 )      (2,589,136 )      (1,248,687 )      (3,558,741 ) 
Net increase (decrease) in cash and cash equivalents     (32,471 )      51,057       5,407       (5,052 ) 
Cash and cash equivalents, beginning of period     66,192       15,135       33,721       66,192  
Cash and cash equivalents, end of period   $ 33,721     $ 66,192     $ 39,128     $ 61,140  
Supplemental disclosure of cash flow information – interest paid   $ 140,338     $ 215,481     $ 41,153     $ 79,735  

At April 11, 2014, we had minimal cash on hand as we have been funding our pre-operating period through funds borrowed from T3 Ag. As of March 31, 2014, we had borrowed approximately $360,000 which will be repaid to T3 Ag plus interest at a rate of 4% per annum as soon as practicable following completion of this offering out of the proceeds of this offering. We believe that the net proceeds of this offering, together with cash flows from operations will be sufficient to meet our working capital requirements for the next 12 months.

Operating activities create sources and uses of cash in the following ways:

An increase in accounts receivable balances from one period to the next will result in a reported use of cash, as the Company has recorded a receivable for which it does not immediately receive cash for operating purposes; the converse is also true, a decrease in accounts receivable balances from one period to the next will result in a reported source of cash for the Company, as receivable balances are collected and operating cash becomes available through this receipt of funds by the Company. The timing of receipt of funds from customers is highly impactful to cash balances in any given period.
Increases in inventory balances from one period to the next result in a reported use of cash, as the Company has either recorded a payable or has expended cash to increase such inventories, which it will not recoup until such inventories are sold to customers; the opposite is also true in that decreases in inventory balances from one period to the next result in a reported source of cash, as presumably the Company has sold such inventory which has caused the decrease in balance, and cash has been received from customer(s) as a result of this release of inventory. As the Company builds its unharvested crop inventory over the course of the year, it expends cash to do so, representing a use of cash, which is not relieved until the Company’s customers, the apple packing sheds, start to settle inventory pools for which the Company is paid, usually in the following fiscal year. The Company’s operating cash is highly sensitive to the timing and size of inventory balances reported on the Company’s balance sheet in any given period.

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Increases in accounts payable and accrued expense balances from one period to the next result in a reported source of cash, as the Company has incurred expenses for which it has not paid, thereby preserving its cash as those balances increase. The opposite is also true, in that as the Company’s accounts payable and accrued expense balances decrease from one period to the next, this means that the Company has expended its operating cash in order to pay down such balances, therefore creating a use of operating cash in doing so.
Finally, the Company’s net income or loss in any given period impacts its operating cash in either a positive way, via net income, or in a negative way, via net loss. When comparing cash provided or used during two comparative periods, net income will significantly impact cash in that comparison, depending on the income statement activity in each period being compared, which is largely driven by revenue recognized in any given period. The Company’s operating cash varies significantly period over period, depending on revenue recognized from the prior year’s apple inventory pools. This revenue is also significantly impacted by the timing, if any, of receipt of insurance proceeds, as those funds are generally recognized into revenue upon receipt, since amounts may not be reasonably determinable prior to receipt of insurance proceeds.

Operating Activities — Comparison of Years Ended November 30, 2013 and 2012

During the fiscal year ended November 30, 2012, SRV J.V.’s operating activities provided $2.7 million in cash, mainly as a result of the generation of $4.8 million of net income, which was offset by an increase in net trade receivables of $1.7 million and an increase in inventories of $0.9 million. In the fiscal year ended November 30, 2013, SRV J.V.’s operating activities provided $2.7 million in cash, as a result of the generation of $1.5 million of net income supplemented by a $0.8 million decrease in net trade receivables and a $0.8 million decrease in inventories, offset by a $0.5 million decrease in the liability balance for advances from customers on inventory pools.

Operating Activities — Comparison of the three month periods ended February 28, 2014 and 2013

During the three months ended February 28, 2014, SRV J.V.’s operating activities provided $1.3 million in cash, as compared to $3.6 million that was provided by operating activities during the three months ended February 28, 2013. This decrease was mainly the result of a large decrease in trade receivables in the three month period ended February 28, 2013, as a result of the receipt of insurance proceeds in that period. Also, there was a large increase in advances from customers on inventory pools in that same period due to the timing of the apple deliveries to the packing sheds.

Due to the seasonality of SRV J.V.’s business, SRV J.V.’s accounts payable balances are at their highest levels in the third and fourth quarters of the fiscal year, and SRV J.V. is paid by its customers mainly in the first and fourth quarters of the fiscal year. We do not see any recoverability issues with respect to our inventory, and inventory obsolescence is not a material concern.

SRV J.V. has long-standing relationships with its customers and has never had to write off any receivables due from them. To the best of our knowledge, there is no company-related issue that might delay payment, nor are there any negative issues impacting SRV J.V.’s relationships with its customers. Moreover, we believe that all of SRV J.V.’s outstanding accounts receivable balances are fully collectible. SRV J.V.’s relationship with its customers is strong, and following the completion of this offering we intend to continue to do a significant amount of business with such customers.

Investing Activities

SRV J.V.’s primary investing activities during the year ended November 30, 2013 consisted of $63,071 as a result of additions of certain new farm equipment. SRV J.V.’s investing activities during the year ended November 30, 2012 totaled $99,513, also for the purchase of various pieces of farming equipment.

Similarly, SRV J.V.’s only investing activities during the three months ended February 28, 2014 and 2013 consisted of $0 and $48,028, respectively, spent on the purchase of various pieces of equipment.

Financing Activities

During the year ended November 30, 2013, SRV J.V.’s financing activities consisted primarily of payment on long-term debt of $1.4 million and distributions to SRV J.V.’s members of $1.3 million. During the year

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ended November 30, 2012, SRV’s financing activities consisted of payment on long-term debt of $1.3 million and distributions to SRV J.V.’s members of $1.4 million.

During the three months ended February 28, 2014, SRV J.V.’s financing activities consisted primarily of payment on long-term debt of $734,000 and distributions to SRV J.V.’s members, net of contributions, of $514,000. During the three months ended February 28, 2013, SRV J.V.’s financing activities again consisted primarily of payment on long-term debt of $696,000 and distributions to SRV J.V.’s members, net of contributions, of $3.0 million.

Interest Rate Fluctuation Risk

We do not have any long-term borrowings.

Inflation Risk

We do not believe that inflation has had a material effect on SRV J.V.’s business, financial condition or results of operations. However, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.

Off Balance Sheet Arrangements

SRV J.V. did not have any off-balance sheet arrangements.

Capital Resources and Requirements

Our future liquidity and capital requirements will be influenced by numerous factors, including:

the costs of re-developing portions of our land to grow new fruit varieties;
the extent and timing of future land acquisitions;
the extent and duration of future operating income;
the level and timing of future sales and expenditures;
working capital required to support our growth;
investment capital for renewing plant and equipment;
competition; and
market developments.

SRV J.V.’s grape and apple revenue and associated fixed and variable operating expenses, as well as operating expenses, have historically been relatively stable, and we expect this trend to continue. Our new focus on farm acquisition and re-development is expected to increase sales volume over time, which, in turn, we anticipate will result in increasing revenue. Historically, the available labor force has been stable due to the farming proximity to the Tri-Cities and the large pool of migrant laborers attracted to the large agriculture industry in the Tri-Cities area. Many of SRV J.V.’s laborers have worked for SRV J.V. for over a decade. SRV J.V.’s major customers in Washington State have been stable and productive for over 10 years. SRV J.V. has crop insurance to compensate for years where crop yield is low due to weather, insects or disease. Therefore, while the market price for grapes and apples may fluctuate year to year, SRV J.V. is generally able to maintain a profitable margin between our costs and selling prices.

Certain of SRV J.V.’s equipment, buildings, irrigation pipe and trellis infrastructure is out-dated. We expect to use approximately $1.0 million of the proceeds from this offering over the next two years to replace old equipment and infrastructure, build new facilities and upgrade to newer growing and harvesting technology. We may need to make additional capital expenditures to update our equipment and infrastructure in the future. Over the next five years, our plans to acquire other properties consistent with our business plans, and our plans for the re-development of portions of the SRV land will require substantial capital investment in the future. We expect to use approximately $4.8 million of the proceeds from this offering in addition to debt to help finance the acquisition of new properties consistent with our business plans over the next five years, and approximately $1.0 million of the proceeds from this offering to re-develop portions of the SRV land over the next five years.

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Jumpstart Our Business Startups Act of 2012

We are an emerging growth company within the meaning of the rules under the Securities Act, and we will utilize certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies. For example, we will not have to provide an auditor’s attestation report on our internal controls in future annual reports on Form 10-K as otherwise required by Section 404(b) of the Sarbanes-Oxley Act. The JOBS Act also permits us, as an “emerging growth company,” to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We are choosing to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted by issuers. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.

Significant Accounting Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we re-evaluate all of our estimates, including those related to the area of accounts receivable, growing and harvest costs, long-lived assets including property, plant and equipment, and commitments and contingencies. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the ongoing recording of revenue and expenses. Actual results may materially differ from these estimates under different assumptions or conditions as additional information becomes available in future periods.

We believe the following are the more significant judgments and estimates used in preparation of our financial statements:

Accounts receivable — We grant credit in the course of our operations to Tree Top and the packing sheds and generally do not require collateral. We provide allowances on our receivables as necessary based on accounts receivable aging and other factors. We do not record balances in receivables until the revenue recognition rules, described below, are accomplished.

We only record crop insurance revenue once the amount is known and collectability is certain, which generally is when the actual insurance check is received, which means that a receivable for crop insurance is not normally even part of the recognition process for insurance proceeds.

Growing and harvest costs — Growing costs consist of orchard maintenance costs such as cultivation, fertilization and soil amendments, pest control, pruning and irrigation. Harvest costs are comprised of labor and equipment expenses incurred to harvest and deliver crops to Tree Top and the packing sheds. Most costs, including amortization of capitalized growing costs, and harvest costs are associated with and charged to specific crop types, either grapes or apples. Certain other costs, such as property taxes, insurance, indirect labor including farm supervision and management and irrigation that benefit multiple crops are allocated to crops on a per acre basis.

Long-lived assets — We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset my not be recoverable. If the estimated undiscounted future cash flows from the use of an asset are less than the carrying value of that asset, a write-down is recorded to reduce the carrying value of the asset to its fair value. Assets held for sale, such as harvested and unharvested crop costs, are carried at the lower of cost or fair value less estimated cost to sell.

Critical Accounting Policies

The accounting policies and the use of accounting estimates are set forth in the footnotes to the audited financial statements.

In preparing our financial statements, we must select and apply various accounting policies. Our most significant policies are described in Note 1 —  Nature of Operations and Summary of Significant Accounting Policies set forth in the notes to the audited financial statements.

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We believe the following represent our critical accounting policies.

Revenue Recognition Policy

Revenue and related costs are recognized in the statements of income when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred and title has transferred, (iii) selling price is fixed or determinable, and (iv) collectability is reasonably assured.

Grapes — Revenue from the sale of grapes to third parties is recorded when title is passed, the price is fixed and determinable and collectability is reasonably assured, which is typically when the grapes are delivered to SRV J.V.’s customer, Tree Top. SRV J.V. sold substantially all of its grape production to one customer during the years ended November 30, 2013 and 2012. In 2007, SRV J.V. entered into a contractual agreement with the one customer to sell the entire grape yield produced by SRV J.V. each crop year for five consecutive years starting with crop year 2007. The second contract term ended on December 31, 2013, and a third contract term has been extended and will expire on December 31, 2018.

Revenue from the sale of grapes is not based on estimates, but is recorded only when the price for the product is known. Variations in revenue for fruit from year to year are the result of growing and harvesting conditions, quality and quantity of fruit delivered and market prices for the product.

Apples — SRV J.V.’s arrangements for sales of its apples with its packing sheds are such that SRV is the producer and supplier of the apples and the packing sheds are SRV J.V.’s customers for accounting purposes. Further marketing and sales efforts for SRV J.V.’s apples are performed by marketing and sales companies contracted by the packing sheds, or in some cases, performed in-house by the packing sheds. SRV J.V.’s apples can be held in climate-controlled storage for up to 12 months until they are sold. The sales price for the apples delivered to the packing sheds is determined based on the volume, size, variety and grade of the apples delivered, and the average price for all apples of similar size, variety and grade pooled together in what are known as “inventory pools” managed by each packing shed, less the packing sheds’ charges to pack and market the apples. SRV J.V. bears inventory risk and retains certain pricing power until the product is packed, marketed and the inventory pools are sold to the purchasers. The inventory pools for each packing shed consist of apples from between 10 to 30 other apple growers, whose apple inventories are stored separately within each packing shed. Revenue is recognized upon settlement of the inventory pool, which is when title for the apples has transferred to the purchasers and the selling price is fixed and determinable. For almost all of SRV J.V.’s apples, settlement of the inventory pools occurs in the third and fourth quarters of the year subsequent to delivery of the apples to the packing sheds. Revenue from the sale of apples is not based on estimates, but is recorded only when inventory pools have settled, and the selling price and volume at that price is certain. Variations in revenue for fruit from year to year are the result of growing and harvesting conditions, quality and quantity of fruit delivered and market prices for the product.

The packing shed charges are recorded as a reduction of revenue based on the application of specific authoritative revenue recognition guidance entitled “Vendor’s Income Statement Characterization of Consideration Given to a Customer.” The identifiable benefit SRV J.V. receives from the packing sheds for packing and marketing services cannot be sufficiently separated from the sales of SRV J.V.’s apples facilitated by the packing sheds. In addition, SRV J.V. is not able to reasonably estimate the fair value of the benefit received from the packing sheds for such services and as such, these costs are characterized as a reduction of revenue in SRV J.V.’s statement of income.

Crop Insurance — Revenue from crop insurance proceeds is recorded when the amount of and the right to receive the payment can be reasonably determined. Because revenue from crop insurance is not recorded until the amount of and the right to receive the payment can be reasonably determined, revenue from crop insurance will generally be recorded in a period other than the period in which the loss arose. That may create variations in total revenue from year to year.

Inventories

Unharvested crop inventory — Costs of growing crops are accumulated until the time of harvest and are reported as inventory at the lower of cost or market value. Crop growing costs include labor, seed, fertilizer, water supply, equipment and other expenses directly related to growing crops. These costs are allocated over

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the quantity of fruit produced, as the fruit is sold. Fruit production will vary from year to year based on growing and harvesting conditions and therefore the gross margin on fruit will vary year to year.

Harvested crop inventory — Harvested crop inventory includes costs accumulated during the growing phase plus harvesting costs and are stated at the lower of these costs or the estimated net realizable value. Fruit delivered to packing sheds is included in SRV J.V.’s inventory until such time as title to the fruit has passed to the purchasers and the sales price is fixed or determinable. The sales price is fixed once inventory pools that include SRV J.V.’s fruit are sold to the purchasers. These costs are allocated over the quantity of fruit produced, as the fruit is sold. Fruit production will vary from year to year based on growing and harvesting conditions and therefore the gross margin on fruit will vary year to year.

Recently Adopted and Recently Enacted Accounting Pronouncements

None.

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BUSINESS

Introduction

Taggares Agriculture Corp. was formed in January 2014 to leverage the well-established Taggares family name and farming expertise to acquire, re-develop and operate profitable farmland in the Pacific Northwest (the region encompassing Washington, Oregon and Idaho). Our primary focus is on acquiring farmland with the necessary characteristics to grow differentiated permanent crops that are profitable to our business such as tree fruit (e.g. apples), stone fruit (e.g. cherries, nectarines and pears) and grapes (e.g. concord and wine grapes). Such characteristics include an established permanent crop, secure water rights, re-development potential, large contiguous area, existing operations and consistent yields. In addition, we plan to use value-enhancing farming techniques to increase the yield of our crops, such as advanced pruning and thinning techniques, frost prevention such as ponds and wind machines, and other infrastructure improvements. Our management, consultants and advisors have extensive experience in these advanced techniques. Further, we plan to establish partnerships to add to our economies of scale, such as those with Valicoff Fruit Company, Inc. (“Valicoff”), the apple packing shed that will pack, store, distribute, market and sell our apples, in which we will earn favorable pricing terms.

We have an established team of managers, directors and outside advisors, all of whom are committed to our business and the creation of long-term value for our stockholders. Our President and Chief Executive Officer is Peter “Pete” Taggares IV, a fourth-generation member of the Taggares family which has been farming in the Pacific Northwest since the 1920s and has a well-established name with a deep history among farmers and members of the Pacific Northwest agriculture community. Pete Taggares IV’s grandfather, Peter J. Taggares II, established a unique branding strategy in the Pacific Northwest by painting all of his farm infrastructure white, from the buildings to the electrical poles, across his portfolio of farm holdings which at one time included over 40,000 aggregate acres of farmland in the Pacific Northwest. Pete Taggares IV will be supported by Peter J. Taggares III, his father and the current Vice President and co-owner of The P.J. Taggares Company and Snake River Vineyards (“SRV”), an apple and concord grape farm on the Snake River in Burbank, Washington that encompasses a total of approximately 3,200 acres.

To date, we have identified and negotiated a large farm acquisition, entered into new strategic partnerships, developed farm acquisition and re-development strategies and established a high-quality board of directors. We have negotiated purchase and sale agreements to acquire SRV, a 3,200 acre farm in the Pacific Northwest; negotiated a five-year contract with Tree Top, Inc. to sell all concord grapes produced on such farm subject to a minimum and maximum price per ton, thus reducing market price risk; and negotiated a three-year contract with Valicoff to pack the apples grown on the farm in exchange for a rebate on each apple bin packed. We have developed the acquisition and re-development strategies described in more detail below, which include the acquisition of desirable farmland and the re-development of such land to diversify the crops we grow and to grow more profitable permanent crop varieties. We intend to improve farm operations on SRV, the farm we plan to acquire immediately following this offering, which involves optimizing resources to increase yields and infrastructure improvements to reduce weather-related risks. We have also established a board of directors with significant experience and expertise in real estate, investing and agriculture. See “Management” beginning on page 76.

We believe we have a significant opportunity in the Pacific Northwest to acquire and improve farmland matching our acquisition criteria. We anticipate an increase in the supply of Pacific Northwest cropland available to be acquired or leased over the next several years. In 2007, in the Pacific Northwest, there were 47,425 farms in operation, of which approximately 88.2%, or 41,844 farms, were family-owned and approximately 57.0%, or 27,052 farms, were primarily operated by individuals over 55 years of age. Further, of the 2,204,792 farms in the United States as of 2007, approximately 94.0% were family-owned. In addition, the fastest growing group of farm operators in the United States is those 65 years and older. We believe this data strongly indicates the fragmented nature of the agriculture industry in general and the aging demographics of farm owners in the Pacific Northwest specifically. Based on this data and our experience, we believe that a large number of farms in the Pacific Northwest are currently or will soon become available to be acquired or leased over the next several years.

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We intend to use a substantial portion of the proceeds of this offering to acquire the real property, certain personal property, business operations, water and other rights related to the real property (the “Business and Assets”) of SRV immediately following the closing of this offering. SRV is an apple and concord grape farm on the Snake River in Burbank, Washington that encompasses approximately 3,200 acres and has been owned and operated for almost 35 years by various members of the Taggares family. The purchase price for the Business and Assets of SRV is an aggregate of $30.0 million, as documented in the purchase and sale agreements governing the transaction that have been negotiated and executed by the parties. The SRV farm is a prime example of a property that meets or exceeds all of our acquisition criteria. For example, SRV has a contiguous area of approximately 3,200 acres, secure water rights to pump water directly from the Snake River, established farming operations that have lasted over 30 years, consistent yields, and established tree fruit plantings with high potential for re-development into more diverse and higher-profit fruit. As such, we believe the acquisition of SRV will greatly advance our business strategy.

We currently anticipate that in connection with this offering, Peter J. Taggares III and Peter J. Taggares IV will re-invest approximately $500,000 each of their proceeds from the sale of the Business and Assets of SRV for shares of our common stock, or 83,334 shares of common stock each, at an assumed public offering price of $6.00 per share. These purchase amounts constitute approximately 20% and 100% of the proceeds we expect Peter J. Taggares III and Peter J. Taggares IV, respectively to receive following the sale of the Business and Assets of SRV. See “Related Party Transactions and Structure of the Company and Related Parties” beginning on page 87, and in particular the diagram on page 88 showing the purchase of the Business and Assets of SRV and the corporate structures and ownership percentages of the parties involved.

Following our acquisition of SRV, we plan to re-develop approximately 1,000 acres of SRV’s land over the next five years to grow more diverse and higher-profit permanent crop varieties such as new high-density apple varieties, wine grapes and cherries. We believe this strategy will enable us to maximize our profits and diversify crop risk. Our forecasts show that our apple profits could be increased by replacing some of our lower-profit concord grape vines and apple trees with high-density apple trees that grow high-profit apple varieties, or by re-grafting some of our older apple trees with new, higher-profit apple varieties. “High-density” apple plantings involve planting specialized apple trees at closer intervals in the orchard rows, which brings trees into production faster, reduces labor cost, time and materials, and permits greater yield per acre. For example, a farmer may be able to plant 1,000 high-density apple trees per acre, as compared to 200 trees per acre for conventional spacing free-standing apple trees. Examples of higher-profit apple varieties currently include Honeycrisps, Pink Lady and Buckeye Gala. Examples of other higher-profit crops we may consider producing include stone fruit (such as cherries, nectarines and pears) and wine grapes. Further, diversifying our crops will reduce the impact to our business of the potential weather-related and market risks associated with any one type of crop we grow. See “Farm Re-Development Strategy and Opportunity” beginning on page 59.

Upon completion of this offering, we believe we will be well-positioned to offer to potential sellers of farmland a unique value proposition. We believe that at present, buyers of cropland fall into two broad categories. One is the typical owner-operator who acquires cropland to farm it themselves. The other is the institutional buyer, such as Hancock Agricultural Investment Group (HAIG), that acquires cropland to build portfolios of properties generally operated by third parties. Typical owner-operators tend to have the farming expertise to farm the land they acquire, but unlike institutional buyers, tend to have limited financial resources and access to capital. Institutional buyers, on the other hand, have greater financial resources and access to capital but tend not to have the desire and expertise necessary to operate the farm properties they acquire. We hope to combine the advantages of both of these types of buyers and be a unique buyer of cropland in the marketplace. We possess the farming expertise to effectively operate the cropland we acquire, and following this offering we expect to have broad financial resources and access to capital as compared to typical owner-operators. Further, we believe the Taggares family name, reputation and long-standing relationships in the farming community will help us identify attractive acquisition and leasing opportunities in the Pacific Northwest before such opportunities are listed by a selling agent and known by our competitors. See “Acquisition Opportunity and Strategy” beginning on page 59.

As noted above, we were formed in January 2014 for the purpose of consummating this offering and acquiring the Business and Assets of SRV immediately following the closing of this offering. As such, except

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as otherwise indicated, the discussion of our business and operations contained in this section assumes that this offering has occurred and we have acquired the Business and Assets of SRV.

Trends in the Global Apple Industry

According to the 2012 World Apple Review, as of 2011, total global apple production was about 75.2 million metric tons, approximately 46.5% of which, or 35.0 million metric tons, was produced in the People’s Republic of China, which is currently the world’s largest apple market. The United States is the world’s second largest producer of apples at approximately 4.2 million metric tons, approximately 71% of which was produced in Washington State. Poland, Turkey and Italy rank third, fourth and fifth, respectively. Approximately one out of every four fresh apples grown in the United States is exported and fresh apple exports from the 2011 U.S. apple crop totaled a record 44.0 million bushels, with a record value $987.1 million. In 2011, the People’s Republic of China imported roughly 78,000 metric tons of apples, which represents more than a 100% increase from the amount imported in 2003. This shows that domestic demand for fresh apples in China has grown faster than total production. In addition, the estimated per capita consumption of fresh apples rose 147.5% from the period between 1991-1993 to 2000-2002 and 45.9% over the period between 2000-2002 and 2009-2011. We believe this rise in consumption has been stimulated by the rise of a more affluent middle class and the spread of modern retailing that has made items like fresh apples available in good condition year round. Further, the Chinese domestic apple market is heavily reliant on a single variety of apple, Fuji. We believe these trends indicate that as the People’s Republic of China imports more apples to match increasing domestic demand for greater quantities and different varieties of apples, there is an increasing opportunity for U.S.-based apple growers to market and sell apples in China. As an illustration of this opportunity, an increase by only 10% of Chinese fresh apple demand would constitute approximately 3.5 million metric tons, which is equivalent to approximately 83% of the amount of the entire U.S. apple production in 2011. We also believe this trend is beginning in other developing countries, such as India, and will create long-term global demand for high-quality fresh apples.

Washington Apple Industry

In the fertile valleys and plateaus of Washington’s Columbia Basin, growers tend orchards that produce some of the world’s best apples. More than 175,000 acres of apple orchards are nestled in the eastern foothills of the Cascade Mountains at elevations from 500 to 3,000 feet above sea level. The orchards are irrigated with plentiful and cool mountain water. The area first became known to American pioneers at the turn of the 19th century and by 1826, early settlers had discovered that the area’s rich lava-ash soil and plentiful sunshine created perfect conditions for growing apples. The arid climate also meant fewer insect and disease problems providing a smooth finish on the apples. Noting the health and vigor of apple trees planted along stream banks, pioneers developed irrigation systems and by 1889 commercial orchards were established. Most apple-growing districts in Washington State are still located along the banks of major rivers, including the Snake River. In 2012, approximately 71% of apples grown in the United States were produced in Washington State.

The average size of an orchard is about 50 acres, but some cover as many as 3,000 acres and employ 300 or more workers year-round. An estimated 35,000 to 45,000 pickers are employed during the peak of harvest. Washington State growers successfully harvest a wide variety of apples including Red and Golden Delicious, Granny Smith, Braeburn, Jonagold, Fuji, Gala and many others. Orchardists continually strive to improve growing methods to produce apples that are crisper, juicier, more flavorful and keep better in storage.

Apples of all varieties can be sold either as fresh, or whole, apples, which are cleaned and sold as-is to consumers, or as processed apples, which are used as canned, frozen, dried or sliced apples, or which are processed and turned into apple concentrate, apple sauce or apple juice. In 2011, approximately 67% of the total number of apples produced in the United States were sold as fresh apples, and the remainder were sold as processed apples. In 2011, the commercial fresh and processed apple market constituted approximately $2.4 billion and $341 million in value, respectively. These values constitute an increase of 17% and 19% in the market for fresh and processed apples, respectively.

Developments in the Apple Industry

Apple trees are generally not grown on their own roots but, instead, are propagated by taking vegetative buds from a young shoot (the “scion”) of the desired variety and grafting those buds onto another tree

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branch, small sapling or “rootstock.” A rootstock is the part of a tree that becomes the root system of a budded tree. Most orchards today are propagated from “clonal” rootstocks; in other words, they are budded onto rootstocks that are genetically identical offshoots or clones of a mother rootstock type with certain desirable characteristics such as disease resistance, tolerance of winter cold, seasonal flooding and summer droughts, or reducing tree size. Clonal propagation ensures that the important traits of each rootstock will make the resulting orchard more manageable and productive. Ideally, a new rootstock must grow for approximately two years before it is ready for budding.

“High-density” apple plantings involve planting specialized apples trees called “dwarf trees” at closer intervals in the orchard rows, which brings trees into production faster, reduces labor cost, time and materials, and permits greater yield per acre. For example, a farmer may be able to plan 1,000 high-density apple trees per acre, as compared to 200 trees per acre for conventional spacing free-standing apple trees. Specifically, to improve harvest efficiency in the picking operation and to increase yield per acre, dwarf to semi-dwarf trees are planted at close intervals in the rows. This process, which is referred to as “high-density” planting, provides a continuous tree wall of bearing surface to be sprayed and picked, thus reducing ladder work and other labor, therefore saving time and materials. In addition, dwarf trees do not take as long to bear fruit and therefore, these new plantings provide orchardists with a faster return on investment by allowing growers to respond more rapidly to the changing consumer demand for new varieties.

Concord Grape Industry

The concord grape variety traces its origins to Concord, Massachusetts in the late 1840s, where it was first produced by hybridizing different local native species. Concord grapes became favorable because of their early ripening characteristics, which help them survive harmful northern frosts, and their rich, full-bodied flavor. Concord grapes quickly spread worldwide in popularity, and in 2012 the concord grape variety constituted over 85% of all grape varieties used in the processed grape industry. Approximately 303,110 tons of concord grapes are produced in the United States, and approximately 55% of all concord grapes grown domestically were produced in Washington State, or approximately 167,000 tons. The supply of concord grapes produced in the United States has declined in recent years, from 372,990 tons in 2010 and 417,000 tons in 2011 to 303,110 tons in 2012, due to farmers switching to higher profit per parcel crops like apples, wine grapes and hops.

There are three major buyers of concord grapes in the United States, Tree Top, Inc. (“Tree Top”), The J.M. Smucker Company (“Smucker”) and Milne Fruit Products, Inc. (“Milne”). We believe that the need of these major customers to procure supply for their fruit processing operations will encourage price stability for the future, as they engage into long-term contracts containing minimum price guarantees with suppliers.

Concord grapes are used primarily for grape juice and grape jellies, which are made primarily from processed grape concentrate, a process by which water is removed from the raw grape juice. Concord grapes can also be pasteurized and stored as single strength juice, or made into jelly by heating and adding fruit pectin and sweeteners. Major purchasers of concord grapes include companies like Tree Top, Smucker and Milne. Concord grapes are generally not used to produce wine, and only in limited markets are whole concord grapes available for purchase, and then only around harvest time in autumn.

The SRV produces approximately 20,000 tons of concord grapes annually, which constitutes approximately 7% of the annual United States concord grape production in 2012 (303,110) and approximately 12% of the annual concord grape production in Washington State in 2012 (167,000). While the concord grape industry has experienced a decline in recent years, we believe that due to SRV’s comparatively large market share and strong relationship with its sole customer, Tree Top, our concord grape business will continue to be profitable in the long-term future.

Competitive Strengths

Strategic Partnerships

We believe that our family name, reputation and long-standing relationships in the Pacific Northwest farming community will enable us to enter into strategic partnerships, including joint ventures, distribution agreements and sales and marketing contracts, that will benefit our business. These strategic partnerships, such as those with Tree Top and our packing shed, are designed to reduce market risk, create synergies, provide

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opportunities to reduce costs and improve our profitability. In addition, we may in the future form joint ventures with growers who are experts in a particular crop variety or farming condition, such as wine grapes, or with buyer partners who specialize in the sales and marketing of a particular crop variety.

Proprietary Dealflow

We will leverage our network of family relationships, advisors, board members, agriculture land brokers, and financial institutions in the Pacific Northwest to identify desirable acquisition and leasing opportunities in advance of our competitors and before such opportunities are listed by a selling agent. Similarly, we believe that our experience and expertise will help us recognize farms that have attractive prices and present profitable farming opportunities. In addition, as discussed below, the Taggares name is well known in the Pacific Northwest farming community, which helps us to get introductions to local farmers who may be considering a sale of their farms in the future. Further, following this offering we will have access to the public capital markets which provides options for financing farm acquisitions that may not be available to our competitors. Finally, we believe there may be tax and other advantages to using shares of our publicly-traded stock as consideration for farm acquisitions. We believe there are very few other companies or families in the Pacific Northwest farming community who share these features of our business.

Farming Capability

We have extensive experience and knowledge in managing and operating agricultural farmland. Our farm manager for SRV, Jose Contreras, has more than thirty years of experience managing farm operations and has managed over 70 full-time workers and an additional 300 part time workers during harvest. Mr. Contreras has extensive experience with cropland re-development: he is responsible for the re-planting each year of an average of 340 acres of concord grapes, has planted over 300 acres of new apples over the past 30 years and has improved the irrigation infrastructure for new fruit varieties. Peter Taggares III, a management advisor and non-voting board observer, was a Vice President and co-owner of P. J. Taggares Company between 1991 and 2013, where he oversaw farming operations at Snake River Vineyards. Two of our other advisors, A.J. Ochoa and Jason Schlagel, have extensive experience in managing and operating row crops and tree fruit properties, respectively. In addition, Valicoff and Tree Top provide farm consulting for apples and grapes, respectively.

Family Name

The Taggares family has a well-established name with a deep history among farmers and members of the agriculture industry in the Pacific Northwest. Pete Taggares I, who immigrated from Greece in the 1920s, settled in Prosser, Washington on a small piece of land and began many successful businesses. His son, Pete Taggares II, bought a small farm in Othello, Washington that he grew to over 4,000 acres with the expansion of the Columbia Basin Irrigation Project. Pete Taggares II established Washington State’s first french fry plant and one of the nation’s largest, Chef Reddy, in the 1960s. In 1971, Pete Taggares II purchased a 3,200 acre parcel of land in Burbank, Washington, which became Snake River Vineyards and one of the world’s largest vineyards. In 1974, he joined J.R. Simplot to develop Sim Tag Farms, a 30,000 acre farm in Boardman, Oregon. By then, the Taggares name had become a brand recognizable to most in the Pacific Northwest farming community. Pete Taggares III, a star University of Washington football player, entered the family business at age 24, eventually taking over operations as Vice President and co-owner of P.J. Taggares Company and Snake River Vineyards.

Differentiation

We intend to acquire properties and operate them ourselves or enter into long-term leasing arrangements with other growers to operate their farms. Competitors in our acquisition strategy include companies who are seeking to acquire properties in the Pacific Northwest. Some of our competitors are significantly larger than we are and have substantially greater financial and other resources at their disposal, including, for example, institutional investors like HAIG that manage investments in row and permanent cropland throughout the United States and the world. However, while HAIG and other companies may be better capitalized than us, we believe that these competitors do not have our established family relationships and reputation. Additionally, we believe many have different acquisition strategies and lack our operational expertise. We have observed that these competitors tend to avoid farms that have old infrastructure or any other land that requires more time and farm expertise to operate. In addition, many of these competitors tend to buy properties and lease them back to sellers or other operators who actually run the farming operations. We also compete with other

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local farms and companies who may have similar reputations, relationships and experience as us, but do not have the same access to capital and other resources to enable them to complete acquisitions and scale their operations. Therefore, since we have the expertise and experience to operate under many challenging farming conditions, as well as access to a range of capital sources, including through this offering and from banks and other financial lending institutions, we believe that we will be well positioned to identify and complete acquisitions as compared with our competitors.

Acquisition Opportunity and Strategy

As noted above, the Taggares family has been farming in the Pacific Northwest since the 1920s and has a well-established name with a deep history among farmers and members of the agriculture community. Our acquisition strategy is to capitalize on the Taggares name, reputation and long-standing relationships in the farming community and to leverage our experience and access to capital to identify attractive acquisition and leasing opportunities, including, but not limited to, those opportunities that can be identified before such opportunities are listed by a selling agent and known by our competitors. We believe that these relationships and expertise are a key aspect of our competitive advantage in the Pacific Northwest. Following our acquisition of the Business and Assets of SRV, we plan to acquire other properties with secure water rights in the Pacific Northwest to farm permanent crops (such as tree fruit). In addition, we intend to enter into long-term leasing and other contractual arrangements to diversify and scale rapidly into other profitable crop varieties. While we intend to exercise our contractual right purchase the Business and Assets of SRV immediately following the closing of this offering, we expect to complete other strategic acquisitions in the next two to five years.

While our acquisition strategy involves the consideration of acquisition prospects that we think will help grow our business, we may not be successful in identifying appropriate acquisition candidates, consummating acquisitions on satisfactory terms or in a timely manner, or integrating any newly acquired or expanded business with our current operations. Moreover, future acquisitions entail numerous risks, including diversion of management’s attention to other business concerns, risks of entering markets in which we have limited prior experience, including the growth and distribution of new crop varieties, and the potential loss of key employees of acquired organizations.

We intend to finance our acquisition strategy through a combination of the proceeds from this offering, re-investment of earnings for the near term, and by traditional debt financing from banks and other financial lending institutions, such as a line of credit to be established following the closing of the offering. Specifically, we intend to utilize $30.0 million of the proceeds from this offering to purchase the Business and Assets of SRV. In addition, we are currently in discussions with a financial institution regarding a $15.0 million line of credit for future acquisitions, which we expect to formalize after the closing of the offering. Moreover, we anticipate that we will utilize approximately $4.8 million of the proceeds from this offering for future acquisitions and, for the near term, we intend to re-invest any earnings that we generate to support our acquisition strategy. Finally, we plan to incur additional long-term debt from banks and other financial lending institutions as needed in order to help fund our future acquisitions.

As described above, we will require additional financing in the form of a line of credit and a bank loan to fund our acquisition strategy. Such additional financing may not be available to us on commercially reasonable terms or at all. If we cannot raise additional funds on acceptable terms, we may not be able to develop or enhance our business, take advantage of future opportunities or acquisitions, and our ability to conduct our business may be adversely affected. Moreover, if we incur additional debt, our costs of debt service and the risks associated with our business could increase.

Farm Re-Development Strategy and Opportunity

Historically, the owners of SRV focused on maximizing the cash returns from the business and chose not to invest significantly to expand or improve their operations. These owners intentionally elected to maintain the same scale of operations rather than making capital contributions to diversify crop varieties or enhance crop yield and profits, or engaging in new, potentially value-enhancing sales activities and strategic alliances. Instead, the business relied largely on crop results and existing customer relationships. As part of our business strategy, we intend to re-develop portions of the SRV property.

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Our re-development strategy centers on crop yield optimization, infrastructure improvements and entering into strategic partnerships. With respect to crop yield optimization, we plan to use a part of the proceeds from this offering to re-develop approximately 1,000 acres of the SRV property over the next five years to diversify into additional crop varieties, such as new high-density apple varieties, wine grapes and stone fruits (e.g. cherries, nectarines and pears) to maximize our profits and diversity crop risk. For example, we believe our apple profits could be increased by replacing some of our lower-profit apple trees with high-density apple trees that grow high-profit apple varieties, or re-grafting some of our older apple trees with new, higher-profit apple varieties. In order to replace our grape vines and lower-profit apples, we expect to cultivate new plantings of higher-profit apple varieties by budding scions onto newly acquired “mature” rootstock (i.e., rootstock that is at least two years old). There may not be a sufficient supply of “mature” rootstock available to us on commercially reasonable terms or at all. If we are unable to acquire mature rootstock for these new plantings, we anticipate purchasing new rootstock and allowing it to grow for at least two years until it is sufficiently mature and suitable for budding.

As noted above, we intend to increase our use of “high-density” apple trees in order to enable us increase operational efficiencies and to respond more rapidly to changing consumer demand and to capitalize on higher-profit apple varieties. “High-density” apple plantings involve planting specialized apple trees at closer intervals in the orchard rows, which brings trees into production faster, reduces labor cost, time and materials, and permits greater yield per acre. For example, a farmer may be able to plant 1,000 high-density apple trees per acre, as compared to 200 trees per acre for conventional spacing free-standing apple trees. Examples of higher-profit apple varieties currently include Honeycrisps, Pink Lady and Buckeye Gala. However, the popularity and profitability of any apple variety depends on a number of factors, including consumer demand, economic and weather conditions, worldwide supply of such varieties and other factors that are outside of our control. While we intend to monitor these factors and incorporate strategies that will help enable us to react quickly to changing consumer preferences, any failure to accurately predict consumer preferences and to match our sales to the demand of our customers would adversely impact our business.

With the proceeds of this offering, we intend to enhance the SRV property through the use of pruning techniques, frost prevention and other infrastructure improvements to enhance the yield of fruit we are able to produce. We believe our farm management techniques will also give our farm managers the flexibility to take steps to increase yield in response to changing conditions. We also intend to enter into strategic partnerships, including joint ventures with growers or buyers, distribution agreements and sales and marketing contracts (such as those with Valicoff). These arrangements are designed to enhance the profitability of the farm and help reduce market risk. For example, our agreement with our packing shed will give us a rebate per apple bin packed and provides us with greater control over when our apples are sold to market.

We intend to use $1.0 million of the proceeds of this offering to finance our near-term re-development plans, and we will require additional funds in the future to complete our long-term re-development plans. We intend to finance our long-term re-development strategy primarily through the re-investment of earnings over the next five years, and we may consider seeking traditional debt financing from banks and other financial lending institutions in the future.

In summary, our re-development strategy is to maximize profit per acre and diversify into multiple crop varieties to reduce weather and market risk. Our re-development plan will involve the following:

re-grafting of existing apple trees to grow different high-profit apple varieties;
new plantings of new high-density apple trees that grow high-profit apple varieties, wine grapes and stone fruits (such as cherries, nectarines and pears);
infrastructure improvements to reduce weather risk profile, such as building retention ponds and wind machines for frost control;
enhancing crop yield optimization by adding additional labor for pruning and thinning of plants; and

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improving crop yield and quality by engaging consultants and advisors, including orchardists, scientists, tree fruit experts and packing shed advisors to advise us on a range of issues, including fertilization, pruning, thinning, watering and picking techniques; pest and disease management; crop varieties and consumer preferences; and post-harvest handling, packing and shipping procedures.

Based on fiscal 2013 and 2012 results of operations, SRV generated net income per acre of $645 and $2,006, respectively, for concord grapes and $3,516 and $10,934, respectively, for its existing apple varieties. We currently estimate that re-grafted apples will require approximately two years, new apple varieties will require approximately five years, wine grapes will require approximately three years, and cherries will require approximately three years before they are in full production, respectively. Once we are able to sell new apple and fruit varieties, we project we will be able to generate greater net income per acre from new apple and fruit varieties than with our current concord grape and apple varieties.

We estimate that we will utilize approximately $1.0 million of the proceeds from this offering for the re-development of portions of the land acquired from SRV to cultivate new apple varieties, including purchasing new apple plants, and for plant infrastructure improvements, such as installing trellising posts.

Current Products

SRV currently grows concord grapes and apples of many varieties, of the types and on approximate acreage as set forth in the following table. SRV’s concord grapes are sold in the processed fruit market, exclusively to Tree Top.

There are only three major buyers of concord grapes in the United States, Tree Top, Smucker and Milne. SRV chose to sell all of its grapes to Tree Top because it was able to secure a long-term contract with a requirement that Tree Top buy all of SRV’s grapes and a minimum guaranteed price. This arrangement ensures pricing stability and reduces market risk. Almost all of SRV’s apples are sold in the fresh fruit market through Sage Marketing, a subcontractor of Valicoff, to many customers domestically and around the world.

 
Variety of Fruit   Approx. Acreage
Concord grape   2,400
Fuji apple   261
Gala apple   41
Golden Delicious apple   51
Braeburn apple   31
Pink Lady apple   27
Red Chief apple   14
Cameo apple   10
Scarlet apple   3

As a small company, we will have very little pricing power. Generally, the local market determines the price for grapes and apples based on supply and demand, and the purchasers of our products based on an average of the local market price. However, because of the minimum guaranteed pricing terms under our contract with Tree Top, Inc. and our ability to control when our apples are sold to market, we have some ability to influence the pricing for our products. See “Sales and Marketing” on page 62 of this prospectus for more information.

Growing, Picking and Distribution

Grapes

The production process for SRV’s concord grapes is straightforward: the concord grapes are grown on vines located on approximately 2,400 acres of land on the SRV property. In the first and second fiscal quarters of each year (December through May), SRV prunes, thins and fertilizes its grape vines with the goal of enhancing crop yield. In the fourth fiscal quarter of each year (September through November), SRV harvests the grapes with the use of mechanical vehicles. The picked grapes are immediately placed into containers and loaded onto trucks for delivery to the processing facility of SRV’s concord grape customer, Tree Top. The grapes are picked and distributed to Tree Top within hours. Consistent with industry standard practices, SRV bears risk of loss for the grapes until they are delivered to Tree Top’s processing facility and unloaded. In fiscal 2010, 2011 and 2012, SRV’s 2,400 acres of concord grapes yielded approximately 17 million,

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2.5 million and 15 million tons, respectively, or a yield per acre of approximately 7.42, 1.05 and 6.18, respectively. We attribute the reduction in yield in 2011 and 2012 to a freeze that occurred in November 2010.

Of the approximately 2,400 acres located on the SRV property dedicated to concord grapes, 111 of them have been certified by the Washington State Department of Agriculture as organic in accordance with Title 7 CFR Part 205 of the National Organic Program and the rules and regulations promulgated thereunder by the US Department of Agriculture.

Apples

Similarly, the production process for SRV’s apple varieties is simple: the apples are grown on trees located on approximately 440 acres of land on the SRV property. In January through July of each year, SRV prunes, fertilizes and maintains its apple trees to maximize crop yield. In August through November of each year, SRV picks the apples with the use of manual labor. SRV’s packing sheds supply apple crates, called bins, which they place throughout the apple orchards in each row. SRV’s pickers pick the apples and place them into the bins. When full, the bins are placed onto flatbed trucks with the use of forklifts. The trucks then transport the apple bins to the packing sheds, which are located from 25 to 150 miles away. The apples are picked and distributed to the packing sheds within hours. Even though the trucks are owned by the packing sheds, consistent with industry standard practices, SRV bears risk of loss for the apples until they are finally delivered to the purchaser to which the packing shed sells the apples. In fiscal 2010, 2011 and 2012, our approximately 460 acres of apples yielded approximately 21,000, 17,000, and 32,000 bins, respectively, or a yield per acre of approximately 45.2, 38.0 and 70.6, respectively. We attribute the reduction in yield in 2011 to a frost that occurred in November 2010 and the fact that the 2011 crop was an “alternate bearing” crop year.

“Alternate bearing” refers to the tendency of an entire tree to produce a greater than average crop one year, and a lower than average crop the following year. This phenomenon is common in many perennial trees and shrubs, including apple trees. In recent years, 2011 was an “alternate bearing” crop year for SRV’s apple crop, in which SRV experienced a lower than average apple crop yield. As part of our re-development strategy, we plan to purchase new apple rootstock in part to grow apple trees that may avoid this alternate bearing phenomenon. However, we cannot guarantee that we will successful in avoiding the alternate bearing phenomenon in our new apple trees, the success of which is dependent on factors largely outside of our control.

Sales and Marketing

SRV sells our grapes exclusively to Tree Top, and SRV has entered into a long-term contract, which was recently renegotiated and now extends until December 2018 and contains volume, pricing and other related terms. As such, we do not anticipate that this relationship will change for the foreseeable future. SRV sells its apples to one or more apple packing sheds, with whom SRV has done business for many years. After this offering, we intend to enter into a long-term contract with Valicoff Fruit Company, Inc. to promote stability in our apple pricing, based on a non-binding letter of intent which is included as an exhibit to this prospectus. We do not engage in any sales or marketing activities outside of our existing arrangements with Tree Top or the packing shed. However, Valicoff uses a subcontractor, Sage Marketing, that will engage in sales and marketing activities on our behalf after we deliver our apples to Valicoff. We expect that under our contract with Valicoff, we will have increased ability to control the timing of and volume of our apple sales to the market. As such, although we rely on the sales and marketing efforts of Sage Marketing to obtain the best price for the apples we sell to them, we have some control over when they proceed with these efforts.

SRV’s agreement with Tree Top provides that SRV sells all of the concord grapes it produces to Tree Top at the average of the market price, which is determined based on the local market price for concord grapes. Two large companies in Eastern Washington, The J.M. Smucker Company, and affiliated entities, and Milne Fruit Products, Inc., and affiliated entities, effectively set the market price for concord grapes based on their production capability and purchasing power. The market price for concord grapes is determined in September of every year, and Tree Top pays an amount equal to the average competitive posted cash field price per ton times the number of tons delivered to Tree Top, subject to minimum and maximum prices in accordance with our contract with Tree Top. 50% is paid at delivery, and the balance is paid incrementally every two weeks thereafter, with the remainder payable on or before January 31st of every year.

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Following this offering, we expect to enter into a long-term agreement with Valicoff that will provide that we sell all of the apples we produce to Valicoff, and Valicoff will receive, store, pack, market, sell and deliver our apples to the fresh apple market. This agreement will be based on the non-binding letter of intent we have received from Valicoff, which is included as an exhibit to this prospectus. Under our prospective agreement with Valicoff, we will expect to receive from Valicoff a rebate of up to $35.00 per bin of packed fruit produced, prorated accordingly depending on the number of packed cartons per bin. The $35.00 per bin rebate assumes that each bin contains 18 packed cartons; if any bin contains less than 18 packed cartons, the rebate will be reduced by $1.95 for each carton under 18. We will be eligible to participate in this rebate program only if we deliver a certain minimum number of bins to Valicoff for packing each year. As mentioned above, Valicoff uses Sage Marketing as a subcontractor for the sales and marketing activities it performs on our behalf.

Crop Insurance

The current U.S. farm bill, the Agricultural Act of 2014 (the “Farm Bill”), provides a crop insurance system that offers a safety net for farm operators in the event that primary crop prices decline below profitable levels. In general, crop insurance under the Farm Bill operates as follows. A crop insurance contract is entered into between insured farmers and their insurance providers. Either party has the right to cancel or terminate the contract at the end of each crop year. Unless the contract is canceled, it is normally automatically renewed the next year. Under the contract, the insured farmer agrees to insure all the eligible acreage of a crop planted in a particular county. This choice is made county by county and crop by crop. All eligible acreage must be insured to reduce the potential for adverse selection against the insurance provider. Adverse selection generally exists whenever the insured person has better knowledge of the relative riskiness of a particular situation than the insurance provider does. The insurance provider agrees to indemnify (that is, to protect) the insured farmer against losses that occur during the crop year. In most cases, the insurance covers loss of yield exceeding a deductible amount. Losses must be due to unavoidable perils beyond the farmer's control. Over the last few years, products that combine yield and price coverage have been introduced. These products cover loss in value due to a change in market price during the insurance period, in addition to the perils covered by the standard loss of yield coverage. Crop insurance policies also typically indemnify the insured person for other adverse events, such as the inability to plant or excessive loss of quality due to adverse weather. The nature and scope of this “helper” coverage vary depending on the crop. This is because of the differences in the individual natures of crops.

The crop insurance carried by Snake River Vineyards insures its grape and apple crops against adverse events like weather, disease and insects, and is extended to SRV pursuant to the Farm Bill. If in any year either of our apple or grape crops experience a qualified adverse event, we file a claim with our insurance company and the insurance company pays us an amount equal to 100% of the established price of the crop times a certain percentage of the average yield for such crop in prior years. In previous years, SRV’s crop insurance has covered 70% of the average yield for concord grapes, and 65% of the average yield for apples. In recent years, SRV has filed crop insurance claims due to frost and freezes in fiscal 2013 and fiscal 2011, respectively, in the amounts of $600,000 and $1,965,244, respectively.

The process of making a claim for crop insurance under our current coverage is as follows. SRV must initiate a claim within 72 hours of the discovery of damage, and the actual adjustment of the claim does not begin until after the “end of insurance.” The end of insurance occurs upon the earlier to occur of the completion of harvest of the crop, the calendar date provided in special provisions in the insurance policy (October for grapes, November for apples), or the destruction of the crop. The insurance company then has 60 days to adjust the claim, or file for an extension for finalization. After the claim is finalized, if the amount of the claim is over $250,000, the claim goes through an audit process, the timeline for which depends in part on how quickly SRV provides the requested information to the insurance company. Typically for claims that SRV has made in recent years, claims have been finalized and paid in January or February of the year following the year in which the claim was made.

To the extent the crop insurance portion of the Farm Bill does not cover claims we may have in the future, we may need to obtain crop insurance on the private insurance market. We expect that private crop insurance will be more expensive than crop insurance under the Farm Bill.

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Research and Development

SRV’s historical research and development programs concentrate on sustaining and improving the productivity of its farms, enhancing the yield of the fruit we produce and developing better distributions processes. Agricultural research is directed toward sustaining and improving crop yields and crop quality by examining and improving agricultural practices in all phases of production (such as the development of specifically adapted crop varieties, land preparation, fertilization, pest and disease control, post-harvest handling, packing and shipping procedures), and includes on-site technical review, working with packing sheds to quantify costs and the implementation and monitoring of recommended agricultural practices. Research efforts are also directed towards integrated pest management. The aggregate amounts SRV spent on research and development in each of the last two years have been insignificant in both of of such years.