You are on page 1of 211

7+(+3:$<

+RZ%LOO+HZOHWWDQG,%XLOW2XU
&RPSDQ\
E\'DYLG3DFNDUG
(GLWHGE\
'DYLG.LUE\ZLWK
.DUHQ/HZLV
+DUSHU%XVLQHVV
$'LYLVLRQRI+DUSHU&ROOLQV3XEOLVKHUV
$KDUGFRYHUHGLWLRQRIWKLVERRNZDVSXEOLVKHGLQE\
+DUSHU%XVLQHVVDGLYLVLRQRI+DUSHU&ROOLQV3XEOLVKHUV
7+(+3:$<&RS\ULJKW F E\7KH'DYLGDQG/XFLOH3DFNDUG
)RXQGDWLRQ$OOULJKWVUHVHUYHG3ULQWHGLQWKH8QLWHG6WDWHVRI
$PHULFD1RSDUWRIWKLVERRNPD\EHXVHGRUUHSURGXFHGLQDQ\
PDQQHUZKDWVRHYHUZLWKRXWZULWWHQSHUPLVVLRQH[FHSWLQWKHFDVHRI
EULHITXRWDWLRQVHPERGLHGLQFULWLFDODUWLFOHVDQGUHYLHZV)RU
LQIRUPDWLRQDGGUHVV+DUSHU&ROOLQV3XEOLVKHUV,QF(DVWUG
6WUHHW1HZ<RUN1<22
+DUSHU&ROOLQVERRNVPD\EHSXUFKDVHGIRUHGXFDWLRQDOEXVLQHVVRU
VDOHVSURPRWLRQDOXVH)RULQIRUPDWLRQSOHDVHZULWH6SHFLDO0DUNHWV
'HSDUWPHQW+DUSHU&ROOLQV3XEOLVKHUV,QF(DVWUG6WUHHW1HZ
<RUN1<
)LUVWSDSHUEDFNHGLWLRQSXEOLVKHG
,6%1
55'
7KLVERRNLVGHGLFDWHGWRWKHPHPRU\RI)ORUD+HZOHWWDQG/XFLOH
3DFNDUG
7KHLUVWHDGIDVWHQFRXUDJHPHQWDQGWKHLUDFWLYHSDUWLFLSDWLRQLQWKH
HDUO\\HDUVRIRXUFRPSDQ\ZHUHWKHJHQHVLVRIWKH+3:D\

&RQWHQWV
$&.12:/('*0(176L[
352/2*8([L
&KDSWHU3XHEORWR6WDQIRUG
&KDSWHU)ULHQGVKLSZLWK+HZOHWW
&KDSWHU*DUDJH%HFRPHV:RUNVKRS
&KDSWHU*DLQLQJ0RUH6SDFH
&KDSWHU)URP3DUWQHUVKLSWR&RUSRUDWLRQ
&KDSWHU*URZWKIURP3URILW
&KDSWHU&RPPLWPHQWWR,QQRYDWLRQ
&KDSWHU/LVWHQLQJWRFXVWRPHUV2
&KDSWHU7UXVWLQ3HRSOH
&KDSWHU*URZLQJWKH2UJDQL]DWLRQ
&KDSWHU0DQDJLQJWKH2UJDQL]DWLRQ
&KDSWHU,5HVSRQVLELOLW\WR6RFLHW\
(3,/2*8(
$SSHQGL[,+LVWRULFDO+LJKOLJKWVRI+HZOHWW3DFNDUG&RPSDQ\
$SSHQGL[3URGXFW,QQRYDWLRQDW+3
$SSHQGL[9LQWDJH&KDUWV

$FNQRZOHGJPHQWV
7KLVERRNZDVHGLWHGE\'DYH.LUE\DQG.DUHQ/HZLVZKRSURYLGHG
LQYDOXDEOHDVVLVWDQFHLQWKLVUROH
0DQ\RWKHUSHRSOHSURYLGHGDVVLVWDQFHWRPHZLWKRXWZKLFKWKH
ERRNPLJKWQHYHUKDYHEHHQZULWWHQ$PRQJWKHP,HVSHFLDOO\ZLVK
WRWKDQN$O%DJOH\%LOO7HUU\'LFN+DFNERUQ%DUQH\2OLYHU$UW
)RQJ'LFN:HUHDQGP\SHUVRQDOVHFUHWDU\*UHWFKHQ'HQQLVZKR
KHOSHGWRSXWLWDOOWRJHWKHU,
GOLNHDOVRWRDFNQRZOHGJHWKH

DVVLVWDQFHRI0DUJDUHW3DXOOP\VHFUHWDU\DWWKHFRPSDQ\
7KHDFFXUDF\LQWKLVUHFRUGLVODUJHO\WKHLUFRQWULEXWLRQWKHHUURUV
DUHIXOO\P\UHVSRQVLELOLW\
,QWKHVHFWLRQDERXWP\LQYROYHPHQWDVWKH86GHSXW\VHFUHWDU\RI
GHIHQVH,KDYHLQFOXGHGRQO\WKRVHDFWLYLWLHVWKDWLQYROYHGDSSO\LQJ
WKH+3:D\LQWKH'2'DQGVRPHRIWKHLPSRUWDQWPDQDJHPHQW
FKDQJHVLQYROYLQJWKH&KDLUPDQRIWKH-RLQW&KLHIV

3URORJXH
,QWKHIDOORI,OHIWP\KRPHWRZQRI3XHEOR&RORUDGRWRHQUROO
DW6WDQIRUG8QLYHUVLW\7KHUH,PHWDQRWKHUIUHVKPDQ%LOO+HZOHWW
,QWKRVHGD\VLIDVWXGHQWSODQQHGDFDUHHULQDWHFKQLFDOILHOG
VFLHQFHDQGPDWKHPDWLFVFRXOGEHLQFOXGHGLQWKHILUVWWZR\HDUVRI
JHQHUDOVWXGLHV,KDGGHFLGHG,ZDQWHGWREHDQHOHFWULFDOHQJLQHHU
DQG%LOOWKRXJKWKHPLJKWEHLQWHUHVWHGLQPHGLFLQHRUHQJLQHHULQJ
VRKHDQG,ZHUHLQPDQ\RIWKHVDPHFODVVHVGXULQJRXUIUHVKPDQ
DQGVRSKRPRUH\HDUV%\RXUVHQLRU\HDUZHKDGEHFRPHJRRG
IULHQGV
7KURXJKDFRPELQDWLRQRIFLUFXPVWDQFHVWKDW,ZLOOGHVFULEHLQWKH
IROORZLQJSDJHV%LOOVRPHIULHQGVDQG,GHFLGHGWRVWDUWRXURZQ
EXVLQHVVZKHQZHJUDGXDWHG:HDFWXDOO\VWDUWHGRXUEXVLQHVVLQ
VRPH\HDUVODWHU
'XULQJWKHILUVWIHZ\HDUVRIRSHUDWLQJWKH+HZOHWW3DFNDUG
&RPSDQ\%LOODQG,GHYHORSHGDZD\RIGRLQJWKLQJVDPDQDJHPHQW
VW\OHWKDWLQFOXGHGVRPHIHDWXUHVQRWFRPPRQWRPDQDJHPHQWLQ
WKRVHGD\V7KLVEHFDPHNQRZQDVWKH+3:D\
7KLVERRNLVWKHVWRU\RI%LOO+HZOHWWDQGPHDQGWKH+HZOHWW3DFNDUG
&RPSDQ\ZKLFKZHVSHQWRXUOLYHVEXLOGLQJDQGRSHUDWLQJ

7+(+3:$<

&KDSWHU
3XHEORWR6WDQIRUG
$VZHJHWROGHUZHKDYHWKHRSSRUWXQLW\WRORRNEDFNRYHUPDQ\
\HDUVDQGVHHKRZFHUWDLQHYHQWVVHHPLQJO\XQLPSRUWDQWDWWKH
WLPHKDGDSURIRXQGHIIHFWLQVKDSLQJRXUEXVLQHVVRUSURIHVVLRQDO
FDUHHUV
,QP\RZQFDVHWKHUHZHUHWZRVXFKHYHQWV2QHRFFXUUHGLQWKH
VXPPHURIZKHQ,ZDVJLYHQDWRXURI6WDQIRUG8QLYHUVLW\7KLV
LQWURGXFWLRQWR6WDQIRUGOHGWRP\GHFLVLRQWRDWWHQGWKHXQLYHUVLW\
7KHVHFRQGHYHQWUHODWHGWRWKHILUVWZDVEHFRPLQJDFTXDLQWHGZLWK
3URIHVVRU)UHG7HUPDQDW6WDQIRUG,WZDV)UHGZKRVSDUNHGP\
LQWHUHVWLQHOHFWURQLFVDQGZKRODWHUHQFRXUDJHGDQGKHOSHG%LOO
+HZOHWWDQGPHJRLQWREXVLQHVVIRURXUVHOYHV+LVLQWHUHVWDQGIDLWK
LQRXUDELOLWLHVHYHQDWRXU\RXQJDJHDQGLQWKHPLGVWRIWKH*UHDW
'HSUHVVLRQJDYHXVFRQILGHQFHDQGKHOSHGVHWDFRXUVHIRUXV
,ZDVERUQLQ3XHEOR&RORUDGRLQ0\IDWKHUZDVDODZ\HUDQG
P\PRWKHUDKLJKVFKRROWHDFKHU7KH\PHWDW&RORUDGR&ROOHJHLQ
&RORUDGR6SULQJVDQGDIWHU

'$9,'3$&.$5'

WKH\ZHUHPDUULHGWKH\PRYHGWR3XHEORZKLFKZDVP\IDWKHU
V
KRPH0\\RXQJHUVLVWHU$QQ/RXLVHZDVERUQLQ
3XHEORLQUHVHPEOHGOHVVDPLGZHVWHUQIDUPFRPPXQLW\WKDQLW
GLGDZHVWHUQIURQWLHUFLW\RUERUGHUWRZQ7KHUHZDVDVWHHOPLOODQG
VHYHUDOIRXQGULHVWKDWVPHOWHGRUHIURP/HDGYLOOHDQGRWKHUPLQHVLQ
WKH5RFN\0RXQWDLQVWRWKHZHVW3XHEORZDVWRXJKDQGYLROHQWZLWK
LPPLJUDQWZRUNHUVDIHZJDQJVWHUVDQGORWVRIEURWKHOVDQG
VDORRQV6WUHHWILJKWVDQGVKRRWLQJVZHUHQRWXQFRPPRQ
:HOLYHGRQWKHQRUWKVLGHRIWKHFLW\ULJKWQH[WWRWKHSUDLULH,FRXOG
FURVVWKHVWUHHWLQIURQWRIRXUKRXVHDQGILQGKRUQHGWRDGV ZKLFK
DUHDOPRVWH[WLQRWWRGD\ DQGZLOGRQLRQVDQGFDFWXVZKLFKRIWHQ
JDYHVKHOWHUWRUDWWOHVQDNHV
:HFRXOGORRNDFURVVWKHSUDLULHDQGVHH3LNHV3HDNDERXWILIW\PLOHV
WRWKHQRUWKDQGDERXWWKLUW\PLOHVWRWKHZHVWWKH:HW0RXQWDLQ
5DQJH,VSHQWPDQ\KRXUVURDPLQJWKHSUDLULHVRPHWLPHVZLWK
FKLOGKRRGIULHQGVVRPHWLPHVDORQHXQWLOP\KLJKVFKRRO\HDUVZKHQ
VWXGLHVDQGVFKRRODFWLYLWLHVFRQVXPHGPRVWRIP\WLPH%XWLQWKRVH
HDUO\\HDUVRIURDPLQJP\ORYHRIQDWXUHZDVERUQ
2QHRIP\HDUO\UHFROOHFWLRQVRI3XHEORZDVWKHJUHDWIORRGRI,
UHFDOOJRLQJGRZQWRZQZLWKP\IDWKHUDQGVHHLQJPXGDERXWIRXU
IHHWGHHS$QRWKHUPHPRUDEOHVLJKWZDVDUDLOURDGER[FDUVWXFNLQ
WKHVHFRQGIORRUZLQGRZRIRQHRIWKHPDLQEXLOGLQJV$IOHHWRI
IRXUZKHHOGULYHDUP\WUXFNVZDVEURXJKWLQWRKDXO

7+(+3:$<

WKHPXGDQGGHEULVRXWRIWKHFLW\DQGGXPSLWLQWKHSUDLULHDERXWD
PLOHQRUWKRIRXUKRXVH$QXPEHURINLGVIURPRXUQHLJKERUKRRG
ZHQWRXWDQGVLIWHGWKURXJKWKHPXGLQWULJXHGZLWKWKHSRVVLELOLW\RI
ILQGLQJVRPHWKLQJRIYDOXH%XW,GRQ
WUHFDOOILQGLQJDQ\WKLQJXVHIXO
2XUKRXVHLQ3XHEORZDVRQWKHFRUQHURI7ZHQW\QLQWK6WUHHWDQG
+LJK6WUHHW,WZDVVHWEDFNIURP7ZHQW\QLQWK6WUHHWWRSURYLGHIRU
DODUJH\DUG7KH\DUGZDVGLYLGHGLQWRWZRURXJKO\HTXDOVHFWLRQVE\
DURZRIOLODFEXVKHV,QWKHIURQWVHFWLRQZDVDURVHDUERUDQGDEHG
RISHRQLHVZLWKWKHUHVWLQODZQ,QWKHUHDUVHFWLRQZHUHVRPHIUXLW
WUHHVDYHJHWDEOHJDUGHQDQGDSRROQHDUDZLOGIORZHUJDUGHQ
0\IDWKHUKDGQRLQWHUHVWLQJDUGHQLQJDQGVRWKHHQWLUHJDUGHQZDV
P\PRWKHU
VSURMHFW,VWDUWHGKHOS

'DYH3DFNDUGZLWKKLVPRWKHU(OODE\WKHJDUGHQLQ3XHEOR
&RORUDGR

'$9,'3$&.$5'

LQJP\PRWKHUZKHQ,ZDVTXLWH\RXQJDQGJDUGHQLQJEHFDPHD
OLIHORQJLQWHUHVWIRUPH,DOVRIRXQGLWWREHDQH[FHOOHQWUHFUHDWLRQDO
DFWLYLW\IRURQHTXLFNO\IRUJHWVWKHWURXEOHVRIWKHZRUOGZKHQ
DEVRUEHGZLWKJDUGHQLQJ$VDQDGXOWZKHUHYHUZHZHUHORFDWHGIRU
DSHULRGRIWLPH,KDGDJDUGHQDQGQRZWKDW,DPUHWLUHG,HQMR\
GHYRWLQJPRUHWLPHWRJDUGHQLQJSURMHFWV,DOVRKDYHDQDYLG
LQWHUHVWLQIDUPLQJDQGUDQFKLQJ

(DUO\([SHULPHQWV
$VDYHU\\RXQJFKLOG,PXVWKDYHKDGVRPHDSWLWXGHIRUVFLHQFH
DQGPDWKP\SDUHQWVGLGQRWKLQJWRGLVFRXUDJHPH,VSHQWKRXUV
FXUOHGXSZLWKWKHIDPLO\:RUOG%RRN(QF\FORSHGLDVWXG\LQJHYHU\
HQWU\RQWKHQDWXUDOVFLHQFHV,DOVRFRQGXFWHGP\RZQH[SHULPHQWV
,UHPHPEHUWKDWZKLOHTXLWH\RXQJ,JRWDWKULOOIURPORRNLQJDW
SLFWXUHVRIUDLOURDGVEULGJHVPRWRUVJHQHUDWRUVDQGRWKHU
PHFKDQLFDODQGHOHFWULFDOHTXLSPHQW,WULHGWRVLPXODWHVRPHRI
WKHVHGHYLFHVZLWKVPDOOVFDOHPRGHOVLQRXUEDFN\DUG$QROGHUER\
/OR\G3HQURVHOLYHGDFURVVWKHDOOH\EHKLQGXV+LVPRWKHUDQGVLVWHU
KDGWXEHUFXORVLVDQG/OR\GZRUNHGLQWKHHYHQLQJVDWDQDPXVHPHQW
SDUNDFURVVWRZQWRKHOSVXSSRUWWKHP+HDOVRKHOSHGPHZLWKP\
PRGHOVDQGGHYLFHVDQGZHEHFDPHJRRGIULHQGV/DWHURQVLQFHKH
FRXOGQRWDIIRUGWRJRWRFROOHJH/OR\GMRLQHGWKHQDY\DQGZHNHSW
LQWRXFKIRUPDQ\\HDUV
,DOVRZDVLQWHUHVWHGLQH[SORVLYHV)ULHQGVDQG,

7+(+3:$<

ZRXOGPDNHJXQSRZGHUXVLQJDPPRQLXPQLWUDWHLQVWHDGRIVRGLXP
QLWUDWHZKLFKZDVXVHGLQFRPPRQJXQSRZGHU7KHDPPRQLXP
QLWUDWHZDVPRUHDFWLYH:HDOVRPDGHDPPRQLXPLRGLGHE\
GLVVROYLQJLRGLQHFU\VWDOVLQDPPRQLD:HWKHQVHSDUDWHGRXWWKH
DPPRQLXPLRGLGHZLWKILOWHUSDSHUDQGZKHQLWZDVGU\LWZRXOG
H[SORGHIURPDPHUHWRXFK
$ERXWDPLOHIURPRXUKRXVHZDVDVDQGPLOOZKHUHEODVWLQJSRZGHU
ZDVNHSWLQILYHJDOORQGUXPV:HIRXQGWKDWDWDEOHVSRRQRUWZRRI
SRZGHUZDVRIWHQOHIWLQWKHHPSW\GUXPVZKLFKJDYHXVDQRWKHU
VRXUFHRIH[SORVLYHSRZGHU
3OD\LQJZLWKH[SORVLYHVZDVDGDQJHURXVSDVWLPHDV,OHDUQHGIURP
H[SHULHQFH2QFHZKLOH,KHOGDSLHFHRIFRSSHUWXELQJORDGHGZLWK
H[SORVLYHSRZGHULQP\OHIWKDQGDQGSRXQGHGWKHWXELQJFORVHGZLWK
DKDPPHULQP\ULJKWKDQGLWH[SORGHG/OR\GZDVZLWKPHDQGZH
ZUDSSHGP\EOHHGLQJKDQGLQDVKHHWRIFORWKDQGZHQWWRWKHRIILFH
RID'U:LVHWRKDYHLWVHZQXS+HZDVQRWDYHU\JRRGVXUJHRQ
DQG,KDYHOLYHGZLWKDGLVWRUWHGOHIWWKXPEHYHUVLQFH1HHGOHVVWR
VD\WKLVHQGHGP\H[SHULPHQWVZLWKH[SORVLYHV
5DGLRZDVDQRWKHUNHHQLQWHUHVW,UHFDOOP\ILUVWYDFXXPWXEH,
FRQQHFWHGWKLVWXEHZLWKDYDULDEOHFRQGHQVHUDFRLODJULGOHDGDQ
$EDWWHU\D%EDWWHU\DQGDVHWRIKHDGSKRQHVRQRXUGLQLQJURRP
WDEOH7KHUHZDVJUHDWH[FLWHPHQWDVP\IDPLO\DQG,WRRNWXUQV
OLVWHQLQJWR:+2LQ'HV0RLQHV,RZDDQDVWRQLVKLQJVL[KXQGUHG
PLOHVIURP3XHEOR,SXWWRJHWKHUDIDLUO\VRSKLVWLFDWHGYDFXXPWXEH
UHFHLYHUZKHQ,ZDVWZHOYH

'$9,'3$&.$5'

5DGLR'59'DYH3DFNDUG
VKDPUDGLRVWDWLRQ3XHEOR
\HDUVROG%\WKHWLPH,UHDFKHG&HQWHQQLDO+LJK6FKRRO,ZDVD
SURILFLHQWUDGLRRSHUDWRUDQGEHFDPHVHFUHWDU\RIWKH6DQ,VDEHO
5DGLR&OXE7KLVLQWXUQHQDEOHGPHWRDWWHQGWKHVWDWHZLGHKDP
UDGLRFRQYHQWLRQVLQ'HQYHU
0\IDWKHUZDVQRWDILVKHUPDQEXW,KDGDIULHQG:HQGHOO6SHDU
ZKRVHIDPLO\ZRXOGVSHQGWZRZHHNVHYHU\VXPPHUILVKLQJLQWKH
*XQQLVRQ5LYHUDUHD7KH\WRRNPHZLWKWKHPVHYHUDOWLPHV7KXV
P\LQWHUHVWLQWURXWILVKLQJEHJDQZKHQ,ZDVDERXWWHQ\HDUVROG$W
WKDWWLPHWKHOLPLWRQWURXWZDVILIW\ILVKDGD\(DFKRIXVKDGQR
GLIILFXOW\FDWFKLQJWKHOLPLW,FDQVWLOOUHPHPEHUWKDWLWZDVYHU\
WLUHVRPHKLNLQJVHYHUDOPLOHV

7+(+3:$<

EDFNWRFDPSZLWKDFUHHOIXOORIILVK7KH6SHDUVZRXOGEULQJDORQJ
VHYHUDOVPDOOZRRGHQNHJVWRVDOWWKHWURXWDQGSUHVHUYHLWIRU
ZLQWHU(YHU\QLJKWZHZRXOGKDQJWKHILVKRQDOLQHWRGU\DQGLQWKH
PRUQLQJSXWWKHPLQDNHJDOD\HURIILVKDQGWKHQDOD\HURIVDOWDQG
VRRQXQWLOWKHNHJZDVIXOO:KHQWKHNHJVZHUHRSHQHGLQWKH
ZLQWHURQHFRXOGKDUGO\WHOOWKHGLIIHUHQFHEHWZHHQWKHILVKDQGWKH
VDOW,WZRXOGKDYHEHHQPXFKEHWWHUWRVPRNHWKHILVKEXWQRQHRI
XVNQHZKRZWRGRWKDW:KHQ,ZDVLQKLJKVFKRROVHYHUDORIP\
IULHQGVDQG,ZRXOGJRILVKLQJIRUDZHHNRUWZRHYHU\VXPPHUEXW
ZHJDYHXSVDOWLQJRXUFDWFK
:KHQ,ZDVHOHYHQ\HDUVROGP\IDWKHUERXJKWPHDSRQ\QDPHG
/DGGLH+HZDVDIDLUO\ODUJHVWDOOLRQZLWKORWVRIHQHUJ\,ZRXOG
VDGGOHKLPXSLQWKHPRUQLQJDQGZKHQ,JRWRQKLPKHZRXOGEXFN
DQGUHDUXS7KHQZKHQP\IDWKHUKLWKLPRQKLVEHKLQGZLWKD
EURRPKHZRXOGJRRXWWKHGULYHZD\DWDIXOOJDOORSDQGJRQRUWKRQ
7ZHQW\QLQWK6WUHHWWRZDUGWKHSUDLULH+HZRXOGVSRWDSDWFKRI
DOIDOIDUDFHXSWRLWDWIXOOVSHHGWKHQSODQWKLVIRUHOHJVWRVWRSDQG
HDW,ZRXOGJRIO\LQJRYHUKLVKHDGDQGKLWWKHJURXQG+HNQHZDOO
WKHWULFNVWRJHWULGRIKLVULGHUVXFKDVUXQQLQJQH[WWRD
EDUEHGZLUHIHQFHWRVFUDSHKLPRII0\IDWKHUZRXOGQ
WOHWPHTXLW
KRZHYHUVR,ILQDOO\JRWVR,FRXOGKDQGOHKLPDQGZHEHFDPHJRRG
IULHQGV,ZRXOGRIWHQULGHKLPRXWLQWKHSUDLULHWRKXQW2QRQHRI
WKHODVWULGHV,UHPHPEHUZHZHUHJRLQJIXOOVSHHGZKHQKHVWHSSHG
LQDSUDLULHGRJKROHDQGZHERWKUROOHGLQWKHGXVW)RUWXQDWHO\KH
GLGQRWEUHDNDOHJQRUGLG,7KLVZDVD

'$9,'3$&.$5'

'DYH3DFNDUGKROGV/DGGLH
VUHLQVIRUKLVVLVWHU$QQ/RXLVH
KDUGZD\WROHDUQKRZWRKDQGOHDKRUVHEXWRYHUWKH\HDUV,KDYH
GRQHDORWRIULGLQJVRPHRILWLQWRXJKPRXQWDLQFRXQWU\
,QWKHODVW\HDURIJUDGHVFKRRO,EHJDQWDNLQJYLROLQOHVVRQV,
HQMR\HGWKHPWRDGHJUHHEXWGLGQRWSUDFWLFHHQRXJKEHFDXVHRWKHU
DFWLYLWLHVDOZD\VVHHPHGWRKDYHDKLJKHUSULRULW\0\IDWKHUKDGD
EDFKHORUIULHQG0U3RSHZKRDOVRSOD\HGWKHYLROLQ+HZRXOGRIWHQ
MRLQXVDWKRPHRQ6XQGD\HYHQLQJVZKHUHP\PRWKHUZKRSOD\HG
WKHSLDQRDQG0U3RSHDQG,ZRXOGSOD\IRUDQKRXURUWZR
'XULQJP\ILUVW\HDULQKLJKVFKRRO,SOD\HGVHFRQG

7+(+3:$<

ILGGOHLQWKHRUFKHVWUDDQGWXEDLQWKHEDQG,KDYHDOZD\VHQMR\HG
PXVLFEXWQHYHUVSHQWHQRXJKWLPHZLWKDQLQVWUXPHQWWREHFRPHD
YHU\JRRGSOD\HU

&HQWHQQLDO+LJK6FKRRO
&HQWHQQLDOKDGWKHWUDGLWLRQDOKLJKVFKRRODFDGHPLFSURJUDP2XU
FODVVVSRQVRUZDV0LVV0HOFKRUWKH/DWLQWHDFKHU,KDGWRZRUNYHU\
KDUGDW/DWLQEXWWKHPDWKDQGVFLHQFHFRXUVHVZHUHHDV\EHFDXVH,
DOUHDG\NQHZDERXWDVPXFKDVWKHWHDFKHUVGLG,ZDVHOHFWHG
SUHVLGHQWRIP\FODVVDOOIRXU\HDUV
0\LQYROYHPHQWLQDWKOHWLFVEHJDQLQP\MXQLRU\HDUDQGLQP\
VHQLRU\HDUZHKDGFKDPSLRQVKLSWHDPVLQIRRWEDOOEDVNHWEDOODQG
WUDFN,QWKHVWDWHKLJKVFKRROEDVNHWEDOOWRXUQDPHQWZHORVWWKH
ILQDOJDPHWRDWHDPIURPDVPDOOWRZQLQHDVWHUQ&RORUDGRFDOOHG
-RHV,ZDVVHOHFWHGDVWKHDOOVWDWHEDVNHWEDOOFHQWHU
,QWKHDOOVWDWHWUDFNPHHW,ZRQWKHKLJKMXPSWKHEURDGMXPS
QRZWKHORQJMXPS WKHORZKXUGOHVWKHKLJKKXUGOHVDQGWKH
GLVFXVVHWWLQJDQHZUHFRUGIRUWKHDOOVWDWHPHHW7KHJUHDWKXUGOHU
IURPWKH8QLYHUVLW\RI&RORUDGR*RUGRQ$OORWWZDVVWXG\LQJODZLQ
P\IDWKHU
VRIILFHDQGJDYHPHVRPHH[FHOOHQWFRDFKLQJ+HODWHU
ZDVHOHFWHGWRWKH866HQDWHDQGZDVYHU\HQFRXUDJLQJWRRXU
FRPSDQ\ZKLOHVHUYLQJWKHUH
,HQMR\HGDWKOHWLFVDQGOHDUQHGVRPHOHVVRQVWKDWZHUHKHOSIXOLQ
PDQDJLQJ+HZOHWW3DFNDUG,UHPHP

'$9,'3$&.$5'

PHUSDUWLFXODUO\D0U3RUWHUZKRWRRNDSHUVRQDOLQWHUHVWLQERWK
JUDGHVFKRRODQGKLJKVFKRRODWKOHWHVLQ3XHEOR+HVDLGWKDWPDQ\
WLPHVWZRWHDPVSOD\LQJIRUDFKDPSLRQVKLSHDFKKDYHHTXDOO\JRRG
SOD\HUV,QWKLVFDVHWHDPZRUNEHFRPHVYHU\LPSRUWDQWHVSHFLDOO\LQ
WKHVSOLWVHFRQGSOD\V*LYHQHTXDOO\JRRGSOD\HUVDQGJRRG
WHDPZRUNWKHWHDPZLWKWKHVWURQJHVWZLOOWRZLQZLOOSUHYDLO
,KDYHUHPHPEHUHGWKDWDGYLFHDQGLWKDVEHHQDJXLGLQJSULQFLSOH
LQGHYHORSLQJDQGPDQDJLQJ+3*HWWKHEHVWSHRSOHVWUHVVWKH
LPSRUWDQFHRIWHDPZRUNDQGJHWWKHPILUHGXSWRZLQWKHJDPH
6WDQIRUG8QLYHUVLW\
,QWKHVXPPHURIEHWZHHQP\MXQLRUDQGVHQLRU\HDUVLQKLJK
VFKRROP\PRWKHUVLVWHUDQG,GURYHRXWWR&DOLIRUQLD:HVSHQWD
IHZZHHNVLQ+HUPRVD%HDFKQHDU/RV$QJHOHVDQGWKHQYLVLWHGWKH
1HIIIDPLO\LQ3DOR$OWR:HDOVRYLVLWHG0RQWHUH\DQG3DFLILF*URYH
0UV1HIIKDGEHHQP\PRWKHU
VFODVVPDWHDW&RORUDGR&ROOHJHDQG
KHUROGHVWGDXJKWHU$OLFHKDGMXVWILQLVKHGKHUILUVW\HDUDW
6WDQIRUG$OLFHWRRNPHRQDWRXURIWKH6WDQIRUGFDPSXV7KRXJK,
KDGNQRZQQRWKLQJDERXWWKHXQLYHUVLW\,ZDVLPSUHVVHGE\P\YLVLW
DQGOHDUQHGWKDW6WDQIRUGKDGDYHU\JRRGHOHFWULFDOHQJLQHHULQJ
SURJUDP6R,DSSOLHGLQWKHVSULQJRI'HVSLWHP\IDWKHU
V
LQWHUHVWLQP\IROORZLQJKLPLQWRDFDUHHULQODZ,KDGGHFLGHGDVIDU
EDFNDVJUDGHVFKRRO

7+(+3:$<

WKDW,ZDQWHGWREHDQHQJLQHHU$QGEHFDXVHRIP\LQWHUHVWLQUDGLR
DQGHOHFWULFDOGHYLFHV,KDGQDUURZHGWKDWWRHOHFWULFDOHQJLQHHULQJ

$GPLVVLRQWR6WDQIRUG
7KH8QLYHUVLW\RI&RORUDGRDW%RXOGHUKDGDJRRGSURJUDPLQ
HOHFWULFDOHQJLQHHULQJDWWKHWLPH6RPHRIP\ROGHUIULHQGVZHUH
DOUHDG\LQWKHSURJUDPVR,KDGDVVXPHGWKDW
VZKHUH,
GJRDV
ZHOO%XWYLVLWLQJ6WDQIRUGFKDQJHGP\PLQGDQGPXFKWRP\
VXUSULVHP\DSSOLFDWLRQZDVDFFHSWHG7KHWXLWLRQZDVD
TXDUWHUQRWDQLQVLJQLILFDQWVXPLQWKRVHGD\VRIDGHHSHQLQJ
GHSUHVVLRQ0\IDWKHUKDGEHHQDSSRLQWHGDEDQNUXSWF\UHIHUHHLQ
VRP\SDUHQWVZHUHDEOHWRSURYLGHVRPHILQDQFLDOVXSSRUWDQG
,ZRUNHGWRHDUQWKHEDODQFH
0\XQGHUJUDGXDWH\HDUVDW6WDQIRUGZHUHEXV\,QDGGLWLRQWRP\
VWXGLHV,SDUWLFLSDWHGLQDWKOHWLFV$VDIUHVKPDQ,ZRQOHWWHUVLQ
IRRWEDOOEDVNHWEDOODQGWUDFNDQGVHWDVFKRROUHFRUGIRUVFRULQJWKH
PRVWSRLQWVLQDIUHVKPDQWUDFNPHHWZLWKRXUDUFKULYDOWKH
8QLYHUVLW\RI&DOLIRUQLD%XW,GHFLGHGQRWWRFRQWLQXHZLWKWUDFN,W
WRRNWRRPXFKWLPHIURPP\VWXGLHVDQG,KDGFRPHWR6WDQIRUGWR
EHDVWXGHQWQRWDQDWKOHWH,UHPHPEHUWKDWWKHYDUVLW\WUDFN
FRDFK'LQN7HPSOHWRQZDVYHU\XSVHWZLWKP\GHFLVLRQ
)RRWEDOOZDVQRWP\EHVWVSRUWEXWSHHUSUHVVXUHZDVVRVWURQJWKDW
,SOD\HGIRRWEDOOWKURXJKP\VHQLRU\HDU

'$9,'3$&.$5'

7KDWH[SHULHQFHUHLQIRUFHGP\LGHDVRQKRZWREXLOGDZLQQLQJWHDP
:KLOH,ZDVDWWHQGLQJ6WDQIRUG,UHWXUQHGWR3XHEORHYHU\VXPPHU
DQGIRXQGDMREWKHUH0\IDWKHUGLGQ
WLQVLVWWKDW,FRQWULEXWHWRWKH
FRVWRIP\HGXFDWLRQEXW,IHOWVWURQJO\WKDW,VKRXOGDQGEHVLGHV,
OLNHGWRNHHSEXV\

'DYH3DFNDUGDVDQHQGRQWKH6WDQIRUGIRRWEDOOWHDP

7+(+3:$<

,VSHQWRQHVXPPHUZLWKDKDUGURFNPLQHUQHDUWKHURDGWR&ULSSOH
&UHHNWKHFHQWHURIWKH&RORUDGRJROGUXVK:HGULOOHGKROHVLQWKH
URFNE\KDQGZLWKDKDPPHUDQGDURFNGULOO7KHPLQHUVHWWKH
G\QDPLWHZLWKDIXVHDQGDIWHUWKHH[SORVLRQ,KDXOHGWKHORRVHURFN
RXWZLWKDZKHHOEDUURZ7KHPLQHUZRXOGVHQGVDPSOHVIRUDVVD\
EXWWKHYDOXHQHYHUUHDFKHGWKHDWRQWKDWZDVUHTXLUHGWRPDNH
WKHPLQHSURILWDEOH7KHSULFHRIJROGKDGEHHQVHWDWDQRXQFH
E\3UHVLGHQW5RRVHYHOW$WWRGD\
VSULFHRIJROGWKHPLQHSUREDEO\
ZRXOGKDYHEHHQSURILWDEOH
$QRWKHUVXPPHU,KDGDKLJKHUSD\LQJMREDWDEULFN\DUGLQ3XHEOR
7KHMREZDVWRORDGDQGXQORDGWKHNLOQV7KHEULFNVZRXOGEH
XQORDGHGIURPWKHNLOQVZKHQWKH\ZHUHMXVWFRROHQRXJKWREH
KDQGOHGZLWKKHDY\JORYHV%\QRRQWLPHWKHRXWVLGHWHPSHUDWXUH
KDGXVXDOO\UHDFKHGDKXQGUHGGHJUHHVRUPRUH,WZDVDWRXJKMRE
WKDWGHVHUYHGP\KLJKHUSD\
,DOVRZRUNHGIRUDFRQVWUXFWLRQFRPSDQ\EXLOGLQJDURDGRYHU:ROI
&UHHN3DVVLQWKHVRXWKZHVWHUQFRUQHURI&RORUDGR7KLVZDVKDUG
ZRUNWRREXWLWKDGWKHFRPSHQVDWLRQRIDQKRXURUVRRIJRRG
ILVKLQJDIWHUGLQQHU0\H[WHQVLYHNQRZOHGJHRIWKLVSDUWRIWKHVWDWH
SURPSWHG%LOO+HZOHWWDQGPHWRWDNHDORQJSDFNWULSXSWKH/RV
3LQRV5LYHULQWKHVXPPHURIDIWHUZHJUDGXDWHGIURP
6WDQIRUG
<HWDQRWKHUVXPPHU,KDGDMREGHOLYHULQJLFHLQWKH%HVVHPHUDUHD
RI3XHEOR,ZRXOGSLFNXSVHYHUDOWRQVRILFHIURPDIUHLJKWFDUWKDW
FDPHIURP6DOLGDZKHUHWKHLFHKDGEHHQFXWDQGVWRUHGGXULQJWKH
ZLQWHU6LQFHWKH

'$9,'3$&.$5'

LFHZDVLQODUJHEORFNV,KDGWRFXWLWLQWRSLHFHVIRUP\FXVWRPHUV
7KLVZDVDERXWD\HDUEHIRUHWKHUHSHDORI3URKLELWLRQDQGP\PRVW
LPSRUWDQWFXVWRPHUVZHUHWKHEHHUMRLQWVKHDYLO\IUHTXHQWHGE\VWHHO
PLOOZRUNHUVLQWKHWRXJKSDUWRI3XHEORWKDW,KDGDYRLGHGZKHQ,
ZDVLQKLJKVFKRRO,KDGWRVHOOWKHLFHIRUFDVKWREHDEOHWREX\
DQRWKHUVXSSO\RILFHWKHQH[WGD\,FDQ
WUHFDOOKRZPXFKPRQH\,
PDGHWKDWVXPPHUEXW,EHOLHYH,GLGSUHWW\ZHOO
%DFNDW6WDQIRUGLWZDVKDPUDGLRWKDWKHOSHGVHWP\IXWXUHFRXUVH
7KHXQLYHUVLW\KDGDQDPDWHXUUDGLRVWDWLRQLQDVPDOOEXLOGLQJMXVW
RIIWKHHQJLQHHULQJFRUQHURIWKH4XDG,WZDVQHDUWKHODERUDWRU\RI
DQHZ\RXQJSURIHVVRUQDPHG)UHG7HUPDQ,GLGQ
WNQRZPXFK
DERXWKLPDWWKHWLPHQRWHYHQWKDWKLVIDWKHUZDVDIDPRXV
HGXFDWRUDQGLQYHQWRURIWKHZHOONQRZQ6WDQIRUG%LQHWLQWHOOLJHQFH
WHVW,ZRXOGRFFDVLRQDOO\VSHQGWLPHDWWKHUDGLRVWDWLRQDQG
3URIHVVRU7HUPDQZRXOGVWRSE\IURPWLPHWRWLPHWRYLVLWZLWKPH
)LQDOO\RQDVSULQJGD\LQKHLQYLWHGPHLQWRKLVRIILFHDQG
VXJJHVWHG,WDNHKLVJUDGXDWHFRXUVHLQUDGLRHQJLQHHULQJGXULQJP\
VHQLRU\HDU7KDWZDVWKHEHJLQQLQJRIDVHULHVRIHYHQWVWKDW
UHVXOWHGLQWKHHVWDEOLVKPHQWRIWKH+HZOHWW3DFNDUG&RPSDQ\
$VWKHILUVWXQGHUJUDGXDWHWREHLQYLWHGLQWR7HUPDQ
VJUDGXDWH
FRXUVH,IHOWYHU\KRQRUHG,WZDVWKDWFODVVWDXJKWE\DQRZ
OHJHQGDU\WHDFKHUWKDWUHDOO\VSDUNHGP\HQWKXVLDVPIRUHOHFWURQLFV
7KHV\OODEXVIRUWKHFRXUVHVHUYHGDVWKHEDVLVIRU7HUPDQ
VIDPRXV
WH[WERRN5DGLR(QJLQHHULLQJWKHPRVWLQIOXHQWLDOWH[WRQWKH

7+(+3:$<

VXEMHFWDWWKDWWLPH3URIHVVRU7HUPDQKDGWKHXQLTXHDELOLW\WR
PDNHDYHU\FRPSOH[SUREOHPVHHPWKHHVVHQFHRIVLPSOLFLW\7KLV
ZDVWKHVHFUHWRIKLVWH[WERRNDQGWKHUHDVRQWKHERRNEHFDPHWKH
PRVWZLGHO\XVHGWH[WRQWKHVXEMHFWLQWKHZRUOG,WZDVDGLIILFXOW
FODVVDQGDGHPDQGLQJ\HDUHVSHFLDOO\EHFDXVH,ZDVSOD\LQJRQWKH
YDUVLW\IRRWEDOOWHDPDWWKHWLPHFDUU\LQJDIXOOXQGHUJUDGXDWHFODVV
ORDGDQGVOLQJLQJKDVKDWP\IUDWHUQLW\DQGODWHUDWDFDIHWHULDLQ
3DOR$OWR
:KLOHLQYROYHGLQWKHVHYDULRXVDFWLYLWLHV,PDGHDQXPEHURIIULHQGV
RQHRIWKHPZDV%LOO+HZOHWW

&KDSWHU
)ULHQGVKLSZLWK+HZOHWW
%,//+(:/(77$1',PHWLQWKHIDOORIZKHQZHHQUROOHGDV
IUHVKPHQDW6WDQIRUG,KDGDOUHDG\GHFLGHGWKDW,ZDQWHGWREHDQ
HOHFWULFDOHQJLQHHU%LOOKDGQ
WGHFLGHGRQDFDUHHUEXWGXULQJRXU
IUHVKPDQDQGVRSKRPRUH\HDUVZHZHUHLQPDQ\RIWKHVDPHPDWK
DQGVFLHQFHFODVVHV,WZDVQ
WXQWLOZHZHUHVHQLRUVWKDWZHEHFDPH
EHWWHUDFTXDLQWHGDQGE\WKHHQGRIWKDW\HDUZHKDGIRUPHGD
FORVHIULHQGVKLS
%LOO
VHDUO\\HDUVZHUHTXLWHGLIIHUHQWIURPPLQH+LVJUDQGSDUHQWVRQ
ERWKVLGHVRIKLVIDPLO\OLYHGLQ&DOLIRUQLDZHOOEHIRUHWKHWXUQRIWKH
FHQWXU\DQGKLVPRWKHUDQGIDWKHUERWKJUHZXSLQ6DQ)UDQFLVFR
+LVIDWKHUZDVDGRFWRUZKRKDGWUDLQHGDW-RKQV+RSNLQVDQGZKR
HDUO\LQKLVFDUHHUWDXJKWPHGLFLQHDWWKH8QLYHUVLW\RI0LFKLJDQ,W
ZDVDW$QQ$UERUWKDW%LOOZDVERUQLQ$IHZ\HDUVODWHUKLV
IDWKHUEHFDPHDSURIHVVRUDWWKH6WDQIRUG0HGLFDO6FKRROZKLFKLQ
WKRVHGD\VZDVLQ6DQ)UDQFLVFR
%LOOKDVGHVFULEHGKLVFKLOGKRRGDVEXV\DQGKDSS\

7+(+3:$<

+LVSDUHQWVZHUHZHOOHGXFDWHGDQGIDLUO\ZHOORII)DPLO\YDFDWLRQV
ZHUHXVXDOO\VSHQWLQWKH6LHUUD1HYDGDZKHUH%LOOOLNHPHEHJDQ
WRGHYHORSDORYHIRUWKHRXWGRRUVZKLFKKHUHWDLQVWRWKLVGD\
$VD\RXQJVWHU%LOOJDYHHDUO\HYLGHQFHRIZKDWEHFDPHDSURPLQHQW
WUDLWDQLQVDWLDEOHFXULRVLW\+HZDQWHGWRNQRZKRZWKLQJVZRUNHG
DQGZK\WKH\GLGZKDWWKH\GLGDQGKHRIWHQFRQGXFWHGKRPHPDGH
H[SHULPHQWVWRILQGRXW6RPHLQYROYHGH[SORVLYHVDQGOLNHPHKH
ZDVOXFN\WRVXUYLYH+HDOVROLNHGWRH[SORUHRFFDVLRQDOO\FOLPELQJ
URRIWRSVRUVHHNLQJRXWDUHDVRI6DQ)UDQFLVFRWKDWZHUHVWLOO
XQGHYHORSHG2QHRIKLVIDYRULWHVZDVWKHVLWHRIWKH:RUOG
V
)DLULQWKH0DULQDGLVWULFW7KHUHPDLQVRIWKHIDLUVRPHYDFDQW
EXLOGLQJVSURYLGHGDZRQGHUIXOWKRXJKRIILFLDOO\RIIOLPLWV
SOD\JURXQGIRU%LOODQGKLVEXGGLHV
%LOOZHQWWRDSULYDWHHOHPHQWDU\VFKRROJRLQJWRDQGIURPRQD
FDEOHFDU+HGLGZHOOZLWKQXPEHUVDQGDULWKPHWLFEXWKDGJUHDW
GLIILFXOW\UHDGLQJ+HZDVWKRXJKWWREHDVORZOHDUQHUZKHQLQ
DFWXDOLW\KHZDVG\VOH[LF%XWLQWKRVHGD\VQRRQHNQHZZKDW
G\VOH[LDZDV+HFRQWLQXHGWRKDYHWURXEOHUHDGLQJDQGZULWLQJDQG
ODWHURQLQOHFWXUHFODVVHVKHFRXOGQ
WZULWHQRWHVIDVWHQRXJKWR
NHHSXSZLWKWKHOHFWXUHU6RDVLVWKHFDVHZLWKPDQ\G\VOH[LFVKH
OHDUQHGKRZWROLVWHQWRILOHWKRXJKWVDQGLQIRUPDWLRQLQDORJLFDO
IRUPDQGKDYHWKHPUHDGLO\DYDLODEOHIURPPHPRU\7KLVSURFHGXUH
ZRUNHGSDUWLFXODUO\ZHOOLQOHDUQLQJPDWKDQGVFLHQFHKHVD\V
:KHQ%LOOZDVMXVWWZHOYHKLVIDWKHUGLHGRIDEUDLQ

'$9,'3$&.$5'

WXPRUDQGKLVJUDQGPRWKHUDQGPRWKHUWRRN%LOODQGKLVVLVWHUWR
(XURSH7KH\ZHUHLQ(XURSHIRUILIWHHQPRQWKVGXULQJZKLFKWLPH
/RXLVH%LOO
VVLVWHUZHQWWRVFKRROLQ3DULVDQG%LOOZDVWXWRUHGE\KLV
PRWKHUDQGJUDQGPRWKHU7KH\DOVRWUDYHOHGH[WHQVLYHO\ZKLFKLQ
LWVHOIZDVDJRRGHGXFDWLRQIRU%LOO
$IWHUUHWXUQLQJWR6DQ)UDQFLVFR%LOODWWHQGHG/RZHOO+LJK6FKRRO
ZKLFKZDVDQRWHGFROOHJHSUHSDUDWRU\KLJKVFKRRO+HZDVDQ
H[FHSWLRQDOVWXGHQWLQWKHVFLHQFHVDQGDQLQGLIIHUHQWVFKRODULQ
DOPRVWHYHU\WKLQJHOVH,QIDFW%LOOOLNHVWRWHOOWKHVWRU\WKDWZKHQLW
FDPHWLPHWRJUDGXDWHKHOLNHPDQ\RIKLVFODVVPDWHVDVNHGKLV
KLJKVFKRROSULQFLSDOIRUDUHFRPPHQGDWLRQ

%LOO+HZOHWWUDSSHOOLQJRQ0W2ZHQ:\RPLQJ

7+(+3:$<

WR6WDQIRUG7KHSULQFLSDOFDOOHGKLVPRWKHULQDQGVDLG0UV
+HZOHWW\RXUVRQKDVLQGLFDWHGKHZDQWVWRJRWR6WDQIRUG7KHUH
V
QRWKLQJLQKLVUHFRUGWRMXVWLI\P\UHFRPPHQGLQJKLP'R\RXNQRZ
ZK\KHZDQWVWRJR"6KHVDLG+LVIDWKHUWDXJKWWKHUH7KH
SULQFLSDOEULJKWHQHGDQGDVNHG:DVKLVIDWKHU$OELRQ:DOWHU
+HZOHWW"6KHVDLG\HVDQGKHVDLG+HZDVWKHILQHVWVWXGHQW,
HYHUKDG7KDWDFFRUGLQJWR%LOOZDVKRZKHJRWLQ+HDGGHGWKDW
WKHQH[W\HDUWKHSULQFLSDOUHWLUHG6R,MXVWPDGHLW
:KLOHLQKLJKVFKRRO%LOOZDVLQYROYHGLQDQXPEHURIDFWLYLWLHV+H
HQMR\HGFKHPLVWU\DQGSK\VLFVDQGFRQWLQXHGH[SHULPHQWLQJDQG
EXLOGLQJWKLQJV+HEXLOWD7HVODFRLOPDGHDQHOHFWULFDUFIURP
FDUERQURGVDQGEXLOWDVPDOOFU\VWDOUDGLRVHWIRUKLPVHOIDQG
DQRWKHUIRUKLVVLVWHU+HDQGVRPHRWKHUPDWKVWXGHQWVWDONHGWKHLU
WHDFKHULQWRWHDFKLQJWKHPFDOFXOXVZKLFKZDVQRWDVWDQGDUGKLJK
VFKRROFRXUVH,WJDYHWKHPDUXQQLQJVWDUWLQFROOHJH
%LOOKDVRIWHQVDLGWKDWLIKLVIDWKHUKDGQ
WGLHGKHPLJKWKDYHFKRVHQ
DFDUHHULQPHGLFLQH+HKDVMRNHGWKDWKHFKRVHHOHFWULFDO
HQJLQHHULQJDVDFROOHJHPDMRUEHFDXVHKHOLNHGHOHFWULFWUDLQVEXW
FHUWDLQO\LQWKRVHHDUO\\HDUVKLVLQWHUHVWVZHUHDVPXFKLQFKHPLVWU\
DQGPDWKHPDWLFVDVLQHOHFWULFLW\
7KURXJK%LOO,EHFDPHIULHQGO\ZLWK(G3RUWHU%LOO
VFORVHVWER\KRRG
IULHQG3RUWHUZKRFDPHGRZQWR6WDQIRUGZLWK%LOOZDVDQHDUO\
KDPUDGLR]HDORW6LQFHKLVFDOOOHWWHUVZHUH:%2$)ULVFR6QDNH
EHFDPHKLVKDP,'(GNQHZVRPXFKDERXWUDGLRVWKDWKHSDU

'$9,'3$&.$5'

WLDOO\VXSSRUWHGKLPVHOIDW6WDQIRUGE\UHSDLULQJWKHP7KHVRQRIDQ
(SLVFRSDODUFKELVKRS(GZDVDG\QDPLFFKDUDFWHUZKRZDVWRSOD\
DQLPSRUWDQWUROHLQRXUOLYHVIRUWKHQH[WIRUW\\HDUV+LVIDWKHUZDV
WKHPLQLVWHUZKRPDUULHG%LOODQG)ORUD+HZOHWWLQDQGSULRUWR
KLVGHDWKEDSWL]HGWKUHHRIWKHLUILYHFKLOGUHQDQGDOOIRXURIP\ZLIH
/X
VDQGPLQH
7KHUHZDVDOVRLQ7HUPDQ
VJUDGXDWHFODVVD\RXQJPDQQDPHG
%DUQH\2OLYHU+HKDGMXVWWUDQVIHUUHGWR6WDQIRUGIURP&DO7HFKDVD
MXQLRUKDYLQJDOUHDG\WDNHQPRVWRIWKHUHTXLUHGHQJLQHHULQJ
FODVVHV6R7HUPDQOHWKLPWDNHWKHJUDGXDWHFODVVRQWKHVWLSXODWLRQ
WKDWLI%DUQH\GLGQ
WSDVVWKHILUVWPLGWHUPH[DPLQDWLRQKH
GKDYHWR
GURSRXW,QIDFWKHJRWWKHKLJKHVWJUDGHQRWRQO\RQWKHPLGWHUP
EXWRQHYHU\H[DPIRUWKHUHVWRIWKH\HDU

)RUPLQJD1XFOHXV
/DUJHO\EHFDXVHRI7HUPDQ
VFODVVHVWKHIRXURIXV+HZOHWW3RUWHU
2OLYHUDQG,EHFDPHIDVWIULHQGV,WLVQRWDFRLQFLGHQFHWKDWDIHZ
\HDUVODWHUWKLVJURXSZRXOGEHFRPHWKHPDQDJHPHQWWHDPRI
+HZOHWW3DFNDUG3RUWHUZKRGLHGLQVSHQWWKLUW\\HDUVDWWKH
FRPSDQ\DVSURGXFWLRQPDQDJHU2OLYHURQHRIWKHJUHDWHVWDSSOLHG
VFLHQWLVWVRIWKLVFHQWXU\UHWLUHGLQDV+3
VGLUHFWRURIUHVHDUFK
DQGGHYHORSPHQWDQGQRZGHYRWHVKLVHQHUJLHVWRVXFKSURMHFWVDV
6(7,WKHVHDUFKIRUH[WUDWHUUHVWULDOLQWHOOLJHQFH
%LOO+HZOHWW
VDQGP\FRPPRQLQWHUHVWLQWKHRXW

7+(+3:$<

GRRUVILUVWPDQLIHVWHGLWVHOILQRXUMXQLRU\HDUZKHQRQHRIRXU
SURIHVVRUVRUJDQL]HGDILHOGWULSWRWKH6LHUUD1HYDGDWRYLVLWD
K\GURHOHFWULFSRZHUSODQWRSHUDWHGE\6RXWKHUQ&DOLIRUQLD(GLVRQ%LOO
DQG,WRRNWKDWRFFDVLRQWRJRILVKLQJDQGKDGDZRQGHUIXOWLPH7KDW
ZDVDSUHFXUVRURIPDQ\WULSVWRWKHPRXQWDLQVLQFOXGLQJD
WZRZHHNSDFNWULSLQ&RORUDGRVKRUWO\DIWHUZHJUDGXDWHGLQ
2QWKDWRFFDVLRQZHSOXVDKRUVHZHUHQWHGIRUDGROODUDGD\KLNHG
XSLQWRWKH6DQ-XDQ0RXQWDLQV7KHUHLVQRTXHVWLRQWKDWDVKDUHG
ORYHRIWKHRXWGRRUVVWUHQJWKHQHGRXUIULHQGVKLSDQGKHOSHGEXLOGD
PXWXDOXQGHUVWDQGLQJDQGUHVSHFWWKDWLVDWWKHFRUHRIRXU
VXFFHVVIXOEXVLQHVVUHODWLRQVKLSODVWLQJPRUHWKDQDKDOIFHQWXU\
)UHG7HUPDQ
VNHHQLQWHUHVWLQUDGLRHQJLQHHULQJLQGXFHGKLPWR
EHFRPHDFTXDLQWHGZLWKDOPRVWDOORIWKHSLRQHHUVLQWKHLQGXVWU\
PDQ\RIZKRPZHUHORFDWHGLQWKH3DOR$OWRDUHD(DUO\ZLUHOHVV
ZRUNE\6WDQIRUGJUDGXDWH&\ULO)(OZHOOZDVRUJDQL]HGLQWRWKH
)HGHUDO7HOHJUDSK&RPSDQ\DWWKHEHJLQQLQJRIWKHFHQWXU\/HH'H
)RUHVWLQYHQWHGWKHYDFXXPWXEHLQ3DOR$OWRLQDQG)ULW]
.ROVWHUGHYHORSHGWKHUDGLRGLUHFWLRQILQGHULQWKHV
,QWKHHDUO\VPDQ\%D\$UHDILUPVPRYHGWR&KLFDJRZKLFK
KDGEHFRPHWKHFHQWHURIWKHUDGLRLQGXVWU\,Q)HGHUDO
7HOHJUDSKPRYHGHDVWWR1HZ-HUVH\%XWDORWRISHRSOHGLGQ
WZDQW
WRPRYH7KH\RSWHGLQVWHDGWRVWD\LQWKHDUHDDQGVWDUWWKHLURZQ
WHFKQRORJ\ILUPV,QWKHV7HUPDQ
VJUDGXDWHFRXUVHLQUDGLR
HQJLQHHULQJLQFOXGHGYLVLWVWRVRPHRIWKHVHILUPV,UHPHPEHU
YLVLWLQJ.DDU(QJLQHHULQJLQ

'$9,'3$&.$5'

3DOR$OWR(LWHO0F&XOORXJKLQ%XUOLQJDPHDQG&KDUOLH/LWWRQ
VVKRS
ZKLFKZRXOGLQWLPHEHFRPH/LWWRQ,QGXVWULHVLQ5HGZRRG&LW\,DOVR
ZHQWWR6DQ)UDQFLVFRWRPHHW3KLOR)DUQVZRUWKZKRZDVGHYHORSLQJ
DWHOHYLVLRQFDPHUDWXEH
,UHPHPEHU7HUPDQVD\LQJVRPHWKLQJOLNH:HOODV\RXFDQVHH
PRVWRIWKHVHVXFFHVVIXOUDGLRILUPVZHUHEXLOWE\SHRSOHZLWKRXW
PXFKHGXFDWLRQDGGLQJWKDWEXVLQHVVRSSRUWXQLWLHVZHUHHYHQ
JUHDWHUIRUVRPHRQHZLWKDVRXQGWKHRUHWLFDOEDFNJURXQGLQWKHILHOG
7KDWJRWXVWKLQNLQJDQGLQRXUVHQLRU\HDUZLWK7HUPDQ
V
HQFRXUDJHPHQW%LOO+HZOHWW(G3RUWHU%DUQH\2OLYHUDQG,ZHUH
PDNLQJWHQWDWLYHSODQVWRWU\WRGRVRPHWKLQJRQRXURZQDIWHU
JUDGXDWLRQ%XWRXUSODQVZHUHVHWDVLGHZKHQLQWKHVSULQJRI7
,UHFHLYHGDMRERIIHUIURP*HQHUDO(OHFWULF7KHFRXQWU\ZDV
WKHQLQWKHWKURHVRIWKH*UHDW'HSUHVVLRQDQGMREVZHUHVFDUFH
7HUPDQHQFRXUDJHGPHWRWDNHWKH*(MRESRLQWLQJRXWWKDW,ZRXOG
OHDUQDJUHDWGHDOWKDWZRXOGSURYHXVHIXOLQRXURZQHQGHDYRU+H
DOVRWKRXJKW%LOOZRXOGEHQHILWIURPVRPHJUDGXDWHZRUN6RZH
DJUHHGWRSRVWSRQHRXUEXVLQHVVYHQWXUHVWLOOGHWHUPLQHGHYHQWXDOO\
WRVWDUWWKHFRPSDQ\ZHKDGWDONHGDERXW
([SHULHQFHDW*HQHUDO(OHFWULF
6LQFHP\MREDW*HQHUDO(OHFWULFGLGQRWVWDUWXQWLO)HEUXDU\,
GHFLGHGWRWDNHVRPHIDOOTXDUWHUFRXUVHVDWWKH8QLYHUVLW\RI
&RORUDGRLQ%RXOGHU7KH

7+(+3:$<

EHVWFRXUVHZDVRQHLQHQJLQHHULQJPDWKHPDWLFVWDXJKWE\D
3URIHVVRU+XWFKLVRQ+HFRXOGSXWWZRFROXPQVRIILYHGLJLWQXPEHUV
RIDERXWWZHQW\OLQHVRQWKHEODFNERDUGDQGDGGERWKFROXPQVIDVWHU
WKDQDQ\RQHLQWKHFODVVFRXOGDGGRQH,IRXQGKLVFRXUVHWREHRQH
RIWKHPRVWLQWHUHVWLQJ,KDGHYHUWDNHQ
,Q-DQXDU\,GURYHP\PRWKHUDQGVLVWHUHDVWWRYLVLWVRPH
IULHQGVLQ3LWWEXUJ7KHQ,GURYHXSWR6FKHQHFWDG\WREHJLQP\MRE
ZLWK*(2QP\ILUVWGD\,PHWZLWKD0U%RULQJZKRKDG
LQWHUYLHZHGPHDW6WDQIRUG+HNQHZRIP\LQWHUHVWLQHOHFWURQLFV
VWLOOFDOOHGUDGLR EXWWROGPHWKHUHZDVQRIXWXUHIRUHOHFWURQLFVDW
*HQHUDO(OHFWULFDQGUHFRPPHQGHGWKDW,FRQFHQWUDWHP\ZRUNDQG
LQWHUHVWVRQJHQHUDWRUVPRWRUVDQGRWKHUKHDY\FRPSRQHQWVIRU
SXEOLFXWLOLW\SODQWVDQGHOHFWULFDOWUDQVPLVVLRQV\VWHPV
,KDYHRIWHQWKRXJKWRIWKHLURQ\RI0U%RULQJ
VDGYLFHEHFDXVHRXU
HOHFWURQLFVILUP+HZOHWW3DFNDUG&RPSDQ\KDVEHFRPHODUJHUWKDQ
WKHHQWLUH*HQHUDO(OHFWULF&RPSDQ\ZDVDWWKHWLPHKHJDYHPHWKDW
DGYLFH
*(FRQWLQXHGLWVSROLF\HYHQGXULQJWKHGHSUHVVLRQRIKLULQJVRPH
FROOHJHJUDGXDWHVHDFK\HDUDQGLQLWLDOO\SXWWLQJWKHPWRZRUNLQ
YDULRXVWHVWGHSDUWPHQWV0\ILUVWDVVLJQPHQWZDVLQUHIULJHUDWRU
SURGXFWVWHVWLQJUHIULJHUDWRUVIRUOHDNVDQGRWKHUSUREOHPV,WZDV
RQWKHVZLQJVKLIWDQGZDVQRWYHU\LQWHUHVWLQJ
,GHFLGHGWRORRNIRUDQRWKHUMRERQP\RZQDQGIRXQGRQHILUVWLQ
WKHUDGLRWUDQVPLWWHUGHSDUWPHQWWHVWLQJHTXLSPHQWEHLQJEXLOWIRU
WKHDUP\7KDWZDV

'$9,'3$&.$5'

QRWYHU\FKDOOHQJLQJHLWKHUVR,ORRNHGDURXQGIXUWKHUDQGIRXQGD
MRELQWKHYDFXXPWXEHHQJLQHHULQJGHSDUWPHQW,WZDVLQWKHVDPH
EXLOGLQJDV*(
VPDLQUHVHDUFKGHSDUWPHQW7KLVQHZMREZDV
LQWHUHVWLQJDQG,KDGDFKDQFHDVZHOOWRPHHWVRPHEULJKWSHRSOH
IURPWKHPDLQUHVHDUFKODERUDWRU\
0\LQLWLDODVVLJQPHQWZDVLQWKHVHFWLRQZKHUHWKH\ZHUHPDNLQJ
FRQWUROOHGPHUFXU\YDSRUUHFWLILHUWXEHVIRUWKHFRQWURORIVSRWDQG
VHDPZHOGLQJ7KHODUJHVWWXEHZDVDJODVVEXOEDERXWWKHVL]HRID
JDOORQMXJZLWKWKHDQRGHKHOGE\DVHDODWWKHWRSDQGWKHPHUFXU\
SRROFRQQHFWHGE\DVHDOWKURXJKWKHERWWRP7KHFRQWUROHOHPHQW
ZDVDSRLQWHGSLHFHRIVLOLFRQFDUELGHFRQQHFWHGE\DVHDODQGDOHDG
RQRQHVLGHRIWKHWXEH7KHDUFZDVVWDUWHGRQHDFKSRVLWLYHF\FOH
GXULQJWKHFRQWUROSHULRGDQGFRXOGEHFRQWUROOHGWRDIUDFWLRQRID
F\FOH,IWKHFRQWUROHOHPHQWORVWFRQWUROWKHWXEHEOHZXS
7KHWHVWIDFLOLW\ZDVRQWKHJURXQGIORRURIWKHEXLOGLQJDQGWKHUH
ZHUHWZRODUJHZDUHKRXVHGRRUVWKDWZHUHOHIWRSHQZKHQHYHUDWHVW
ZDVXQGHUZD\7KHWXEHZDVSURWHFWHGZLWKDVWURQJPHWDOPHVK
VKLHOG,WFRQWDLQHGWKHJODVVVSOLQWHUVLIDWXEHH[SORGHGEXWWKH
PHUFXU\SRROEHFDPHDFORXGRIPHUFXU\YDSRUWKDWGULIWHGRXWRI
WKHURRPWKURXJKWKHRSHQGRRUV7KHRSHUDWRUKDGWRUXQWKURXJK
WKHGRRUVDKHDGRIWKHPHUFXU\YDSRUDQGZDLWIRULWWRGLVSHUVH
EHIRUHHQWHULQJWKHURRPDJDLQ
7KHVHWXEHVZHUHPDGHLQEDWFKHVRIWZHQW\DQGHYHU\WXEHLQWKH
ODVWEDWFKKDGIDLOHGZKHQ,ZDVJLYHQWKHMRERIJHWWLQJWKHQH[W
EDWFKWKURXJK

7+(+3:$<

:RUNLQJ7RJHWKHU
,OHDUQHGHYHU\WKLQJ,FRXOGDERXWSRVVLEOHFDXVHVRIIDLOXUHDQG,
GHFLGHGWRVSHQGPRVWRIP\WLPHRQWKHIDFWRU\IORRUWRPDNHVXUH
HYHU\VWHSZDVGRQHSURSHUO\,WVRRQEHFDPHDSSDUHQWWKDWWKH
LQVWUXFWLRQVWKHHQJLQHHULQJGHSDUWPHQWJDYHWKHIDFWRU\SHRSOH
ZHUHQRWDGHTXDWHWRHQVXUHWKDWHYHU\VWHSZRXOGEHGRQH
SURSHUO\,IRXQGWKHIDFWRU\SHRSOHHDJHUWRGRWKHMREULJKW:H
ZRUNHGWRJHWKHUWRFRQGXFWWHVWVDQGLGHQWLI\HYHU\SRVVLEOHFDXVHRI
IDLOXUHDQGDVDUHVXOWHYHU\WXEHLQWKDWEDWFKRIWZHQW\SDVVHGLWV
ILQDOWHVWZLWKRXWDVLQJOHIDLOXUH
7KDWZDVDYHU\LPSRUWDQWOHVVRQIRUPHWKDWSHUVRQDO
FRPPXQLFDWLRQZDVRIWHQQHFHVVDU\WREDFNXSZULWWHQLQVWUXFWLRQV
7KDWZDVWKHJHQHVLVRIZKDWEHFDPHPDQDJHPHQWE\ZDONLQJ
DURXQGDWWKH+HZOHWW3DFNDUG&RPSDQ\
,QWKRVHGD\VP\*(IULHQGVDQG,ZHUHHDFKHDUQLQJOHVVWKDQ
SHUPRQWKVRILYHRUVL[RIXVUHQWHGDODUJHKRXVHDQGKLUHGD
KRXVHNHHSHU6LQFHZHFRXOGOLYHRQDGROODUSHUGD\ZHKDGTXLWHD
ELWOHIWIRUHYHU\WKLQJHOVH2QHFRXOGEX\DIDLUO\JRRGVXLWIRU
DQGHYHQZLWKDORZVDODU\FRXOGDFWXDOO\VDYHDIHZGROODUVHDFK
PRQWK
,HQMR\HGP\H[SHULHQFHDW*(,ZDVDEOHWROHDUQPDQ\WKLQJVWKDW
ODWHUSURYHGKHOSIXOZKHQZHVWDUWHGRXURZQEXVLQHVVDQG,DOVR
GHYHORSHGFORVHIULHQGVKLSV

'$9,'3$&.$5'

ZLWKVRPHLQGLYLGXDOVZKRZRXOGODWHUPDNHWKHLURZQPDUNLQ
HOHFWURQLFV2QHZDV%REE\:LOVRQZKRKDGJUDGXDWHGIURP<DOH
DQGVSHQWKLVILUVW\HDURXWRIVFKRRODVDUDGLRRSHUDWRUDQG
QDYLJDWRURQDIOLJKWDURXQGWKHZRUOGLQDSULYDWHSODQHRSHUDWHGE\
D'U/LJKW%REE\HQGHGXSPDQDJLQJ*(
V;UD\GLYLVLRQLQ
&KLFDJR7KHQWKHUHZDV-DFN+XWFKLQVZKRSUHVHQWHGDSDSHUZLWK
PHDWDPHHWLQJRIWKH$PHULFDQ,QVWLWXWHRI(OHFWULFDO(QJLQHHUVLQ
1HZ<RUN&LW\LQWKHVSULQJRI-DFNODWHUIRUPHGKLVRZQ
EXVLQHVVLQ,OOLQRLVPDNLQJKLJKSRZHUWUDQVLVWRUV
$QRWKHUIHOORZZKROLYHGLQRXUKRXVHLQ6FKHQHFWDG\ZDV-RKQ
)OXNHZLWKZKRP,GHYHORSHGDOLIHORQJIULHQGVKLS'XULQJ:RUOG:DU
,,-RKQZRUNHGIRU$GPLUDO+\PDQ5LFNRYHULQ:DVKLQJWRQDQGDIWHU
WKHZDUKHVWDUWHGKLVRZQFRPSDQ\LQWKH1RUWKZHVWWKH-RKQ
)OXNH0DQXIDFWXULQJ&RPSDQ\DPDMRUSURGXFHURIHOHFWURQLF
LQVWUXPHQWV7KURXJK-RKQ,PHW$GPLUDO5LFNRYHUZKRZDVYHU\
KHOSIXOWRPHZKHQ,ZHQWWR:DVKLQJWRQLQDVGHSXW\
VHFUHWDU\RIGHIHQVH
-RKQ&DJHZDVDQRWKHU*(IULHQGZKRZDVODWHUWRSOD\DQLPSRUWDQW
UROHDW+3$IWHUWKHZDU-RKQZDVDQHOHFWURQLFVSURIHVVRUDW
3XUGXH8QLYHUVLW\,ZRXOGFDOODQGDVNKLPDERXWJUDGXDWLQJ
HQJLQHHUVZHPLJKWZDQWWRKLUH+HUHFRPPHQGHGDQXPEHURI
RXWVWDQGLQJSHRSOHWRXV,QZHKLUHG-RKQWRVXSHUYLVHDQ
LPSRUWDQWSURGXFWGHYHORSPHQWSURMHFWDQGODWHUKHRUJDQL]HGDQG
PDQDJHG+HZOHWW3DFNDUG/WGRXUILUVW%ULWLVKVXEVLGLDU\,Q
KHFRHGLWHGZLWK%DUQH\

7+(+3:$<

2OLYHUDWH[WERRN(OHFWURQLF0HDVXUHPHQWDQG,QVWUXPHQWDWLRQ
,QVWLOOJULSSHGE\WKHGHSUHVVLRQ*(UHGXFHGVRPHRILWVZRUN
VFKHGXOHVDQGPDQ\RIXVJRWRIIZRUNDWWKUHHLQWKHDIWHUQRRQ
7KLVDOORZHGWLPHIRUJROIRULQP\FDVHEDVNHWEDOO,OLNHGWKH
JDPHDQGHYHQWXDOO\MRLQHGDORFDOSURIHVVLRQDOWHDP:HSUDFWLFHG
LQWKHHYHQLQJVDQGRQWKHZHHNHQGVZHSOD\HGJDPHVLQVRPHRI
WKHVPDOOWRZQVDURXQGQRUWKHUQ1HZ<RUNDQG1HZ(QJODQG:H
PDGHRQO\DIHZGROODUVDZHHNQRWDSULQFHO\VXPEXWVWLOOYHU\
XVHIXOLQWKRVHHFRQRPLFDOO\GHSUHVVHGWLPHV:HSOD\HGRXUODVW
JDPHRIWKHVHDVRQLQ1HZ<RUN&LW\DWWKH7KLUW\IRXUWK6WUHHW
$UPRU\,GRQ
WUHPHPEHUPXFKDERXWWKHJDPHH[FHSWWKDWRXU
WHDPORVWDQGWKDW.DWH6PLWKDSRSXODUVLQJHUWRVVHGWKHEDOOWR
VWDUWWKHJDPH
:KLOH,ZDVLQ6FKHQHFWDG\%LOO+HZOHWWZDVEXV\GRLQJJUDGXDWH
ZRUN+HFRPSOHWHGD\HDUDW6WDQIRUGLQWKHQVSHQWWKH
IROORZLQJ\HDUJHWWLQJDPDVWHU
VGHJUHHDW0,7:KLOHLQ&DPEULGJH
KHPDQDJHGWRYLVLWPHLQ6FKHQHFWDG\DIHZWLPHVDQGZHZHUH
DEOHWRWDNHVRPHFDQRHWULSVWRJHWKHU
,HQMR\HGP\VWD\LQ6FKHQHFWDG\DQGVSHQWPDQ\ZHHNHQGVILVKLQJ
LQWKHODNHVRIQRUWKHUQ1HZ<RUN9HUPRQWDQG1HZ+DPSVKLUH,Q
WKHIDOOWKHZRRGVZHUHEHDXWLIXODQGVRPH*(IULHQGVDQG,ZRXOG
KXQWGHHUZRRGFRFNDQGRWKHUJDPH
,QWKHZLQWHU,VSHQWPDQ\ZHHNHQGVVNLLQJDW1RUWK&UHHN1HZ
<RUN6NLLQJZDVMXVWEHJLQQLQJWREHD

'$9,'3$&.$5'

'DYH3DFNDUGVNLLQJDW*RUH0DLQWDLQ1HZ<RUN

7+(+3:$<

SRSXODUVSRUW7KHSHRSOHLQ1RUWK&UHHNXVHGWKHLUVFKRROEXVHVWR
WDNHVNLHUVWRWKHWRSRI*RUH0RXQWDLQ7KHUHZHUHQXPHURXVWUDLOV
GRZQWKHPRXQWDLQIRUEHJLQQHUVDQGH[SHUWV6NLVZHUHPDGHRI
HLWKHUKLFNRU\PDSOHRUDVKDQG,EURNHWKUHHSDLUVRIVNLVPLVVLQJ
WXUQVRQWKHWUDLOVDQGJRLQJRIILQWRWKHZRRGV)RUWXQDWHO\P\OHJV
ZHUHVWURQJHUWKDQWKHVNLV7KHVHWULSVHQJHQGHUHGJUHDW
FDPDUDGHULHDPRQJWKHUHFHQWFROOHJHJUDGXDWHVZRUNLQJLQ
6FKHQHFWDG\
,Q,GURYHEDFNDFURVVWKHFRXQWU\WR3DOR$OWR,KDGD
VOHHSLQJEDJZLWKPHVR,GLGQ
WKDYHWRVWRSDWDQ\KRWHOV,QWKRVH
GD\VLWZDVSHUIHFWO\VDIHWRVOHHSDWDQ\FRQYHQLHQWSODFHDORQJWKH
KLJKZD\%\WKHQ%LOOKDGUHWXUQHGIURPWKH(DVWDQG,ZDQWHGWR
VSHQGVRPHWLPHZLWKKLP7KHSULPDU\SXUSRVHRIP\YLVLW
KRZHYHUZDVWRVHHD\RXQJZRPDQQDPHG/XFLOH6DOWHU,KDGILUVW
PHW/XGXULQJP\VHQLRU\HDUDW6WDQIRUGZKLOH,ZDVVHUYLQJPHDOV
LQKHUVRURULW\GLQLQJURRP
2QHZHHNHQGLQWKHVSULQJRIDJURXSRIP\IULHQGVZHUH
RUJDQL]LQJDWULSXSWR6DQ)UDQFLVFRWRJRGDQFLQJRQ6DWXUGD\QLJKW
DWWKH0DUN,GLGQ
WKDYHDGDWHEXWDIULHQGRIPLQHWKRXJKWKH
NQHZD\RXQJZRPDQDW'HOWD*DPPDZKHUH,KDGDNLWFKHQMRE
ZKRZRXOGSUREDEO\DJUHHWRJRZLWKPH7KHUH,ZDVLQWKHNLWFKHQ
LPPHUVHGWRP\HOERZVLQSRWVDQGSDQVZKHQ/XFLOHVWUROOHGXSWR
PHDQGVDLG:KHQGR\RXZDQWPH"
%HIRUHWKDWGDQFH,NQHZ/XFLOHYHU\VOLJKWO\6KHZDVDQDWWUDFWLYH
DQGYHU\EULJKWVWXGHQWIURP6DQ)UDQFLVFRRXUQLJKWRIGDQFLQJ
EORVVRPHGLQWRD

'$9,'3$&.$5'

URPDQFHWKDWFRQWLQXHGHYHQDIWHUZHKDGJUDGXDWHGDQGZHUHWKUHH
WKRXVDQGPLOHVDSDUW,QWKH\HDUVDIWHURXUJUDGXDWLRQ,KDGJRWWHQ
WRPHHW/X
VSDUHQWVDQGKHUVLVWHU$XGUH\ZKRZDVDOVRDVWXGHQW
DW6WDQIRUG$IWHUDZKLOH/XDQG,EHJDQWRFRQWHPSODWHPDUULDJH
IDLUO\VHULRXVO\
'XULQJP\YLVLWWR3DOR$OWR,DOVRJRWWRJHWKHUZLWK%LOO+HZOHWWDQG
DWWKDWWLPHZHKDGRXUILUVWRIILFLDOEXVLQHVVPHHWLQJ7KHPLQXWHV
RIWKHPHHWLQJGDWHG$XJXVWDUHKHDGHGWHQWDWLYH
RUJDQL]DWLRQSODQVDQGDWHQWDWLYHZRUNSURJUDPIRUDSURSRVHG
EXVLQHVVYHQWXUH7KHSURGXFWLGHDVZHGLVFXVVHGLQFOXGHG
KLJKIUHTXHQF\UHFHLYHUVDQGPHGLFDOHTXLSPHQWDQGLWZDVQRWHG
WKDWZHVKRXOGPDNHHYHU\DWWHPSWWRNHHSXSRQ>WKHQHZO\
DQQRXQFHGWHFKQRORJ\RI@WHOHYLVLRQ2XUSURSRVHGQDPHIRUWKH
QHZFRPSDQ\7KH(QJLQHHULQJ6HUYLFH&RPSDQ\
%\WKHVSULQJRI/XDQG,KDGGHFLGHGWRJHWPDUULHG6KH
UHVLJQHGKHUMREDVVHFUHWDU\WRWKH6WDQIRUGUHJLVWUDUDQGWRRNWKH
2YHUODQG([SUHVVWR&KLFDJRFKDQJLQJWUDLQVWKHUHWRUHDFK
6FKHQHFWDG\,WZDVDIRXUGD\MRXUQH\,WLVDPHDVXUHRIKRZ
VFDUFHMREVZHUHDWWKHWLPHWKDW,GLGQ
WGDUHWDNHWLPHRIIIURP*(
DQGULVNORVLQJP\KLJKHUSD\LQJMRE,GLGQ
WZDQWWKHSHRSOHDW*(
WRKDYHDQ\LQGLFDWLRQWKDW,GLGQ
WSODQWRFRPHEDFN)RUWKDW
UHDVRQ,RQO\WRRNRII)ULGD\DIWHUQRRQVRZHFRXOGJHWPDUULHG
VSHQGRXU
KRQH\PRRQRYHUWKHZHHNHQGLQ0RQWUHDODQG,FRXOGEHEDFNDW
ZRUN0RQGD\PRUQLQJ
'XULQJWKRVHPRQWKV)UHG7HUPDQKDGEHHQWKLQN

7+(+3:$<

LQJDERXWKRZ%LOODQG,PLJKWSURFHHGDQGLQWKHVXPPHURI
KHDUUDQJHGD6WDQIRUGIHOORZVKLSIRUPH,WFDUULHGDVWLSHQGRI
D\HDUEXWPRUHLPSRUWDQWLWUHXQLWHGPHZLWK+HZOHWW7KH
IHOORZVKLSRIIHUHGDQLQWHUHVWLQJWHFKQLFDOFKDOOHQJH,ZDVWRZRUN
ZLWKD\RXQJ6WDQIRUGLQYHQWRU5XVV9DULDQRQRQHRIKLVLGHDV7KH
WDVNZDVWRPRGLI\DYDFXXPWXEHWRRSHUDWHDWKLJKHUIUHTXHQFLHV
,WZDVRQHSDUWRIDODUJHUSURMHFWWKDWZRXOGPDNH5XVVDQGKLV
EURWKHU6LJIDPRXVWKHNO\VWURQWXEHWKHWHFKQRORJ\EHKLQGUDGDU
DQGSDUWLFOHDFFHOHUDWRUV
0\ERVVHVDW*(JDYHPHWKHLUEOHVVLQJDQGDQ

/XFLOH3DFNDUGDVWKH3DFNDUGVDUHDERXWWROHDYH6FKHQHFWDG\WR
GULYHFURVVFRXQWU\WR&DOLIRUQLDLQ

'$9,'3$&.$5'

XQSDLGOHDYHRIDEVHQFHDQGLQ$XJXVW/XDQG,GURYHEDFNWR
&DOLIRUQLDZLWKDXVHG6HDUV5RHEXFNGULOOSUHVVLQWKHUXPEOHVHDW
,WZRXOGEH+3
VILUVWSLHFHRIHTXLSPHQW
,GLGQ
WIRUPDOO\UHVLJQIURP*(XQWLOQHDUO\D\HDUODWHU/XFLOH
DOZD\VUHPHPEHUHGWKHPRPHQWVKHGURSSHGP\OHWWHURI
UHVLJQDWLRQLQWKHPDLOER[LQ-XQH0DLOLQJWKDWOHWWHUFXWRXU
ILQDQFLDOWLHV%XWZHZHUHKRSHIXODQGH[FLWHGDERXWZKDWWKHIXWXUH
KDGLQVWRUH
7HUPDQKDGDUUDQJHGIRUPHWRGRWKHODERUDWRU\ZRUNRQWKH9DULDQ
UHVHDUFKSURMHFWXSDW&KDUOLH/LWWRQ
VSODFH/LWWRQ(QJLQHHULQJ
/DERUDWRULHVLQ5HGZRRG&LW\+HKDGDOVRDUUDQJHGIRUPHWRJHW
FUHGLWIRUP\ZRUNDW*(VRWKDW,FRXOGJHWP\((GHJUHHIURP
6WDQIRUGZLWKMXVWRQH\HDURIUHVLGHQFH
/XJRWKHUMREEDFNDWWKH6WDQIRUGUHJLVWUDU
VRIILFH:RUNLQJ
0RQGD\WKURXJK)ULGD\DQGKDOIRI6DWXUGD\VKHHVVHQWLDOO\
VXSSRUWHGXVIRUWKHQH[WIHZ\HDUV%XWPRVWLPSRUWDQW+HZOHWW
ZDVEDFNLQWRZQDVZHOO'XULQJWKHLQWHULPKHKDGREWDLQHGKLV
PDVWHU
VGHJUHHIURP0,7DQGXSRQJUDGXDWLRQKDGH[DFWO\RQHMRE
RIIHUZLWK-HQVHQ6SHDNHULQ&KLFDJR%XW7HUPDQFDPHWKURXJKIRU
KLPWRRSXWWLQJ%LOOWRJHWKHUZLWKD6DQ)UDQFLVFRGRFWRUZKRZDV
LQWHUHVWHGLQGHYHORSLQJVRPHPHGLFDOHTXLSPHQW

&KDSWHU
*DUDJH%HFRPHV:RUNVKRS
12:7+$7%,//$1',ZHUHEDFNWRJHWKHUZHVWDUWHGSXWWLQJRXU
SODQVWRZRUN%LOOKDGIRXQGDWZRVWRU\KRXVHRQ$GGLVRQ$YHQXHLQ
3DOR$OWRDQG/XDQG,UHQWHGWKHORZHUIORRU%LOOZKRDWWKHWLPH
ZDVVWLOODEDFKHORUOLYHGLQDOLWWOHEXLOGLQJRXWEDFN7KHUHZDVDOVR
DRQHFDUJDUDJHDQGWKDWEHFDPHRXUZRUNVKRS (GLWRU
VQRWH,Q
WKHVWDWHRI&DOLIRUQLDGHVLJQDWHGWKH$GGLVRQ$YHQXHJDUDJH
DVD&DOLIRUQLD+LVWRULFDO/DQGPDUNDQGWKHELUWKSODFHRI6LOLFRQ
9DOOH\
%HJLQQLQJLQWKHDXWXPQRIP\VFKHGXOHZDVWRJRWRFODVVHV
DW6WDQIRUGPRVWPRUQLQJVZRUNZLWK%LOODQGDOVRILQGWLPHWRVWXG\
LQWKHDIWHUQRRQWKHQJRXSWR/LWWRQ/DERUDWRULHVLQWKHHYHQLQJ,W
KHOSHGWKDW&KDUOLH/LWWRQGLGQ
WOLNHJHWWLQJVWDUWHGHDUO\LQWKHGD\
EXWLQVWHDGZRUNHGXQWLORU$02WKHUZLVH,
PQRWVXUH
KRZ,FRXOGKDYHMXJJOHGDOO

'$9,'3$&.$5'

WKLVZRUNDQGVWXG\DQGVWLOOKDYHKDGWLPHIRUDKRPHOLIH
:LWKP\H[SHULHQFHDW*(DQGZLWK&KDUOLH
VKHOS,ZDVTXLWH
FDSDEOHRIPDNLQJWKHYDFXXPWXEHPRGHOVWRWHVW5XVV9DULDQ
V
WKHRULHV0\UHODWLRQVKLSZLWK&KDUOLHGHYHORSHGLQWRDORQJDQG
HQGXULQJIULHQGVKLS&KDUOLHZDVDEOHWRGRHYHU\WKLQJEHWWHUWKDQ
DQ\RQHHOVH,QWKHIDOORIZKHQKHZDQWHGWREXLOGDQHZ
SODQWKHGLGQ
WKLUHDFRQWUDFWRUWRGRWKHH[FDYDWLQJ,QVWHDGKH
ERXJKWD&DWHUSLOODUORDGHUDQGH[FDYDWHGWKHVLWHKLPVHOI,KHOSHG
KLPDQGEHFDPHIDLUO\SURILFLHQWZLWKDEXOOGR]HU:KHQ%LOO+HZOHWW
DQG,DFTXLUHGDUDQFKLQ,ERXJKWDEXOOGR]HUDQGKHOSHGEXLOG
PRUHWKDQWZHQW\PLOHVRIURDGV

'DYH3DFNDUGEXLOGLQJWKHURDGVDW6DQ)HOLSHUDQFKQHDU6DQ-RVH
&DOLIRUQLD

7+(+3:$<

&KDUOLH/LWWRQKDGVWDUWHGZLWKWKH)HGHUDO7HOHJUDSK&RPSDQ\LQ
3DOR$OWR%XWZKHQ6RWKHQHV%HKQZKRUDQ)HGHUDO7HOHJUDSKZLWK
KLVEURWKHU+HUQDQGPRYHGWKHFRPSDQ\WR1HZ-HUVH\LQ
&KDUOLHGHFLGHGWRVHWXSKLVRZQPDQXIDFWXULQJFRPSDQ\+H
WKRXJKWWKHYDFXXPWXEHPDQXIDFWXULQJHTXLSPHQWWKDWZDVRQWKH
PDUNHWZDVQRWJRRGHQRXJKVRKHGHFLGHGWRGHVLJQDQG
PDQXIDFWXUHKLVRZQJODVVEORZLQJODWKHVIRUWKHELJNLORZDWW
WXEHVWKDWZHUHXVHGE\UDGLRWUDQVPLWWHUV+HQRVRRQHUPDGHKLV
ILUVWODWKHZKHQ5&$ERXJKWLWKLVVHFRQGZDVLPPHGLDWHO\ERXJKW
E\:HVWLQJKRXVH

/LWWRQ$QVZHUVWKH&DOO
0RVWRIWKHSHRSOHDURXQGWKHFRXQWU\GRLQJYDFXXPWXEHZRUN
NQHZDERXW&KDUOLH
VDFWLYLW\DQGRUGHUHGKLVQHZGHVLJQV+LVPRVW
LPSRUWDQWFRQWULEXWLRQZDVWKHGHVLJQRIDORZYDSRUSUHVVXUHRLO
DOOPHWDOYDFXXPSXPS8SXQWLOWKHQPRVWRIWKHYDFXXPSXPSV
KDGEHHQPHUFXU\YDSRUSXPSVVXFKDVWKHSXPSV,XVHGDW*(
7KHVHKDGWKHGLVDGYDQWDJHRIUHTXLULQJWKDWWKHPHUFXU\YDSRU
WUDSVEHFRROHGE\OLTXLGDLU6RXUFHVRIORZYDSRUSUHVVXUHRLOLQWKH
FRXQWU\ZHUHYHU\OLPLWHGEXW&KDUOLHKDGGLVFRYHUHGWKDWE\
GLVWLOOLQJDFHUWDLQFRPPHUFLDOEUDQGRIPRWRURLOKHFRXOGSURGXFH
KLVRZQORZYDSRUSUHVVXUHRLO
,QDWWKHXUJLQJRISK\VLFLVWV$OEHUW(LQVWHLQDQG/HR6]LODUG
3UHVLGHQW5RRVHYHOWHVWDEOLVKHGDQ

'$9,'3$&.$5'

HQWHUSULVHWRSURGXFHDQDWRPLFH[SORVLRQXVLQJXUDQLXPILVVLRQ7KH
SHRSOHLQYROYHGLQWKLVXQGHUWDNLQJODWHUNQRZQDVWKH0DQKDWWDQ
3URMHFWGHFLGHGWRXVHDSURFHVVUHTXLULQJDODUJHYROXPHRI
ORZYDSRUSUHVVXUHRLO$QGWKH\GHFLGHGWKDW&KDUOLHFRXOGSURGXFH
WKHRLOTXLFNHUDQGEHWWHUWKDQDQ\RQHHOVH,QDW\SLFDOO\/LWWRQ
PDQQHUKHRUGHUHGWKHODUJHVWUHGZRRGZDWHUWDQNDYDLODEOHVHWLW
XSLQWKUHHRUIRXUZHHNVDQGLQVWDOOHGWKHVWLOOV7KHPRWRURLOZDV
GHOLYHUHGLQUDLOURDGWDQNFDUVWR5HGZRRG&LW\DQGWKHQ&KDUOLH
GLVWLOOHGLWLQKLVZDWHUWDQNEXLOGLQJ$OWKRXJK,KDGQRWEHHQFOHDUHG
WRNQRZDERXWWKHSURMHFW,ZDVZRUNLQJVRFORVHO\ZLWK&KDUOLHWKDW
,NQHZDOODERXWLW
&KDUOLH
VWDOHQWVDOVRH[WHQGHGWRWKHIRXUZKHHOGULYHKHZDVWKH
ILUVWSHUVRQWRXVHDIRXUZKHHOGULYHYHKLFOHWRH[SORUHWKH6LHUUD
1HYDGD+HFRQVWUXFWHGKLVRZQE\OLQNLQJWZROLJKWWUXFNFKDVVLV
HDFKZLWKDPRWRUDQGDWUDQVPLVVLRQWRSRZHUWZRRILWVZKHHOV
$IWHUWKHZDUKHZDVDPRQJWKHILUVWWRUHFRJQL]HKRZHIIHFWLYHD
-HHSFRXOGEHLQPDQHXYHULQJLQWKH6LHUUD%LOODQG,ERXJKWD-HHS
DQGRQRXUILUVWWULSLQWKH'HVRODWLRQ9DOOH\DUHDZHJRWVWXFNRQD
URFNZLWKDOOIRXUZKHHOVRIIWKHJURXQG,WWRRNDOLWWOHWLPHWREXLOG
XSURFNVXQGHUWKHZKHHOVDQGJHWJRLQJDJDLQ:HERXJKWDVWDNH
WUXFNODUJHHQRXJKWRFDUU\WKH-HHSDWUDLOHUWRIROORZWKHWUXFNDQG
DVWDWLRQZDJRQZLWKWKHEDFNILWWHGRXWWRVOHHSLQ(YHU\\HDUD
JURXSRIXVLQFOXGLQJ1RHO(OGUHG'DYH6FRWW5D\'HPHUH%LOO
+HZOHWWDQGP\VHOIZHQWRQDGHHUKXQWLQJWULSLQ1HYDGDRU
0RQWDQDIRUWZRZHHNV$VDUHVXOWDFORVH

7+(+3:$<

IULHQGVKLSGHYHORSHGDPRQJ%LOO+HZOHWWDQGPH1RHO(OGUHGDQG
WKHRWKHUSHRSOHIURPWKHFRPSDQ\ZKRZHQWZLWKXV:HDOZD\VJRW
WZRGHHUHDFKDQGVRPHWLPHVDQHON
'XULQJWKRVHPRQWKVLQZKHQ%LOODQG,ZHUHJHWWLQJVWDUWHGLQ
RXU3DOR$OWRJDUDJHZHZHUHLQIUHTXHQWFRQWDFWZLWKRXU6WDQIRUG
FODVVPDWHDQGFORVHIULHQG(G3RUWHU(GKDGEHHQVHOOLQJ
DLUFRQGLWLRQLQJHTXLSPHQWSULPDULO\WRKRWHOVLQWKH6DFUDPHQWR
9DOOH\DQGE\QRZZDVGRLQJZHOOHQRXJKWKDWKHGHFLGHGWRVWD\LQ
WKHYDOOH\UDWKHUWKDQMRLQ%LOODQGPH%XW(GGLGDVNXVWRGHVLJQ
VRPHFXVWRPFRQWUROHTXLSPHQWIRUKLVDLUFRQGLWLRQHUV
,QWKHIDOORIZHKDGQRW\HWGHFLGHGRQZKDWSURGXFWVZH
VKRXOGGHYHORSDQGPDQXIDFWXUHDQGVRZHGLGDQXPEHURIMREV
WKDWFDPHWRRXUDWWHQWLRQ7,0RVHOH\ZDVDORFDOHQWUHSUHQHXU
DQGSUHVLGHQWRIKLVRZQFRPSDQ\'DOPR9LFWRUKHFDPHWRXVZLWK
DQXPEHURILGHDVIRUSURGXFWVLQRXUHDUO\GD\V$WRQHSRLQWKH
HYHQGHFLGHGWRSURGXFHKDUPRQLFDV
0RVHOH\NQHZDERXWDQDXGLRRVFLOODWRU%LOOKDGGHYHORSHGDQGKH
DVNHGXVWRSURGXFHDWXQHUIRUKLVKDUPRQLFDXVLQJWKLVRVFLOODWRU,W
WXUQHGRXWWKDWWKHRVFLOODWRUZDVQRWQHDUO\DFFXUDWHHQRXJKWRGR
WKLV,GRQ
WUHPHPEHUZKDWHYHUFDPHRI0RVHOH\
VKDUPRQLFDV
0RVHOH\DOVRZDVWU\LQJWRGHYHORSDQH[HUFLVHUXVLQJHOHFWULFDO
SXOVHVWRDFWLYDWHWKHPXVFOHV+HKDGDQDFFRPPRGDWLQJZLIHDQG
ZHVSHQWRQH6XQGD\DSSO\LQJHOHFWULFDOFXUUHQWVRIGLIIHUHQW
IUHTXHQFLHVWRDFWLYDWH

'$9,'3$&.$5'

KHUOHJPXVFOHV1HLWKHURI0RVHOH\
VSURMHFWVZDVSXWLQWR
SURGXFWLRQEXWKLVDVVLJQPHQWVSURYLGHGDOLWWOHLQFRPHIRU%LOODQG
PH
:HGHVLJQHGDQGEXLOWDYDULDEOHIUHTXHQF\PRWRUFRQWUROOHUIRUWKH
/LFN2EVHUYDWRU\DWRSQHDUE\0RXQW+DPLOWRQRXUFRQWUROOHUHQDEOHG
WKHWHOHVFRSHWRWUDFNDFFXUDWHO\:HDOVRLQYHQWHGDVLJQDOLQJGHYLFH
WRLQGLFDWHDIRXOOLQHUROOIRUDORFDOERZOLQJDOOH\
7KHVHPLVFHOODQHRXVMREVPDGHXVPRUHVXUHRIRXUVHOYHVDQGRXU
VNLOOV7KH\DOVRUHYHDOHGVRPHWKLQJZHKDGQ
WSODQQHGEXWWKDWZDV
RIJUHDWEHQHILWWRRXUSDUWQHUVKLSQDPHO\WKDWRXUDELOLWLHVWHQGHG
WREHFRPSOHPHQWDU\%LOOZDVEHWWHUWUDLQHGLQFLUFXLWWHFKQRORJ\
DQG,ZDVEHWWHUWUDLQHGDQGPRUHH[SHULHQFHGLQPDQXIDFWXULQJ
SURFHVVHV7KLVFRPELQDWLRQRIDELOLWLHVZDVSDUWLFXODUO\XVHIXOLQ
GHVLJQLQJDQGPDQXIDFWXULQJHOHFWURQLFSURGXFWV
)URPRXUHIIRUWVLQEXLOGLQJYDULRXVGHYLFHVZH
GPDGHDOLWWOH
PRQH\DQGLQWKHEDFNRIRXUPLQGVZDVJURZLQJWKHQRWLRQWKDW
MXVWPD\EHRQHRIWKHVHGHYLFHVFRXOGEHGHYHORSHGLQWRDYLDEOH
SURGXFW,QUHFRJQLWLRQRIRXUSURJUHVVVPDOODVLWZDV%LOODQG,
EHJDQE\VLJQLQJDSDUWQHUVKLSDJUHHPHQW,GRQ
WUHPHPEHU
WKHH[DFWWHUPVRIWKHDJUHHPHQWEXW,NQRZLWZDVSUHWW\LQIRUPDO
%LOODGYDQFHGVRPHPRQH\WREX\VRPHFRPSRQHQWVDQGWRROVDQG,
FRQWULEXWHGWKHHTXLSPHQW,EURXJKWIURP6FKHQHFWDG\:HIOLSSHGD
FRLQWRVHHZKRVHQDPHZRXOGFRPHILUVWLQWKHFRPSDQ\QDPH
1HHGOHVVWRVD\%LOOZRQ
)UHG7HUPDQZDVRQFHDJDLQEHKLQGWKHQH[WVWHS

7+(+3:$<

%DFNLQD%HOO/DEVVFLHQWLVWQDPHG+DUROG%ODFNKDGZULWWHQD
SDSHUDERXWDQHZLGHDFDOOHGQHJDWLYHIHHGEDFN,WZDVLGHDOIRU
WHOHSKRQHUHSHDWHUVRUDPSOLILHUVEHFDXVHE\XVLQJWKLVWHFKQLTXH
WKHJDLQRIDQDPSOLILHUFRXOGEHPDGHUHODWLYHO\LQGHSHQGHQWRI
FKDQJHVLQWKHFKDUDFWHULVWLFVRIWKHYDFXXPWXEHLQYROYHG)RUWKH
VDPHUHDVRQLWEHFDPHXVHIXOLQHOHFWURQLFPHDVXULQJLQVWUXPHQWV
,QWKHVSULQJRIZRUNLQJLQ7HUPDQ
VODERUDWRU\DJURXSRI
VWXGHQWVLQFOXGLQJ%LOO+HZOHWWGHYHORSHGVRPHODERUDWRU\
HTXLSPHQWDSSOLFDWLRQVIRUQHJDWLYHIHHGEDFN%LOO
VLPSRUWDQW
FRQWULEXWLRQZDVWKHUHVLVWDQFHVWDELOL]HGDXGLRRVFLOODWRU7HUPDQ
DOVRPDGHDQLPSRUWDQWFRQWULEXWLRQ%\XVLQJVRPHDSSUR[LPDWLRQV
KHUHGXFHGWKH%ODFNHTXDWLRQVWRDVLPSOHUIRUPWKDWZDVPXFK
HDVLHUWRXVH
%LOO
VDXGLRRVFLOODWRUUHSUHVHQWHGWKHILUVWSUDFWLFDOORZFRVWPHWKRG
RIJHQHUDWLQJKLJKTXDOLW\DXGLRIUHTXHQFLHVQHHGHGLQ
FRPPXQLFDWLRQVJHRSK\VLFVPHGLFLQHDQGGHIHQVHZRUN7KHDXGLR
RVFLOODWRUZDVWREHFRPHWKH+HZOHWW3DFNDUG&RPSDQ\
VILUVW
SURGXFW
/DWHUWKDW\HDUDIWHUZHVWDUWHGXSLQWKHJDUDJH7HUPDQDUUDQJHG
IRU+DUROG%XWWQHUDQHQJLQHHULQJJUDGXDWHRI6WDQIRUGDQG
,QWHUQDWLRQDO7HOHSKRQHDQG7HOHJUDSK
VYLFHSUHVLGHQWRIUHVHDUFK
DQGGHYHORSPHQWWRWDNHDORRNDW%LOO
VRVFLOODWRU%XWWQHUZDVVR
LPSUHVVHGWKDWKHRIIHUHGXVIRUWKHIRUHLJQSDWHQWULJKWVDQG
KHOSLQJHWWLQJWKH86SDWHQW
,Q1RYHPEHUZHEXLOWDPRGHORIWKHDXGLRRVFLOODWRUDQG%LOOWRRNLW
XSWR3RUWODQG2UHJRQWRDQ

'$9,'3$&.$5'

,QVWLWXWHRI5DGLR(QJLQHHUVFRQIHUHQFH7KHUHVSRQVHZDVSRVLWLYH
HQRXJKWKDWZHGHFLGHGWRPDNHDUXQIRULW:HEXLOWWKHILUVW
SURGXFWLRQPRGHOE\&KULVWPDVDQG,FOHDUO\UHFDOOKDYLQJWKLVXQLW
VLWWLQJRQWKHPDQWHODERYHWKHILUHSODFH7KHUHZHWRRNSLFWXUHVRILW
DQGSURGXFHGDWZRSDJHVDOHVEURFKXUHWKDWZHVHQWWRDOLVWRI
DERXWWZHQW\ILYHSRWHQWLDOFXVWRPHUVSURYLGHGE\)UHG7HUPDQ
:HGHVLJQDWHGWKLVILUVWSURGXFWWKH0RGHO$EHFDXVHZHWKRXJKW
WKHQDPHZRXOGPDNHXVORRNOLNHZH
GEHHQDURXQGIRUDZKLOH:H
ZHUHDIUDLGWKDWLISHRSOHNQHZZH
GQHYHUDFWXDOO\GHYHORSHG
GHVLJQHGDQGEXLOWDILQLVKHGSURGXFWWKH\
GEHVFDUHGRII2XU
SULFLQJZDVHYHQPRUHQDLYH:HVHWLWDWQRWEHFDXVHRIDQ\
FRVWFDOFXODWLRQVEXWEHFDXVHRIDOOWKLQJVLWUHPLQGHGXVRI



RU)LJKW WKHVORJDQXVHGLQWKHFDPSDLJQWRHVWDEOLVKWKH
QRUWKHUQERUGHURIWKH8QLWHG6WDWHVLQWKH3DFLILF1RUWKZHVW :H
VRRQGLVFRYHUHGZHFRXOGQ
WDIIRUGWREXLOGWKHPDFKLQHVIRUWKDW
SULFH/XFNLO\RXUQHDUHVWFRPSHWLWLRQZDVDRVFLOODWRUIURP
*HQHUDO5DGLRZKLFKJDYHXVFRQVLGHUDEOHURRPWRPDQHXYHU
:HZHUHQ
WH[SHFWLQJPXFKIURPRXUILUVWPDLOLQJEXWDPD]LQJO\
HQRXJKLQWKHILUVWFRXSOHRIZHHNVRI-DQXDU\EDFNFDPHVHYHUDO
RUGHUVDQGVRPHZHUHDFFRPSDQLHGE\FKHFNV
&KDUOLH/LWWRQZDVDWUHPHQGRXVKHOSLQJHWWLQJXVVWDUWHGLQ
SURGXFWLRQ+HJDYHXVDFFHVVWRKLVVKRSVRZHFRXOGGRWKLQJVZH
ZHUHQ
WDEOHWRDFFRPSOLVKLQWKHJDUDJHRQRXURZQ8VLQJ&KDUOLH
V
IRXQGU\,KDGPDGH

7+(+3:$<

WKHSDWWHUQVDQGFDVWWKHDOXPLQXPSDUWVIRUWKHDLUFRQGLWLRQLQJ
FRQWUROGHYLFHVZHVXSSOLHG(G3RUWHU/LWWRQDOVRKDGDQHQJUDYLQJ
PDFKLQHVRZH
GEHHQDEOHWRHQJUDYHWKHKRWHOQDPHVRQWKH
FRQWUROV

)DEULFDWLQJ,QVWUXPHQW3DQHOV
:KHQZHVWDUWHGPDNLQJWKHDXGLRRVFLOODWRUVZHERXJKWWKH
FDELQHWVEXWPDGHWKHSDQHOVRXUVHOYHV:HVDZHGWKHPRXWRI
DOXPLQXPDQGGULOOHGWKHKROHV7KHQZH
GVSUD\SDLQWWKHPDWKRPH
DQGXVHWKHNLWFKHQRYHQWREDNHRQWKHSDLQW7KHQ,
GWDNHWKH
SDQHOVXSWR&KDUOLH
VDQGHQJUDYHDOOWKHGHVLJQDWLRQVRQWKHSDQHOV
WKURXJKWKHSDLQW1H[WZHFDOLEUDWHGWKHGLDOVE\VHWWLQJXSD
IUHTXHQF\VWDQGDUG7KHQZHPDUNHGWKHGLDOZLWKDSHQFLODQG,
GJR
EDFNXSWR&KDUOLH
VDQGHQJUDYHWKRVHSHQFLOOLQHV,QWKHEHJLQQLQJ
HDFKRIWKHRVFLOODWRUVZDVLQGLYLGXDOO\FDOLEUDWHG7KHUHZHUHDOZD\V
DIHZWULFNVLQYROYHGLQXVLQJWKHHQJUDYLQJHTXLSPHQWDQG&KDUOLH
NQHZWKHPDOO
,VXSSRVHZHFRXOGKDYHHYHQWXDOO\GRQHPDQ\RIWKHVHWKLQJVRQ
RXURZQ%XWKDYLQJ&KDUOLH/LWWRQDQGKLVHTXLSPHQWWKHUHPDGHDQ
LPSRUWDQWGLIIHUHQFHGXULQJDSHULRGZKHQWLPHDQGPRQH\ZHUH
YHU\WLJKW+HQHYHUVDZXVDVFRPSHWLWRUVEXWDOZD\VDV
FRPSDWULRWV
&KDUOLHGLGVRPHWKLQJHOVHLPSRUWDQWDVZHOO+HORYHGWRH[SRXQG
DQGSKLORVRSKL]HRQQHZLGHDV$QGZKHQHYHUKHZDQWHGWROHDUQ
PRUHDERXWVRPHWKLQJKH
GRUJDQL]HDVHPLQDUDWKLVVKRSDQG
LQYLWHPHDQGD

'$9,'3$&.$5'

IHZRWKHUSHRSOHXVXDOO\IURP6WDQIRUG$PRQJWKLVJURXSZDV$OH[
3RQLDWRIIZKRODWHUIRXQGHG$PSH[&RUSRUDWLRQ7KHVHPLQDUV
RFFXUUHGVHYHUDOWLPHVGXULQJ,FDQUHPHPEHUDQXPEHURI
GLVFXVVLRQVDERXWSK\VLFDOSKHQRPHQDVXFKDVZDYHWKHRU\DQG
TXDQWXPPHFKDQLFV:HDOVRWDONHGDERXWEXVLQHVVSKLORVRSK\
&KDUOLHZDVYHU\FRQVHUYDWLYHLQWKLVUHJDUG$VHFFHQWULFDVKHZDV
KHNQHZ\RXKDGWRVXSSRUW\RXUFRPSDQ\DQGSD\\RXUELOOV,
OHDUQHGDORWDERXWUXQQLQJDEXVLQHVVIURPWKRVHFRQYHUVDWLRQV
,DOVRJDLQHGDORWIURPWZRFODVVHV,WRRNDW6WDQIRUGWKDWIDOORI
EXVLQHVVODZDQGPDQDJHPHQWDFFRXQWLQJ,KDGVLJQHGXS
EHFDXVH,WKRXJKWWKH\PLJKWEHRIVRPHXVHLQRXUQHZEXVLQHVV
/RRNLQJEDFNWKH\ZHUHDPRQJWKHPRVWLPSRUWDQWFRXUVHV,HYHU
WRRNEHFDXVHWKHILUVWWDXJKWPHHQRXJKDERXWSDUWQHUVKLSV
FRQWUDFWVDQGLQFRUSRUDWLRQVRWKDWIRUWKHQH[WIHZ\HDUVZHUDUHO\
UHTXLUHGWKHVHUYLFHVRIODZ\HUVDQGWKHVHFRQGKHOSHGPHVHWXS
WKHERRNVDQGZLWK/X
VKHOSLQWKHHYHQLQJVDQGRQ6XQGD\VNHHS
WKHPEDODQFHG

7KH'LVQH\6DOH0\WKVDQG)DFWV
:KHQ%LOO+HZOHWWWRRNWKHRULJLQDOPRGHORIWKHDXGLRRVFLOODWRUWR
WKHWHFKQLFDOFRQIHUHQFHLQ3RUWODQGLQ1RYHPEHUKHVKRZHGLW
WRVHYHUDOSHRSOH$PRQJWKRVHZKRH[SUHVVHGFRQVLGHUDEOHLQWHUHVW
LQLWZDV%XG+DZNLQVWKHFKLHIVRXQGHQJLQHHUIURP:DOW

7+(+3:$<

'LVQH\6WXGLRV+DZNLQVZDVGHYHORSLQJWKHVRXQGHTXLSPHQWIRU
'LVQH\
VLQQRYDWLYHPRYLH)DQWDVLDDQGZDVSODQQLQJWREX\IRU
HDFKDXGLRRVFLOODWRUVIURPWKH*HQHUDO5DGLR&RPSDQ\:KHQ
%LOOWROGKLPRXUPRGHOZRXOGFRVWOHVVWKDQ+DZNLQVGHFLGHG
WREX\RXURVFLOODWRUVLQVWHDGRI*HQHUDO5DGLR
V,QWKHHQGDIWHU
+DZNLQVKDGXVPDNHHQRXJKPRGLILFDWLRQVLQWKHRULJLQDOGHVLJQIRU
WKHUHVXOWWREHWKH0RGHO%KHRUGHUHGHLJKWXQLWVDW
HDFK
7KURXJKWKH\HDUVWKHUHKDVEHHQFRQVLGHUDEOHRYHUVWDWHPHQWDERXW
WKLVVDOHWR'LVQH\&RQWUDU\WRVRPHYLHZV+3GLGQRWPDNHD
WHFKQLFDOFRQWULEXWLRQWRWKHSURGXFWLRQRI)DQWDVLD,QVWHDGZH
HQDEOHG'LVQH\WREX\DJRRGSURGXFWDWDSULFHFRQVLGHUDEO\OHVV
WKDQRXUFRPSHWLWRU
V,W
VDOVREHHQVDLGWKDWLILWKDGQ
WEHHQIRURXU
VDOHWR'LVQH\ZHPLJKWKDYHJRQHRXWRIEXVLQHVV7KHWUXWKRIWKH
PDWWHULVWKDWZLWKRUZLWKRXWWKH'LVQH\VDOH%LOODQG,ZHUH
GHWHUPLQHGWRPRYHDKHDGZLWKRXUFRPSDQ\
$QRWKHUJHQWOHPDQZKRWRRNDQHDUO\LQWHUHVWLQRXUDFWLYLWLHVDQG
ZKRZDVGHVWLQHGWRSOD\DQLPPHQVHO\LPSRUWDQWUROHLQWKHVXFFHVV
RI+HZOHWW3DFNDUGZDV1RUPDQ1HHO\1RUPZDVD6RXWKHUQ
&DOLIRUQLDPDQXIDFWXUHUV
UHSUHVHQWDWLYHKDQGOLQJUDGLRUHFRUGLQJ
DQGRWKHUHOHFWULFDOHTXLSPHQW+HKDGKHDUGDERXW+HZOHWW
V
RVFLOODWRUDQGLQYLWHG%LOOWRVSHDNDWWKH5DGLR(QJLQHHUV&OXELQ/RV
$QJHOHV7KHHYHQLQJGLGQRWVWDUWRXWRQDSURPLVLQJQRWHIRULW
EHJDQZLWKWKHFOXESUHVLGHQWLQWURGXFLQJ%LOO+HZOHWWDV%LOO
3DFNDUGEXWWKHSUHVHQWDWLRQLWVHOIGUHZDVWURQJ

'$9,'3$&.$5'

UHVSRQVHQRQHPRUHVRWKDQWKHRQHIURP1RUPKLPVHOI
6KRUWO\WKHUHDIWHU1RUPYLVLWHG%LOODQGPHLQRXU$GGLVRQ$YHQXH
JDUDJH:HKDGDOUHDG\DSSURDFKHGKLPDERXWEHLQJRXUILUVWVDOHV
UHSUHVHQWDWLYHDQGGXULQJKLVYLVLWZHUHDFKHGDYHUEDODJUHHPHQW
DQGVHDOHGLWZLWKDKDQGVKDNH7KDWZDVWKHZD\ZHZHUHWR
FRQGXFWRXUEXVLQHVVZLWK1RUPIRUWKHQH[WILIW\\HDUV
'XULQJRXUFRQYHUVDWLRQ1RUPHPSKDVL]HGWKHLPSRUWDQFHRIRXU
RIIHULQJPRUHWKDQRQHSURGXFWEHFDXVHDVLQJOHSURGXFWUDUHO\PDGH
DVXFFHVVIXOFRPSDQ\7KHSURGXFWVWKDW%LOODQGKLVDVVRFLDWHVKDG
GHYHORSHGDW6WDQIRUGLQWKHVSULQJRILQFOXGHGDQXPEHURI
LQVWUXPHQWVGHVLJQHGWRPDNHDXGLRIUHTXHQF\PHDVXUHPHQWV,Q
DGGLWLRQWR%LOO
VRVFLOODWRUZHGHFLGHGWRGHYHORSDIXOOOLQHRI
DXGLRIUHTXHQF\PHDVXULQJLQVWUXPHQWVEDVHGRQWKLVZRUN7KDW
PHDQWZHZRXOGEHLQGLUHFWFRPSHWLWLRQZLWKWKH*HQHUDO5DGLR
&RPSDQ\
$WWKHHQGRIRXUILUVWIXOO\HDULQEXVLQHVVRXUVDOHVWRWDOHG
DQGZHKDGPDGHLQSURILWV:HZRXOGVKRZDSURILW
HYHU\\HDUWKHUHDIWHU

&KDSWHU
*DLQLQJ0RUH6SDFH
%<7+()$//2)RXUEXVLQHVVKDGJURZQWRWKHSRLQWZKHUHZH
QHHGHGDGGLWLRQDOVSDFH6RZHUHQWHGDVPDOOEXLOGLQJLQ3DOR$OWR
RQ3DJH0LOO5RDGQHDU(O&DPLQR5HDOEHKLQGWKHZRUNVKRSRI-RKQ
7LQNHU%HOODQGDERXWWZRPLOHVIURPWKHJDUDJH$ERXWWKDWVDPH
WLPH%LOO+HZOHWWPDUULHG)ORUD/DPVRQZKRPKHKDGILUVWPHWZKHQ
WKH\ZHUHFKLOGUHQDQGWKHLUIDPLOLHVZHUHYDFDWLRQLQJLQWKH6LHUUD
%LOOZDVPRUHWKDQKDSS\WRJLYHXSKLVWLQ\RQHURRPEDFKHORU
TXDUWHUVRQ$GGLVRQ$YHQXHWRPRYHLQWRDKRXVHZLWK)ORUDQRWIDU
IURPRXUQHZVKRS:HVHWXSDQRIILFHLQWKHIURQWVHFWLRQRIRXU
QHZEXLOGLQJZKLOHWKHEDFNURRPKHOGDIHZPDFKLQHWRROVDQG
DVVHPEO\EHQFKHV7KHUHZHUHDOVRIDFLOLWLHVIRUKRWGLSSLQJDQG
SDLQWLQJ,WVHHPHGDVLIZHKDGDOOWKHVSDFHZHZRXOGHYHUQHHG
1RWWKDWRXUQHZORFDWLRQZDVZLWKRXWLWVSUREOHPV,QWKHZLQWHU
ZKHQLWUDLQHGZDWHUZRXOGUXQGRZQ3DJH0LOO5RDGDQG
RFFDVLRQDOO\ZH
GKDYHWRVDQGEDJ

'$9,'3$&.$5'

%LOODQG)ORUD+HZOHWWDW6TXDZ9DOOH\IRUWKHRSHQLQJRIWKH
:LQWHU2O\PSLFV
WKHIURQWGRRUWRNHHSWKHZDWHURXW7RUHSODFH/X
VNLWFKHQRYHQ
ZKLFKZHKDGXVHGWREDNHSDLQWRQWRRXUFDELQHWVZHEXLOWDQRYHQ
RXWRIDQROGUHIULJHUDWRUDQGKDGLWRXWEDFNEHKLQGWKHVKRS
8QIRUWXQDWHO\ZHGLGQ
WWDNHLQWRDFFRXQWWKDWWKHUHIULJHUDWRUKDG
NDSRNLQVXODWLRQDQGRQHQLJKWWKHWKLQJFDXJKWILUH/XFNLO\
VRPHERG\ZDVGULYLQJE\VDZWKHIODPHVDQGFDOOHGWKHILUH
GHSDUWPHQWEHIRUHPXFKGDPDJHZDVGRQH
,QWKRVHHDUO\GD\V%LOODQG,KDGWREHYHUVDWLOH:HKDGWRWDFNOH
DOPRVWHYHU\WKLQJRXUVHOYHVIURPLQYHQWLQJDQGEXLOGLQJSURGXFWVWR
SULFLQJSDFNDJLQJDQGVKLSSLQJWKHPIURPGHDOLQJZLWKFXVWRPHUV
DQGVDOHVUHSUHVHQWDWLYHVWRNHHSLQJWKHERRNVIURPZULWLQJWKHDGV
WRVZHHSLQJXSDWWKHHQGRIWKHGD\0DQ\RIWKHWKLQJV,OHDUQHGLQ
WKLVSURFHVVZHUHLQYDOXDEOHDQGQRWDYDLODEOHLQEXVLQHVVVFKRROV

7+(+3:$<

:HIRXQGWKDWSDUWVIRURXUSURGXFWVZHUHSULFHGRQDWZROHYHO
VWUXFWXUH0DQXIDFWXUHUV
UHSUHVHQWDWLYHVVROGWRUHWDLOGHDOHUVDWWKH
IDFWRU\SULFHDQGWKHQWKHUHWDLOGHDOHUVPDUNHGXSWKHSDUWVWHQ
WLPHVIRUVDOHWRWKHLUFXVWRPHUV:HJRWDFTXDLQWHGZLWKWKH
$OOHQ%UDGOH\UHSUHVHQWDWLYH%LOO3XUG\ZKRVHWXVXSWREX\DW
IDFWRU\SULFHV:HODWHUZHUHDEOHWRZRUNRXWWKHVDPHDUUDQJHPHQW
IRURWKHUFRPSRQHQWVDQGWKXVFRXOGEX\PRVWRIRXUSDUWVDW
SHUFHQWRIWKHUHWDLOSULFH2IJUHDWHUGLIILFXOW\ZDVREWDLQLQJWKH
FDELQHWVDQGFKDVVLVIRURXUSURGXFWV$WWKHWLPHWKH%D\$UHDKDG
IHZVKHHWPHWDORUPHFKDQLFDOSDUWVVKRSV:HKLUHGDPDQQDPHG
$O6SHDUWRPDNHRXUFDELQHWV,WZDVFXVWRPDU\LQWKRVHGD\VWR
KDYHPHDVXUHPHQWHTXLSPHQWLQZRRGHQFDELQHWV0RVWFDELQHWV
ZHUHPDGHRIZDOQXWEXWZHGHFLGHGWRXVHRDN$VZHGHVLJQHG
WHVWHTXLSPHQWIRUKLJKHUIUHTXHQFLHVZHJDYHXSXVLQJZRRG
EHFDXVHLWVHUYHGQRXVHIXOSXUSRVHDQGDGGHGWRWKHFRVW
2XUVKHHWPHWDOZRUNZDVGRQHE\(UQLH6KLOOHUZKRKDGDRQHPDQ
VKRSMXVWGRZQWKHVWUHHWIURPRXU$GGLVRQ$YHQXHJDUDJH(UQLH
ZDVDJUXIIROGIHOORZEXWKHZDVDJRRGPHFKDQLFDQGDJRRG
FUDIWVPDQDQGKHGLGRXUVKHHWPHWDOZRUNIRUDQXPEHURI\HDUV

$1HHGIRU&DVK
&DVKIORZZDVDIUHTXHQWSUREOHPGXULQJWKRVHHDUO\GD\V,UHFDOO
WKDWHDUO\LQWKH,77&RPSDQ\KDGDFRQWUDFWWREXLOGDQ
LQVWUXPHQWIRUDQDLUFUDIWODQGLQJ

'$9,'3$&.$5'

'DYH3DFNDUG OHIW DQG%LOO+HZOHWWLQWKHVKRS


V\VWHP7KHV\VWHPUHTXLUHGDYDULDEOHIUHTXHQF\RVFLOODWRUDQGD
FU\VWDOFRQWUROOHGIL[HGIUHTXHQF\RVFLOODWRU*HQHUDO5DGLRD
FRPSDQ\,PHQWLRQHGHDUOLHUDVDVXSSOLHURIDXGLRRVFLOODWRUVKDG
SURYLGHG,77ZLWKWKHYDULDEOHIUHTXHQF\RVFLOODWRUEXWVKLHGDZD\
IURPWKHIL[HGIUHTXHQF\YHUVLRQ:HDJUHHGWRWDNHLWRQQRW
NQRZLQJDQ\EHWWHUDQGLWWXUQHGRXWWREHDJUHDWFKDOOHQJH$VZH
VWDUWHGZRUNLWEHFDPHREYLRXVZHGLGQ
WKDYHHQRXJKHQJLQHHULQJ
WDOHQWWRFRPSOHWHWKHMRELQWKHWLPHUHTXLUHG)RUWXQDWHO\,ZDV
DEOHWRKLUH1RHO(OGUHG%LOO'RROLWWOHDQG%UXQWRQ%DXHUIURP+HLQW]
DQG.DXIPDQ$OOWKUHHEHFDPHLPSRUWDQWPHPEHUVRIRXUWHDP:H
PDQDJHGWREXLOGWKHXQLWWRWKHUHTXLUHGVSHFLILFDWLRQVDQGZH
GHOLYHUHGLWWR,77DORQJZLWK

7+(+3:$<

RXULQYRLFH)RUVRPHWLPHZHGLGQ
WJHWSDLGDQGLWJRWWRWKHSRLQW
ZKHUHXQOHVVZHUHFHLYHGSD\PHQWZHFRXOGQ
WPHHWWKHQH[W
ZHHN
VSD\UROO6R,FDOOHG+DUROG%XWWQHURXUIULHQGDW,77DQGKH
LPPHGLDWHO\ZLUHGWKHIXQGVWRPH
+DUROGZDVDJRRGIULHQGLQDQXPEHURIZD\VDQGZKHQKHUHWLUHG
IURP,77,LPPHGLDWHO\DVNHGKLPWRMRLQRXU+3ERDUG+HEHFDPH
RQHRIRXUEHVWGLUHFWRUVDQGEHFDXVHRIKLVH[SHULHQFHDW,77KH
NQHZSHRSOHDWYLUWXDOO\HYHU\HOHFWURQLFVFRPSDQ\LQWKHZRUOG
2XUH[SHULHQFHZLWKWKH,77FRQWUDFWFRQYLQFHGPHWKDWZHQHHGHG
PRUHZRUNLQJFDSLWDO,FRQFOXGHGWKDWWKHWKLQJWRGRZDVWR
HVWDEOLVKVRPHFUHGLWZLWKWKH%DQNRI$PHULFDWKHODUJHVWEDQNLQ
&DOLIRUQLD:HDSSOLHGIRUDORDQRIDQGWKH\VHQWDPDQRXWWR
ORRNXVRYHU+HDSSDUHQWO\ZDVQ
WYHU\LPSUHVVHGIRUWKHEDQN
DJUHHGWRJLYHXVDORDQRQO\LIZHZRXOGVLJQRYHUWRLWRXUDFFRXQWV
UHFHLYDEOH
7KDWGLGQ
WKDYHPXFKDSSHDOWRXVVR,ZHQWRYHUWRRXUOLWWOHORFDO
EDQN3DOR$OWR1DWLRQDODQGLQWURGXFHGP\VHOIWRLWVSUHVLGHQW-XG
&UDU\+HVDLGKHUHPHPEHUHGPHDVDQDWKOHWHDW6WDQIRUG,
GHVFULEHGRXULQLWLDOVXFFHVVDQGH[SODLQHGWKDWZHQRZQHHGHGD
ORDQRIWRH[SDQGRXUEXVLQHVV&UDU\OLVWHQHGFDUHIXOO\DVNHG
VRPHTXHVWLRQVWKHQZURWHRXWDQRWHIRUPHWRVLJQ:HWKHQ
ZDONHGDFURVVWKHURRPDQGKHKDQGHGPHDGHSRVLWVOLSIRU
7KDWOLWWOHOHDSRIIDLWKRQ&UDU\
VSDUWZDVWKHEHJLQQLQJRIDORQJ
DQGKDSS\UHODWLRQVKLSEHWZHHQXV$QGZKHQZHILQDOO\JUHZWRWKH
SRLQWZKHUHRXUILQDQFLQJUHTXLUHPHQWV

'$9,'3$&.$5'

ZHUHEH\RQGWKHEDQN
VOHJDOOLPLWVZHZHQWWR3DOR$OWR1DWLRQDO
V
DVVRFLDWHEDQN:HOOV)DUJR7KH:HOOV)DUJR%DQNVHQWDUHWLUHG
HQJLQHHUWRYLVLWXV,VSHQWDIXOODIWHUQRRQZLWKKLPDQG,KDYH
UHPHPEHUHGHYHUVLQFHVRPHDGYLFHKHJDYHPH+HVDLGWKDWPRUH
EXVLQHVVHVGLHIURPLQGLJHVWLRQWKDQVWDUYDWLRQ,KDYHREVHUYHGWKH
WUXWKRIWKDWDGYLFHPDQ\WLPHVVLQFHWKHQ
,QWKHIDOORIVKRUWO\DIWHUZHKDGPRYHGIURPWKHJDUDJHWR
WKH3DJH0LOO5RDGEXLOGLQJZHKDGDYLVLWIURP0HOYLOOH(DVWKDPWKH
IRXQGHURI*HQHUDO5DGLR+HDGTXDUWHUHGLQ0DVVDFKXVHWWV*HQ5DG
DVLWLVQRZNQRZQKDGEHHQHVWDEOLVKHGIRUVRPHWLPHDQG%LOODQG
,NQHZLWWREHDILQHFRPSDQ\
)UHG7HUPDQKDGLQWURGXFHGXVWR(DVWKDPZKRVSHQWDQDIWHUQRRQ
ZLWKXVDQGJDYHXVVRPHYHU\JRRGDGYLFHRQKRZWRRUJDQL]HDQG
UXQDFRPSDQ\,NQHZE\WKHQWKDW(DVWKDPUHDOL]HGZHZHUHJRLQJ
WREHLQGLUHFWFRPSHWLWLRQZLWKKLVFRPSDQ\DQG,DQWLFLSDWHGWKDW
RXUPHHWLQJZLWKKLPZRXOGEHXQFRPIRUWDEOH+HDVVXUHGXV
KRZHYHUWKDWFRPSHWLWLRQZDVDJRRGWKLQJDQGLWZDVEHWWHUWR
KDYHWZRFRPSDQLHVLQWURGXFLQJDQHZSURGXFWHVSHFLDOO\LILW
LQFRUSRUDWHGQHZWHFKQRORJ\EHFDXVHWKDWPDGHLWDOOWKHPRUH
FUHGLEOHWRWKHFXVWRPHU$IWHUWKDWPHHWLQJ(DVWKDPDQGKLV
*HQHUDO5DGLRFROOHDJXHVFRQWLQXHGWREHKHOSIXOWRXVDQGDOWKRXJK
ZHZHUHFRPSHWLWRUVZHDOVREHFDPHJRRGIULHQGV
'XULQJRXUOLWWOHFRPSDQ\FRQWLQXHGWRJURZDQGE\WKHHQGRI
WKH\HDUZHKDGDERXWWHQSHRSOHRQ

7+(+3:$<

WKHSD\UROOLQFOXGLQJ+DUYH\=HLEHUWKHILUVWHPSOR\HHZHKLUHG
ZKHQZHZHUHVWLOOLQWKHJDUDJH:HKDGDOVRDGGHGRXUILUVW
VHFUHWDU\+HOHQ3HUU\DQGZHKDGH[SDQGHGLQWRWKHIURQWRI7LQNHU
%HOO
VPXFKODUJHUFRUQHUEXLOGLQJ
7KDW\HDUDOVR/XDQG,EHJDQWREXLOGRXUIDPLO\2XUILUVWFKLOG
'DYLG:RRGOH\ZDVERUQWKDW2FWREHU/XKDGUHVLJQHGIURPKHUMRE
DW6WDQIRUGEXWFRQWLQXHGWRZRUNIRUWKHFRPSDQ\6KHGLG
HYHU\WKLQJLQFOXGLQJLQWHUYLHZLQJSURVSHFWLYHHPSOR\HHV

'DYLGDQG/XFLOOH3DFNDUGZLWK'DYLG:RRGOH\

'$9,'3$&.$5'

+HZOHWW&DOOHGLQWRWKH6HUYLFH
:HKDGDSSRLQWHG%UXFH%XUOLQJDPHDVRXUVDOHVUHSUHVHQWDWLYHRQ
WKH(DVW&RDVWDQGKHZDVDJRRGIULHQGRIWKHKHDGRIWKH$UP\
6LJQDO&RUSVODERUDWRULHVDW)RUW0RQPRXWK1HZ-HUVH\,QWKH
VSULQJRI%LOO+HZOHWWZKRKDGDFRPPLVVLRQLQWKHDUP\
UHVHUYHVZDVFDOOHGWRDFWLYHGXW\:LWK%UXFH%XUOLQJDPH
VKHOSZH
ZHUHDEOHWRFRQYLQFHWKH6LJQDO&RUSVWKDW%LOOFRXOGFRQWULEXWH
PRUHWRWKHGHIHQVHHIIRUWE\PDQDJLQJZLWKPHWKHLPSRUWDQW
ZRUNZHZHUHGRLQJDW+3%LOOFDPHEDFNLQWKHIDOOEXWZDVRQWKH
MRERQO\DVKRUWWLPHEHIRUHWKH-DSDQHVHDWWDFNRQ3HDUO+DUERURQ
'HFHPEHU6RRQWKHUHDIWHUKHZDVFDOOHGEDFNWRGXW\DQGVSHQW
WKHGXUDWLRQRIWKHZDUDVDQRIILFHULQWKH$UP\6LJQDO&RUSV'XULQJ
WKRVH\HDUVZHZHUHERWKVREXV\WKDWZHKDGOLWWOHFRQWDFW+3ZDV
QRWDGHIHQVHFRQWUDFWRULQWKHVHQVHRIGHVLJQLQJDQGEXLOGLQJ
HTXLSPHQWVROHO\IRUWKHPLOLWDU\%XWVLQFHPXFKRIRXUHTXLSPHQW
ZDVERXJKWE\WKHPLOLWDU\VHUYLFHVDQGE\GHIHQVHFRQWUDFWRUVZH
JUHZUDSLGO\GXULQJWKHZDU2XUDQQXDOVDOHVYROXPHPRYHGXSWRD
PLOOLRQGROODUVYHU\TXLFNO\DQGE\WKHHQGRIWKHZDUZHHPSOR\HG
WZRKXQGUHGSHRSOH7KHUHZDVDVWDWHHPSOR\PHQWRIILFHLQ3DOR
$OWRDQGZHJRWPRVWRIRXUSHRSOHWKURXJKWKLVRIILFH,UHFDOOKLULQJ
DUHWLUHGDUP\RIILFHU&DS6WXDUWDQGDVNLQJKLPWRWDNHRYHURXU
SD\UROODFFRXQWLQJDQGWKHGLVWULEXWLRQRI

7+(+3:$<

RXUSD\UROOH[SHQVH+HGLGDYHU\WKRURXJKMREDQGPDGHVXUHWKDW
HYHU\WKLQJEDODQFHGGRZQWRWKHODVWSHQQ\
:HDOVRKLUHGDUHWLUHGPHFKDQLFDOHQJLQHHU5XIH.LQJPDQZKR
WXUQHGRXWWREHDQH[SHUWPDFKLQHU\GHVLJQHU:HWRRNRQDPDMRU
MREIRUWKHQDY\WKDWUHTXLUHGDVHUYRV\VWHPWRFRQWURODQWHQQD
GLVKHV5XIHNQHZZKDWWROHUDQFHVZHUHUHTXLUHGIRUWKHEHDULQJV
DQGKHGLGDQH[FHOOHQWMREGHVLJQLQJWKHJHDUV+HDOVRGHVLJQHGD
PDFKLQHWRPDNHSODVWLFFDUGVWRKROGWKHFRPSRQHQWV,WIRUPHGWKH
WHUPLQDOVIURPDORQJEUDVVVWULSSXQFKHGWKHKROHVIRUWKH
WHUPLQDOVDQGLQVHUWHGDQGORFNHGWKHWHUPLQDOV7KLVSURYLGHGDQ
H[FHOOHQWPRXQWIRURXUFRPSRQHQWVDWDYHU\ORZFRVW:HXVHG
WKHVHWHUPLQDOFDUGVLQDOORXUGHVLJQVXQWLOZHVWDUWHGXVLQJSULQWHG
FLUFXLWERDUGV:HDOVRGHYLVHGDPDQXDOGH[WHULW\WHVWWRKHOSXV
ILQGSHRSOHZKRFRXOGPRXQWDQGVROGHUFRPSRQHQWVVNLOOIXOO\7KLVLV
DUHODWLYHO\VLPSOHRSHUDWLRQEXWLIQRWGRQHSURSHUO\FDQOHDGWR
SURGXFHIDLOXUHV
,QWKHHDUO\V6RWKHQHV%HKQEXLOWDPDMRUIDFWRU\LQ1HZ
-HUVH\ZKLFKZDVGHVLJQHGWRPDQXIDFWXUHPRVWRIWKHPDJQHWURQV
IRUWKHZDUHIIRUW,WZDVODLGRXWZLWKZLGHDLVOHVLQWKHSURGXFWLRQ
DUHDVRWKDW%HKQFRXOGFRPIRUWDEO\HVFRUWWKHELJEUDVVYLVLWRUV
IURP:DVKLQJWRQ,WKDGRQO\RQHSUREOHP,WFRXOGQ
WSURGXFHHYHQ
RQHJRRGWXEH,QGHVSHUDWLRQ%HKQDVNHG&KDUOLH/LWWRQWRFRPH
EDFNDQGPDNHWKHIDFWRU\ZRUN&KDUOLHDJUHHG$JRRG
DGPQLQLVWUDWLYHPDQ-DFN&RSHODQGZDVVHQWRXWIURP1HZ-HUVH\
DQGSXWLQFKDUJHRI

'$9,'3$&.$5'

&KDUOLH
VRSHUDWLRQLQ5HGZRRG&LW\-DFNGLGQRWKDYHDQ\WHFKQLFDO
NQRZOHGJHRUH[SHULHQFHVR,RIIHUHGWRKHOS$ERXWD\HDUODWHUD
PDMRUILUHDW/LWWRQ(QJLQHHULQJ/DERUDWRULHVGHVWUR\HGPXFKRIWKHLU
PDFKLQHVKRS%\WKDWWLPHZHDW+3KDGEXLOWXSDJRRGPDFKLQH
VKRSLQ3DOR$OWREXWZHZHUHXVLQJLWRQO\RQWKHGD\VKLIW6R,
PDGH+3
VVKRSDYDLODEOHWR-DFNDQGKLVSHRSOHDWQLJKW7KDWILWWHG
WKHLUVFKHGXOHDQGHQDEOHGWKHPWRNHHSJRLQJXQWLOWKH\FRXOG
UHEXLOGDQGUHHTXLSWKHLURZQSODQW
:HEHJDQRSHUDWLQJWZRVKLIWVRIZRUNHUVGXULQJWKHZDUDQGLQ
ZHEXLOWRXUILUVWEXLOGLQJDW3DJH0LOO5RDGWR
DFFRPPRGDWHRXULQFUHDVHGSURGXFWLRQ$OWKRXJKWKHSUHVVXUHWR
PHHWSURGXFWLRQGHDGOLQHVZDVHQRUPRXVWKHUHZDVDOVRORWVRI
H[FLWHPHQWDQGD

+HZOHWW3DFNDUGSURGXFWLRQOLQHF

7+(+3:$<

JUHDWVHQVHRIFDPDUDGHULH:HZHUHRQHRIRQO\WKUHH&DOLIRUQLD
PDQXIDFWXUHUVWRZLQWKHDUP\QDY\(DZDUGLQ2QO\
SHUFHQWRIDOOPDQXIDFWXUHUVLQWKH8QLWHG6WDWHVZHUHVRKRQRUHG
2XUSHRSOHZRUNHGYHU\KDUGDQGZHZDQWHGWRUHFRJQL]HDQG
HQFRXUDJHWKHLUFRQWULEXWLRQ(YHQEHIRUHWKHZDU%LOODQG,KDG
EHJXQLPSOHPHQWLQJDQLQFHQWLYHFRPSHQVDWLRQSODQIRUDOORXU
SHRSOHDSODQEDVHGRQVRPHWKLQJZH
GOHDUQHGIURP*HQHUDO5DGLR
,WLQYROYHGDFRPSOLFDWHGIRUPXODEXWLQHVVHQFHLWSDLGHYHU\RQHD
ERQXVDVDSHUFHQWDJHRIWKHLUEDVHSD\VKRXOGSURGXFWLRQH[FHHG
FHUWDLQOHYHOV*HQHUDO5DGLR
VSODQDSSOLHGWRHQJLQHHUVRQO\%XW%LOO
DQG,WKRXJKWHYHU\RQHDW+3VKRXOGEHLQFOXGHG:HZDQWHGWR
UHFRJQL]HWKHFRQWULEXWLRQVRIHDFKLQGLYLGXDOQRWMXVWDVSHFLDO
JURXS
7KHSODQZRUNHGYHU\ZHOODQGZDVHVSHFLDOO\KHOSIXOGXULQJWKHZDU
:DJHVKDGEHHQIUR]HQE\ODZEXWVLQFHSODQVOLNHWKLVWKDWKDG
DOUHDG\EHHQHVWDEOLVKHGFRXOGVWD\LQHIIHFWZHZHUHDEOHWR
FRQWLQXHRXUSURJUDPRISD\LQJERQXVHVWLHGWRSURGXFWLRQ
(YHQWXDOO\EHFDXVHRIELJJDLQVLQSURGXFWLYLW\WKHERQXVWRRXU
HQWLUHZRUNIRUFHURVHWRDVPXFKDVSHUFHQWRIEDVHZDJHV$W
WKDWSRLQWZKLFKZDVVRPHWLPHDIWHUWKHZDUZHDEDQGRQHGWKLV
SDUWLFXODUERQXVSODQ%XWLQQRZD\GLGZHGLVFRQWLQXHWKHSUDFWLFH
RIVKDULQJSURILWVDPRQJDOORXUSHRSOH7RWKLVGD\+HZOHWW3DFNDUG
KDVDSURILWVKDULQJSURJUDPWKDWHQFRXUDJHVWHDPZRUNDQG
PDLQWDLQVWKDWLPSRUWDQWOLQNEHWZHHQHPSOR\HHHIIRUWDQGFRUSRUDWH
VXFFHVV
2QHGD\HDUO\LQWKHZDU,FDPHWRWKHRIILFHWRILQG

'$9,'3$&.$5'

WZRPHQIURPWKHORFDO5HQHJRWLDWLRQ%RDUGZDLWLQJWRVHHPH
5HQHJRWLDWLRQZDVDSURFHGXUHHVWDEOLVKHGE\WKHIHGHUDO
JRYHUQPHQWWRSUHYHQWFRPSDQLHVIURPPDNLQJH[FHVVLYHSURILWV
IURPWKHLUZDUHIIRUWV,WZDVDJRRGSURJUDPXQGHUZKLFKWKH
JRYHUQPHQWWULHGWRDOORZDUHDVRQDEOHSURILWIRUJRRGSHUIRUPDQFH
%LOODQG,KDGGHFLGHGZHZHUHJRLQJWRUHLQYHVWRXUSURILWVDQGQRW
UHVRUWWRORQJWHUPERUURZLQJ,IHOWYHU\VWURQJO\DERXWWKLVLVVXH
DQGZHIRXQGZHZHUHFOHDUO\DEOHWRILQDQFHSHUFHQWJURZWKSHU
\HDUE\UHLQYHVWLQJRXUSURILWV$IWHUVRPHGLVFXVVLRQZLWKWKH
PHPEHUVRIWKHERDUGWKH\VHHPHGWREHLPSUHVVHGZLWKZKDWZH
ZHUHGRLQJEXWVDLGWKH\KDGDOLPLWRISHUFHQWRISURILWWKH\
FRXOGDOORZRQHTXLW\,SRLQWHGRXWWKDWRXUEXVLQHVVKDGEHHQ
GRXEOLQJHYHU\\HDUDQGWKDWLWZRXOGFRQWLQXHWRGRVRIRUVHYHUDO
\HDUV,DOVRWROGWKHPWKDW,KDGNHSWP\VDODU\DWDORZHUOHYHO
WKDQLWVKRXOGKDYHEHHQEHFDXVH,GLGQRWWKLQNLWZDVIDLUIRUP\
VDODU\WREHKLJKHUWKDQ%LOO
VDUP\VDODU\0RUHRYHU,SRLQWHGRXW
WKDWZHKDGFRQWUROOHGRXUFRVWVWRWKHH[WHQWWKDWWKHJRYHUQPHQW
FRXOGQRWJHWEHWWHUSURGXFWVIURPDQ\RQHHOVHDWDORZHUSULFH)RU
WKHVHUHDVRQV,ZRXOGQRWDFFHSWSHUFHQWRQHTXLW\7KH\VDLG,
ZRXOGKDYHWRWDNHP\FDVHWR:DVKLQJWRQ,GLGVRDQGZRUNHGRXW
DQDJUHHPHQWZLWKWKHJRYHUQPHQWWKDWJDYHRXUFRPSDQ\YLUWXDOO\
HYHU\WKLQJZHDVNHGIRU

7+(+3:$<

(QWU\LQWR0LFURZDYH
(YHQWKRXJKSURGXFWLRQFRQWLQXHGWREHRXUPDLQHPSKDVLVZH
EHJDQWRJHWLQWRSURGXFWGHYHORSPHQWLQWKHHDUO\SDUWRIWKHZDU
ZKHQZHJRWDFTXDLQWHGZLWKVRPHSHRSOHDWWKH1DYDO5HVHDUFK
/DERUDWRU\:HZHUHLQWHUHVWHGLQVHOOLQJWKHPRXUVWDQGDUG
SURGXFWVEXWDOVRLQWHUHVWHGLQILQGLQJRXWZKDWRWKHULQVWUXPHQWV
WKH\PLJKWQHHG,QWKHFRXUVHRIWKLVUHODWLRQVKLSZHEHFDPH
DFTXDLQWHGZLWK'U$QG\+DHIIZKRKHDGHGDVHFWLRQRIWKHODE'U
+DHIIDQGKLVDVVRFLDWHVKDGGHYHORSHGDPLFURZDYHVLJQDO
JHQHUDWRUDQGWKH\ZDQWHGWRJHWDGGLWLRQDOXQLWVEXLOWIRUXVHE\
WKHQDY\:HKDGQRSUHYLRXVH[SHULHQFHLQWKHIUHTXHQF\UDQJHEXW
ZHDJUHHGWREXLOGWKHVHXQLWV:HKDGWRILJXUHRXWKRZWRGRWKH
PDQXIDFWXULQJZLWKRXUOLPLWHGPDFKLQHVKRSFDSDELOLW\1RUPDQ
6KURFNZDVKHOSIXOLQWKLVSURMHFWDQGVRPHKRZZHJRWLWGRQHDQG
GHOLYHUHGVRPHXQLWVZLWKLQDVKRUWWLPHDQGDWDUHDVRQDEOHFRVW
'U+DHIIZDVLPSUHVVHGDQGDVNHGXVWRGRVRPHIXUWKHUZRUNIRU
WKHQDY\:HGHYHORSHGDGGLWLRQDOLQVWUXPHQWVDQGODWHURQDJDLQ
ZRUNLQJZLWK'U+DHIIZHEXLOWDGHYLFHKLVJURXSGHYHORSHGWKDW
ZDVFDSDEOHRIMDPPLQJDQHQHP\
VVKLSERDUGUDGDU,WZDVDWWKH
FRUHRIZKDWZDVFRGHQDPHGWKH/HRSDUGSURMHFW:HZHUHYHU\
FRQVFLHQWLRXVDERXWPHHWLQJRXUGHOLYHU\VFKHGXOHRQWKLVSURMHFW
ZRUNLQJDURXQGWKHFORFN,UHFDOOPRYLQJDFRWLQWRWKHIDFWRU\DQG
VOHHSLQJWKHUHPDQ\QLJKWV

'$9,'3$&.$5'

7KLVDFWLYLW\ZDVLPSRUWDQWWRXV:HDFTXLUHGVRPHQHZWHFKQLFDO
NQRZOHGJHWKDWKHOSHGJHWXVLQWRWKHIRUHIURQWRIWKHPLFURZDYH
LQVWUXPHQWDWLRQEXVLQHVVDPRYHWKDWSDLGKDQGVRPHGLYLGHQGVIRU
WKHFRPSDQ\DIWHUWKHZDU
$VRXUFRPSDQ\JUHZGXULQJ:RUOG:DU,,VRGLGRXUOLQHRI
SURGXFWV)ROORZLQJRQWKHKHHOVRI%LOO
VDXGLRRVFLOODWRUZHGHVLJQHG
DZDYHDQDO\]HUDQGVRPHGLVWRUWLRQDQDO\]HUV:HWKHQGHYHORSHGD
KLJKHUSRZHUDXGLRVLJQDOJHQHUDWRU7KLVIRXQGDSDUWLFXODUO\JRRG
PDUNHWLQWKHPDQXIDFWXUHRISUR[LPLW\IXVHVIRUWKHPLOLWDU\:HGLG
QRWEXLOGDYDFXXPWXEHYROWPHWHUDWWKLVWLPHEHFDXVHRQHZDV
EHLQJEXLOWE\WKH%DODQWLQH&RPSDQ\ZKRVHSURGXFWVZHUHKDQGOHG
E\PRVWRIWKHVDPHVDOHVUHSUHVHQWDWLYHVKDQGOLQJRXUSURGXFWV,W
WXUQHGRXWWKDWWKH%DODQWLQHSURGXFWKDGVRPHGHILFLHQFLHVDQGVR
ODWHURQZHGHYHORSHGRXU0RGHO$YDFXXPWXEHYROWPHWHU
ZKLFKEHFDPHDYHU\VXFFHVVIXOSURGXFW

0DLQWDLQLQJD)RFXV
7KRXJKWKHVHLQVWUXPHQWVGLIIHUHGIURPRQHDQRWKHUDOOZHUH
GHVLJQHGWRPHDVXUHDQGWHVWHOHFWURQLFHTXLSPHQW7KH\UHIOHFWHG
RXUVWUDWHJ\WRFRQFHQWUDWHRQEXLOGLQJDJURXSRIFRPSOHPHQWDU\
SURGXFWVUDWKHUWKDQEHFRPLQJLQYROYHGLQDORWRIXQUHODWHGWKLQJV,
EHOLHYHWKLVGHFLVLRQWRIRFXVRXUHIIRUWVZDVH[WUHPHO\LPSRUWDQW
QRWRQO\LQWKHHDUO\GD\VRIWKHFRPSDQ\

7+(+3:$<

EXWODWHURQDVZHOO'XULQJWKHZDUIRUH[DPSOHZHFRXOGKDYH
WDNHQRQVRPHELJDWOHDVWIRUXVSURGXFWLRQFRQWUDFWV%XWWKDW
ZRXOGKDYHEXLOWWKHFRPSDQ\WRDOHYHOWKDWSUREDEO\FRXOGQ
WEH
VXVWDLQHGODWHURQ,IHOWWKDWZHVKRXOGWDNHRQQRPRUHWKDQZH
FRXOGUHDVRQDEO\KDQGOHEXLOGLQJDVROLGEDVHE\GRLQJZKDWZHGLG
EHVWGHVLJQLQJDQGPDQXIDFWXULQJKLJKTXDOLW\LQVWUXPHQWV
2IFRXUVHVHYHUDOHOHFWURQLFVFRPSDQLHVLQ&DOLIRUQLDZHUHFDSDEOHRI
DQGLQWHUHVWHGLQWDNLQJRQZDUUHODWHGFRQWUDFWV6RPHRIWKHPIHOW
DWOHDVWLQWKHHDUO\GD\VRIWKHZDUWKDWWKH\ZHUHQRWJHWWLQJWKHLU
IDLUVKDUHRIWKHVHFRQWUDFWV7KHLUGLVFRQWHQWKHOSHGIXHOWKH
IRUPDWLRQRIWKH:HVW&RDVW(OHFWURQLFV0DQXIDFWXUHUV$VVRFLDWLRQ
7KLVDVVRFLDWLRQSURYLGHGDYHKLFOHIRU:HVW&RDVWFRPSDQLHVWREDQG
WRJHWKHUDQGPDNHWKHLUFDVHLQ:DVKLQJWRQ2ULJLQDOO\WKHUHZHUH
DERXWDGR]HQPHPEHUVLQ6RXWKHUQ&DOLIRUQLDRUJDQL]HGE\/HV
+RIIPDQRI0LVVLRQ%HOO5DGLRODWHUWREHFRPH+RIIPDQ5DGLR,SXW
WRJHWKHUDVLPLODUJURXSLQWKH1RUWKLQFOXGLQJ(LWHO0F&XOORXJK
+HLQW]DQG.DXIPDQ.DDU(QJLQHHULQJDQG+3$VRXULQGXVWU\
JUHZVRGLGWKHDVVRFLDWLRQ,QWKHODWHVLWEHFDPH:(0$
UHSUHVHQWLQJWKHLQWHUHVWVDQGFRQFHUQVRIHOHFWURQLFVFRPSDQLHV
ZHVWRIWKH0LVVLVVLSSL,QWKHQDPHZDVFKDQJHGWRWKH
$PHULFDQ(OHFWURQLFV$VVRFLDWLRQ $($ 7RGD\WKH$($LVDQDWLRQDO
WUDGHDVVRFLDWLRQZLWKPRUHWKDQPHPEHURUJDQL]DWLRQV
WKURXJKRXWWKHFRXQWU\
,QDIWHUWKHZDUHQGHG%LOOUHWXUQHGWR3DOR

'$9,'3$&.$5'

$OWRMXVWLQWLPHIRU&KULVWPDV6RRQKHZDVEDFNLQVWULGHDWWKH
FRPSDQ\6RPHRIKLVH[SHULHQFHVDVD6LJQDO&RUSVRIILFHUSURYHG
WREHTXLWHXVHIXOLQYROYLQJKLPLQYDULRXVVFLHQWLILFDQGHQJLQHHULQJ
SURMHFWV+HEHFDPHDFTXDLQWHGZLWKDQXPEHURIWHFKQLFDOSHRSOH
VRPHRIZKRPZHODWHUKLUHGLQWRWKHFRPSDQ\
:DU
VHQGEURXJKWVRPHZRUULVRPHSUREOHPVWRPRVWFRPSDQLHVDQG
ZHZHUHQRWLPPXQH$VH[SHFWHGWKHUHZDVDVKDUSGHFOLQHLQRXU
EXVLQHVVDQGDFRUUHVSRQGLQJGURSLQHPSOR\PHQW0DQ\ZRPHQ
ZKRKDGMRLQHGXVDVZDUSURGXFWLRQZRUNHUVOHIWWKHFRPSDQ\DIWHU
WKHZDUZDVRYHU:HPDQDJHGWRUHWDLQRXUNH\SHRSOHKRZHYHU
DQGWKHVORZGRZQJDYHXVWKHRSSRUWXQLW\WRVHHNRXWDQGDWWUDFW
VRPHJRRGWHFKQLFDOSHRSOHWRWKHFRPSDQ\:HZHUHHVSHFLDOO\
LQWHUHVWHGLQVRPHRIWKHHQJLQHHUVZKRKDGZRUNHGGXULQJWKHZDU
ZLWK)UHG7HUPDQDW+DUYDUG
V5DGLR5HVHDUFK/DERUDWRU\DQGDW
RWKHUZDUUHODWHGUHVHDUFKODEV$VLWWXUQHGRXWZHZHUHDEOHWR
KLUH5DOSK/HH%UXFH:KROH\$UW)RQJ5D\'HPHUHDQG+RZDUG
=HLGOHU$QGVRPHWLPHODWHU*HRUJH.DQDQG+RUDFH2YHUDFNHU
7KHVHHQJLQHHUVZHUHLQVWUXPHQWDOLQGHYHORSLQJVRPHPXFKQHHGHG
QHZSURGXFWVGXULQJWKHFULWLFDOSRVWZDUSHULRGDQGLQWKH
ORQJHUUXQILOOLQJHVVHQWLDOSRVLWLRQVZLWKLQWKHFRPSDQ\
,PHQWLRQHGWKDWVRPHZRUNZHGLGIRUWKHQDY\GXULQJWKHZDUKDG
JLYHQXVWKHRSSRUWXQLW\WREXLOGVRPHPLFURZDYHVLJQDOJHQHUDWRUV
)URPWKDWEHJLQQLQJZHKDGDFTXLUHGTXLWHDELWRIH[SHUWLVHLQ
PLFURZDYHHTXLSPHQWDQGIROORZLQJWKHZDUZHGHFLGHGWRFRQ

7+(+3:$<

WLQXHLQWKHILHOGRIPLFURZDYH,W
VLQWHUHVWLQJWRQRWHWKDW*HQHUDO
5DGLRDWWKDWWLPHWKHOHDGLQJLQVWUXPHQWFRPSDQ\GLGQ
WWKLQN
WKHUHZDVPXFKIXWXUHLQPLFURZDYHWHVWHTXLSPHQW%XWLWWXUQHG
RXWWRUHSUHVHQWDQLPSRUWDQWDQGJURZLQJVKDUHRIRXUEXVLQHVV
$ORQJWKHZD\ZHKDGKHDUGWKDW9DULDQ$VVRFLDWHVZKLFKKDGD
VPDOOZDYHJXLGHEXVLQHVVZDQWHGWRGHYRWHLWVDWWHQWLRQWRRWKHU
WKLQJVDQGVRLQZHSXUFKDVHG9DULDQ
VZDYHJXLGHEXVLQHVV
DQGIROGHGLWLQWRRXURWKHUPLFURZDYHRSHUDWLRQV
,I+HZOHWW3DFNDUGZDVJURZLQJGXULQJWKHVDQGVVRZDV
WKH3DFNDUGIDPLO\2XUWKUHHGDXJKWHUV1DQF\6XVDQDQG-XOLH
ZHUHERUQLQDQGUHVSHFWLYHO\7RDFFRPPRGDWH
WKHVHFKLOGUHQ/XFLOHDQG,ZHUHREOLJHGWRPRYHVHYHUDOWLPHV$IWHU
OHDYLQJWKHKRXVHRQ$GGLVRQZHPRYHGWRDKRXVHRQ0DWDGHURLQ
VRXWK3DOR$OWRZKLFKZDVMXVWDFURVVDYDFDQWILHOGIURPWKH7LQNHU
%HOOVKRS$IHZ\HDUVODWHU,OHDUQHGDERXWDSDUWLDOO\EXLOWKRPHLQ
/RV$OWRV+LOOV:HSXUFKDVHGWKHKRXVHKLUHGDFRQWUDFWRUWRILQLVK
WKHEXLOGLQJDQGZLWKSODQVGUDZQXSE\WKHFHOHEUDWHGODQGVFDSH
DUFKLWHFW7KRPDV&KXUFK,SXWLQWKHWUHHVVKUXEVDQGIORZHUEHGV
P\VHOI%\ZHPRYHGDJDLQWRDKRXVHZHEXLOWKLJKHULQWKH
KLOOVVXUURXQGHGE\DSULFRWRUFKDUGVZKHUH,VWLOOOLYH

&KDSWHU
)URP3DUWQHUVKLSWR&RUSRUDWLRQ
,1:(LQFRUSRUDWHG+HZOHWW3DFNDUG7KLVDOORZHGIRUVRPHWD[
DGYDQWDJHVDQGDOVRSURYLGHGPRUHFRQWLQXLW\WRWKHEXVLQHVVWKDQD
SDUWQHUVKLSFRXOG%\WKDWWLPHZHKDGDOVRSXWLQSODFHDJRRGSDUW
RIWKHWRSPDQDJHPHQWWHDPWKDWZDVWRJXLGHWKHFRPSDQ\RYHU
WKHQH[WWKLUW\\HDUV(G3RUWHUKDGILQDOO\MRLQHGXVFRQFHQWUDWLQJ
RQWKHSURGXFWLRQHQGRIWKLQJV1RHO(OGUHGKHDGHGPDUNHWLQJDQG
)UDQN&DYLHUILQDQFH
%\RXUHPSOR\PHQWKDGJRWWHQEDFNXSWRLWVZDUWLPHSHDNRI
DERXWWZRKXQGUHG$IWHUKDYLQJH[SDQGHGLQWRD4XRQVHWKXWZH
EXLOWDPRUHSHUPDQHQWSODQWDGMDFHQWWRRXUH[LVWLQJIDFLOLWLHV:H
GHVLJQHGLWWREHDJHQHUDOSXUSRVHEXLOGLQJDQG,UHPHPEHU
WKLQNLQJWKDWLIZHFRXOGQ
WNHHSWKHFRPSDQ\JRLQJZHFRXOGOHDVH
RXWWKHEXLOGLQJDVDVXSHUPDUNHW
7KHFRPSDQ\JUHZYHU\UDSLGO\LQWKHHDUO\V

7+(+3:$<

JURZWKWKDWZDVVWLPXODWHGLQSDUWE\WKH.RUHDQ:DU%XWZHKDG
DOVREXLOWDJRRGIRXQGDWLRQRQZKLFKWRJURZDQGWKDQNVWRVRPH
KDUGZRUNZHKDGXQGHUWDNHQLQWKHODWHVRXUSURGXFWOLQHKDG
JURZQWRPRUHWKDQRQHKXQGUHGLWHPVE\:HDOVRKDG
LPSURYHGDQGH[SDQGHGRXUPDQXIDFWXULQJRSHUDWLRQVWRNHHSSDFH
ZLWKWKHLQFUHDVLQJQXPEHURISURGXFWV$QGXQGHU1RHO(OGUHGRXU
QHWZRUNRIVDOHVUHSUHVHQWDWLYHVKDGEHFRPHPRUHHIILFLHQWDQG
SURGXFWLYH%HWZHHQDQGRXUVDOHVGRXEOHGDQGIURP
WRWKH\GRXEOHGDJDLQ
$IWHU:RUOG:DU,,)UHG7HUPDQKDGUHWXUQHGWR6WDQIRUGIURP
+DUYDUG
V5DGLR5HVHDUFK/DERUDWRU\:HUHVXPHGRXUFORVH
UHODWLRQVKLSZLWK)UHGDQGWRJHWKHUZHGHYHORSHGDIHOORZVKLS
SURJUDPZKHUHE\6WDQIRUGJUDGXDWHHQJLQHHULQJVWXGHQWVZRXOG
UHVHDUFKDQGWKHQGHVLJQDQGEXLOGDSURGXFWIRU+32QHRIWKHVH
JUDGXDWHVWXGHQWVZKRKDGGRQHKLVXQGHUJUDGXDWHZRUNDW&DO
7HFKZDV$O%DJOH\:HZDQWHGWRGHYHORSDKLJKVSHHGFRXQWHUIRU
PHDVXULQJQXFOHDUUDGLRDFWLYLW\DQG%DJOH\ZDVDVVLJQHGWRWKLV
SURMHFW,WWXUQHGRXWKHZDVDEOHWRGHYHORSDQHOHFWURQLFFRXQWHU
WKDWZRXOGRSHUDWHDWDIUHTXHQF\RIXSWRWHQPHJDF\FOHV7KLVWRRN
WKHFRXQWHUEH\RQGLWVRULJLQDOSXUSRVHDQGHQDEOHGXVWRPDNHD
IUHTXHQF\FRXQWHURXWRILWDQGDGGLWWRWKH+3SURGXFWOLQH7KLV
IUHTXHQF\FRXQWHUZDVQRWYHU\UHOLDEOHDQGZHDVVLJQHGRQHRIRXU
HQJLQHHUV0DUY:LOURGWWRSURYLGHUHSDLUVHUYLFHDWRXUFXVWRPHU
V
ORFDWLRQ7KHFRXQWHUZDVVRXVHIXOZKHQLWGLGZRUNWKDWRXU
FXVWRPHUVWROHUDWHGLWVXQUHOLDELOLW\

'$9,'3$&.$5'

'DYH3DFNDUG%LOO+HZOHWWDQG)UHG7HUPDQRXWVLGHWKH6WDQIRUG
(OHFWURQLF5HVHDUFK/DERUDWRU\LQ$JLIWIURP+HZOHWW3DFNDUG
&RPSDQ\SURYLGHGDQDGGLWLRQDOZLQJWREHXVHGDVDQLQVWUXFWLRQ
ODE

7+(+3:$<

7KLVLVDORQJZD\IURPZKDWZHKDYHWRGRWRGD\LQSURYLGLQJ
ORQJWHUPUHOLDELOLW\LQRXUSURGXFWV6WDUWLQJZLWKWKLVVLQJOHSURGXFW
$O%DJOH\DQGKLVGHVLJQWHDPGHYHORSHGDJURZLQJIDPLO\RI
IUHTXHQF\FRXQWHUVDQGUHODWHGSURGXFWVWKDWKDYHEHHQDPRQJWKH
PRVWVXFFHVVIXORI+3
VRIIHULQJVDQGWKDWRYHUWKH\HDUVKDYH
DFFRXQWHGIRUELOOLRQVRIGROODUVLQVDOHV
2XUFROODERUDWLRQZLWK6WDQIRUGDQG)UHG7HUPDQFRQWLQXHGDQGLQ
ZHH[SDQGHGRQWKHIHOORZVKLSSURJUDPDQGHVWDEOLVKHGZKDW
EHFDPHNQRZQDVWKH+RQRUV&RRSHUDWLYH3URJUDPZKLFKDOORZHG
TXDOLILHG+3HQJLQHHUVWRSXUVXHDGYDQFHGGHJUHHVDW6WDQIRUG7KH
SURJUDPPDGHLWSRVVLEOHIRUXVWRKLUHWRSOHYHO\RXQJJUDGXDWHV
IURPDURXQGWKHFRXQWU\ZLWKWKHSURPLVHWKDWLIWKH\FDPHWRZRUN
IRUXVDQGZHWKRXJKWLWDSSURSULDWHWKH\FRXOGDWWHQGJUDGXDWH
VFKRROZKLOHRQIXOO+3VDODU\2ULJLQDOO\WKHFRPSDQ\SDLGSDUWRI
WKHLUWXLWLRQDVZHOODQGPRUHUHFHQWO\KDVSDLGDOORIWKHLUWXLWLRQ
0RUHWKDQIRXUKXQGUHG+3HQJLQHHUVKDYHREWDLQHGPDVWHU
VRU
GRFWRUDWHGHJUHHVWKURXJKWKLVSURJUDP,WKDVHQDEOHGXVWRKLUH
WKHWRSHQJLQHHULQJJUDGXDWHVIURPXQLYHUVLWLHVDOODFURVVWKH
FRXQWU\IRUDQXPEHURI\HDUVDQLPSRUWDQWIDFWRULQWKHXOWLPDWH
VXFFHVVRIRXUFRPSDQ\
,QWKHHDUO\V6WDQIRUGFUHDWHGWKH6WDQIRUG,QGXVWULDO3DUND
GHYHORSPHQWWKDWIXUWKHUVWUHQJWKHQHGLWVWLHVZLWKORFDOLQGXVWU\
7KHXQLYHUVLW\ODUJHO\WKURXJKWKHHIIRUWVRQFHDJDLQRI)UHG
7HUPDQVHWDVLGHDFUHVRI6WDQIRUGODQGDGMDFHQWWRLWV3DOR$OWR
FDPSXVWREHGHYHORSHGLQWRDWWUDFWLYHVLWHVIRUUHVHDUFK

'$9,'3$&.$5'

ODERUDWRULHVRIILFHVDQGOLJKWPDQXIDFWXULQJIDFLOLWLHV&RPSDQLHV
OHDVHGWKHODQGIURP6WDQIRUGDQGXQGHUVWULFW]RQLQJRUGLQDQFHV
DQGDUFKLWHFWXUDOFRQWUROVGHVLJQHGDQGFRQVWUXFWHGWKHLURZQ
EXLOGLQJV
,QZHEHJDQFRQVWUXFWLRQRIRXUILUVWWZREXLOGLQJVLQWKHSDUN
9DULDQ$VVRFLDWHVKDGSUHFHGHGXVDVDWHQDQWEXWRYHUWKH\HDUV
+3KDVEHFRPHWKHODUJHVWWHQDQWZLWKIDFLOLWLHVWRWDOLQJPRUHWKDQ
RQHPLOOLRQVTXDUHIHHW
7KH6WDQIRUG3DUNWKHILUVWRILWVNLQGLQWKHQDWLRQQRZKDVPRUH
WKDQHLJKW\WHQDQWV/LNH+HZOHWW3DFNDUGPDQ\RIWKHVH
RUJDQL]DWLRQVKDYHFORVHWLHVZLWKWKHXQLYHUVLW\HVSHFLDOO\ZLWKWKH
HQJLQHHULQJDQGEXVLQHVVVFKRROV
,Q,EHFDPHDUDQFKHUIRUWKHILUVWWLPH%LOODQG,KDGEHHQ
GHHUKXQWLQJDWDSODFHQDPHG6DQ)HOLSHMXVWVRXWKRI6DQ)UDQFLVFR
%D\:HOLNHGWKHDUHDVRZKHQWKHODQGZDVRIIHUHGIRUVDOHZH
GHFLGHGWREHJLQDUDQFKLQJSDUWQHUVKLS,WZDVDIDPLO\SDUWLFLSDWLRQ
DUUDQJHPHQWIURPWKHILUVW0RVWRIWKH+HZOHWWDQG3DFNDUGFKLOGUHQ
OHDUQHGWRVZLPLQWKHSRRODW6DQ)HOLSH7KHFKLOGUHQURGHKRUVHV
WKURXJKWKHKLOOVDQGOHDUQHGDERXWWKHSOHDVXUHVDQGSUREOHPVRI
FDWWOHUDLVLQJ$IWHUDIHZ\HDUVZHDGGHGWRWKHRULJLQDOUDQFKZLWK
WKHSXUFKDVHRI/RV+XHFRVWRWKHVRXWKRIWKHRULJLQDOWUDFW/DWHU
ZHERXJKWUDQFKODQGLQ,GDKRDQGDOVRLQWKH&HQWUDO9DOOH\RI
&DOLIRUQLD6HYHUDO\HDUVDJRFRQVHUYDWLRQLVWVFODLPHGZHKDG
GDPDJHGWKHUDQJHLQ,GDKRE\UXQQLQJWRRPDQ\KHDGRIFDWWOHRQ
LW$VDPDWWHURIIDFWGXHWRVWHSV%LOODQG,KDYHWDNHQWR

7+(+3:$<

LPSURYHWKHODQGJDPHLQWKDWDUHDQRZLVILYHWLPHVZKDWLWZDV
ZKHQZHILUVWDFTXLUHGWKHODQG
,KDYHHQMR\HGPDQ\SOHDVXUHVDVWKHUHVXOWRIP\H[SHULHQFHVDVD
UDQFKHU,
YHDOVROHDUQHGDWKLQJRUWZR(YHU\VHDVRQZHZRXOG
URXQGXSWKHFDWWOHIURPWKHUDQJHDQGGULYHWKHPWRWKHFRUUDO
$ORQJWKHZD\ZH
GFRPHWRDJDWHWKHWULFNZDVWRJHWWKHP
WKURXJKWKHJDWHDQGQRWVWDPSHGHWKHP,IRXQGDIWHUPXFKWULDO
DQGHUURUWKDWDSSO\LQJVWHDG\JHQWOHSUHVVXUHIURPWKHUHDUZRUNHG
EHVW(YHQWXDOO\RQHZRXOGGHFLGHWRSDVVWKURXJKWKHJDWHWKHUHVW
ZRXOGVRRQIROORZ3UHVVWKHPWRRKDUGDQGWKH\
GSDQLFVFDWWHULQJ
LQDOO

+XQWLQJDW6DQ)HOLSHUDQFK OHIWWRULJKW (UQLH$UEXFNOH%LOO


+HZOHWW1RHO(OGUHG0RUULH'R\OHDQG'DYH3DFNDUG

'$9,'3$&.$5'

GLUHFWLRQV6ODFNRIIHQWLUHO\DQGWKH\
GMXVWKHDGEDFNWRWKHLUROG
JUD]LQJVSRWV7KLVLQVLJKWZDVXVHIXOWKURXJKRXWP\PDQDJHPHQW
FDUHHU
$QRWKHUEHQHILWIURPUDQFKLQJZDVP\IULHQGVKLSZLWK%LOO+HZOHWW
%\UXQQLQJWKHUDQFKHVWRJHWKHUDVZHOODVWKHFRPSDQ\%LOODQG,
GHYHORSHGDXQLTXHXQGHUVWDQGLQJRIHDFKRWKHU7KLVKDUPRQ\KDV
VHUYHGXVZHOOHYHU\VLQJOHGD\LQUXQQLQJ+3

$:DWHUVKHG<HDU
,QPDQ\UHVSHFWVZDVDZDWHUVKHG\HDUIRU+3$WWKHHQGRI
QHZRUGHUVZHUHDWDQDOOWLPHKLJK2XUSURGXFWLRQKDG
H[SDQGHGWUHPHQGRXVO\DQGZHKDGLQFUHDVHGRXUQXPEHURI
HPSOR\HHVIURPRQ-DQXDU\WRRQ-DQXDU\
2XU3DJH0LOO5RDGVLWHLQFOXGHGIRXUEXLOGLQJV$QGE\
6HSWHPEHURXUILUVWEXLOGLQJ RIVL[SODQQHG LQWKH6WDQIRUG
,QGXVWULDO3DUNZDVFRPSOHWHGDQGLQSURGXFWLRQ2XUVHFRQG
EXLOGLQJDQHZODERUDWRU\RSHQHGLQ2FWREHU
,Q1RYHPEHU+HZOHWW3DFNDUGVWRFNZDVILUVWRIIHUHGWRWKH
SXEOLF7HQSHUFHQWRIWKHFRPPRQVWRFN%LOO+HZOHWWDQG,RZQHG
EHFDPHDYDLODEOHDWSHUVKDUH7KHRIIHULQJDQGODWHU
RIIHULQJVEURDGHQHGWKHEDVHRI+3RZQHUVKLSDQGHQDEOHGRXU
HPSOR\HHVWREHFRPHVKDUHRZQHUV,WDOVRIDFLOLWDWHGRXUDFTXLVLWLRQ
RIRWKHUFRPSDQLHVLQWKHODWHVDQGHDUO\V
$QRWKHUHYHQWWKDWKDGVLJQLILFDQFHIRUWKH

7+(+3:$<

FRPSDQ\HVSHFLDOO\IRURXUEXVLQHVVRXWVLGHWKH8QLWHG6WDWHVZDV
WKHVLJQLQJRIWKH7UHDW\RI5RPH8QWLOWKHQZHKDGGRQHUHODWLYHO\
OLWWOHWRGHYHORSIRUHLJQPDUNHWVIRURXUSURGXFWV)RUVRPH\HDUVZH
KDGUHWDLQHGDQH[SRUWDJHQWLQ6DQ)UDQFLVFRWRVHOO+3SURGXFWV
WKURXJKDQHWZRUNRIRYHUVHDVVDOHVUHSUHVHQWDWLYHV7KLVZRUNHG
UHDVRQDEO\ZHOOEXWE\LWZDVDSSDUHQWWKDWZHQHHGHGWR
PRXQWDPRUHDJJUHVVLYHHIIRUW6RZHFUHDWHGDQH[SRUW
GHSDUWPHQWWKDWGHDOWGLUHFWO\ZLWKWKHRYHUVHDVUHSUHVHQWDWLYHV
:KHQWKH7UHDW\RI5RPHZDVVLJQHGLQ+3H[SRUWVDFFRXQWHG
IRUSHUFHQWRIRXUWRWDOVDOHV7KHLPSRUWDQFHRIWKHWUHDW\WR
FRPSDQLHVOLNHRXUVZDVWKDWLWOHGWRWKHFUHDWLRQRIWKH(XURSHDQ
&RPPRQ0DUNHWZKLFKLQWLPHEHFDPHDQLPPHQVHPDUNHWIRU
HOHFWURQLFSURGXFWV%XWLWZDVDPDUNHWIDYRULQJORFDOO\SURGXFHG
SURGXFWVDVRSSRVHGWRLPSRUWVIURPWKH8QLWHG6WDWHV7KXVLW
EHFDPHFULWLFDOIRU86FRPSDQLHVWRHVWDEOLVKQRWRQO\DPDUNHWLQJ
SUHVHQFHZLWKLQWKH(XURSHDQPDUNHWEXWDPDQXIDFWXULQJSUHVHQFH
DVZHOO
%LOO+HZOHWWZDVHVSHFLDOO\HQWKXVLDVWLFDERXWWKH&RPPRQ0DUNHW
DQGWKRURXJKO\FRQYLQFHGRILWVSURPLVLQJEXVLQHVVRSSRUWXQLWLHVIRU
+36RZLWKWKHKHOSRI%LOO'RROLWWOH5D\'HPHUHDQGDWWRUQH\1DWH
)LQFKKHLPPHGLDWHO\EHJDQWRLQYHVWLJDWHWKHSURVDQGFRQVRI
VHWWLQJXSRSHUDWLRQVLQYDULRXVFRXQWULHV$IWHUZHLJKLQJKLVILQGLQJV
DQGQDUURZLQJWKHFKRLFHVKHPDGHWULSVWRWKUHHFRXQWULHVDQG
DUUDQJHGPHHWLQJVZLWKEDQNHUVORFDOJRYHUQPHQWRIILFLDOV
H[HFXWLYHVRIPDQXIDFWXULQJILUPVDQG86FRQVXODWHV

'$9,'3$&.$5'

,Q$SULOZHRSHQHGDQRIILFHLQ*HQHYD6ZLW]HUODQGZKLFK
EHFDPHRXU(XURSHDQKHDGTXDUWHUV,Q-XO\DQ+3VDOHVRSHUDWLRQ
JRWXQGHUZD\LQ:HVW*HUPDQ\$QGLQ6HSWHPEHUZHRSHQHGD
VPDOOLQVWUXPHQWDVVHPEO\SODQWLQWKHWRZQRI%REOLQJHQQHDU
6WXWWJDUW:HVW*HUPDQ\)URPWKDWPRGHVWEDVHZHVWHDGLO\
H[SDQGHGRXU(XURSHDQRSHUDWLRQV,Q(XURSHDFFRXQWHGIRU
PRUHWKDQRQHWKLUGRI+3
VWRWDOEXVLQHVV

&KLQD
+HZOHWW3DFNDUGQRZSURGXFHVDQGVHOOVWKRXVDQGVRISURGXFWVLQ
PRUHWKDQSODQWVDQGRIILFHVORFDWHGLQRYHUFRXQWULHV
DURXQGWKHZRUOG$V,KDYHVDLGPDQ\WLPHVRXUVXFFHVVGHSHQGVLQ
ODUJHSDUWRQJLYLQJWKHUHVSRQVLELOLW\WRWKHOHYHOZKHUHLWFDQEH
H[HUFLVHGHIIHFWLYHO\XVXDOO\RQWKHORZHVWSRVVLEOHOHYHORIWKH
RUJDQL]DWLRQWKHOHYHOQHDUHVWWKHFXVWRPHU
+HZOHWW3DFNDUG
VSUHVHQFHLQWKH)DU(DVWJRHVEDFNWRWKHYHU\
HDUO\\HDUVRIWKHFRPSDQ\DQG,ZLOOVSHDNODWHURIRXU
ORQJVWDQGLQJEXVLQHVVUHODWLRQVKLSZLWK-DSDQDQGZLWK-DSDQHVH
HQWHUSULVHV
,ZHQWWRWKH3HRSOH
V5HSXEOLFRI&KLQDIRUWKHILUVWWLPHLQ
1RYHPEHUDVSDUWRIWKH&RPPLWWHHRQWKH3UHVHQW'DQJHU
7KLVJURXSZDVHVWDEOLVKHGEHFDXVHDQXPEHURISHRSOHP\VHOI
LQFOXGHGIHOWZHZHUHQRWVWUHQJWKHQLQJRXUPLOLWDU\FDSDELOLW\IDVW
HQRXJKWRFRXQWHUWKHUDSLGEXLOGXSLQWKH6RYLHW8QLRQ:H

7+(+3:$<

ZDQWHGWKH&RPPLWWHHRQWKH3UHVHQW'DQJHUWREHQRQSDUWLVDQ
ZKLFKLVZK\ZHGHOD\HGWKHIRUPDODQQRXQFHPHQWRILWVIRUPDWLRQ
XQWLODIWHU3UHVLGHQW&DUWHUZDVLQDXJXUDWHGLQ6KRUWO\
DIWHUZDUGWKH&KLQHVHJRYHUQPHQWLQYLWHGXVWRYLVLWWKHPWR
GLVFXVVKRZZHPLJKWKHOSLQGHDOLQJZLWKWKH6RYLHW8QLRQDORQJ
&KLQD
VQRUWKHUQERUGHU
*HQHUDO%UHQW6FRZFURIW-RH)RZOHU WKHVHFUHWDU\RIWKHWUHDVXU\LQ
WKH-RKQVRQDGPLQLVWUDWLRQ 3DXO1LW]H0D[.DPSHOPDQDQG,ZHQW
WR&KLQDZLWKRXUZLYHV8SRQDUULYLQJZHZHUHPHWE\WKHIRUHLJQ
PLQLVWHU7KHJRYHUQPHQWKDGDUUDQJHGDQLQWHUHVWLQJWULSIRUXV
VWDUWLQJDW%HLMLQJDQGFRYHULQJDZLGHVSDQRIWKHFRXQWU\:KHQZH
UHWXUQHGWR%HLMLQJDWWKHHQGRIRXUWRXUWKHPLQLVWHUGHVFULEHGKRZ
WKHLUJRYHUQPHQWIHOWDERXWHDFKRIWKHQDWLRQVRQWKHLUERUGHU,
UHPHPEHUWKDWZKHQKHFDPHWR+RQJ.RQJKHVDLGZHVKRXOGQRW
ZRUU\DERXWWKHLUUHODWLRQVWKHUHIRUZKHUHHOVHFRXOGWKH\VHOOWKHLU
VQDNHVDQGWXUWOHV$VPDOOHUQXPEHURIXVZHUHLQYLWHGIRUDQRWKHU
YLVLWLQ
+HQU\.LVVLQJHUKDGMXVWYLVLWHG&KLQDDQGWKH&KLQHVHKDG
FRPSODLQHGWRKLPWKDWWKH\ZHUHQRWJHWWLQJDQ\KHOSIURPWKH
&DUWHUDGPLQLVWUDWLRQ'U.LVVLQJHUVXJJHVWHGWKH\LQYLWHVRPH
$PHULFDQVIURPWKHSULYDWHVHFWRUDQGKHJDYHWKHPP\QDPH
DPRQJRWKHUV6KRUWO\WKHUHDIWHU,UHFHLYHGDQLQYLWDWLRQWRYLVLWDQG
FRQVXOWRQLQGXVWULDOSROLF\DQGPLOLWDU\ORJLVWLFV
,ZDVWUHPHQGRXVO\H[FLWHGE\WKLVLQYLWDWLRQ)LQDOO\,VDZDQ
RSSRUWXQLW\IRUDVXEVWDQWLYHEXVLQHVVFRQYHUVDWLRQZLWKWKH
&KLQHVH,QJUHDWKDVWH,DVVHPEOHGD

'$9,'3$&.$5'

VSHFLDOGHOHJDWLRQMXVWP\VHOI/XFLOHDQG&KL1LQJ/LXDQHQJLQHHU
DW+3ZKRZDVWKHVRQRID1DWLRQDOLVW&KLQHVHJHQHUDO
2XUKRVWZDVWREH<H=KHQKXDYLFHFKLHIRIUHVHDUFKDQG
GHYHORSPHQWIRUWKH&KLQHVHDUP\6LQFH,
GEHHQWR&KLQDEHIRUH,
NQHZWKHDFWLYLWLHVLQ%HLMLQJWKDW,ZDQWHGWRUHYLVLW,JDYHP\KRVW
DOLVWRIWKHVHDQGZHVSHQWWKHILUVWZHHNYLVLWLQJWKHP,GLGQRW
KDYHDQ\LGHDDERXWZKHWKHUZHZHUHPDNLQJDQ\SURJUHVV
7KH\JDYHXVDIUHHGD\RQ6XQGD\:KHQRXUKRVWMRLQHGXVRQWKH
IROORZLQJGD\KHVDLGWKDW:DQJ=KHQDYLFHSUHPLHUDQGVXUYLYRU
RIWKH/RQJ0DUFKZDVKROGLQJDUHFHSWLRQIRUXVDWWKH*UHDW+DOORI
WKH3HRSOHWKDWDIWHUQRRQDQGKHZDVDOVRKRVWLQJDGLQQHUIRUXVDW
WKHVDPHORFDWLRQ,LPPHGLDWHO\NQHZWKHQWKDWZHZKHUHJHWWLQJ
VRPHZKHUH
7KDWHYHQLQJZHODLGRXUSODQIRUWKHZHHN/XFLOHZDQWHGWRJRWR
;L
DQWRVHHWKHFHUDPLFVROGLHUVXQIRUWXQDWHO\ZHZHUHWROGWKDW
;L
DQZDVFORVHG%XWWKHQH[WGD\ZHZHUHWROG:HDUHJRLQJWR
;L
DQWRGD\
:KLOH/XFLOHH[DPLQHGWKHFHUDPLFVROGLHUVRXUKRVWVVHWXSWZR
YHU\LQWHUHVWLQJYLVLWVIRUPHLQWKHDUHDRQHWRDIDFWRU\WKDWZDV
PDNLQJDQWLDLUFUDIWUDGDUXVLQJVWHFKQRORJ\DERXWZKLFK,
NQHZDJUHDWGHDO7KH\DOORZHGPHWRH[DPLQHWKHHTXLSPHQWLQD
ILHOGEHKLQGWKHSODQWZKHUHWKH\ZHUHFRQGXFWLQJWHVWV7KHUHZHUH
DERXWSHRSOHDWWKLVIDFLOLW\DQGZHZHUHWKHILUVW$PHULFDQV
HYHUWRYLVLW,WZDVREYLRXVWRPHWKDWZKDWWKH\ZHUHEXLOGLQJ
ZRXOGEHHQWLUHO\

7+(+3:$<

XVHOHVVLQPRGHUQGD\FRPEDWEXW,GLGQ
WVD\DQ\WKLQJDWWKHWLPH
H[FHSWWRFRPSOLPHQWWKHPRQWKHLUZRUNPDQVKLS
7KHQH[WGD\ZHYLVLWHGDSODQWPDNLQJWXUELQHHQJLQHVDJDLQXVLQJ
V6RYLHWWHFKQRORJ\7KH\KDGDWHVWIDFLOLW\WKHUHIRUPHDVXULQJ
WKHHIILFLHQF\RIWKHHQJLQHVWKUXVWIXHOFRQVXPSWLRQWKDWVRUWRI
WKLQJ
,WULHGWRFRPPHQGWKHLUZRUNRQFHPRUHWKRXJKDJDLQWKHLU
HTXLSPHQWZDVHDVLO\WZHQW\ILYH\HDUVRXWRIGDWH$QG,WROGP\
JXLGHVWKDW,ZRXOGKDSSLO\DUUDQJHVRPHPHHWLQJVLQWKH8QLWHG
6WDWHVVRWKDWWKH\FRXOGOHDUQDERXWRXUZRUNLQUHODWHGILHOGV
7KHQZHKDGGLQQHUZLWK&KL1LQJ/LX
VIDPLO\LQFOXGLQJKLVEURWKHU
DQGKLVEURWKHU
VZLIH+LVEURWKHUKDGVHUYHGLQWKH.RUHDQ:DU
ILJKWLQJDJDLQVWWKH8QLWHG6WDWHV$IWHUZDUGKHVHWWOHGLQ;L
DQDQG
EHFDPHDWHDFKHU7KH\KDGWKUHHGDXJKWHUV7KHROGHVWZDVDQ
H[FHOOHQWYLROLQSOD\HUDQGWKH\RXQJHVWZDVWKHORFDO3LQJ3RQJ
FKDPSLRQ$WWKLVGLQQHUWKH\SXWRQD3LQJ3RQJFRQWHVWIRUXVWR
ZDWFKDQGZHKDGDQLQWHUHVWLQJWLPHGLVFXVVLQJZKDWKDG
KDSSHQHGLQ&KLQDVLQFH&KL1LQJ/LXKDGHPLJUDWHGLQ-XO\
:HUHWXUQHGWR%HLMLQJDQGDFRXSOHRIGD\VEHIRUHZHOHIWWKH\VDLG
WKH\ZDQWHGWRIRUPDMRLQWYHQWXUHZLWK+HZOHWW3DFNDUG,VDLGWKDW
ZDV2.EXW,ZDQWHGWRNQRZZKDWWKHUXOHVZHUHJRLQJWREH7KH\
VDLGWKDW,FRXOGPDNHWKHUXOHV7KH\VHWXSDVSHFLDOFRUSRUDWH
HQWLW\WRGHDOZLWKXVDQGVHQWDGR]HQHQJLQHHUVDQGPDQDJHUVWR
WKH8QLWHG6WDWHVWRVHHKRZZHFRQGXFWHGRXUEXVLQHVV0\KRVWLQ
&KLQDFDPHWRWKH8QLWHG

'$9,'3$&.$5'

6WDWHVWKHIROORZLQJ\HDUZKLOHWKHGR]HQ&KLQHVHHQJLQHHUVDQG
PDQDJHUVZHUHYLVLWLQJRXU3DOR$OWRIDFLOLW\7RJHWKHUWKH\YLVLWHG
RXUUDQFKLQ0HUFHG$WWKHWLPHZHZHUHKDYLQJDURXQGXSKHDQG
KLVSHRSOHZDWFKHGFDWWOHEUDQGLQJDQGVDPSOHGVRPH5RFN\
0RXQWDLQR\VWHUV/XDQG,LQYLWHGWKHPWRRXUSODFHLQ%LJ6XUQHDU
0RQWHUH\$VKRVWVZHJRWWKHUHDKHDGRIRXUJXHVWVDQGUHDOL]HG
WKDWZHGLGQ
WKDYHDQ\FKRSVWLFNVLQWKHKRXVH6R,ZHQWRXWLQWR
WKHVKRSDQGPDGHDGR]HQVHWVRIFKRSVWLFNVRXWRIUHGZRRG:KHQ
RXUJXHVWVDUULYHGWKH\DVNHGPHWRDXWRJUDSKWKHLUQHZKDQGPDGH
FKRSVWLFNVZKLFK,GLG$QGWKH\WRRNWKHPEDFNWR&KLQDDV
VRXYHQLUV
,QWKH\LQYLWHGXVWREULQJWKHHQWLUH+3ERDUGRIGLUHFWRUVWR
&KLQDIRUDPHHWLQJ2XUFRPSDQ\KDVHQMR\HGDQH[WUDRUGLQDU\
UHODWLRQVKLSZLWK&KLQDHYHUVLQFH)RUWKHLUSDUWWKH&KLQHVHKDYH
EHHQDEOHWRDFTXLUHIURPXVWKHLQVWUXPHQWDWLRQWKH\QHHGWREXLOG
XSWKHLUIOHGJOLQJHOHFWURQLFVPDQXIDFWXULQJFDSDELOLW\2XUEXVLQHVV
LVYHU\DFWLYHLQ&KLQD:HKDYHVHYHUDOPDQXIDFWXULQJSODQWVDQG
ZHVHOO+3SURGXFWVPDLQO\LQWKHLQGXVWULDODUHDDORQJWKHHDVWFRDVW
RIWKH&KLQHVHPDLQODQG

0RUH6WUXFWXUH
2XUUDSLGJURZWKXSWRKDGEURXJKWWROLJKWVRPH
RUJDQL]DWLRQDOZHDNQHVVHV$QGZLWKSURVSHFWVIRUFRQWLQXLQJJURZWK
DKHDG,WKRXJKWLWZDVWLPHWR

7+(+3:$<

+3
VIXOOSURGXFWOLQHLQSURGXFWV
SURYLGHPRUHVWUXFWXUHWRWKHFRPSDQ\DQGDEHWWHUGHOLQHDWLRQRI
JRDOVDQGUHVSRQVLELOLWLHV%\RXUSURGXFWOLQHLQFOXGHGPRUH
WKDQWKUHHKXQGUHGLQVWUXPHQWVRXUDQQXDOVDOHVZHUHDSSURDFKLQJ
PLOOLRQDQGZHKDGQLQHW\HQJLQHHUVHQJDJHGLQSURGXFW
GHYHORSPHQW,WZDVWLPHWRRUJDQL]HWKHVHHQJLQHHUVLQWRVPDOOHU
PRUHHIILFLHQWJURXSVZKLFKZHGLGE\IRUPLQJIRXU
SURGXFWGHYHORSPHQWJURXSV(DFKJURXSFRQFHQWUDWHGRQDIDPLO\RI
UHODWHGSURGXFWVDQGHDFKKDGDVHQLRUHQJLQHHULQJKHDGUHSRUWLQJ
WR'U%HUQDUG2OLYHU7KDWZDV%DUQH\2OLYHURXUROGIULHQGIURP
6WDQIRUGZKRPZHPDQDJHGWRHQWLFHIURP%HOO/DERUDWRULHVLQ
:HDSSRLQWHGKLPYLFHSUHVLGHQWRIUHVHDUFKDQG
GHYHORSPHQW
2QHRIWKHQHZGLYLVLRQVFRQFHQWUDWHGRQIUHTXHQF\FRXQWHUVDQG
UHODWHGLQVWUXPHQWVDQRWKHURQPLFURZDYHHTXLSPHQWDWKLUGRQ
DXGLRDQGYLGHRSURGXFWVDQGWKHIRXUWKRQRVFLOORVFRSHV

'$9,'3$&.$5'

7KHUHLVDQLQWHUHVWLQJVWRU\EHKLQGRXUZRUNLQRVFLOORVFRSHV'XULQJ
WKHZDU%LOO+HZOHWWKDGJRWWHQWRNQRZDEULJKW\RXQJHQJLQHHU
QDPHG+RZDUG9ROOXP+HZDVLPSUHVVHGZLWK9ROOXPVRPXFKVR
WKDWKHXUJHGPHWRWDONZLWKKLP7KLVZDVZKLOH%LOOZDVVWLOOLQWKH
DUP\,DUUDQJHGIRU9ROOXPWRYLVLWXVDQGKHDQG,KDGDORQJFKDW
+HWROGPHKHZDVNHHQO\LQWHUHVWHGLQGHVLJQLQJDQHZW\SHRI
RVFLOORVFRSHZKLFKLVDIXQGDPHQWDOPHDVXULQJLQVWUXPHQW+H
ZDQWHGWRGHVLJQRQHZLWKDWULJJHUHGVZHHSDFRQFHSWIURPUDGDU
WHFKQRORJ\
'XULQJRXUFRQYHUVDWLRQLWEHFDPHFOHDUWRERWKRIXVWKDWUDWKHU
WKDQMRLQLQJ+39ROOXPUHDOO\ZDQWHGWRVWDUWKLVRZQFRPSDQ\
DQGZHKHOSHGKLPGRMXVWWKDW:HOLQHGKLPXSZLWK1RUP1HHO\
DQGPDQ\RIRXURWKHUVDOHVUHSUHVHQWDWLYHILUPVDFURVVWKH8QLWHG
6WDWHV7KXVZDVERUQ7HNWURQL[WKH2UHJRQEDVHGFRPSDQ\WKDW
EHFDPHWKHGRPLQDQWRVFLOORVFRSHVXSSOLHULQWKHZRUOG
$VWLPHZHQWRQLWEHFDPHTXLWHFOHDUWKDWLIZHZHUHJRLQJWRRIIHUD
FRPSOHWHOLQHRIHOHFWURQLFPHDVXULQJLQVWUXPHQWVZHQHHGHGWRILOO
LQWKHOLQHZLWKRXURZQRVFLOORVFRSH6RLQZHGHVLJQHGDQ
RVFLOORVFRSHWKH0RGHOZKLFKZHKRSHGZRXOGSURYLGHDVWURQJ
FKDOOHQJHWR7HNWURQL[%XWDVLWWXUQHGRXWWKHZDVYHU\
XQUHOLDEOHDQGRIFRXUVHZHKDGWRGRRXUEHVWWRLPSURYHLW,Q
UHWURVSHFWZHVKRXOGKDYHJRWWHQLQWRWKHRVFLOORVFRSHEXVLQHVV
PXFKHDUOLHUWKDQZHGLG%XWHYHQDIWHUZHKDGEXLOWXSDIDPLO\RI
ZHOOGHVLJQHGKLJKTXDOLW\RVFLOORVFRSHV7HNWURQL[KDGVXFKD
VWURQJ

7+(+3:$<

SRVLWLRQWKDWRYHUWKHQH[WIHZ\HDUVZHZHUHDEOHWRFDSWXUHRQO\
DERXWSHUFHQWRIWKHPDUNHW:HGHYHORSHGDQRVFLOORVFRSH
V\VWHPPDQDJHGE\DFRPSXWHUVRPH\HDUVODWHUDQGZHZHUHDEOH
WRGRPLQDWHWKHPDUNHWZLWKWKDWV\VWHP
*HWWLQJEDFNWRWKHUHVWUXFWXULQJRIRXUSURGXFWGHYHORSPHQWVWDII
WKHUHZDVDQRWKHULPSRUWDQWUHDVRQZK\ZHVSOLWLWLQWRGLYLVLRQV
7KLVDOORZHGDGHVLJQHQJLQHHUWRFRQFHQWUDWHRQO\RQWKHGLYLVLRQ
V
SURGXFWVDQGWRZRUNFORVHO\ZLWKWKHDSSURSULDWHILHOGVDOHVSHRSOHWR
JHWDJRRGIL[RQFXVWRPHUQHHGVDQGRSLQLRQV

0HHWLQJLQ6RQRPD
$QRWKHUVLJQLILFDQWHYHQWWKDWRFFXUUHGHDUO\LQZDVWKH
FRPSDQ\
VILUVWRIIVLWHPHHWLQJRIVHQLRUPDQDJHUV7KLVZDVD
WZRGD\PHHWLQJWKDWWRRNSODFHDWWKH6RQRPD0LVVLRQ,QQDERXW
VHYHQW\PLOHVQRUWKRI6DQ)UDQFLVFR$ERXWWZHQW\SHRSOHDWWHQGHG
%LOO+HZOHWWDQG,GHFLGHGWRKDYHWKHPHHWLQJIRUDWOHDVWWKUHH
UHDVRQV)LUVWZHWKRXJKWLWDJRRGLGHDWRJHWRXUNH\PDQDJHUV
WRJHWKHUDWOHDVWRQFHD\HDUWRGLVFXVVSROLFLHVDQGSUREOHPVWR
H[FKDQJHYLHZVDQGWRPDNHSODQVIRUWKHIXWXUH6HFRQGWKHUH
ZHUHQRZPRUHWKDQSHRSOHLQWKHFRPSDQ\PDNLQJLW
LQFUHDVLQJO\GLIILFXOWIRU%LOODQGPHWRNQRZHYHU\RQHZHOODQGWR
KDYHDSHUVRQDONQRZOHGJHRIHYHU\WKLQJWKDWZDVJRLQJRQ6RZH
IHOWLWHVVHQWLDOWKDWGHVSLWH+3VJURZWKZHWU\WRPDLQWDLQD
VPDOOFRPSDQ\

'$9,'3$&.$5'

DWPRVSKHUHDQGWRKDYHRXUNH\PDQDJHUVWKRURXJKO\IDPLOLDUZLWK
RXUPDQDJHPHQWVW\OHDQGREMHFWLYHV
7KHWKLUGUHDVRQZHKDGWKHPHHWLQJZDVWRSUHVHQWWRWKHJURXSIRU
WKHLUUHYLHZDQGVWXG\DVHWRIFRUSRUDWHREMHFWLYHVWKDW,KDG
SUHYLRXVO\GUDIWHGDQGGLVFXVVHGZLWK%LOO%\ZD\RIEDFNJURXQG%LOO
DQG,RIWHQWKRXJKWDERXWKRZDFRPSDQ\OLNHRXUVVKRXOGEH
RUJDQL]HGDQGPDQDJHG:HWKRXJKWWKDWLIZHFRXOGJHWHYHU\ERG\
WRDJUHHRQZKDWRXUREMHFWLYHVZHUHDQGWRXQGHUVWDQGZKDWZH
ZHUHWU\LQJWRGRWKHQZHFRXOGWXUQWKHPORRVHDQGWKH\ZRXOG
PRYHLQDFRPPRQGLUHFWLRQ
:HGHYRWHGDJRRGSDUWRIWKH6RQRPDPHHWLQJWRDUHYLHZDQG
GLVFXVVLRQRIWKHSURSRVHGREMHFWLYHV%LOODQG,IHOWVWURQJO\WKDWLI
RXUPDQDJHUVDQGVXSHUYLVRUVZHUHWREHJXLGHGE\ZULWWHQ
REMHFWLYHVWKH\VKRXOGKDYHDSDUWLQGHYHORSLQJWKHP:HDOVR
SRLQWHGRXWWKDWREMHFWLYHVZHUHPHDQWWREHHYDOXDWHGIURPWLPHWR
WLPHDQGLIQHFHVVDU\WREHPRGLILHGIRUWKHIXWXUHEHQHILWRIWKH
FRPSDQ\
7KHUHZHUHVL[RULJLQDOREMHFWLYHV$VWLPHZHQWRQZHUHILQHGWKHVH
REMHFWLYHVEDVHGRQRXUH[SHULHQFHZLWKWKHPDQGRQFKDQJHVLQWKH
EXVLQHVVHQYLURQPHQW:HSXEOLVKHGDVHFRQGYHUVLRQRIWKH
REMHFWLYHVLQDQGWKH\ZHUHDVIROORZV
3URILW7RUHFRJQL]HWKDWSURILWLVWKHEHVWVLQJOHPHDVXUHRIRXU
FRQWULEXWLRQWRVRFLHW\DQGWKHXOWLPDWHVRXUFHRIRXUFRUSRUDWH
VWUHQJWK:HVKRXOG

7+(+3:$<

DWWHPSWWRDFKLHYHWKHPD[LPXPSRVVLEOHSURILWFRQVLVWHQWZLWKRXU
RWKHUREMHFWLYHV
&XVWRPHUV7RVWULYHIRUFRQWLQXDOLPSURYHPHQWLQWKHTXDOLW\
XVHIXOQHVVDQGYDOXHRIWKHSURGXFWVDQGVHUYLFHVZHRIIHURXU
FXVWRPHUV
)LHOGRI,QWHUHVW7RFRQFHQWUDWHRXUHIIRUWVFRQWLQXDOO\VHHNLQJ
QHZRSSRUWXQLWLHVIRUJURZWKEXWOLPLWLQJRXULQYROYHPHQWWRILHOGVLQ
ZKLFKZHKDYHFDSDELOLW\DQGFDQPDNHDFRQWULEXWLRQ
*URZWK7RHPSKDVL]HJURZWKDVDPHDVXUHRIVWUHQJWKDQGD
UHTXLUHPHQWIRUVXUYLYDO
(PSOR\HHV7RSURYLGHHPSOR\PHQWRSSRUWXQLWLHVIRU+3SHRSOH
WKDWLQFOXGHWKHRSSRUWXQLW\WRVKDUHLQWKHFRPSDQ\
VVXFFHVV
ZKLFKWKH\KHOSPDNHSRVVLEOH7RSURYLGHIRUWKHPMREVHFXULW\
EDVHGRQSHUIRUPDQFHDQGWRSURYLGHWKHRSSRUWXQLW\IRUSHUVRQDO
VDWLVIDFWLRQWKDWFRPHVIURPDVHQVHRIDFFRPSOLVKPHQWLQWKHLU
ZRUN
2UJDQL]DWLRQ7RPDLQWDLQDQRUJDQL]DWLRQDOHQYLURQPHQWWKDW
IRVWHUVLQGLYLGXDOPRWLYDWLRQLQLWLDWLYHDQGFUHDWLYLW\DQGDZLGH
ODWLWXGHRIIUHHGRPLQZRUNLQJWRZDUGHVWDEOLVKHGREMHFWLYHVDQG
JRDOV
&LWL]HQVKLS7RPHHWWKHREOLJDWLRQVRIJRRGFLWL]HQVKLSE\PDNLQJ
FRQWULEXWLRQVWRWKHFRPPXQLW\DQGWRWKHLQVWLWXWLRQVLQRXUVRFLHW\
ZKLFKJHQHUDWHWKHHQYLURQPHQWLQZKLFKZHRSHUDWH
(DFKRIWKHVHREMHFWLYHVZDVVXSSRUWHGE\WH[WWKDWH[SODLQHGZK\LW
ZDVFKRVHQDQGWKDWGLVFXVVHGLQVRPH

'$9,'3$&.$5'

GHWDLOWKHHYROXWLRQDQGLPSRUWDQFHRIWKHREMHFWLYH7KRXJKWKHIXOO
WH[WVDUHQRWUHSHDWHGKHUH,ZLOOEHUHIHUULQJWRWKHPZKHQ,WDON
LQWKHIROORZLQJSDJHVDERXWWKHREMHFWLYHVLQWKHEURDGHUFRQWH[WRI
ZKDWKDVFRPHWREHFDOOHGWKH+3:D\
$Q\RUJDQL]DWLRQDQ\JURXSRISHRSOHZKRKDYHZRUNHGWRJHWKHUIRU
VRPHWLPHGHYHORSVDSKLORVRSK\DVHWRIYDOXHVDVHULHVRI
WUDGLWLRQVDQGFXVWRPV7KHVHLQWRWDODUHXQLTXHWRWKH
RUJDQL]DWLRQ6RLWLVZLWK+HZOHWW3DFNDUG:HKDYHDVHWRIYDOXHV
GHHSO\KHOGEHOLHIVWKDWJXLGHXVLQPHHWLQJRXUREMHFWLYHVLQ
ZRUNLQJZLWKRQHDQRWKHUDQGLQGHDOLQJZLWKFXVWRPHUV
VKDUHKROGHUVDQGRWKHUV2XUFRUSRUDWHREMHFWLYHVDUHEXLOWXSRQ
WKHVHYDOXHV7KHREMHFWLYHVVHUYHDVDGD\WRGD\JXLGHIRUGHFLVLRQ
PDNLQJ7RKHOSXVPHHWRXUREMHFWLYHVZHHPSOR\YDULRXVSODQV
DQGSUDFWLFHV,WLVWKHFRPELQDWLRQRIWKHVHHOHPHQWVRXUYDOXHV
FRUSRUDWHREMHFWLYHVSODQVDQGSUDFWLFHVWKDWIRUPVWKH+3:D\
DQGWKDWLVWKHVXEMHFWRIWKHFKDSWHUVWKDWIROORZ

&KDSWHU
*URZWK)URP3URILW
$7+(://(773$&.$5' DQGRWKHUFRPSDQLHVDVZHOO SHRSOH
PDWHULDOVIDFLOLWLHVPRQH\DQGWLPHDUHWKHUHVRXUFHVDYDLODEOHWR
XVIRUFRQGXFWLQJRXUEXVLQHVV%\DSSO\LQJRXUVNLOOVZHWXUQWKHVH
UHVRXUFHVLQWRXVHIXOSURGXFWVDQGVHUYLFHV,IZHGRDJRRGMRE
FXVWRPHUVSD\XVPRUHIRURXUSURGXFWVWKDQWKHVXPRIRXUFRVWVLQ
SURGXFLQJDQGGLVWULEXWLQJWKHP7KLVGLIIHUHQFHRXUSURILW
UHSUHVHQWVWKHYDOXHZHDGGWRWKHUHVRXUFHVZHXWLOL]H
,WLVLPSRVVLEOHWRRSHUDWHDEXVLQHVVIRUORQJXQOHVVLWJHQHUDWHVD
SURILWDQGVRLIDFRPSDQ\LVWRPHHWDQ\RILWVRWKHUREMHFWLYHVLW
PXVWPDNHDSURILW2XUDELOLW\WRSURSHUO\VHUYHRXUFXVWRPHUVWR
ILQDQFHUHVHDUFKDQGGHYHORSPHQWWRRIIHUUHZDUGLQJHPSOR\PHQW
RSSRUWXQLWLHVDQGWRPDNHFRQWULEXWLRQVWRWKHFRPPXQLWLHVLQZKLFK
ZHRSHUDWHDOOGHSHQGGLUHFWO\RQRXUDELOLW\WRJHQHUDWHDQDGHTXDWH
SURILW7KHSURILWZHJHQHUDWHIURPRXURSHUDWLRQVLVWKHXOWLPDWH
VRXUFHRIWKHIXQGV

'$9,'3$&.$5'

ZHQHHGWRSURVSHUDQGJURZ,W
VWKHIRXQGDWLRQRIIXWXUH
RSSRUWXQLW\DQGHPSOR\PHQWVHFXULW\
7KHSURILWWKDWFDQUHDVRQDEO\EHH[SHFWHGRQHDFKSURGXFWYDULHV
ZLWKLWVFRPSHWLWLYHVLWXDWLRQWKHXQLTXHYDOXHRIWKDWSURGXFWDQG
WKHFDSLWDOLQYHVWPHQWQHFHVVDU\WRSURGXFHLW7KHUHIRUHWKHVDPH
SURILWOHYHOFDQQRWEHH[SHFWHGIURPHDFKSURGXFWRUIURPHDFK
GLYLVLRQRUXQLWRIWKHFRPSDQ\
6L[W\\HDUVDJRRXUFRXQWU\ZDVLQWKHGHSWKVRIWKH*UHDW
'HSUHVVLRQ7KRXVDQGVRIEXVLQHVVHVKDGVKXWWKHLUGRRUVDQGRQH
RIHYHU\WKUHHSHRSOHLQWKHODERUIRUFHZDVRXWRIZRUN%LOO+HZOHWW
DQG,ZHUHUDLVHGGXULQJWKDWGHSUHVVLRQ:HKDGREVHUYHGLWV
GHYDVWDWLQJHIIHFWVRQSHRSOHLQFOXGLQJPDQ\IDPLOLHVDQGIULHQGV
ZKRZHUHFORVHWRXV
0\IDWKHUKDGEHHQDSSRLQWHGDVDEDQNUXSWF\UHIHUHHIRUWKHVWDWH
RI&RORUDGR:KHQ,UHWXUQHGWR3XHEORGXULQJWKHVXPPHUVRIWKH
V,RIWHQKHOSHGP\IDWKHULQORRNLQJXSWKHUHFRUGVRIWKRVH
FRPSDQLHVWKDWKDGJRQHEDQNUXSW,QRWHGWKDWWKHEDQNVVLPSO\
IRUHFORVHGRQILUPVWKDWPRUWJDJHGWKHLUDVVHWVDQGWKHVHILUPVZHUH
OHIWZLWKQRWKLQJ7KRVHILUPVWKDWGLGQRWERUURZPRQH\KDGD
GLIILFXOWWLPHEXWWKH\HQGHGXSZLWKWKHLUDVVHWVLQWDFWDQGVXUYLYHG
GXULQJWKHGHSUHVVLRQ\HDUVWKDWIROORZHG
)URPWKLVH[SHULHQFH,GHFLGHGRXUFRPSDQ\VKRXOGQRWLQFXUDQ\
ORQJWHUPGHEW)RUWKLVUHDVRQ%LOODQG,GHWHUPLQHGZHZRXOG
RSHUDWHWKHFRPSDQ\RQDSD\DV\RXJREDVLVILQDQFLQJRXUJURZWK
SULPDULO\RXWRIHDUQLQJVUDWKHUWKDQE\ERUURZLQJPRQH\:HNQHZ

7+(+3:$<

VHOIILQDQFLQJZDVSRVVLEOHEHFDXVH*HQHUDO5DGLRDFRPSDQ\ZH
DGPLUHGKDGEHHQLQEXVLQHVVVHYHUDO\HDUVKDGEHHQVXFFHVVIXO
DQGKDGQHYHUVRXJKWRXWVLGHILQDQFLQJ2XUIHHOLQJZDVLIWKH\FRXOG
GRLWZHFRXOGGRLW$QGZHKDYHIRUPRUHWKDQDKDOIFHQWXU\
,NQRZWKDWLQVRPHLQGXVWULHVSDUWLFXODUO\WKRVHUHTXLULQJODUJH
FDSLWDOLQYHVWPHQWVWKHSD\DV\RXJRDSSURDFKMXVWLVQ
WIHDVLEOH,
DOVRNQRZWKDWLWKDVEHFRPHSRSXODUWKURXJKRXWLQGXVWU\WRPHHW
FDSLWDOQHHGVE\OHYHUDJLQJSURILWVZLWKHTXLW\ILQDQFLQJDQG
ORQJWHUPERUURZLQJ7KHDGYRFDWHVRIWKLVDSSURDFKVD\\RXFDQ
PDNH\RXUSURILWVJRIXUWKHUE\OHYHUDJLQJWKHP7KDWPD\EHEXW
DW+3LWZDVRXUILUPSROLF\WRSD\DVZHJRDQGQRWWRLQFXU
VXEVWDQWLDOGHEW
2XUORQJVWDQGLQJSROLF\KDVEHHQWRUHLQYHVWPRVWRIRXUSURILWVDQG
WRGHSHQGRQWKLVUHLQYHVWPHQWSOXVIXQGVIURPHPSOR\HHVWRFN
SXUFKDVHVDQGRWKHUFDVKIORZLWHPVWRILQDQFHRXUJURZWK7KH
VWRFNSXUFKDVHSODQDOORZVHPSOR\HHVWRDSSO\XSWRDFHUWDLQ
SHUFHQWDJHRIWKHLUVDODULHVWRSXUFKDVHVKDUHVRI+3VWRFNDWD
SUHIHUHQWLDOSULFH7KHFRPSDQ\SLFNVXSDSRUWLRQRIWKHSULFHRIWKH
VWRFN7KHSODQKDVEHHQLQH[LVWHQFHVLQFHDQGKDVSURYLGHG
XVZLWKVLJQLILFDQWDPRXQWVRIFDVKWRKHOSILQDQFHRXUJURZWK
,QVHWWLQJXSWKHVWRFNSXUFKDVHSODQZHPDGHRQHLPSRUWDQW
PLVWDNH:HGLGQRWUHTXLUHRXUHPSOR\HHVZKRERXJKW+3VWRFNDWD
SUHIHUHQWLDOSULFHWRNHHSLW7KHUHLVDORQJVWDQGLQJWUXWKDERXW
ZDJHDQGVDODU\OHYHOVQRPDWWHUZKDWWKHSD\WKHHPSOR\HH
WKLQNVKHRUVKHQHHGVDERXWSHUFHQWPRUH:HIRXQGWKDW

'$9,'3$&.$5'

PDQ\RIRXUSHRSOHZKRSDUWLFLSDWHGLQWKLVSUHIHUHQWLDOVWRFN
SXUFKDVHSODQVROGWKHLUVWRFNULJKWDZD\(YHQRXUHPSOR\HHVDW
KLJKOHYHOVKDGVWDQGLQJRUGHUVWRVHOOWKHLUVWRFNDVVRRQDVWKH\
UHFHLYHGLW
7KDWVLWXDWLRQKDVEHHQFRUUHFWHGEXWLWLVLURQLFWKDWPDQ\RIRXU
HPSOR\HHVZKRKHOGRQWRWKHLUVWRFNDQGVROGLWZKHQWKH\UHWLUHG
RIWHQKDGJDLQVRIPRUHWKDQDPLOOLRQGROODUV

$&ULWLFDO7HVW
2XUSROLF\RIVHOIILQDQFLQJUHTXLUHVQRWRQO\DUHDVRQDEOHOHYHORI
SURILWEXWDOVRJRRGPDQDJHPHQWRIDVVHWV7KLVSROLF\XQGHUZHQWD
FULWLFDOWHVWLQWKHHDUO\V)ROORZLQJDSHULRGRIZRUOGZLGH
UHFHVVLRQDQGVORZJURZWKWKHFRPSDQ\IDFHGDUHERXQGLQJPDUNHW
:LWKOLPLWHGFDVKWRZRUNZLWKLWZDVJLYLQJVHULRXVFRQVLGHUDWLRQWR
VRPHORQJWHUPERUURZLQJDVPXFKDVPLOOLRQ:HKDGSULFHG
VRPHRIRXUSURGXFWVWRRORZRXULQYHQWRULHVDQGDFFRXQWV
UHFHLYDEOHZHUHDWDODUPLQJO\KLJKOHYHOVDQGZHZHUHGRLQJDSRRU
MRERIFRQWUROOLQJFRVWV%XW,ZDVFRQYLQFHGZHFRXOGFRUUHFWWKH
SUREOHPWKURXJKJUHDWHUVHOIGLVFLSOLQH,TXLFNO\YLVLWHGQHDUO\HYHU\
RQHRIRXUPDMRUGLYLVLRQVPHHWLQJZLWKDKRVWRIPDQDJHUVDQG
JLYLQJWKHPDOHFWXUHWKDWZDVODWHUFKDUDFWHUL]HGE\RQHPDQDJHUDV
'DYH
VJLYHHPKHOOWDON7KHUHVSRQVHZDVLPSUHVVLYH2XU
PDQDJHUVUHDOO\NQXFNOHGGRZQLQYHQWRULHVZHUHVKDUSO\
UHGXFHGDFFRXQWVUHFHLYDEOHZHUHWLJKWHQHGFRVWVFDPH

7+(+3:$<

XQGHUEHWWHUFRQWURO:HJRWWKHZKROHWHDPZRUNLQJRQWKH
SUREOHPDQGWKHFRPSDQ\ZHQWRQWRH[SHULHQFHDSHULRGRIVWURQJ
SURILWDEOHJURZWKZLWKRXWUHVRUWLQJWRORQJWHUPERUURZLQJ
,QDQDO\]LQJRXUDFFRXQWVUHFHLYDEOHZHIRXQGDPDMRUZHDNQHVV
0DQ\RIRXUFXVWRPHUVZHUHEX\LQJSURGXFWVIURPVHYHUDO+3
HQWLWLHVWRFRPELQHLQWRDV\VWHP7KH\ZHUHQRWSD\LQJIRUDQ\RI
WKHSURGXFWVXQWLOWKH\UHFHLYHGWKHODVWRQHQHHGHG
:HFKDQJHGWKLVSURFHGXUHVRWKDWZHZHUHDEOHWRSXWWKHV\VWHP
WRJHWKHUDQGFKHFNLWRXWEHIRUHLWZDVGHOLYHUHG7KLVSURYLGHGDQ
LQFHQWLYHWR+3HQWLWLHVWRH[SHGLWHSURGXFWLRQRISURGXFWV,WDVVXUHG
WKDWWKHV\VWHPZRUNHGSURSHUO\DQGLWKHOSHGVROYHWKHDFFRXQWV
UHFHLYDEOHSUREOHP
$SRVLWLYHIDOORXWIURPWKLVHQWLUHHSLVRGHZDVWKHFOHDUUHPLQGHUWKDW
VHOIILQDQFLQJUHTXLUHVFRQVWDQWYLJLODQFHDQGVHOIGLVFLSOLQH

5HVSRQVLELOLW\WR6KDUHKROGHU
$QLPSRUWDQWHOHPHQWRIWKH+3:D\KDVWRGRZLWKWKHFRPSDQ\
V
UHODWLRQVKLSZLWKLWVVKDUHKROGHUVDQGWKHLQYHVWPHQWFRPPXQLW\$
SULPDU\REMHFWLYHLQWKLVDUHDLVWRSURYLGHFRQVLVWHQF\LQRXU
FRUSRUDWHSHUIRUPDQFHLQFOXGLQJVWHDG\JURZWKLQHDUQLQJVDQG
HTXLW\2EYLRXVO\WKLVLVQRWDOZD\VSRVVLEOHHYHQIRUWKHEHVWRI
FRUSRUDWLRQVEXWRYHUWKH\HDUVRXU+HZOHWW3DFNDUGSHUIRUPDQFH
KDVEHHQTXLWHJRRG

'$9,'3$&.$5'

+3FRPPRQVWRFNILUVWFDPHLQWREHLQJLQZKHQZH
WUDQVIRUPHGRXURULJLQDOSDUWQHUVKLSLQWRDFRUSRUDWLRQ7HQ\HDUV
ODWHUWREURDGHQWKHEDVHRIRZQHUVKLS%LOODQG,RIIHUHGIRUSXEOLF
VDOHSHUFHQWRIWKHPLOOLRQVKDUHVRXWVWDQGLQJ$OVRLQWKH
FRPSDQ\GLVWULEXWHGQHZVKDUHVWRHPSOR\HHVDVERQXVHVDV
ZHOODVPDNLQJDYDLODEOHDQRWKHUVKDUHVIRUHPSOR\HHVWRFN
RSWLRQV$WWKDWWLPHSXEOLFWUDGLQJEHJDQLQWKHRYHUWKHFRXQWHU
PDUNHW
,QZHLQLWLDWHGRXUHPSOR\HHVWRFNSXUFKDVHSODQ(PSOR\HH
SDUWLFLSDWLRQKDVEHHQDFWLYHDQGWKHEDVLFSODQUHPDLQVLQHIIHFW
WRGD\,Q+3VWRFNZDVDFFHSWHGVLPXOWDQHRXVO\IRUOLVWLQJRQ
WKH1HZ

+3OLVWVRQWKH1HZ<RUN6WRFN([FKDQJH0DUFK OHIWWR
ULJKW 'DYH3DFNDUG.HLWK)XQVWRQSUHVLGHQWRIWKH1<6(DQG
0RUWLPHU0DUFXVVSHFLDOLVWLQWKHVWRFN

7+(+3:$<

<RUNDQG3DFLILF6WRFN([FKDQJHVDQGLQUHFHQW\HDUVLWKDVEHHQ
OLVWHGRQWKHSULQFLSDOIRUHLJQH[FKDQJHVDVZHOO
:HKDGWZRPDLQSXUSRVHVLQJRLQJSXEOLFZLWKRXUVWRFNLQ
2QHZDVWREURDGHQWKHRZQHUVKLSRIWKHFRPSDQ\HVSHFLDOO\
HPSOR\HHRZQHUVKLS7KHRWKHUZDVWRKDYHVWRFNDYDLODEOHLQWKH
HYHQWZHZDQWHGWRDFTXLUHRWKHUFRPSDQLHV,WLVRIWHQPRUH
SUDFWLFDOWRDFTXLUHDFRPSDQ\E\DQH[FKDQJHRIVWRFNWKDQE\
RXWULJKWSXUFKDVH$VLWWXUQHGRXWZHDFTXLUHGVHYHUDOFRPSDQLHVLQ
WKHVPRVWRIWKHPWKURXJKDQH[FKDQJHRIVWRFN
7KHGD\RIRXUILUVWSXEOLFOLVWLQJRQWKH1HZ<RUN6WRFN([FKDQJH
GLGQRWVWDUWVPRRWKO\$IHZRIXVIOHZWR1HZ<RUNWKHGD\EHIRUH
WKHHYHQWDQGVWD\HGXSWRZQDWWKH(VVH[+RXVH(DUO\WKHQH[W
PRUQLQJZHVHWRIIIRU:DOO6WUHHW,WQHYHURFFXUUHGWRPHWRWDNHD
WD[LLQVWHDGZHMXPSHGRQWKH%07VXEZD\DQGKHDGHGGRZQWRZQ
8QIRUWXQDWHO\,ZDVQ
WPXFKRIDVXEZD\QDYLJDWRUDIWHUPXFK
GHEDWHZHPDGHWKHZURQJFRQQHFWLRQDW7LPHV6TXDUH:HDUULYHG
RQ:DOO6WUHHWVHYHUDOPLQXWHVODWHDQGZHUHLPPHGLDWHO\XVKHUHG
LQWRDKXJHFRUQHURIILFHDQGJUHHWHGE\WKHFKDLUPDQRIWKH
H[FKDQJH.HLWK)XQVWRQ+HFKXFNOHGZKHQ,H[SODLQHGWKDWZH
G
JRWWHQORVWRQWKHVXEZD\,GRQ
WWKLQNKHFRXOGIDWKRPWKDWZH
ZRXOGWDNHWKHVXEZD\WRVXFKDQLPSRUWDQWHYHQW%XWZHGLG
2YHUWKH\HDUVRXUFRPPXQLFDWLRQVZLWKVKDUHKROGHUVDQGWKH
LQYHVWPHQWFRPPXQLW\KDYH,EHOLHYHUHIOHFWHGRXUEDVLF
SKLORVRSKLHVDQGWKH+3:D\:H

'$9,'3$&.$5'

KDYHHQGHDYRUHGWREHIRUWKULJKWDQGFDQGLGDQGKDYHSUDFWLFHGIXOO
DQGSURPSWGLVFORVXUHRIHYHQWVRUGHYHORSPHQWVKDYLQJDUHDORU
SRWHQWLDOHIIHFWRQWKHSULFHRI+HZOHWW3DFNDUGVWRFN

:DOO6WUHHW
V6KRUW7HUP)RFXV
0XFKKDVEHHQVDLGDQGZULWWHQDERXW:DOO6WUHHW
VVHHPLQJIL[DWLRQ
RQTXDUWHUO\HDUQLQJV$QGLQGHHGWKHIRFXVRQVKRUWWHUPUHVXOWV
RIWHQKDVDVLJQLILFDQWHIIHFWRQWKHSULFHRIDFRPSDQ\
VVWRFN
0RUHRYHUWKDWHIIHFWLVIUHTXHQWO\XQUHODWHGWRWKHEDVLFVWUHQJWK
DQGORQJWHUPSURVSHFWVRIWKHFRPSDQ\
,WLVDOZD\VSRVVLEOHWRLPSURYHSURILWVIRUDWLPHE\UHGXFLQJWKH
OHYHORIRXULQYHVWPHQWLQQHZSURGXFWGHVLJQDQGHQJLQHHULQJLQ
FXVWRPHUVHUYLFHRULQQHZEXLOGLQJVDQGHTXLSPHQW%XWLQWKHORQJ
UXQZHZLOOSD\DVHYHUHSULFHIRURYHUORRNLQJDQ\RIWKHVHDUHDV
2QHRIRXUPRVWLPSRUWDQWPDQDJHPHQWWDVNVLVPDLQWDLQLQJWKH
SURSHUEDODQFHEHWZHHQVKRUWWHUPSURILWSHUIRUPDQFHDQG
LQYHVWPHQWIRUIXWXUHVWUHQJWKDQGJURZWK
*RRGQHZSURGXFWVDUHWKHOLIHEORRGRIWHFKQLFDOFRPSDQLHVVXFKDV
RXUVDOWKRXJKRXUEXVLQHVVOHYHOVYDU\IURP\HDUWR\HDU$VWURQJ
UHVHDUFKDQGGHYHORSPHQWHIIRUWKDVDOZD\VEHHQWKHGULYLQJIRUFH
EHKLQGSURGXFWFRQWULEXWLRQDW+32YHUWKH\HDUVRXUDQQXDO
H[SHQGLWXUHVRQ5 'KDYHDPRXQWHGWREHWZHHQDQGSHUFHQWRI
VDOHVDQGLQUHFHQW\HDUVKDYHH[FHHGHG

7+(+3:$<

SHUFHQW,QPHHWLQJRXUSURILWREMHFWLYHZHDUHDOZD\VPLQGIXODW+3
RIWKHORQJSXOOVWHDGLO\DGGLQJVWUHQJWKDQGYDOXHWRWKHFRPSDQ\
7KHSULFLQJRIQHZSURGXFWVLVDQLPSRUWDQWDQGFKDOOHQJLQJH[HUFLVH
2IWHQDSURGXFWZLOOEHLQWURGXFHGWRWKHPDUNHWDWDSULFHWRRORZWR
PDNHDQDGHTXDWHVKRUWWHUPSURILW7KHWKLQNLQJLVWKDWZH
OOJHW
RXUFRVWVGRZQDQGWKDWZLOOHQDEOHXVWRPDNHDJRRGSURILW
HLWKHUQH[WPRQWKQH[WTXDUWHURUQH[W\HDU%XWWKDWWLPHVHOGRP
LIHYHUFRPHV
2IWHQSULFLQJDOVRIDOOVSUH\WRWKHJRDORIPDUNHWVKDUH0DQ\
PDQDJHUVLQ$PHULFDQLQGXVWU\DUHFDXJKWXSZLWKWKHLGHDRI
FDSWXULQJDODUJHUVKDUHRIDPDUNHWRIWHQE\XQGHUFXWWLQJWKH
FRPSHWLWLRQ
VSULFHV,QWKHVKRUWWHUPWKDWRIWHQUHVXOWVLQDQ
LPSUHVVLYHVDOHVYROXPHEXWDWWKHH[SHQVHRIOLWWOHRUQRSURILW
,QZHLQWURGXFHGDSURGXFWWKDWUHGHILQHGWKHFDOFXODWRU
PDUNHW,WZDVWKH0RGHOKDQGKHOGFDOFXODWRUWKHZRUOG
VILUVW
HOHFWURQLFVOLGHUXOH:HSULFHGWKHSURGXFWDWZKLFKZDV
FRQVLGHUHGKLJKE\PDQ\DQGH[FHVVLYHE\VRPH%XWWKHFDOFXODWRU
UHSUHVHQWHGVXFKDXQLTXHYDOXHWKDWRQFHLWKLWWKHPDUNHWZH
FRXOGQ
WPDNHWKHPIDVWHQRXJK1RWWRRPDQ\PRQWKVODWHUZHKDG
DJJUHVVLYHFRPSHWLWRUVFRPSDQLHVWKDWRIIHUHGFDOFXODWRUVDWSULFHV
VXEVWDQWLDOO\EHORZ+3
V7KHLUJRDOZKLFKWKH\UHDGLO\DGPLWWHG
ZDVWRFDSWXUHPDUNHWVKDUHIURPXVDQGWKH\GLG%XWLQWKH
ORQJWHUPZHPDGHDSURILWE\PDNLQJVXUHZHNHSWRXUFRVWVGRZQ
$WWKDWWLPHRXUSROLF\DW+3ZDVWRUHJDUGLQFUHDVHG

'$9,'3$&.$5'

PDUNHWVKDUHDVDUHZDUGIRUGRLQJWKLQJVZHOOIRUSURYLGLQJ
FXVWRPHUVZLWKVXSHULRUSURGXFWVDQGVHUYLFHVDQGNHHSLQJRXUFRVWV
GRZQ7KLVKDVEHHQDEDVLFSROLF\IURPWKHYHU\EHJLQQLQJRIRXU
FRPSDQ\DQGZHH[SHFWLWWRFRQWLQXHLQWKHIXWXUH

&KDSWHU
&RPPLWPHQWWR,QQRYDWLRQ
:+(1%,//+(:/(77$1',SXWWRJHWKHUWKHLQLWLDOSODQVIRURXU
EXVLQHVVHQWHUSULVHLQZHKDGQ
W\HWIRFXVHGRXULQWHUHVWDQG
HQHUJLHVRQWKHILHOGRIHOHFWURQLFLQVWUXPHQWDWLRQ:KDWZHGLG
GHFLGHKRZHYHUZDVWKDWZHZDQWHGWRGLUHFWRXUHIIRUWVWRZDUG
PDNLQJLPSRUWDQWWHFKQLFDOFRQWULEXWLRQVWRWKHDGYDQFHPHQWRI
VFLHQFHLQGXVWU\DQGKXPDQZHOIDUH,WZDVDORIW\DPELWLRXVJRDO
%XWULJKWIURPWKHEHJLQQLQJ%LOODQG,NQHZZHGLGQ
WZDQWWREHD
PHWRRFRPSDQ\PHUHO\FRS\LQJSURGXFWVDOUHDG\RQWKHPDUNHW
7RWKLVGD\+3FRQWLQXDOO\VWULYHVWRGHYHORSSURGXFWVWKDWUHSUHVHQW
WUXHDGYDQFHPHQW
7KHRULJLQDO+HZOHWW3DFNDUGSURGXFWVZHUHHOHFWURQLFPHDVXULQJ
LQVWUXPHQWV:LWKJURZWKRXUSURGXFWOLQHH[SDQGHGDQGVRWRRGLG
RXUILHOGRILQWHUHVW,QWKHSHULRGDIWHU:RUOG:DU,,ZHSXWDJUHDW
GHDORIHIIRUWLQWRGHVLJQLQJEHWWHULQVWUXPHQWV:HKDGFRPH

'$9,'3$&.$5'

WRUHDOL]HWKDWDVXFFHVVIXOQHZLQVWUXPHQWKDGWRLQFOXGHQHZ
WHFKQRORJ\DQGEHXVHIXO7KLVPHDQWWKDWWKHPRVWLPSRUWDQWQHZ
LQVWUXPHQWVZRXOGFRPELQHQHZWHFKQRORJ\DQGGHPRQVWUDWH
PDUNHWDELOLW\7KHUHZHUHIURPWLPHWRWLPHQHZGHYHORSPHQW
RSSRUWXQLWLHVWKDWLQFOXGHGQHZWHFKQRORJ\LQDUHDVZKHUHZHKDGQR
PDUNHWLQJFDSDELOLW\7KHVHZHVROGWRILUPVWKDWKDGWKHPDUNHWLQJ
DELOLW\
:HVWDUWHGDPRQWKO\SXEOLFDWLRQLQFDOOHGWKH+3-RXUQDO,W
ZDVSDWWHUQHGDIWHUDMRXUQDORIWKH*HQHUDO5DGLR&RPSDQ\FDOOHG
WKH([SHULPHQWRU7KH+3-RXUQDOGHVFULEHGWKHWHFKQRORJ\XVHGLQ
WKHGHYHORSPHQWRILPSRUWDQWQHZSURGXFWV$OWKRXJKWKLV
LQIRUPDWLRQZDVXVHIXOWRRXUFRPSHWLWRUVZHWKRXJKWWKHEHQHILWV
RXWZHLJKHGWKLVGLVDGYDQWDJH7KH-RXUQDOZDVSXEOLVKHGPRQWKO\
DQGRIWHQWKHUHZHUHVHYHUDOLVVXHVGHVFULELQJDQHZGHYHORSPHQW
DQGLWVDSSOLFDWLRQ,ZLOOQRWFRYHUHYHU\GHYHORSPHQWZHPDGHEXW,
ZLOOGHVFULEHVRPHRIWKHLPSRUWDQWRQHV
:HZHUHLQYROYHGZLWKTXDUW]IUHTXHQF\VWDQGDUGVIRUDORQJWLPH,Q
WKHFRXUVHRIWKLVZRUNZHOHDUQHGDERXWDVFLHQWLVWLQ&RORUDGR'RQ
+DPPRQGZKRZDVGRLQJVRPHH[FHOOHQWZRUNZLWKTXDUW]:H
DVNHGKLPWRMRLQRXUFRPSDQ\+HGHYHORSHGDQXPEHURIQHZNLQGV
RILQVWUXPHQWVIRUXVXVLQJTXDUW]2QHZDVDTXDUW]WKHUPRPHWHU
WKDWFRXOGPHDVXUHWHPSHUDWXUHZLWKDUHVROXWLRQRIGHJUHHV
&,WFDQEHORFDWHGVRPHGLVWDQFHIURPWKHGLJLWDOUHDGRXWZLWKRXW
DQ\ORVVRIDFFXUDF\DQGLWFDQGRDQXPEHURIWKLQJVQRRWKHU
WKHUPRPHWHUFDQGR

7+(+3:$<

2XUODVHULQWHUIHURPHWHUZDVDQRWKHUUHDOEUHDNWKURXJKLQ
WHFKQRORJ\,WXVHVDWZRIUHTXHQF\ODVHUDQGFDQPDNH
PHDVXUHPHQWVWKDWDUHDFFXUDWHWRDPLOOLRQWKRIDQLQFK,WLVLGHDO
IRUPHDVXULQJPDFKLQHWRRODFFXUDF\DQGLWFDQEHXVHGWRPHDVXUH
GLVWDQFHVRIWZRKXQGUHGIHHW$ODUJHQXPEHURIRXUHQJLQHHUV
SDUWLFLSDWHGLQWKLVSURMHFW/HQ&XWOHUDQG$%DJOH\WRRNWKHOHDG
-RH5DQGR-RKQ'XNHV*DU\*RUGRQ$QGUH5XGH.HQQHWK:D\QH
5LFKDUG%DOGZLQ*OHQQ%UXJZDOG:LOOLDP.UXJHUDQGPDQ\RWKHUV
ZRUNHGRQLW7KHSURMHFWZDVGHVFULEHGLQWKH-RXUQDOLQ$XJXVW
+3KDVEHHQQXPEHURQHLQWKHZRUOGPDUNHWHYHUVLQFH
2QHRIRXUPRVWLPSRUWDQWFRQWULEXWLRQVUHODWHGWROLJKWHPLWWLQJ
GLRGHV0RUHWKDQVL[\HDUVRIUHVHDUFKDQGGHYHORSPHQWRQOLJKW
HPLWWLQJPDWHULDOVZDVLQYROYHG2XUZRUNLQRWKHUDUHDVVXFKDV
VROLGVWDWHWHFKQRORJ\DQGLQWHJUDWHGFLUFXLWWHFKQRORJ\DOVR
FRQWULEXWHG:HKDG/('ZRUNWRWKHSRLQWZKHUHLWFRXOGKDYHEHHQ
XVHGLQWKHHDUO\VEXWQRQHRIRXUGLYLVLRQVFKRVHWRXVHLW
'HVSLWHWKDWIDFW%LOO+HZOHWWDQG,GHFLGHGZHVKRXOGNHHSWKLVZRUN
JRLQJ,WPDGHWKHSRFNHWVL]HGFDOFXODWRUSRVVLEOHLQDQGLW
KDVEHFRPHWKHGLVSOD\LQPDQ\DSSOLFDWLRQVVLQFH+RZDUG%RUGHQ
DQG*HUDOG3LJKLQLGHVFULEHGWKLVGHYHORSPHQWLQWKH+3-RXUQDOLQ
WKHODWHV/('DSSOLFDWLRQVKDYHH[SDQGHGIDUEH\RQGZKDWZDV
HQYLVLRQHGDWWKDWWLPH:HKDYHFRQWLQXHGWKHGHYHORSPHQWRIOLJKW
HPLWWLQJPDWHULDOVDQGRXUODWHVWFRQWULEXWLRQLVWKHEULJKWHVWOLJKW
HPLWWLQJGLRGHVLQWKHZRUOG7KHVHZLOO

'$9,'3$&.$5'

ILQGZLGHXVHLQDXWRPRELOHWDLOOLJKWVDQGWXUQVLJQDOOLJKWV7KHILUVW
DXWRPRELOHWRXVHWKHPLVWKH7KXQGHUELUG7KH\KDYHDJUHDW
DGYDQWDJHRYHULQFDQGHVFHQWOLJKWV7KH\QHYHUEXUQRXWDQGWKH\
XVHPXFKOHVVHQHUJ\7KH\ZLOOLQFUHDVHWKHPLOHDJHRIDQ
DXWRPRELOHE\RQHPLOHSHUJDOORQDQGWKXVSD\IRUWKHPVHOYHVYHU\
TXLFNO\,WVKRXOGEHRQO\DVKRUWWLPHEHIRUHDOORIWKHDXWRPRELOHV
LQWKHZRUOGZLOOEHHTXLSSHGZLWKWKHVHOLJKWHPLWWLQJGLRGHV
7KHNH\WR+3
VSURVSHFWLYHLQYROYHPHQWLQDQ\ILHOGRILQWHUHVWLV
FRQWULEXWLRQ2XUREMHFWLYHLVWRH[SDQGDQGGLYHUVLI\RQO\ZKHQZH
FDQEXLOGRQRXUSUHVHQWVWUHQJWKVDQGZLWKWKHUHFRJQLWLRQWKDWZH
KDYHWKHSURYHQFDSDELOLW\WRPDNHDFRQWULEXWLRQ7RPHHWWKLV
REMHFWLYHLWLVLPSRUWDQWWKDWZHSXWPD[LPXPHIIRUWLQWRRXU
SURGXFWGHYHORSPHQWSURJUDPV7KLVPHDQVZHPXVWFRQWLQXDOO\
VHHNQHZLGHDVIRUQHZDQGEHWWHUNLQGVRISURGXFWV
$FRQVWDQWIORZRIJRRGQHZSURGXFWVLVWKHOLIHEORRGRI
+HZOHWW3DFNDUGDQGHVVHQWLDOWRRXUJURZWK(DUO\RQZHGHYHORSHG
DV\VWHPIRUPHDVXULQJWKHIORZDQGVXFFHVVRIQHZSURGXFWV7KLV
V\VWHPLVUHSUHVHQWHGLQILYH\HDU9LQWDJH&KDUWV VHH$SSHQGL[ 
,QWKHVDQGHDUO\VDVPRUHRIRXUSURGXFWVLQYROYHG
FRPSXWHUVRXUYLQWDJHFKDUWVVKRZWKDWRXUH[LVWLQJFRPSXWHUV
FRQWLQXHGWRVHOOZHOOORQJDIWHUWKH\ZHUHLQWURGXFHGEHFDXVHQHZ
GHYHORSPHQWVODUJHO\LQYROYHGVRIWZDUH1HZVRIWZDUHJDYHRXU
FRPSXWHUV\VWHPVDOLIHWLPHRIVHYHUDOGHFDGHV7KLVPHDQW+3
FXVWRPHUVFRXOGUHO\RQWKHLUFRPSXWHUVIRUDORQJSHULRG

7+(+3:$<

$QGLWKHOSHGRXUGLVWULEXWHGV\VWHPVJDLQDIRRWKROGLQDPDUNHW
WKDWKDGEHHQGRPLQDWHGE\WKHPDLQIUDPHFRPSXWHUVRI,%0DQG
'(&
$W+3DVLQRWKHUWHFKQLFDOFRPSDQLHVWKHUHLVQRVKRUWDJHRILGHDV
7KHSUREOHPLVWRVHOHFWWKRVHOLNHO\WRILOODUHDOQHHGLQWKH
PDUNHWSODFH
7RZDUUDQWVHULRXVSXUVXLWDQLGHDPXVWEHERWKSUDFWLFDO WKHGHYLFH
XQGHUFRQVLGHUDWLRQPXVWZRUNSURSHUO\ DQGXVHIXO2XWRIWKRVH
LGHDVWKDWDUHSUDFWLFDODVPDOOHUQXPEHUDUHXVHIXO7REHXVHIXODQ
LQYHQWLRQPXVWQRWRQO\ILOODQHHGLWPXVWEHDQHFRQRPLFDODQG
HIILFLHQWVROXWLRQWRWKDWQHHG
:KHQ+3ZDVPDNLQJSULPDULO\WHVWDQGPHDVXULQJLQVWUXPHQWVIRU
HQJLQHHUVZHKDGDEXLOWLQPHWKRGIRUKHOSLQJXVGHWHUPLQHZKDW
FXVWRPHUVPLJKWQHHGLQWKHZD\RILQQRYDWLYHQHZLQVWUXPHQWV:H
FDOOHGLWWKHQH[WEHQFKV\QGURPH,IWKHLGHDIRUDQHZLQVWUXPHQW
DSSHDOHGWRWKH+3HQJLQHHUZRUNLQJDWWKHQH[WEHQFKLWZRXOGYHU\
OLNHO\DSSHDOWRRXUFXVWRPHUVDVZHOO$VRXUEXVLQHVVH[SDQGHG
LQSXWIURPRXUQRQHQJLQHHUFXVWRPHUVZDVDFULWLFDOIDFWRULQ
KHOSLQJXVGHFLGHZKDWNLQGVRISURGXFWLGHDVWRSXUVXH:HDOZD\V
DVNHG+RZFDQZHPDNHDFRQWULEXWLRQEDVHGRQRXUVWUHQJWKVDQG
RXUNQRZOHGJH"7KHQZH
GDVN:KRQHHGVLW"
1RFRPSDQ\KDVXQOLPLWHGUHVRXUFHVVRLWLVHVVHQWLDOWKDWWKH
UHVRXUFHVDYDLODEOHEHDSSOLHGWRWKHSURMHFWVPRVWOLNHO\WREH
VXFFHVVIXO$W+3ZHRIWHQXVHGWRVHOHFWSURMHFWVRQWKHEDVLVRID
VL[WRRQHHQJLQHHULQJUHWXUQ7KDWLVWKHSURILWZHH[SHFWHGWR
GHULYHRYHU

'$9,'3$&.$5'

WKHOLIHWLPHRIDSURGXFWVKRXOGEHDWOHDVWVL[WLPHVJUHDWHUWKDQWKH
FRVWRIGHYHORSLQJWKHSURGXFW$OPRVWZLWKRXWH[FHSWLRQWKH
SURGXFWVWKDWEHDWWKHVL[WRRQHUDWLRE\WKHZLGHVWPDUJLQZHUH
WKHPRVWLQQRYDWLYH
7KH,QVWLWXWHRI5DGLR(QJLQHHUV ,5( ZDVWKHSURIHVVLRQDOVRFLHW\
IRUSHRSOHHQJDJHGLQUDGLRHQJLQHHULQJ(DFKVSULQJWKHVRFLHW\PHW
LQ1HZ<RUN&LW\$FFRPSDQ\LQJWKHPHHWLQJZDVDQH[KLELWRIUDGLR
HTXLSPHQWIURPYDULRXVPDQXIDFWXUHUV,DWWHQGHGP\ILUVW,5(VKRZ
LQ1HZ<RUNLQWKHVSULQJRI,NHSWWKHFRVWGRZQE\VWD\LQJ
ZLWKIULHQGV7KHHTXLSPHQWGLVSOD\WKDW\HDUZDVLQWKHEDOOURRPRI
WKH&RPPRGRUH+RWHO,KDGDWDEOHDERXWIRXUIHHWE\HLJKWIHHWRQ
ZKLFKWRVKRZRXU+HZOHWW3DFNDUGLQVWUXPHQWV)URPWKDWEHJLQQLQJ
LQWKH,5(VKRZDQGFRQYHQWLRQJUHZUDSLGO\DQG,DWWHQGHG
HYHU\\HDUXQWLOZKHQ,WRRNWKHMREDV86GHSXW\VHFUHWDU\
RIGHIHQVH6RPH\HDUVEHIRUHWKDWWKHPHPEHUVKLSRIWKH,5(KDG
EHHQH[SDQGHGDQGWKHVRFLHW\EHFDPHWKH,QVWLWXWHRI(OHFWULFDO
DQG(OHFWURQLFV(QJLQHHUVFRPPRQO\NQRZQDVWKH,(((
,QWKHHDUO\GD\VZHZHQWWRWKH1HZ<RUNVKRZDQGFRQYHQWLRQE\
WUDLQ:HWRRNWKHWUDLQOHDYLQJ6DQ)UDQFLVFR)ULGD\DIWHUQRRQ
DUULYLQJLQ&KLFDJR6XQGD\PRUQLQJ7KDWDIWHUQRRQZHWRRNDQRWKHU
WUDLQRXWRI&KLFDJRDUULYLQJ0RQGD\PRUQLQJLQ1HZ<RUN2QRXU
ZD\EDFNZHRIWHQVSHQWDGD\RUWZRLQ&KLFDJR2XUVDOHV
UHSUHVHQWDWLYHLQ&KLFDJRZDVDILQHJHQWOHPDQQDPHG$O&URVVOH\,
ZDVDOZD\VDPXVHGE\RXU

7+(+3:$<

YLVLWVZLWKKLPEHFDXVHHYHU\WKLQJKHSRLQWHGRXWWRXVLQ&KLFDJR
ZDVWKHELJJHVWLQWKHZRUOG
7KH1HZ<RUNVKRZODVWHGWKUHHRUIRXUGD\VGXULQJZKLFKH[KLELWRUV
WULHGWRDWWUDFWODUJHQXPEHUVRIFXVWRPHUVDQGSURVSHFWVWRZKRP
WKH\FRXOGGHPRQVWUDWHWKHLUQHZSURGXFWV:HDOVRPDGHDSRLQWRI
FKHFNLQJRXWRXUFRPSHWLWRUVSURGXFWV7KHGD\VZHUHORQJDQG
DIWHUGLQQHUZHRIWHQUHOD[HGE\JRLQJGRZQWR*UHHQZLFK9LOODJHWR
OLVWHQWRVRPH'L[LHODQGPXVLF
$VWLPHZHQWRQWKHVKRZLQFUHDVHGLQVL]HDQGLPSRUWDQFH
DWWUDFWLQJWKRXVDQGVRIYLVLWRUV,WDOVR

+3VKRZVRIILWVILUVWFRPSXWHULQDWWKH,(((WUDGHVKRZLQ
1HZ<RUN&LW\

'$9,'3$&.$5'

EHFDPHDIRFDOSRLQWIRURXUSURGXFWGHYHORSPHQWHIIRUWV(DFK\HDU
WKHUHZDVPRXQWLQJSUHVVXUHWRKDYHSURGXFWVUHDG\IRU,5(DQG
VRPHWLPHVZH
GWDNHLQVWUXPHQWVWR1HZ<RUNWKDWZHUHQ
W
FRPSOHWHO\FKHFNHGRXW,QWKDWFDVHZH
GKROHXSLQRXUKRWHO
URRPVVRPHWLPHVIRUDQHQWLUHHYHQLQJWRPDNHVXUHWKH
LQVWUXPHQWVZRXOGZRUNSURSHUO\DWWKHVKRZWKHQH[WGD\
/DEPDQDJHUVIDFHDUHDOFKDOOHQJHLQGHDOLQJZLWKWKHHQWKXVLDVWLF
LQYHQWRUZKRSUHVHQWVDYHU\FUHDWLYHDQGLQQRYDWLYHLGHDDQLGHD
WKDWDIWHUFDUHIXODQGREMHFWLYHDQDO\VLVE\RWKHUVLVWXUQHGGRZQ
+RZGRPDQDJHUVSURYLGHHQFRXUDJHPHQWDQGKHOSWKHLQYHQWRU
UHWDLQHQWKXVLDVPLQWKHIDFHRIVXFKGLVDSSRLQWPHQW"
0DQ\+3PDQDJHUVRYHUWKH\HDUVKDYHH[SUHVVHGDGPLUDWLRQIRUWKH
ZD\%LOO+HZOHWWKDQGOHGWKHVHVLWXDWLRQV2QHPDQDJHUKDVFDOOHGLW
%LOO
VKDWZHDULQJSURFHVV8SRQILUVWEHLQJDSSURDFKHGE\D
FUHDWLYHLQYHQWRUZLWKXQEULGOHGHQWKXVLDVPIRUDQHZLGHD%LOO
LPPHGLDWHO\SXWRQDKDWFDOOHGHQWKXVLDVP+HZRXOGOLVWHQ
H[SUHVVH[FLWHPHQWZKHUHDSSURSULDWHDQGDSSUHFLDWLRQLQJHQHUDO
ZKLOHDVNLQJDIHZUDWKHUJHQWOHDQGQRWWRRSRLQWHGTXHVWLRQV$IHZ
GD\VODWHUKHZRXOGJHWEDFNWRWKHLQYHQWRUZHDULQJDKDWFDOOHG
LQTXLVLWLRQ7KLVZDVWKHWLPHIRUYHU\SRLQWHGTXHVWLRQVD
WKRURXJKSURELQJRIWKHLGHDORWVRIJLYHDQGWDNH:LWKRXWDILQDO
GHFLVLRQWKHVHVVLRQZDVDGMRXUQHG6KRUWO\WKHUHDIWHU%LOOZRXOG
SXWRQKLVGHFLVLRQKDWDQGPHHWRQFHDJDLQZLWKWKHLQYHQWRU:LWK
DSSURSULDWHORJLFDQGVHQVLWLYLW\MXGJPHQWZDV

7+(+3:$<

UHQGHUHGDQGDGHFLVLRQPDGHDERXWWKHLGHD7KLVSURFHVVSURYLGHG
WKHLQYHQWRUZLWKDVHQVHRIVDWLVIDFWLRQHYHQZKHQWKHGHFLVLRQ
ZHQWDJDLQVWWKHSURMHFWDYLWDOO\LPSRUWDQWRXWFRPHIRU
HQJHQGHULQJFRQWLQXHGHQWKXVLDVPDQGFUHDWLYLW\

(QWU\LQWRWKH&RPSXWHU$JH
,Q+3
VVDOHVLQFRPSXWHUSURGXFWVVHUYLFHDQGVXSSRUWZHUH
DOPRVWELOOLRQRUDERXWSHUFHQWRIWKHFRPSDQ\
VWRWDO
EXVLQHVV,QRXUVDOHVWRWDOHGPLOOLRQDQGZHUHHQWLUHO\LQ
LQVWUXPHQWV1RWDSHQQ\ZDVIURPFRPSXWHUVDOHV
7KLVUHSUHVHQWVDUHPDUNDEOHWUDQVIRUPDWLRQRIRXUFRPSDQ\DQGLWV
EXVLQHVV,WZRXOGEHQLFHWRFODLPWKDWZHIRUHVDZWKHSURIRXQG
HIIHFWRIFRPSXWHUVRQRXUEXVLQHVVDQGWKDWZHSUHSDUHGRXUVHOYHV
WRWDNHHDUO\DGYDQWDJHRIWKHFRPSXWHUDJH8QIRUWXQDWHO\WKH
UHFRUGGRHVQRWMXVWLI\VXFKSULGH,WZRXOGEHPRUHDFFXUDWHWRVD\
WKDWZHZHUHSXVKHGLQWRFRPSXWHUVE\WKHUHYROXWLRQWKDWZDV
FKDQJLQJHOHFWURQLFV
,QWKHHDUO\VLWEHFDPHDSSDUHQWWKDWFRPSXWHUVFRXOGSOD\D
PDMRUUROHLQWKHLQVWUXPHQWILHOG,WZDVUHFRJQL]HGWKDWDFRPSXWHU
FRXOGLPSURYHWKHDFFXUDF\RIDQHOHFWURQLFLQVWUXPHQWWHQIROGRU
PRUHDVZHOODVPDNHWKHRXWSXWPRUHXVHIXO
,WRRNDWULSWR1HZ(QJODQGWRLQYHVWLJDWHVHYHUDOVPDOOFRPSXWHU
FRPSDQLHV,WZDVFOHDUWRPHWKDWWKH'LJLWDO(TXLSPHQW&RUSRUDWLRQ
'(& PDGHVRPHSURPLV

'$9,'3$&.$5'

LQJSURGXFWV,YLVLWHGWKHPDQGGLVFXVVHGWKHSRVVLELOLW\RIWKHLU
MRLQLQJXV,WDSSHDUHGWKDWZHPLJKWEHDEOHWRDFTXLUH'(&IRU
DERXWPLOOLRQ%XWWKHUHZHUHVRPHFRPSOLFDWLQJIDFWRUVDQGZH
GHFLGHGQRWWRSXUVXHWKHPDWWHUIXUWKHU,DOVRYLVLWHG:DQJ
/DERUDWRULHVZKLFKZDVGHVLJQLQJDQHOHFWURQLFFDOFXODWRUEXW,
GHFLGHGDWWKHWLPHLWZRXOGQRWEHGHVLUDEOHIRUXVWRJHWLQYROYHGLQ
HOHFWURQLFFDOFXODWRUV
0HDQZKLOHWZRRIRXUHQJLQHHUV.D\0DJOHE\DQG3DXO6WRIWEHJDQ
WRH[SHULPHQWZLWKEXLOGLQJDFRPSXWHU7KH\SUHVHQWHGPHZLWKD
YLVLRQRIDV\VWHPRI+3FRPSXWHUVDXWRPDWLQJ+3LQVWUXPHQWVWKDW
ZHUHFRQQHFWHGWRRXUSULQWHUVDQGSORWWHUV,EHJDQWRJHWH[FLWHG
DERXWWKHSURVSHFWRIDQ+3FRPSXWHU
,Q6HSWHPEHUZHEHJDQWRGHYHORSDQDXWRPDWLFFRQWUROOHUIRU
PHDVXUHPHQWV\VWHPVZLWK.D\0DJOHE\KHDGLQJWKHWHDP7KLVZDV
WREHFRPHRXUILUVWPLQLFRPSXWHUWKH0RGHO$OWKRXJKWKH
ZRUNKDGVWDUWHGLQRXU+HZOHWW3DFNDUG/DERUDWRULHVZHDFTXLUHGD
VPDOOFRPSXWHUJURXSIURP8QLRQ&DUELGHWRKHOSVWDIIWKHHIIRUW
7KLVZDVWKHQXFOHXVRIRXUHDUO\FRPSXWHUGLYLVLRQLQ&XSHUWLQRQRW
IDUIURP3DOR$OWR
:HVRRQIRXQGWKDWZHZHUHVHOOLQJPRUHVDVVWDQGDORQH
PLQLFRPSXWHUVWKDQDVFRQWUROOHUVLQDXWRPDWLFPHDVXUHPHQW
V\VWHPV6WLOOZHZHUHVORZWRJHWWKHPHVVDJH$QH[DPSOHRIRXU
FDXWLRXVDSSURDFKWRFRPSXWHUVZDVWKHZD\ZHKDQGOHGD
SURPLVLQJSURMHFWFRGHQDPHG2PHJD,QLWLDWHGE\RXUSHRSOHLQ
&XSHU

7+(+3:$<

WLQR2PHJDZDVZKDWZRXOGKDYHEHHQLQWKHHDUO\VWKH
ZRUOG
VILUVWWKLUW\WZRELWFRPSXWHU7KHWHUPWKLUW\WZRELWUHIHUVWR
WKHZRUGOHQJWKXVHGLQWKHFRPSXWHUGDWDIRUPDWDQGWRWKHZLGWK
RIWKHSDUDOOHOEXVHVXVHGWRWUDQVSRUWGDWDLQWKHPDFKLQH,QLWLDOO\
DZRUGOHQJWKRIHLJKWELWVZDVFRPPRQ,QWKHVWDQGDUGKDG
EHFRPHVL[WHHQELWV$WKLUW\WZRELWPDFKLQHZRXOGUHTXLUHPRUH
KDUGZDUHEXWZRXOGKDYHEHHQWZLFHDVIDVWDQGZRXOGGLUHFWO\
DFFHVVWKRXVDQGVRIWLPHVPRUHPHPRU\
7KHSURVSHFWRISURGXFLQJVXFKDIDVWDQGSRZHUIXOFRPSXWHUKDG
FUHDWHGWUHPHQGRXVHQWKXVLDVPDPRQJRXU&XSHUWLQRSHRSOHDQG
WKH\VRRQKDG2PHJDDWWKHSURWRW\SHVWDJH%\WKDWWLPHKRZHYHU
WKHUHKDGEHHQLQFUHDVLQJWRSPDQDJHPHQWFRQFHUQDERXWWKHVFRSH
RIWKHSURMHFW,WFOHDUO\UHSUHVHQWHGDGHSDUWXUHIURP+3
VEDVLF
SULQFLSOHV,WZDVH[SHQVLYH:HZRXOGKDYHWRWDNHRQGHEWWRIXQG
LWDQGUDWKHUWKDQEXLOGLQJRQH[LVWLQJ+3VWUHQJWKVWKHSURMHFW
UHTXLUHGH[SHUWLVHDQGFDSDELOLWLHVZHGLGQRWKDYHDWWKHWLPHVXFK
DVDQHOHFWURQLFGDWDSURFHVVLQJFHQWHUODUJHEXVLQHVVSURFHVVLQJ
DSSOLFDWLRQVWZHQW\IRXUKRXUVHUYLFHSOXVOHDVLQJDQGVDOHV
RSHUDWLRQV0RUHLPSRUWDQWZDVWKHIDFWWKDWWKHWKLUW\WZRELW
FRPSXWHUSURMHFWSUHVHQWHGDQHZDQGIRUPLGDEOHPDUNHWLQJ
FKDOOHQJH,WZRXOGWDNHXVLQWRXQIDPLOLDUFRPPHUFLDOPDUNHWVDQG
LQWRGLUHFWFRPSHWLWLRQZLWK,%0
VPDLQIUDPHEXVLQHVV%LOO+HZOHWW
V
VDJHDGYLFHKDGDOZD\VEHHQ'RQ
WWU\WRWDNHDIRUWLILHGKLOO
HVSHFLDOO\LIWKHDUP\RQWRSLV

'$9,'3$&.$5'

ELJJHUWKDQ\RXURZQ2PHJDZDVDFDVHLQSRLQW7KHSURMHFWZDV
FDQFHOHGDGHFLVLRQWKDWZDVGLIILFXOWDQGFRQWURYHUVLDO
7KHFDQFHOODWLRQRI2PHJDZDVHVSHFLDOO\GLVDSSRLQWLQJWRRXU
&XSHUWLQRSHRSOH7KHIHOORZZKRKDGEHHQUXQQLQJWKHSURMHFWOHIW
WKHGLYLVLRQ DQGVRRQDIWHUZDUGWKHFRPSDQ\ 6HYHUDOSHRSOHZKR
UHPDLQHGWRRNWRZHDULQJEODFNYHOYHWDUPEDQGVLQPRXUQLQJIRU
WKHFDQFHOHGSURMHFW&DQFHOHGLWPD\KDYHEHHQEXWQRW
DEDQGRQHG,WWXUQHGRXWWKDWDIHZRIWKH2PHJDHQWKXVLDVWVNHSW
WKHSURMHFWKLGGHQLQDEDFNURRPRIWKHODEDQGZHUHVWLOOZRUNLQJ
RQLW
$WWKDWSRLQWVHYHUDONH\PDQDJHUVDQGHQJLQHHUVWRRNDQRWKHUORRN
DWWKHSURMHFW7KH\FRQFOXGHGWKDWLWHPERGLHGVRPHJRRGLGHDVLQ
WHUPVRIFRPSXWHUDUFKLWHFWXUHDQGLIZHFRXOGVFDOHLWEDFNWRD
VL[WHHQELWPDFKLQHDQGVLPSOLI\WKHRSHUDWLQJV\VWHPZHPLJKW
KDYHDSURPLVLQJSURGXFW6RWKH2PHJDGHYHORSPHQWSURJUDPZDV
UHGLUHFWHGDQGUHQDPHG$OSKD7KHUHVXOWZDVDVRSKLVWLFDWHG
ORZFRVWVL[WHHQELWPDFKLQHIRUSURFHVVLQJVPDOOWRPHGLXPVL]HG
RQOLQHEXVLQHVVWUDQVDFWLRQV$OSKDEHFDPH+3
VILUVW
JHQHUDOSXUSRVHFRPSXWHULQWURGXFHGLQDVWKH+37KH
+3ZLWKLWV03(RSHUDWLQJV\VWHPLVRQHRIWKHFRPSXWHU
LQGXVWU\
VPRVWHQGXULQJVXFFHVVVWRULHV0RUHWKDQWZHQW\\HDUV
DIWHULWVLQWURGXFWLRQLWVGHVFHQGDQWPDFKLQHVDUHMXVWQRZHQWHULQJ
WKHLUREVROHVFHQWSKDVH

7+(+3:$<

(OHFWURQLF&DOFXODWRUV$%ULJKW1HZ0DUNHW
$WWKHWLPHRIP\YLVLWWR:DQJ,GLGQ
WWKLQN+3VKRXOGJHWLQWRWKH
FDOFXODWRUEXVLQHVV$OOWKLVFKDQJHGKRZHYHUZKHQD\RXQJ
HQJLQHHUQDPHG7RP2VERUQHSDLGDYLVLWWR+3LQ7RPKDG
ZRUNHGDFURVVWKH6DQ)UDQFLVFR%D\DW6PLWK&RURQD0DUFKDQWD
VXSSOLHURIPHFKDQLFDOFDOFXODWRUV+HKDGEXLOWDPRGHORID
W\SHZULWHUVL]HHOHFWURQLFFDOFXODWRUDQGKDGEHHQWU\LQJWRVHOOKLV
FRQFHSWXQVXFFHVVIXOO\WRYDULRXVFRPSDQLHV$W+3KHVKRZHGKLV
PRGHOWR3DXO6WRIWDVHQLRU+3/DEVPDQDJHUDQGWR%DUQH\2OLYHU
7KH\DQGODWHU%LOO+HZOHWWDQG,UHFRJQL]HGWKDW2VERUQHKDGD
OLWWOHSRZHUKRXVHRIDPDFKLQHWKDWSHUKDSVFRXOGEHGHYHORSHGLQWR
DGHVNWRSFDOFXODWRUFDSDEOHRIVLOHQWO\DQGVZLIWO\FDOFXODWLQJ
WULJRQRPHWULFK\SHUEROLFDQGORJDULWKPLFIXQFWLRQVDQGEH
SURJUDPPDEOHDVZHOO,WZRXOGPDNHREVROHWHWKHQRLV\PHFKDQLFDO
FDOFXODWRUVDQGWKHFXPEHUVRPHWDEOHVRIIXQFWLRQVWKDWFUDPPHG
WKHHQJLQHHU
VERRNVKHOI
:RUNLQJZLWK7RP2VERUQHDQ+3WHDPGHYHORSHGWKH0RGHO
GHVNWRSFDOFXODWRUKLJKO\VXFFHVVIXOLQWKHPDUNHWSODFHDQG
H[HPSOLI\LQJWUXO\LQQRYDWLYHGHVLJQ,WZDVGHYHORSHGEHIRUHWKH
GD\VRIODUJHVFDOHLQWHJUDWHGFLUFXLWVVRLWLQFOXGHGDIRXUWHHQOD\HU
SULQWHGFLUFXLWERDUGWKHPRVWGHPDQGLQJRXUVKRS

'$9,'3$&.$5'

KDGHYHUSURGXFHG$PRQJWKHDGPLUHUVRIWKHZDV$UWKXU&
&ODUNHWKHVFLHQFHILFWLRQZULWHUDQGDXWKRURI$6SDFH
2G\VVH\+LVIDQVDW+3GLVFRYHUHGWKDWKHZDQWHGDIRU
&KULVWPDVDQGWRRNXSDFROOHFWLRQWREX\KLPRQH+HSURPSWO\
QDPHGLW+$/-XQLRUDIWHUWKHFRPSXWHULQKLVPRYLHDQGVDLGLWZDV
DOPRVWH[DFWO\WKHFDOFXODWRUKHKDGGUDZQRQKLVGRRGOHSDGRQH
GD\ZKHQGUHDPLQJDERXWZKDWDQHQJLQHHUZRXOGUHDOO\OLNH,WRRN
DZLWKPHWR:DVKLQJWRQZKHQ,MRLQHGWKH'HIHQVH
'HSDUWPHQWLQ
$OWKRXJKWKHZDVLPPHQVHO\VXFFHVVIXOWKHPRVWH[FLWLQJSDUW
RI+3
VFDOFXODWRUDFWLYLW\ZDVVWLOOWRFRPH$VODUJHUORZHUSRZHU
LQWHJUDWHGFLUFXLWPHPRULHVDQG,&SURFHVVRUVEHFDPHDYDLODEOH
PDQ\RIWKHHQJLQHHUVZKRKDGEXLOWWKHZHUHHDJHUWR
FRPSUHVVLWVIXQFWLRQDOLW\LQWRDKDQGKHOGGHYLFHDQGPHHW%LOO
+HZOHWW
VFKDOOHQJHRIGHYHORSLQJDFDOFXODWRUWKDWFRXOGILWLQWRD
VKLUWSRFNHW
7KHFDOFXODWRUFDOOHGWKH+3EHFDXVHLWKDGWKLUW\ILYHNH\VZDV
LQWURGXFHGLQ$ERXWDPRQWKEHIRUHLWVUHOHDVH%DUQH\2OLYHU
JDYHVDPSOHVRIWKHWRVHYHUDOOHDGLQJHQJLQHHUVDQG1REHO
SK\VLFLVWV7KHFURZGVWKH\GUHZZKHQFDVXDOO\VKRZLQJRIIWKLV
WR\DWPHHWLQJVDQGFRQYHQWLRQVSUREDEO\DFFRXQWHGIRURXUEHLQJ
XQDEOHWRPHHWWKHLQLWLDOGHPDQGVIRUWKHDQGODWHUWKH
SURJUDPPDEOH+36DOHVIRUWKHVHFDOFXODWRUVDQGWKHLU
GHVFHQGDQWVKDYHQRZWRWDOHGRYHUPLOOLRQXQLWV7KHORJORJWULJ
VOLGHUXOHRQFHWKHHQJLQHHU
VIDLWKIXOIULHQGGLVDSSHDUHGRYHUQLJKW
:LWKHDFKSURGXFW+3VWULYHVDV,KDYHVDLGWR

7+(+3:$<

PDNHDFRQWULEXWLRQWRWKHDUWWRDGGVRPHWKLQJQHZDQGGLIIHUHQW
2GGO\HQRXJKWKLVGHVLUHZKLFKKHOSHGXVLQWKHFDOFXODWRUDQGODWHU
LQWKHFRPSXWHUILHOGZLWKRXUUHGXFHGLQVWUXFWLRQVHWFRPSXWHUV
5,6& ZDVDFWXDOO\DKLQGUDQFHLQHQWHULQJWKHSHUVRQDOFRPSXWHU
ILHOG0XFKRIWKHFRQWULEXWLRQLQVFLHQWLILFDQGEXVLQHVVFRPSXWHUVLV
LQKRQLQJWKHDOJRULWKPVDQGPDWFKLQJWKHKDUGZDUHWRWKHPWR
VSHHGWKHRSHUDWLRQ,QLWLDOO\WKHKDUGZDUHVXSSOLHUIXUQLVKHGPXFK
RIWKHVRIWZDUHQHHGHGE\WKHV\VWHP%XWRYHUWKH\HDUVPDQ\
FRPSDQLHVKDYHDULVHQZKRVHHQWLUHEXVLQHVVLVVRIWZDUH7KLVLV
HVSHFLDOO\WUXHIRUWKHSHUVRQDOFRPSXWHU 3& ZKRVHRZQHUV
FRXOGQ
WFDUHOHVVDERXWZULWLQJSURJUDPV
7RGD\LI\RXGRQRWRIIHU3&VZLWKDVWDQGDUGLQWHUIDFHWRWKH
VRIWZDUHVXSSOLHUVZKRVHSURGXFWVWKHXVHUZLOOEX\\RXZLOOPLVVD
ODUJHVKDUHRIWKHPDUNHW:HKDYHKDGWROHDUQWKDWLQWRGD\
V
FRPSXWHUZRUOGWKHFRQWULEXWLRQZHFDQPDNHLVLQHDVHRIXVH
VSHHGUHOLDELOLW\DQGDERYHDOODIIRUGDELOLW\

$0DYHULFN
V3HUVLVWHQFH
(DUOLHU,PHQWLRQHGWKDWVRPHWLPHVPDQDJHPHQW
VWXUQGRZQRID
QHZLGHDGRHVQ
WDOZD\VHIIHFWLYHO\NLOOLW6RPH\HDUVDJRDWDQ+3
ODERUDWRU\LQ&RORUDGR6SULQJVGHYRWHGWRRVFLOORVFRSHWHFKQRORJ\
RQHRIRXUEULJKWHQHUJHWLFHQJLQHHUV&KXFN+RXVHZDVDGYLVHGWR
DEDQGRQDGLVSOD\PRQLWRUKHZDVGHYHORSLQJ

'$9,'3$&.$5'

,QVWHDGKHHPEDUNHGRQDYDFDWLRQWR&DOLIRUQLDVWRSSLQJDORQJWKH
ZD\WRVKRZSRWHQWLDOFXVWRPHUVDSURWRW\SHPRGHORIWKHPRQLWRU
+HZDQWHGWRILQGRXWZKDWWKH\WKRXJKWVSHFLILFDOO\ZKDWWKH\
ZDQWHGWKHSURGXFWWRGRDQGZKDWLWVOLPLWDWLRQVZHUH7KHLUSRVLWLYH
UHDFWLRQVSXUUHGKLPWRFRQWLQXHZLWKWKHSURMHFWHYHQWKRXJKRQKLV
UHWXUQWR&RORUDGRKHIRXQGWKDW,DPRQJRWKHUVKDGUHTXHVWHGLW
EHGLVFRQWLQXHG+HSHUVXDGHGKLV5 'PDQDJHUWRUXVKWKHPRQLWRU
LQWRSURGXFWLRQDQGDVLWWXUQHGRXW+3VROGPRUHWKDQVHYHQWHHQ
WKRXVDQGGLVSOD\PRQLWRUVUHSUHVHQWLQJVDOHVUHYHQXHRIPLOOLRQ
IRUWKHFRPSDQ\
6HYHUDO\HDUVODWHUDWDJDWKHULQJRI+3HQJLQHHUV,SUHVHQWHG
&KXFNZLWKDPHGDOIRUH[WUDRUGLQDU\FRQWHPSWDQGGHILDQFHEH\RQG
WKHQRUPDOFDOORIHQJLQHHULQJGXW\
6RKRZGRHVDFRPSDQ\GLVWLQJXLVKEHWZHHQLQVXERUGLQDWLRQDQG
HQWUHSUHQHXUVKLS"7RWKLV\RXQJHQJLQHHU
VPLQGWKHGLIIHUHQFHOD\LQ
WKHLQWHQW
,ZDVQ
WWU\LQJWREHGHILDQWRUREVWUHSHURXV,UHDOO\MXVWZDQWHGD
VXFFHVVIRU+3&KXFNVDLG,WQHYHURFFXUUHGWRPHWKDWLWPLJKW
FRVWPHP\MRE$VDSRVWVFULSWWRWKHVWRU\WKLVVDPHHQJLQHHU
ODWHUEHFDPHGLUHFWRURIDGHSDUWPHQWZLWKKLVUHSXWDWLRQDVD
PDYHULFNLQWDFW
:KHQRQHWKLQNVRI+3FRQWULEXWLRQVRQHXVXDOO\WKLQNVRILQQRYDWLYH
SURGXFWV%XWLW
VLPSRUWDQWWRSRLQWRXWWKDWRYHUWKH\HDUVZHKDYH
DWWHPSWHGWRPDNHFRQWULEXWLRQVDVZHOOLQWKHIRUPRIQHZ
PDQXIDFWXULQJPHWKRGVDQGWHFKQLTXHV7KHVHPDQXIDFWXULQJ

7+(+3:$<

LQQRYDWLRQVRIWHQPDNHVWDWHRIWKHDUWSURGXFWFRQWULEXWLRQV
SRVVLEOH
,QPDQ\FDVHVWKHGHYHORSPHQWRIQHZRULPSURYHGSURGXFWLRQ
SURFHVVHVUHIOHFWHGDFDQGRDWWLWXGHRQWKHSDUWRIRXU
PDQXIDFWXULQJFUHZVDVSLULWDQGGHVLUHWRILQGDEHWWHUZD\RIGRLQJ
WKLQJV%RWK%LOODQG,HQFRXUDJHGLW
7KH.LQJPDQFDUGZDVRQHH[DPSOH,QDERXWEHIRUHWKHLGHD
RISULQWHGFLUFXLWU\FDPHDORQJZHXVHGDWHFKQLTXHGHYHORSHGE\
5XIH.LQJPDQWKDWJUHDWO\FXWSURGXFWLRQFRVWVDQGLPSURYHGWKH
UHOLDELOLW\DQGVHUYLFHDELOLW\RIRXUSURGXFWV7KH.LQJPDQFDUGZDVD
VWULSZLWKOXJVRQHDFKVLGHLQWRZKLFKFRPSRQHQWVZHUHHDVLO\
LQVHUWHGDQGWKHQVROGHUHG,WSURYLGHGXQLIRUPLW\DQGDOORZHGXVWR
SURGXFHDVWDQGDUGFRPSRQHQWERDUG
$QRWKHUH[DPSOHZDVWKHLQKRXVHLQWHJUDWHGFLUFXLWRSHUDWLRQ+3
GHYHORSHGLQWKHPLGVORQJEHIRUHDQ\RIRXUFRPSHWLWRUV7KLV
FDSDELOLW\DQWLFLSDWHGWKHLQFUHDVHGXVHRIGLJLWDOFLUFXLWU\
LQVWUXPHQWDWLRQ7KH+3WHDPGHYHORSHGQRWRQO\WKHLURZQELSRODU
SURFHVVEXWDOVRRWKHUHTXLSPHQWQHFHVVDU\IRUWKHSURGXFWLRQDQG
WHVWLQJRI,&VEHIRUHVXFKHTXLSPHQWZDVDYDLODEOHIURPRXWVLGH
YHQGRUV
2XUGHGLFDWLRQWRPDNLQJDFRQWULEXWLRQFRXSOHGZLWKRXU
FRPPLWPHQWWRXQGHUVWDQGLQJWKHSRWHQWLDOQHHGVRIFXVWRPHUV
VHUYHGXVZHOOLQDOORZLQJ+3WRDGDSWWRERWKFKDQJLQJWHFKQRORJLHV
DQGFKDQJLQJFXVWRPHUQHHGV

&KDSWHU
/LVWHQLQJWR&XVWRPHUV
7+()81'$0(17$/%$6,6IRUVXFFHVVLQWKHRSHUDWLRQRI
+HZOHWW3DFNDUGLVWKHMREZHGRLQVDWLVI\LQJWKHQHHGVRIRXU
FXVWRPHUV:HHQFRXUDJHHYHU\SHUVRQLQRXURUJDQL]DWLRQWRWKLQN
FRQWLQXDOO\DERXWKRZKLVRUKHUDFWLYLWLHVUHODWHWRWKHFHQWUDO
SXUSRVHRIVHUYLQJRXUFXVWRPHUV
$W+3WKHFXVWRPHUVDWLVIDFWLRQFRQFHSWEHJLQVZLWKWKHJHQHUDWLRQ
RIQHZLGHDVDQGQHZWHFKQRORJ\IURPZKLFKZHFDQGHYHORSXVHIXO
VLJQLILFDQWSURGXFWV7KHVHQHZLGHDVWKHQIRUPWKHEDVLVIRU
GHYHORSPHQWRISURGXFWVWKDWZLOOPHHWODWHQWQHHGVRIIXWXUH
LPSRUWDQFHWRRXUFXVWRPHUV7REHXVHIXOLQDQHUDRIZRUOGZLGH
FRPSHWLWLRQDQGUDSLGFKDQJHQHZSURGXFWVPXVWEHGHYHORSHG
TXLFNO\DQGSURGXFHGHIILFLHQWO\ZLWKPDQXIDFWXULQJSURFHVVHVDQG
WHFKQLTXHVWKDWDVVXUHTXDOLW\DQGHFRQRP\
3URYLGLQJLQQRYDWLYHUHOLDEOHSURGXFWVLVDNH\HOHPHQWLQVDWLVI\LQJ
FXVWRPHUQHHGVEXWWKHUHDUHRWKHULPSRUWDQWHOHPHQWVDVZHOO$W
+3ZHRIIHUPDQ\GLI

7+(+3:$<

IHUHQWSURGXFWVWRPDQ\GLIIHUHQWFXVWRPHUVDQGLW
VLPSHUDWLYHWKDW
WKHSURGXFWVUHFRPPHQGHGWRDVSHFLILFFXVWRPHUDUHWKRVHWKDWZLOO
EHVWIXOILOOWKHFXVWRPHU
VRYHUDOOORQJWHUPQHHGV7KLVUHTXLUHVWKDW
RXUILHOGVDOHVSHRSOHRSHUDWLQJLQGLYLGXDOO\LQWHDPVRUZLWKRWKHU
FRPSDQLHVWKDWDGGYDOXHWR+3SURGXFWVDQGVHUYLFHVZRUNFORVHO\
ZLWKFXVWRPHUVWRGHWHUPLQHWKHPRVWDSSURSULDWHHIIHFWLYH
VROXWLRQVWRWKHLUSUREOHPV
:KHQDFXVWRPHUEX\VDSURGXFWIURP+3WKHFXVWRPHUVKRXOG
H[SHFWQRWRQO\WKDWWKHSURGXFWSHUIRUPVZHOOWKHGD\LW
VUHFHLYHG
EXWWKDWLWEHEDFNHGZLWKWKHEHVWSRVVLEOHVHUYLFHVRWKDWWKH
FXVWRPHUFDQREWDLQORQJWURXEOHIUHHRSHUDWLRQ
)RUPDQ\\HDUV+3
VPDUNHWLQJDQGVDOHVDFWLYLWLHVZHUHKHDGHGE\
1RHO(OGUHGYLFHSUHVLGHQWRIPDUNHWLQJ1RHODNH\PHPEHURIRXU
WRSPDQDJHPHQWWHDPZDVDVWURQJDGYRFDWHIRUKHOSLQJWKH
FXVWRPHUVRPXFKVRWKDWKHZDQWHGRXUVDOHVHQJLQHHUVWRWDNHWKH
FXVWRPHU
VVLGHLQDQ\GLVSXWHVZLWKWKHFRPSDQ\:HGRQ
WZDQW
\RXEOLQGO\DJUHHLQJZLWKXVKH
GWHOOWKHP:HZDQW\RXWRVWLFN
XSIRUWKHFXVWRPHU$IWHUDOOZH
UHQRWVHOOLQJKDUGZDUHZH
UH
VHOOLQJVROXWLRQVWRFXVWRPHUSUREOHPV1RHOVWUHVVHGWKH
LPSRUWDQFHRIFXVWRPHUIHHGEDFNLQKHOSLQJXVGHVLJQDQGGHYHORS
SURGXFWVDLPHGDWUHDOFXVWRPHUQHHGV+HDOVRLQVLVWHGWKDWRXU
VDOHVSHRSOHQHYHUVSHDNGLVSDUDJLQJO\RIWKHFRPSHWLWLRQ7KLV
UHIOHFWHGRXUIHHOLQJWKDWFRPSHWLWRUVVKRXOGEHUHVSHFWHGWKHW\SH
RIUHVSHFWWKDWH[LVWHGEHWZHHQ*HQHUDO5DGLRDQG+3ZKHQ%LOODQG,
ZHUHVWDUWLQJRXW

'$9,'3$&.$5'

(DUOLHU,WDONHGDERXWWKH+3KDQGKHOGFDOFXODWRU7KHFUHDWLRQRI
WKLVXQLTXHSURGXFWSUHVHQWHGWUHPHQGRXVFKDOOHQJHVWRLWVGHVLJQHUV
DQGLWVPDQXIDFWXULQJWHDP1RWRQO\WKDWLIZHZHUHWRPDUNHWWKH
VXFFHVVIXOO\ZHZRXOGKDYHWRGHYHORSPHWKRGVRIVHOOLQJDQG
GLVWULEXWLRQWKDWZHUHFRPSOHWHO\QHZWR+32XUWUDGLWLRQDOV\VWHP
RIGHOLYHU\FXVWRPHUVVHQWLQRUGHUVDQGZHVKLSSHGRXWSURGXFWV
FOHDUO\ZRXOGQ
WZRUN6RZHVHQWVRPHRIRXUSHRSOHWRWKH6WDQIRUG
8QLYHUVLW\%RRNVWRUHDQGRWKHUUHWDLORXWOHWVWRVHHZKDWZHFRXOG
GR2QHRIRXUHQJLQHHUV%LOO7HUU\YLYLGO\UHFDOOVJRLQJWR0DF\
V
GHSDUWPHQWVWRUHLQ6DQ)UDQFLVFR0DF\
VDWWKDWWLPHZDV
LQWHUHVWHGLQEXLOGLQJDQHOHFWURQLFVGHSDUWPHQW%LOOUHPHPEHUV
VKRZLQJWKHFDOFXODWRUHOLFLWLQJLQWHUHVWVWULNLQJDGHDORQWKHSULFH
DQGWKHQVWDUWLQJWRWDONDERXWRUGHUDQGGHOLYHU\VFKHGXOHV$WWKDW
SRLQWWKH0DF\
VPDQDJHUSODFHGERWKKDQGVVTXDUHO\RQWKHWDEOHLQ
IURQWRIKLPORRNHG%LOOLQWKHH\HDQGVDLG<RX\RXQJER\VGRQ
W
XQGHUVWDQG,GRQ
WVHOODQ\WKLQJXQOHVV,KDYHLWLQWKHVWRUH7KDW
ZDVRXULQLWLDWLRQLQWRWKHFRQVXPHUPDUNHW
%XLOGLQJWRILOOVKHOYHVZDVDQHZFRQFHSWWR+3%XWRXUEDVLF
PDQDJHPHQWSULQFLSOHVWUDQVODWHGHDVLO\WRWKHKLJKYROXPHUHWDLO
EXVLQHVVDQGRXUGHFHQWUDOL]HGEXVLQHVVWHDPVHQDEOHGXVWREH
QLPEOHHQRXJKWRFKDQJHEXVLQHVVPRGHOVTXLFNO\
2XUDFWLYLW\LQWKHFRQVXPHUPDUNHWFRQVLVWHGRIYHU\OLWWOHXQWLOWKH
VDOWKRXJKVKRUWO\DIWHUWKHLQWURGXFWLRQRIWKH+3ZHGLGWU\
RXUKDQGDWDFDOFXODWRUZULVWZDWFK%XWWKHDVLWZDVFDOOHG
FRGH

7+(+3:$<

QDPHG&ULFNHWZDVFOXPV\DQGFXPEHUVRPHORQJRQWHFKQRORJ\
DQGVKRUWRQIDVKLRQ:HSUREDEO\VROGIHZHUWKDQWZHQW\WKRXVDQG
RIWKHPPRVWO\WRRXUIULHQGVLQWKHHOHFWURQLFVLQGXVWU\ (GLWRU
V
QRWH,QWRGD\
VJURZLQJPDUNHWIRUDQWLTXHHOHFWURQLFJHDUWKH+3
LVTXLWHVRXJKWDIWHURIWHQIHWFKLQJPRUHWKDQWZLFHLWVRULJLQDO
SULFHRI

7KH6WRU\RI+33ULQWHUV
,Q+HZOHWW3DFNDUGVROGPLOOLRQ'HVN-HWSULQWHUVDQGDOPRVW
PLOOLRQ/DVHU-HWV,QWKHGHFDGHVLQFHWKHVHSULQWHUVZHUH
LQWURGXFHGLQRXUFRPSDQ\KDVVKLSSHGPLOOLRQSULQWHUV
7KLVH[WUDRUGLQDU\VXFFHVVFDQEHWUDFHGEDFNWRWKHURRWVRIRXU
SULQWHUEXVLQHVVLQWKHHDUO\V
:KHQ+3HQWHUHGWKHFRPSXWHUV\VWHPVEXVLQHVVLQWKHODWHV
ZHUHDOL]HGWKDWFRPSXWHUVDQGSHULSKHUDOVSORWWHUVSULQWHUV
PHPRU\VWRUDJHDQGVRIRUWKZHUHLQWHUUHODWHG:HZDQWHGWREH
DEOHWRRIIHURXUFXVWRPHUVWKHLQWHJUDOSDUWVWKDWFRXOGEHFRPELQHG
LQWRDQHQWLUHV\VWHP$WWKDWWLPHLQGXVWU\HIIRUWVLQSULQWLQJZHUH
GLUHFWHGWRZDUGDGDSWLQJWKHODUJHPXOWLXVHUV\VWHPSULQWHUVIRUXVH
ZLWKPLQLFRPSXWHUV%XWWKHVHPDLQIUDPHV\VWHPSULQWHUVZHUH
QRWRULRXVO\XQUHOLDEOHDQGH[SHQVLYHERWKWRSXUFKDVHDQGWR
PDLQWDLQ

'$9,'3$&.$5'

/DVHU7HFKQRORJ\
,QWKHPLGVZRUNLQJZLWK&DQRQ+3EHJDQWRGHYHORSODVHU
SULQWHUVWKDWZRXOGZRUNZLWKRXUPLQLFRPSXWHUV:HZDJHUHGWKDW
FXVWRPHUVVRRQZRXOGGHPDQGJUHDWHUUHOLDELOLW\IDVWHURXWSXWDQG
EHWWHUSULQWTXDOLW\/DVHUWHFKQRORJ\ZRXOGSURYLGHWKLV,Q+3
LQWURGXFHGLWVILUVWODVHUSULQWHU:HXVHGOLFHQVHG&DQRQ
HOHFWURSKRWRJUDSKLFWHFKQRORJ\EXWGHVLJQHGDQGEXLOWWKHSURGXFW
RXUVHOYHV7KH+3ZDVDERXWWKHVL]HRIDUHIULJHUDWRUDQGVWLOO
H[SHQVLYHDWDERXW%XWLWZDVUXJJHGDQGTXLHW8VLQJ
SODLQE\LQFKSDSHULWZDVFDSDEOHRIYHU\KLJKUHVROXWLRQ
DQGKLJKVSHHG,WZDVDVWHSLQWKHULJKWGLUHFWLRQDQGLWFUHDWHG
FRQVWUXFWLYHWLHVEHWZHHQ&DQRQDQG+3
,QWKHVZLWKWKHHPHUJHQFHRIWKHSHUVRQDOFRPSXWHUPDUNHW
DQHZRSSRUWXQLW\DSSHDUHG3HRSOHZLWKSHUVRQDOFRPSXWHUVRQ
WKHLUGHVNVZDQWHGHDV\DQGGLUHFWDFFHVVWRWKHLUSULQWHUV7KH
-DSDQHVHTXLFNO\FDSLWDOL]HGRQWKLVWUHQGSURGXFLQJWZRW\SHVRI
LPSDFWSULQWHUVLQH[SHQVLYHGRWPDWUL[GHYLFHVDQGVOLJKWO\PRUH
H[SHQVLYHGDLV\ZKHHOSULQWHUV+3KDGQRH[SHUWLVHLQLPSDFW
SULQWHUVEXWRXUZRUNZLWK&DQRQRQPLQLFRPSXWHUODVHUSULQWHUVDQG
RXUHDUO\GHYHORSPHQWZRUNRQLQNMHW ZHOOXQGHUZD\DWWKLVSRLQW 
PDGHXVUHDOL]HWKDWWKHIXWXUHRISULQWLQJZRXOGEHQRQLPSDFW7KH
IHOGZDVZLGHRSHQIRUSURGXFWLQQRYDWLRQV

7+(+3:$<

/DVHU-HW
7KRXJKLWZDVWUDGLWLRQDOIRU+3WRLQYHQWLWVRZQWHFKQRORJ\&DQRQ
DOUHDG\KDGWKHSULQWHUHQJLQHVZHQHHGHG:LWKWKHVHHQJLQHVZH
VDZZHFRXOGEXLOGDUHODWLYHO\LQH[SHQVLYHODVHUSULQWHUIRUSHUVRQDO
FRPSXWHUV:HLQWURGXFHGWKHILUVW/DVHU-HWLQ0DUFK1RWKLQJ
OLNHLWH[LVWHGSUHYLRXVO\,WZDVVPDOOIDVWIOH[LEOHDQGUHOLDEOHDQG
LWGHOLYHUHGKLJKTXDOLW\SULQWLQJDWDQDIIRUGDEOHSULFH7KHILUVW
/DVHU-HWFUHDWHGDWRWDOO\QHZSULQWHUPDUNHW VLPLODUWRZKDW
KDQGKHOGFDOFXODWRUVKDGGRQHWZHOYH\HDUVEHIRUH 
5LJKWIURPWKHEHJLQQLQJZHUHFRJQL]HGWKDWWKH/DVHU-HWSULQWHUDW
ZDVJRLQJWREHH[WUHPHO\SRSXODU6RZHGHFLGHGWR
GLVWULEXWHLWXVLQJWKHVPDOO+3VDOHVIRUFHWKDWIRFXVHGRQUHVHOOHUV
7KLVDYHQXHRIGLVWULEXWLRQKDVEHHQDPDMRUFRPSHWLWLYHDGYDQWDJH
IRU+3GXULQJWKHSDVWWHQ\HDUV
0RUHIRUOHVVEHFDPHWKHJRDOIRUHDFKQHZ/DVHU-HWPRGHO7KLV
REMHFWLYHUHYHDOVDOHVVRQOHDUQHGIURPRXUH[SHULHQFHZLWK
FDOFXODWRUV)RUPDQ\\HDUVZHFRQWLQXHGWRLQWURGXFHLQFUHDVLQJO\
VRSKLVWLFDWHGFDOFXODWRUVZLWKJUHDWHUFDSDELOLWLHVDWJUHDWHUFRVWWR
FRQVXPHUV0HDQZKLOHRXUFRPSHWLWRUVZHUHRIIHULQJEDVLFIHDWXUHV
DWDORZHUSULFH)RUWKHPDVVPDUNHWEDVLFIHDWXUHVZHUHVXIILFLHQW
DQGWKHORZHUSULFHGPRGHOVGHFUHDVHG+3
VFDOFXODWRUPDUNHWVKDUH
7KHVRSKLVWLFDWHG+3FDOFXODWRUVVROGWRFXVWRPHUVZKR

'$9,'3$&.$5'

QHHGHGPRUHDGYDQFHGFDSDELOLWLHVEXWZHORVWDODUJHSRUWLRQRI
WKHPDUNHWSODFH:LWK/DVHU-HWSULQWHUVZHGHFLGHGWKDWHDFK
UHYLVLRQZRXOGRIIHURXUFXVWRPHUVJUHDWHUFDSDELOLW\DWDORZHUSULFH
WKDQLWVSUHGHFHVVRU
7KH/DVHU-HW,,ZDVLQWURGXFHGLQ,WRXWVROGDOORWKHUEUDQGVRI
ODVHUSULQWHUVZRUOGZLGH DQGWKHUHZHUHPDQ\E\WKLVWLPH 
,PSURYHPHQWVLQFOXGHGEHWWHUSULQWTXDOLW\DQGJUDSKLFVFDSDELOLWLHV
%HVWRIDOOLWRIIHUHGVRPHWKLQJWKDWWRGD\VHHPVDOPRVWULGLFXORXVO\
VLPSOHFRUUHFWRUGHUSDSHURXWSXW
7ZR\HDUVODWHU+3LQWURGXFHGDSURGXFWWKDWZDVFRPSOHWHO\
XQH[SHFWHGWKH/DVHU-HW,,37KH,,3ZDVOHVVVRSKLVWLFDWHGDQG
VXEVWDQWLDOO\OHVVH[SHQVLYH,WKDGDOOWKHSULQWTXDOLW\UHOLDELOLW\
SDSHUKDQGOLQJIRQWDQGJUDSKLFVIHDWXUHVRIWKH,,EXWLWZDV
SULFHGPRUHWKDQOHVVWKDQLWVSUHGHFHVVRU:HFRXOGQ
WPDNH
WKHPIDVWHQRXJK
7KHORQJH[SHFWHG/DVHU-HW,,,ZDVLQWURGXFHGLQHDUO\,W
RIIHUHGGHVNWRSSXEOLVKLQJOLNHW\SHIDFHDQGJUDSKLFVFDSDELOLWLHVIDU
EH\RQGLWVSUHGHFHVVRUV
&KDUOHV7XQJDQHQJLQHHULQWKH%RLVHODEKDGGHYHORSHGDQG
SDWHQWHGDZD\WRPRUHILQHO\FRQWUROWKHWLPLQJDQGGXUDWLRQRIWKH
ILULQJRIWKHSULQWHU
VODVHU7KLVDOORZHGYDULDWLRQLQWKHVL]HDQG
SODFHPHQWRIGRWVRIWRQHURQWKHSULQWHGSDJHFUHDWLQJDGUDPDWLF
LQFUHDVHLQSULQWTXDOLW\7KH/DVHU-HW,,,DWFRVWOHVVWKDQ
WKH,,DQGOHVVWKDQFRPSHWLQJSURGXFWV,WWRRND\HDUIRUWKHILUVW
FORQHWKDWLPLWDWHG&KDUOHV7XQJ
VUHVROXWLRQHQKDQFHPHQW
WHFKQRORJ\WRHQWHUWKHPDUNHW

7+(+3:$<

,QQRYDWLRQFRQWLQXHVDSDFH/DVHU-HWQRZKDVEHFRPHDXQLYHUVDOO\
UHFRJQL]HGEUDQGQDPHIRUGHVNWRSODVHUSULQWHUVPXFKOLNHRWKHU
EUDQGVVXFKDV.OHHQH[;HUR[%DQGDLGDQG/HYL
VHYROYHGWR
FKDUDFWHUL]HHQWLUHSURGXFWFDWHJRULHV

7KH,QN-HW6WRU\
7KHVWRU\RI+3
VLQNMHWSULQWHUEXVLQHVVEHJDQLQZLWKD
FKDQFHGLVFRYHU\DWRXUFRUSRUDWHODEVLQ3DOR$OWR$QHQJLQHHU
ZRUNLQJRQGHYHORSLQJWKLQILOPWHFKQRORJ\IRULQWHJUDWHGFLUFXLW
DSSOLFDWLRQVZDVWHVWLQJWKHUHVSRQVHRIWKLQILOPWRHOHFWULFDO
VWLPXODWLRQ7KHHOHFWULFLW\VXSHUKHDWHGWKHPHGLXPDQGGURSOHWVRI
IOXLGO\LQJXQGHUWKHILOPZHUHH[SHOOHG$QLGHDZDVERUQ:KDWLIZH
FRXOGILQHO\FRQWUROWKHVHMHWVRIIOXLG"/DUJHLQGXVWULDOLQNMHW
PDUNLQJGHYLFHVDOUHDG\H[LVWHGEXWXSWRWKLVSRLQWRQO\FUXGH
SULQWLQJRITXLWHODUJHFKDUDFWHUVIRULQGXVWULDOSXUSRVHVZDV
SUDFWLFDO6XGGHQO\LWORRNHGOLNHWKLVPDUNLQJWHFKQRORJ\FRXOGEH
PLQLDWXUL]HG$QGLWKDGWKHDGYDQWDJHVRIUHTXLULQJYHU\OLWWOHSRZHU
WRSULQWDQGRIEHLQJLQKHUHQWO\LQH[SHQVLYHWRPDQXIDFWXUH
$VZDVWKHFDVHZLWKODVHUSULQWHUVWKHDGYHQWRIWKHSHUVRQDO
FRPSXWHUPDGHWKHPDUNHWRSSRUWXQLW\FOHDU2QO\WKLVWLPHWKHUH
ZHUHQRRWKHUVXSSOLHUVRILQNMHWWHFKQRORJ\DQGZHNQHZZHFRXOG
PDNHDVLJQLILFDQWFRQWULEXWLRQLQWKLVDUHD
,QNMHWWHFKQRORJ\RIIHUHG+3WKHRSSRUWXQLW\WR

'$9,'3$&.$5'

UHSODFHWKHOHDVWH[SHQVLYHSULQWHUVLQWKHPDUNHWVHULDOGRWPDWUL[
LPSDFWSULQWHUVZLWKSURGXFWVWKDWZHUHVXSHULRULQHYHU\ZD\,QN
MHWKDGWKHSRWHQWLDOIRUEHWWHUSULQWTXDOLW\TXLHWHURSHUDWLRQ
H[WUHPHO\ORZSRZHUFRQVXPSWLRQDQGHYHQWXDOO\KLJKTXDOLW\ORZ
FRVWFRORU

7KLQN-HW
,QWKHILUVW+3WKHUPDOLQNMHWSURGXFWSURJUDPEHJDQDQGE\
ZHKDGGHVLJQHGWKHNH\HOHPHQWDGLVSRVDEOHSULQWKHDG,Q
ZHLQWURGXFHGDWKHUPDOLQNMHWSULQWHUFDOOHGWKH7KLQN-HWD
VPDOOUXJJHGPDFKLQHWKDWSULQWHGRQDVSHFLDOFRDWHGSDSHU:LWK
QLQHW\VL[GRWVSHULQFKLWZDVDFRPSOHWHO\QHZWHFKQRORJ\LQD
PDUNHWGRPLQDWHGE\QRLV\LPSDFWSULQWHUV
0XFKWRRXUVXUSULVHVDOHVGLGQRWPHHWRXUH[SHFWDWLRQV:HZHQW
WRRXUFXVWRPHUVWRILQGRXWZK\DQGWKH\WROGXVWKH\ZDQWHG
EHWWHUSULQWTXDOLW\DYDULHW\RIW\SHIDFHVDQGWKHDELOLW\WRSULQWRQ
DQ\NLQGRISDSHU:HZHQWEDFNWRWKHGUDZLQJERDUG

0DYHULFN
2XUQHZLQNMHWSULQWHUSURMHFWZDVFRGHQDPHG0DYHULFN,W
UHVXOWHGLQDSURGXFWFDSDEOHRIGRWVSHULQFKWKDWRIIHUHGD
FKRLFHRIIRQWVDQGKDGWKHFDSD

7+(+3:$<

ELOLW\RIKDQGOLQJSODLQSDSHU%XWWKHSURGXFWZRXOGKDYHWRVHOOIRU
ZKLFKZDVWRRH[SHQVLYHIRUDSHUVRQDOSULQWHU7KHSURMHFW
ZDVFDQFHOHG7KLVZDVDORZSRLQWIRURXULQNMHW5 'WHDP%XW
GHVSLWHH[WUHPHGLVDSSRLQWPHQWWKHWHDPUHJURXSHGWRWU\DJDLQ

'HVN-HW
2XUFXVWRPHUVKDGPDGHLWFOHDU7KH\ZDQWHGDQLQNMHWSURGXFW
ZLWKQHDUODVHUSULQWTXDOLW\IRUXQGHU7KHGHYHORSPHQW
JURXSEHJDQZLWKVLPSOHREMHFWLYHVKLJKTXDOLW\ORZSULFHDQGD
WZHQW\WZRPRQWKSURGXFWLRQVFKHGXOH7KLVWLPH5 '
PDQXIDFWXULQJDQGPDUNHWLQJZRUNHGWRJHWKHUULJKWIURPWKH
EHJLQQLQJLQFURVVIXQFWLRQDOWHDPV'HFLVLRQVZHUHPDGHDWWKH
ORZHVWSRVVLEOHOHYHO0DQXIDFWXUDELOLW\ZDVEXLOWLQWRWKHSURGXFWDV
LWZDVEHLQJGHYHORSHGDQGXVHUIRFXVJURXSVKHOSHGNHHSXVRQ
WUDFNFRQFHQWUDWLQJRQFXVWRPHUQHHGVHYHU\VWHSRIWKHZD\
7KHUHZHUHGLIILFXOWPRPHQWV:HKDGSULQWKHDGSUREOHPVGU\WLPH
SUREOHPVSULQWTXDOLW\SUREOHPVEXWLQVL[PRQWKVZHKDGD
EUHDGERDUGDQGDSDSHUSDWKPHFKDQLVPZLWKIURQWORDGLQJDQG
GHOLYHU\DFRPELQDWLRQRILQYHQWLYHQHVVDQGFXVWRPHURULHQWDWLRQ
$QGRXUFXVWRPHUVZHUHVDWLVILHGZLWKRXULPSURYHGSULQWTXDOLW\
2XUFXVWRPHUUHVHDUFKVKRZHGWKDWHYHU\RQHSUHIHUUHG'HVN-HW
V
SULQWLQJFDSDELOLWLHVRYHUGRWPDWUL[

'$9,'3$&.$5'

%XWZDVDORWWRVSHQGRQDSHUVRQDOSULQWHUZKHQDGRW
PDWUL[FRVWWR:HKDGQRLOOXVLRQVDERXWRXUQHHGWR
ORZHUWKHSULFH%XWEHFDXVHZHFDUULHGDOOWKHGHYHORSPHQWDQG
PDQXIDFWXULQJFRVWVRXUVHOYHVZHKDGWRZDLWWREULQJWKHSULFH
GRZQXQWLOWKHYROXPHJUHZVXIILFLHQWO\
7KHGHDWKNQHOORIWKHGRWPDWUL[SULQWHUWROOHGLQZKHQ+3
VXSSRUWHGE\DUDSLGO\GHFUHDVLQJFRVWVWUXFWXUHEHJDQDVHULHVRI
SULFHFXWVRQLWV'HVN-HWSULQWHUVWKDWEURXJKWWKHHQWU\OHYHOOLVW
SULFHIURPIRUWKHRULJLQDO'HVN-HWWRLQ%\
WKDWHQWU\OHYHO'HVN-HW WKH'HVN-HW VXSHULRUWRWKHRULJLQDOLQ
HYHU\ZD\QRWRQO\OLVWHGIRULWRIIHUHGDFRORUSULQWLQJ
XSJUDGH
'HVN-HWVLQJOHKDQGHGO\FUHDWHGWKHUHYROXWLRQLQFRORUSULQWLQJ3ULRU
WRWKHLQWURGXFWLRQRIWKHFRORU'HVN-HW&LQFRORUSULQWHUV
ZHUHH[SHQVLYHSXUFKDVHGRQO\E\XVHUVZKRVHVSHFLDOQHHGV
MXVWLILHGWKHSULFH2XUPDUNHWUHVHDUFKFOHDUO\VKRZHGWKDW
FXVWRPHUVZHUHQRWORRNLQJIRUFRORUSULQWHUV$VNHGWRSULRULWL]H
WKHLUUHTXLUHPHQWVIRUSULQWHUVFXVWRPHUVFRQVLVWHQWO\SXWFRORU
SULQWLQJZD\GRZQWKHOLVW%XWZKHQZHDVNHG
,IZHVDWLVILHGDOO
\RXUEODFNSULQWLQJUHTXLUHPHQWVDQGRIIHUHG\RXWKHDELOLW\WRSULQW
LQFRORUDVZHOOIRUOLWWOHRUQRSULFHSHQDOW\ZRXOG\RXEX\VXFKD
SULQWHU"WKHRYHUZKHOPLQJUHVSRQVHZDV<HV2XUFXVWRPHUV
GLGQ
WZDQWFRORUSULQWHUVEXWWKH\ZHUHYHU\LQWHUHVWHGLQSULQWHUV
WKDWFRXOGSULQWLQFRORUWRR,QVKRUW+3VKRXOGRIIHUFRORUDVD
IHDWXUH

7+(+3:$<

,QDSSUR[LPDWHO\QRQLPSDFWFRORUSULQWHUVZHUHVROG
ZRUOGZLGHE\DOOYHQGRUVQ,+3DORQHVROGDOPRVWPLOOLRQ
FRORUSULQWHUV7RGD\DOO'HVN-HWSULQWHUVFDQDOVRSULQWLQFRORU

4XDOLW\
7KHHVVHQFHRIFXVWRPHUVDWLVIDFWLRQDW+HZOHWW3DFNDUGLVRXU
FRPPLWPHQWWRTXDOLW\DFRPPLWPHQWWKDWEHJLQVLQRXUODERUDWRULHV
DQGH[WHQGVLQWRHYHU\SKDVHRIRXURSHUDWLRQV
,WKLQNSHUKDSV+3KDGPRUHUHDVRQWKDQRWKHUFRPSDQLHVWR
HPSKDVL]HTXDOLW\(DUO\RQZHKDGGHFLGHGWRFRQFHQWUDWHRQ
GHYHORSLQJDQGPDQXIDFWXULQJHOHFWURQLFWHVWDQGPHDVXULQJ
LQVWUXPHQWVDQGWKHVHLQVWUXPHQWVZHUHXVHGE\RXUFXVWRPHUVWR
WHVWDQGPHDVXUHWKHTXDOLW\RIWKHLURZQSURGXFWVDQGSURFHVVHV
:HWKHUHIRUHKDGDVWURQJLQFHQWLYHWRGRDVXSHULRUMRE
2YHUWKH\HDUVZHKDYHVSHQWDJRRGGHDORIWLPHORRNLQJDWKRZZH
FRXOGLPSURYHTXDOLW\2QHPHWKRGZHIRXQGYHU\HIIHFWLYHZDVWR
OD\RXWRXUSURGXFWLRQOLQHVVRWKDWWKHDUHDGHYRWHGWRWKHILQDO
WHVWLQJRIDSURGXFWZDVYHU\FORVHWRWKHILQDODVVHPEO\DUHD,IWKH
WHVWFUHZGHWHFWHGDQ\SUREOHPLQWKHILQLVKHGSURGXFWWKH\FRXOG
LPPHGLDWHO\DQGGLUHFWO\WHOOWKHDVVHPEO\SHRSOHZLWKRXWKDYLQJWR
JRWKURXJKFRPSOLFDWHGSURFHGXUHV
7KLVZDVYHU\PXFKOLNHZKDWKDVFRPHWREHNQRZQ

'$9,'3$&.$5'

DVDTXDOLW\FLUFOHEHFDXVHKHUHZHUHSHRSOHZRUNLQJFORVHO\
WRJHWKHUZLWKHIIHFWLYHLQIRUPDOFRPPXQLFDWLRQ:HIRXQGRYHUWLPH
WKDWPDQ\JRRGLGHDVHPHUJHGIURPWKLVLQIRUPDOH[FKDQJHDPRQJ
RXUWHVWDQGDVVHPEO\SHRSOHDQGWKLVKHOSHGWRNHHSDQHPSKDVLV
RQTXDOLW\DQGSURGXFWLYLW\
7RGD\ZHDUHDOOIDPLOLDUZLWKWKHDFFRPSOLVKPHQWVRI-DSDQHVH
LQGXVWU\LQSURGXFLQJTXDOLW\SURGXFWV,QUHFHQW\HDUV-DSDQ
V
DXWRPRELOHVUDGLRVWHOHYLVLRQVHWVUHFRUGLQJHTXLSPHQWDQGPDQ\
RWKHUSURGXFWVKDYHHDUQHGDZRUOGZLGHUHSXWDWLRQIRUTXDOLW\DQG
UHOLDELOLW\2XURZQH[SHULHQFHVZLWKWKH-DSDQHVHKDYHFRQWULEXWHG
LQLPSRUWDQWZD\VWRWKHKLJKTXDOLW\RIRXU+HZOHWW3DFNDUG
SURGXFWV

-DSDQHVH-RLQW9HQWXUH
,QZHIRUPHGDMRLQWYHQWXUHZLWKDFRPSDQ\LQ-DSDQD
FRPSDQ\WKDWKDGEHHQLQYROYHGLQSURFHVVLQVWUXPHQWDWLRQDQGKDG
VRPHFRPSDWLELOLW\ZLWKRXUSURGXFWOLQH:KHQZHZHUHILUVW
FRQVLGHULQJWKHYHQWXUHZKLFKEHFDPHNQRZQDV
<RNRJDZD+HZOHWW3DFNDUGRU<+3DQGQRZLV+HZOHWW3DFNDUG
-DSDQ,YLVLWHG-DSDQDQGVSHQWDFRXSOHRIZHHNVZLWKWKH
<RNRJDZDSHRSOH7KLVZDVDWDWLPHZKHQ-DSDQ
VPDQXIDFWXULQJ
DQGPDQDJHULDOVNLOOVZHUHQRWXSWRRXURZQDQGZKHQZHVWDUWHG,
FRQFOXGHGWKDWLILWZHUHJRLQJWREHVXFFHVVIXOLWQHHGHGWREH
PDQDJHGRXUZD\UDWKHUWKDQWKH<RNRJDZDZD\7KH-DSDQHVH
DJUHHG

7+(+3:$<

DQGVRGXULQJ<+3
VIRUPDWLYH\HDUVLWZDVPDQDJHGE\RQHRIRXU
SHRSOHDQGLWVXFFHVVIXOO\DGRSWHGVRPHRIWKHWKLQJVWKDWKDG
ZRUNHGZHOOIRUXVLQWKH8QLWHG6WDWHV
$WWKDWWLPH+3ZDVVWUXFWXUHGLQWRPDQ\UHODWLYHO\VPDOOGLYLVLRQV
(DFK\HDUZHJRWDOOWKHGLYLVLRQPDQDJHUVWRJHWKHUDQGVSHQWWZRRU
WKUHHGD\VUHSRUWLQJFRPSDULQJQRWHVHYDOXDWLQJSHUIRUPDQFHDQG
VRIRUWK2QHRIRXUVHVVLRQVDOZD\VKDGWRGRZLWKTXDOLW\:HNHSW
DUHFRUGRQWKHIDLOXUHUDWHRIHYHU\+3SURGXFWDQGDQRWKHUUHFRUG
RQRXUZDUUDQW\FRVWV
'XULQJWKHILUVWIHZ\HDUVRIRXU-DSDQHVHMRLQWYHQWXUHWKH<+3
JHQHUDOPDQDJHUDQ$PHULFDQFDPHWRWKHPHHWLQJVDQGUHSRUWHG
DORQJZLWKDOORIRXURWKHUPDQDJHUV<+3
VSHUIRUPDQFHZDVXVXDOO\
MXVWDERXWLQWKHPLGGOH,WZDVQHLWKHUDWWKHWRSQRUDWWKHERWWRP
LQSURGXFWIDLOXUHUDWHVRUZDUUDQW\FRVWV
$IWHUWKLVKDGJRQHRQIRUVRPH\HDUVDEULJKW\RXQJ-DSDQHVH
PDQDJHU.HQ]R6DVDRNDZKRZDVGRLQJJRRGZRUNRYHUWKHUH
FRUQHUHG%LOO+HZOHWWDQGPHRQHGD\+HVDLG:K\GRQ
W\RXOHW
PHUXQ<+3"<RXVHQGDQ$PHULFDQPDQDJHUWRXVWRRYHUVHHRXU
ZRUN:HVSHQGDORWRIWLPHLQIDFWZDVWHDORWRIWLPHWDONLQJWR
KLPDQGLIVRPHWKLQJJRHVZURQJKH
VWKHIHOORZZHEODPH:H
UHDOO\WKLQNZHFDQGREHWWHU6RZHVDLG2ND\\RXJRDKHDG\RX
UXQWKHRSHUDWLRQDQGZH
OOVHHKRZLWJRHV
7KHIROORZLQJ\HDU<+3JUHZDWDIDVWHUUDWHWKDQHYHUEHIRUHDQGLW
VKRZHGLPSURYHPHQWLQWKHTXDOLW\RILWVSURGXFW,WVWDUWHGWRPRYH
XSWRZDUGWKHWRSRI

'$9,'3$&.$5'

WKH+3OLVWDQGVRRQDIWHUWKHPDQDJHUUHWXUQHGZLWKVRPHDPD]LQJ
GDWDRQ<+3TXDOLW\7KHIDLOXUHUDWHVRQWKHSURGXFWVLWZDVEXLOGLQJ
ZHUHEHWWHUWKDQWKRVHRIDQ\RIRXURWKHUGLYLVLRQV$QGDIHZ\HDUV
IROORZLQJWKDWLQLWUHFHLYHG-DSDQ
VFRYHWHG'HPLQJ3UL]HIRU
SURGXFWLYLW\DQGTXDOLW\7KLVSUL]HWKHREMHFWRILQWHQVHFRPSHWLWLRQ
DPRQJ-DSDQHVHILUPVLVQDPHGIRU'U:(GZDUGV'HPLQJDQ
$PHULFDQVWDWLVWLFLDQZKRKHOSHGWKH-DSDQHVHLPSURYHWKHLUSURGXFW
TXDOLW\LQWKH\HDUVIROORZLQJ:RUOG:DU,,
+HUHLVDQH[DPSOHRIZKDW<+3ZDVDEOHWRGR:HKDGEHHQ
PDNLQJSULQWHGFLUFXLWERDUGVLQYDULRXVSDUWVRIWKHFRPSDQ\2XU
EHVWIDLOXUHUDWHVZHUHDERXWIRXULQDWKRXVDQG:HWKRXJKWWKDW
ZDVIDLUO\JRRGDOLWWOHOHVVWKDQSHUFHQW$QGWKDWZDVWKHUDWH
ZHIRXQGDORWRIRWKHUFRPSDQLHVZHUHDFKLHYLQJ2XU-DSDQHVH
XQLWRQWKHRWKHUKDQGFDPHLQZLWKDIDLOXUHUDWHRQLWVSULQWHG
FLUFXLWERDUGVRIRQO\WHQSHUPLOOLRQ7KDW
VIRXUKXQGUHGWLPHV
EHWWHUWKDQDQ\WKLQJZHKDGEHHQDEOHWRGR
2EYLRXVO\WKDWVKRRNXSDORWRISHRSOHDQGFKDQJHGDORWRI
WKLQNLQJZLWKLQWKHFRPSDQ\,WFOHDUO\VKRZHGWKDWRXUWDUJHWVRQ
TXDOLW\MXVWZHUHQRZKHUHQHDUZKDWFRXOGEHDFKLHYHG7KHSRVLWLYH
UHVXOWZDVWKDWWKHWKLQNLQJDQGWKHZRUNWKH\ZHUHGRLQJDW<+3
ZHUHVRRQUHIOHFWHGDOORYHUWKHFRPSDQ\:HZHUHDEOHWRUDLVH
TXDOLW\WDUJHWVLQPDQ\GLYLVLRQVDQGORFDWLRQVIDUEH\RQGDQ\WKLQJ
ZHWKRXJKWFRXOGKDYHEHHQGRQHEHIRUH,KDGRIWHQVHHQWKH
SHRSOHLQRXURSHUDWLRQDW<+3VSHQGFRQVLGHUDEOHWLPHPDNLQJ

7+(+3:$<

VXUHWKDWHYHU\DGMXVWPHQWZDVGRQHMXVWDVDFFXUDWHO\DVSRVVLEOH
7KHVDPHDGMXVWPHQWVZHUHGRQHDW+3LQ3DOR$OWRMXVWDVTXLFNO\
DVSRVVLEOHWRJHWWKHPMXVWEDUHO\ZLWKLQWKHOLPLWVVSHFLILHG7KLV
FDPHDERXWEHFDXVHSHRSOHLQ3DOR$OWRZHUHRQSURILWVKDULQJDQG
SHRSOHLQ-DSDQZHUHQRW,SRLQWHGWKLVRXWWR.HQ]R6DVDRNDRXU
PDQDJHULQ-DSDQDQGKHVDLGWKDW,KDGVKRZQKLPWKHZD\WKDW
JDLQVLQTXDOLW\FRPHIURPPHWLFXORXVDWWHQWLRQWRGHWDLODQGHYHU\
VWHSLQWKHPDQXIDFWXULQJSURFHVVPXVWEHGRQHDVFDUHIXOO\DV
SRVVLEOHQRWDVTXLFNO\DVSRVVLEOH7KLVVRXQGVVLPSOHEXWLWLV
DFKLHYHGRQO\LIHYHU\RQHLQWKHRUJDQL]DWLRQLVGHGLFDWHGWRTXDOLW\

&KDSWHU
7UXVWLQ3HRSOH
,)$125*$1,=$7,21,6WRPD[LPL]HLWVHIILFLHQF\DQGVXFFHVVD
QXPEHURIUHTXLUHPHQWVPXVWEHPHW2QHLVWKDWWKHPRVWFDSDEOH
SHRSOHDYDLODEOHVKRXOGEHVHOHFWHGIRUHDFKDVVLJQPHQWZLWKLQWKH
RUJDQL]DWLRQ(VSHFLDOO\LQDWHFKQLFDOEXVLQHVVZKHUHWKHUDWHRI
SURJUHVVLVUDSLGDFRQWLQXLQJSURJUDPRIHGXFDWLRQPXVWEH
XQGHUWDNHQDQGPDLQWDLQHG7HFKQLTXHVWKDWDUHUHOHYDQWWRGD\ZLOO
EHRXWGDWHGLQWKHIXWXUHDQGHYHU\SHUVRQLQWKHRUJDQL]DWLRQPXVW
EHFRQWLQXDOO\ORRNLQJIRUQHZDQGEHWWHUZD\VWRGRKLVRUKHUZRUN
$QRWKHUUHTXLUHPHQWLVWKDWDKLJKGHJUHHRIHQWKXVLDVPVKRXOGEH
HQFRXUDJHGDWDOOOHYHOVLQSDUWLFXODUWKHSHRSOHLQKLJK
PDQDJHPHQWSRVLWLRQVPXVWQRWRQO\EHHQWKXVLDVWLFWKHPVHOYHV
WKH\PXVWEHDEOHWRHQJHQGHUHQWKXVLDVPDPRQJWKHLUDVVRFLDWHV
7KHUHFDQEHQRSODFHIRUKDOIKHDUWHGLQWHUHVWRUKDOIKHDUWHGHIIRUW
)URPWKHEHJLQQLQJ%LOO+HZOHWWDQG,KDYHKDGDVWURQJEHOLHILQ
SHRSOH:HEHOLHYHWKDWSHRSOHZDQWWRGRDJRRGMREDQGWKDWLWLV
LPSRUWDQWIRUWKHPWRHQMR\

7+(+3:$<

WKHLUZRUNDW+HZOHWW3DFNDUG:HWU\WRPDNHLWSRVVLEOHIRURXU
SHRSOHWRIHHODUHDOVHQVHRIDFFRPSOLVKPHQWLQWKHLUZRUN
&ORVHO\FRXSOHGZLWKWKLVLVRXUVWURQJEHOLHIWKDWLQGLYLGXDOVEH
WUHDWHGZLWKFRQVLGHUDWLRQDQGUHVSHFWDQGWKDWWKHLUDFKLHYHPHQWV
EHUHFRJQL]HG,WKDVDOZD\VEHHQLPSRUWDQWWR%LOODQGPHWRFUHDWH
DQHQYLURQPHQWLQZKLFKSHRSOHKDYHDFKDQFHWREHWKHLUEHVWWR
UHDOL]HWKHLUSRWHQWLDODQGWREHUHFRJQL]HGIRUWKHLUDFKLHYHPHQWV
(DFKSHUVRQLQRXUFRPSDQ\LVLPSRUWDQWDQGHYHU\MRELV
LPSRUWDQW,QWKHKLJKO\WHFKQLFDOILHOGVLQZKLFKZHRSHUDWHOLWWOH
GHWDLOVRIWHQPDNHWKHGLIIHUHQFHEHWZHHQDTXDOLW\SURGXFWDQGRQH
WKDWLVQ
WDVJRRG6RZKDWZH
YHWULHGWRHQJHQGHUDPRQJDOORXU
SHRSOHLVWKHDWWLWXGHWKDWLWLVHDFKLQGLYLGXDO
VEXVLQHVVWRGRWKH
EHVWMREKHRUVKHFDQ,UHFDOOWKHWLPHPDQ\\HDUVDJRZKHQ,
ZDVZDONLQJDURXQGDPDFKLQHVKRSDFFRPSDQLHGE\WKHVKRS
V
PDQDJHU:HVWRSSHGEULHIO\WRZDWFKDPDFKLQLVWPDNLQJDSROLVKHG
SODVWLFPROGGLH+HKDGVSHQWDORQJWLPHSROLVKLQJLWDQGZDVWDNLQJ
DILQDOFXWDWLW:LWKRXWWKLQNLQJ,UHDFKHGGRZQDQGZLSHGLWZLWK
P\ILQJHU7KHPDFKLQLVWVDLG*HW\RXUILQJHURIIP\GLH7KH
PDQDJHUTXLFNO\DVNHGKLP'R\RXNQRZZKRWKLVLV"7RZKLFKWKH
PDFKLQLVWUHSOLHG,GRQ
WFDUH+HZDVULJKWDQG,WROGKLPVR+H
KDGDQLPSRUWDQWMREDQGZDVSURXGRIKLVZRUN
7KHZD\DQRUJDQL]DWLRQLVVWUXFWXUHGDIIHFWVLQGLYLGXDOPRWLYDWLRQ
DQGSHUIRUPDQFH7KHUHDUHPLOLWDU\W\SHRUJDQL]DWLRQVLQZKLFKWKH
SHUVRQDWWKHWRSLVVXHV

'$9,'3$&.$5'

DQRUGHUDQGLWLVSDVVHGRQGRZQWKHOLQHXQWLOWKHSHUVRQDWWKH
ERWWRPGRHVDVKHRUVKHLVWROGZLWKRXWTXHVWLRQRUUHDVRQ7KLVLV
SUHFLVHO\WKHW\SHRIRUJDQL]DWLRQZHDW+3GLGQRWZDQWDQGGR
QRWZDQW:HIHHORXUREMHFWLYHVFDQEHVWEHDFKLHYHGE\SHRSOHZKR
XQGHUVWDQGDQGVXSSRUWWKHPDQGZKRDUHDOORZHGIOH[LELOLW\LQ
ZRUNLQJWRZDUGFRPPRQJRDOVLQZD\VWKDWWKH\KHOSGHWHUPLQHDUH
EHVWIRUWKHLURSHUDWLRQDQGWKHLURUJDQL]DWLRQ
7KHFORVHUHODWLRQVKLSVDPRQJ+3SHRSOHHQFRXUDJHGDIRUPRI
SDUWLFLSDWRU\PDQDJHPHQWWKDWVXSSRUWHGLQGLYLGXDOIUHHGRPDQG
LQLWLDWLYHZKLOHHPSKDVL]LQJFRPPRQQHVVRISXUSRVHDQGWHDPZRUN
,QWKHHDUO\\HDUVZHZHUHDOOZRUNLQJRQWKHVDPHSUREOHPV:H
VROLFLWHGDQGXVHGLGHDVIURPZKHUHYHUZHFRXOGJHWWKHP7KHQHW
UHVXOWZDVWKDWHDFKHPSOR\HHIHOWWKDWKHRUVKHZDVDPHPEHURI
WKHWHDP
$VWKHFRPSDQ\JUHZZHFRXOGQRORQJHUWDNHWHDPZRUNIRU
JUDQWHG:HKDGWRWU\WRHPSKDVL]HDQGVWUHQJWKHQLW7KDW
VRQHRI
WKHUHDVRQVZHGLGQ
WVLQJOHRXWGLYLVLRQVRUJURXSVWKDWZHUHGRLQJ
SDUWLFXODUO\ZHOO$QGZK\EHQHILWVVXFKDVSURILWVKDULQJDUH
SURYLGHGQRWWRVHOHFWHGLQGLYLGXDOVRUJURXSVEXWWRDOOHOLJLEOH
HPSOR\HHV,W
VLPSHUDWLYHWKDWWKHUHEHDVWURQJVSLULWRIKHOSIXOQHVV
DQGFRRSHUDWLRQDPRQJDOOHOHPHQWVRIWKHFRPSDQ\DQGWKDWWKLV
VSLULWEHUHFRJQL]HGDQGUHVSHFWHGDVDFRUQHUVWRQHRIWKH+3:D\
:KHQZHZHUHVPDOODQGLQVLJQLILFDQWDQGKDGWRKLUHWKHEHVWSHRSOH
ZHFRXOGILQGZHKDGWRWUDLQWKHPDQGWKHQKRSHWKH\ZRXOGZRUN
RXW:HZDQWHGRXU

7+(+3:$<

SHRSOHWRVKDUHRXUJRDOVRIPDNLQJDSURILWDQGDFRQWULEXWLRQ:H
LQWXUQIHOWDUHVSRQVLELOLW\WRSURYLGHWKHPZLWKRSSRUWXQLW\DQGMRE
VHFXULW\WRWKHEHVWRIRXUDELOLW\7KXVZHPDGHDQHDUO\DQG
LPSRUWDQWGHFLVLRQ:HGLGQRWZDQWWREHDKLUHDQGILUHD
FRPSDQ\WKDWZRXOGVHHNODUJHVKRUWWHUPFRQWUDFWVHPSOR\D
JUHDWPDQ\SHRSOHIRUWKHGXUDWLRQRIWKHFRQWUDFWDQGDWLWV
FRPSOHWLRQOHWWKRVHSHRSOHJR7KLVW\SHRIRSHUDWLRQLVRIWHQWKH
TXLFNHVWDQGPRVWHIILFLHQWZD\WRJHWDELJMREDFFRPSOLVKHG%XW
%LOODQG,GLGQ
WZDQWWRRSHUDWHWKDWZD\:HZDQWHGWREHLQ
EXVLQHVVIRUWKHORQJKDXOWRKDYHDFRPSDQ\EXLOWDURXQGDVWDEOH
DQGGHGLFDWHGZRUNIRUFH
:HZHUHYHU\FORVHWRRXUHPSOR\HHV:HXQGHUVWRRGWKHLUMREVDQG
VKDUHGPXFKRIWKHLUOLYHVZLWKWKHP:HDOVRZHUHOHDUQLQJZKLFKRI
RXUSHRSOHKDGPDQDJHPHQWSRWHQWLDODOWKRXJKVRPHWLPHVZH
OHDUQHGWKHKDUGZD\2QFHZHSURPRWHGDPDQDJRRGZRUNHUWR
EHWKHPDQDJHURIRXUPDFKLQHVKRS$IHZGD\VODWHUKHFDPHWR
VHHPH+HVDLGKHZDVKDYLQJDWRXJKWLPHPDQDJLQJDQGZDQWHG
PHWRFRPHRXWWRWKHVKRSDQGWHOOKLVSHRSOHWKDWKHZDVWKHLU
ERVV,I,KDYHWRGRWKDW,VDLG\RXGRQ
WGHVHUYHWREHWKHLU
ERVV
$QRWKHUHDUO\H[SHULHQFHDJDLQUHODWHGWRRXUFORVHDVVRFLDWLRQZLWK
RXUSHRSOHZDVWKHFDVHRIDQHPSOR\HHZKRFRQWUDFWHGWXEHUFXORVLV
DQGZDVUHTXLUHGWRWDNHDOHDYHRIDEVHQFHIRUWZR\HDUV7KLVKDG
DVHULRXVHIIHFWRQKLVIDPLO\DQGDOWKRXJKZHZHUHDEOHWRSURYLGH
VRPHILQDQFLDOKHOSZHGHWHUPLQHGWKDWWKLVW\SHRISUREOHPVKRXOG
QHYHUEHUHSHDWHG&RQVHTXHQWO\ZH

'$9,'3$&.$5'

HVWDEOLVKHGDSURJUDPRIFDWDVWURSKLFPHGLFDOLQVXUDQFHWRSURWHFW
RXUHPSOR\HHVDQGWKHLUIDPLOLHV,QWKHODWHVWKLVW\SHRI
FRYHUDJHZDVYLUWXDOO\XQNQRZQ
7KHLQWHUHVW%LOODQG,DQGRXUIDPLOLHVKDGLQWKHZHOIDUHRI+3
HPSOR\HHVZDVUHIOHFWHGLQVRPHHDUO\SUDFWLFHVDQGFXVWRPV
,PPHGLDWHO\DIWHU:RUOG:DU,,RXUHPSOR\PHQWGURSSHGEXWE\
LWKDGJURZQEDFNXSWRDERXWWZRKXQGUHG$WWKDWWLPHP\
ZLIH/XFLOHVWDUWHGWKHSUDFWLFHRIEX\LQJDZHGGLQJJLIWIRUHYHU\
HPSOR\HHZKRPDUULHGDQGDEDE\EODQNHWIRUHYHU\IDPLO\KDYLQJD
EDE\7KLVFRQWLQXHGIRUWHQ\HDUVRUVRXQWLOWKHSUDFWLFHIHOOYLFWLP
WRWKHFRPSDQ\
VUDSLGJURZWKDQGGHFHQWUDOL]DWLRQ
,QIDFW/XFLOHLQVWLJDWHGPDQ\WUDGLWLRQVWKDWVHUYHGWRHQKDQFHWKH
IDPLO\DWPRVSKHUHDW+3DQGKHOSHGFUHDWHDVHQVHRIEHORQJLQJLQ
RXU\RXQJHQWHUSULVH%RWKVKHDQG)ORUD+HZOHWWZHUHFRQVWDQWO\
ZRUNLQJRQEHKDOIRIWKHFRPSDQ\$V,VDLGHDUOLHU/XFLOHVHUYHGDV
RXUVHFUHWDU\DQGERRNNHHSHUIRUWKHILUVWVHYHUDO\HDUVRIRXU
RSHUDWLRQ6KHFRQWULEXWHGQRWRQO\WLPHDQGHQHUJ\EXWDOVRD
YLHZSRLQWDQGDVHQVHRIFDULQJWKDWHYHQWXDOO\EHFDPHDYLWDO
FRPSRQHQWRIWKHVSLULWWKDWGHILQHVHYHU\WKLQJZHGR
*URZWKDOVRDIIHFWHGWKHVL]HDQGQDWXUHRIFRPSDQ\SLFQLFV%LOODQG
,FRQVLGHUHGSLFQLFVDQLPSRUWDQWSDUWRIWKH+3:D\DQGLQWKH
HDUO\GD\VZHKDGDQDQQXDOSLFQLFLQWKH3DOR$OWRDUHDIRUDOORXU
SHRSOHDQGWKHLUIDPLOLHV,WZDVDELJHYHQWRQHODUJHO\SODQQHGDQG
FDUULHGRXWE\RXUHPSOR\HHVWKHPVHOYHV7KHPHQXFRQVLVWHGRI
1HZ<RUNVWHDNVKDPEXUJHUV0H[LFDQEHDQV

7+(+3:$<

RUIULMROHVJUHHQVDODGJDUOLF)UHQFKEUHDGDQGEHHU7KHFRPSDQ\
ERXJKWWKHIRRGDQGEHHU,WEHFDPHFXVWRPDU\IRUWKHPDFKLQH
VKRSSHRSOHWREDUEHTXHWKHVWHDNVDQGEXUJHUVZLWKRWKHU
GHSDUWPHQWVUHVSRQVLEOHIRURWKHUSDUWVRIWKHPHQX%LOODQG,DQG
RWKHUVHQLRUH[HFXWLYHVVHUYHGWKHIRRGJLYLQJXVWKHRSSRUWXQLW\WR
PHHWDOORIWKHHPSOR\HHVDQGWKHLUIDPLOLHV
,QWKHHDUO\VWKHFRPSDQ\ERXJKWDSDUFHORIODQGFDOOHG/LWWOH
%DVLQLQWKHUHGZRRGFRXQWU\DERXWDQKRXU
VGULYHIURP3DOR$OWR
:HFRQYHUWHGSDUWRILWLQWRDUHFUHDWLRQDUHDODUJHHQRXJKWRKDYH
DSLFQLFZLWKWZRWKRXVDQGSHRSOHRUPRUH:HDOVRPDGHLWDYDLODEOH
\HDUDURXQGIRURXUHPSOR\HHVDQGWKHLUIDPLOLHVWRJRRYHUQLJKW
FDPSLQJ7KLVZDVVXFKDSRSXODUEHQHILWWKDWZHGHFLGHGODWHURQ
WRGXSOLFDWHWKHLGHDLQRWKHUSDUWVRIWKHZRUOGZKHUHZHKDG
FRQFHQWUDWLRQV

$WDFRPSDQ\SLFQLFLQWKHV
'DYH3DFNDUGFHQWHUVHUYHV
VWHDNV

'$9,'3$&.$5'

RI+3SHRSOH,Q&RORUDGRZHERXJKWVRPHODQGLQWKH5RFNLHVQH[W
WR(VWHV3DUNDQGLQ0DVVDFKXVHWWVRQWKHVHDVKRUH,Q6FRWODQGZH
ERXJKWDVPDOOODNHIHDWXULQJJRRGILVKLQJ DQGSRVVLEOHVLJKWLQJVRI
WKH/RFK1HVVPRQVWHU DQGLQVRXWKHUQ*HUPDQ\ZHERXJKWODQG
VXLWDEOHIRUVNLLQJ
$VWKHFRPSDQ\JUHZHDFKGLYLVLRQZRXOGKDYHLWVRZQSLFQLF%LOO
DQG,DQGVRPHRIWKHRWKHU+3H[HFXWLYHVZRXOGWU\WRDWWHQGDV
PDQ\RIWKHVHDVZHFRXOGVLQFHWKH\JDYHXVWKHRSSRUWXQLW\WR
PHHWDQGFKDWZLWKPDQ\HPSOR\HHVERWKLQWKH8QLWHG6WDWHVDQG
LQ(XURSH%\WKHODWHVWKHFRPSDQ\KDGJURZQVRODUJHDQG
WKHUHZHUHVRPDQ\SLFQLFVWKDWLWZDVGLIILFXOWWRFRQWLQXHWKLV
WUDGLWLRQDQGWRGD\RIFRXUVHLWZRXOGEHLPSRVVLEOH%XWDQQXDO
SLFQLFVFRQWLQXHWRRFFXUDW+3VLWHVWKURXJKRXWWKHZRUOG

6KDULQJ
7KHXQGHUO\LQJSULQFLSOHRI+3
VSHUVRQQHOSROLFLHVEHFDPHWKH
FRQFHSWRIVKDULQJVKDULQJWKHUHVSRQVLELOLWLHVIRUGHILQLQJDQG
PHHWLQJJRDOVVKDULQJLQFRPSDQ\RZQHUVKLSWKURXJKVWRFN
SXUFKDVHSODQVVKDULQJLQSURILWVVKDULQJWKHRSSRUWXQLWLHVIRU
SHUVRQDODQGSURIHVVLRQDOGHYHORSPHQWDQGHYHQVKDULQJWKH
EXUGHQVFUHDWHGE\RFFDVLRQDOGRZQWXUQVLQEXVLQHVV
2XUHPSOR\HHEHQHILWSURJUDPVUHIOHFWWKLVFRQFHSWRIVKDULQJ7KH
SURJUDPVWDNHYDULRXVIRUPVDURXQGWKH

7+(+3:$<

ZRUOGHDFKFRXQWU\RUJDQL]DWLRQKDYLQJLWVRZQVHWRIEHQHILWV
WDLORUHGWRLWVRZQODZVDQGWUDGLWLRQV
,QWKH8QLWHG6WDWHVDQGPDQ\RWKHUFRXQWULHVHPSOR\HHV
SDUWLFLSDWHLQVWRFNSXUFKDVHSODQVDQGLQFDVKSURILWVKDULQJ86
HPSOR\HHVZLWKPRUHWKDQVL[PRQWKVRIVHUYLFHDUHHOLJLEOHIRUSURILW
VKDULQJDQGHDFK\HDUUHFHLYHDPRXQWVFDOFXODWHGRQWKHFRPSDQ\
V
SUHWD[HDUQLQJV2YHUWKH\HDUVWKLVSD\RXWKDVEHHQDVKLJKDV
SHUFHQWDQGDVORZDVSHUFHQWRIEDVHVDODU\6LQFHWKHFRPSDQ\
KDVDOZD\VEHHQSURILWDEOHWKHSURJUDPKDVFRQWLQXHGXQLQWHUUXSWHG
VLQFHZHVWDUWHGLWLQWKHV
$QRWKHUH[DPSOHRIVKDULQJWKRXJKLQDPXFKGLIIHUHQWZD\
RFFXUUHGLQ%HFDXVHRIDGRZQWXUQLQWKH86HFRQRP\RXU
LQFRPLQJRUGHUVZHUHUXQQLQJDWDUDWHTXLWHDELWOHVVWKDQRXU
SURGXFWLRQFDSDELOLW\:HZHUHIDFHGZLWKWKHSURVSHFWRID
SHUFHQWOD\RII5DWKHUWKDQDOD\RIIKRZHYHUZHWULHGDGLIIHUHQW
WDFN:HZHQWWRDVFKHGXOHRIZRUNLQJQLQHGD\VRXWRIHYHU\WZR
ZHHNVDSHUFHQWFXWLQZRUNVFKHGXOHZLWKDFRUUHVSRQGLQJ
SHUFHQWFXWLQSD\7KLVDSSOLHGWRYLUWXDOO\DOORXU86IDFWRULHVDV
ZHOODVWRDOOH[HFXWLYHVDQGFRUSRUDWHVWDII$WWKHHQGRID
VL[PRQWKSHULRGWKHRUGHUUDWHZDVXSDJDLQDQGHYHU\RQH
UHWXUQHGWRDIXOOZRUNVFKHGXOH6RPHVDLGWKH\HQMR\HGWKHORQJ
ZHHNHQGVHYHQWKRXJKWKH\KDGWRWLJKWHQWKHLUEHOWVDOLWWOH7KHQHW
UHVXOWRIWKLVSURJUDPZDVWKDWHIIHFWLYHO\DOOVKDUHGWKHEXUGHQRI
WKHUHFHVVLRQJRRGSHRSOHZHUHQRWUHOHDVHGLQWRDYHU\

'$9,'3$&.$5'

WRXJKMREPDUNHWDQGZHKDGRXUKLJKO\TXDOLILHGZRUNIRUFHLQSODFH
ZKHQEXVLQHVVLPSURYHG
,VKRXOGSRLQWRXWWKDWWKLVSURJUDPZDVLQUHVSRQVHWRDWHPSRUDU\
VLWXDWLRQRQHOLNHO\WRODVWIRUQRPRUHWKDQD\HDURUWZR,WZDVD
VKRUWWHUPVROXWLRQWRDVKRUWWHUPSUREOHPDQGGLGQRWUHSUHVHQWD
FRPPLWPHQWWRSURYLGLQJDEVROXWHWHQXUHVWDWXVIRURXUSHRSOH
6LQFHRIFRXUVHWKHUHKDYHEHHQRWKHUHFRQRPLFUHFHVVLRQVLQ
WKH8QLWHG6WDWHVDQGLQPRVWRWKHUFRXQWULHV*HQHUDOO\VSHDNLQJ
ZH
YHEHHQDEOHWRULGHRXWWKHVHUHFHVVLRQVE\WUDQVIHUULQJ
SURGXFWLRQIURPVRPHDUHDVWRRWKHUVDQGE\LQVWLWXWLQJWHPSRUDU\
ZRUNUHGXFWLRQSURJUDPVDWDIHZORFDWLRQV$VZHPRYHGLQWRWKH
HDUO\VKRZHYHULWEHFDPHFOHDUWKDW+3OLNHDOPRVWHYHU\
RWKHU$PHULFDQPDQXIDFWXUHUZRXOGQHHGWRUHGXFHVWDII
'RZQVL]LQJLVWRGD\
VSRSXODUHXSKHPLVPEXWLQDQ\HYHQWRXU
QHHGWRFXWZDVFRQVLGHUDEO\OHVVWKDQWKDWRIPRVWPDQXIDFWXUHUV
HVSHFLDOO\WKRVHLQWKHFRPSXWHULQGXVWU\:HKDGDOUHDG\WDNHQ
VWHSVDW+3WRUHGXFHFRUSRUDWHEXUHDXFUDF\DQGWRHPSKDVL]H
GHFHQWUDOL]DWLRQ:HDFFRPSOLVKHGPRVWVWDIIUHGXFWLRQVWKURXJK
HDUO\UHWLUHPHQWSURJUDPVDQGDSURJUDPRIYROXQWDU\VHYHUDQFH
RIIHULQJDJHQHURXVILQDQFLDOSDFNDJHWRSHRSOHZLOOLQJWROHDYHWKH
FRPSDQ\
7KHUDSLGFKDQJHVLQWHFKQRORJ\PDNHHGXFDWLRQDODQGWUDLQLQJ
DFWLYLWLHVDQHFHVVLW\IRURXUSHRSOH0DQ\RIRXU
FRUSRUDWHVSRQVRUHGHGXFDWLRQDOSURJUDPVDUHRQVSHFLILFWHFKQLFDO
VXEMHFWVZKLOHRWKHUVHPSKDVL]HPRUHJHQHUDOVNLOOV$VD
FRUSRUDWLRQZHVSHQGDERXW

7+(+3:$<

PLOOLRQHDFK\HDULQGHYHORSLQJDQGSURYLGLQJFRXUVHVIRURXU
HPSOR\HHV$QGWKHFRVWRIDOORZLQJSHRSOHWLPHRIIIURPZRUNDQG
VXSSRUWLQJWKHPLQRXWVLGHMREUHODWHGFRXUVHVDGGVDQRWKHU
PLOOLRQRUVR3DUWRIWKDWH[SHQVHLVVXSSRUWLQJFROOHJHZRUNRIWHQ
DLPHGDWDQDGYDQFHGGHJUHH
7RVRPHHGXFDWLRQPHDQVXQQHFHVVDU\VDFULILFHWRRWKHUVLWPHDQV
WKHSURVSHFWRIRSSRUWXQLW\IRULQFUHDVHGFRQWULEXWLRQDQGJUHDWHU
SHUVRQDOVDWLVIDFWLRQ)RUWXQDWHO\WKHODWWHUYLHZKDVSUHYDLOHGDW
+HZOHWW3DFNDUG7KHYDVWPDMRULW\RIRXUSHRSOHKDYHUHFRJQL]HG
WKHYDOXHRIHGXFDWLRQDQGVHOIGHYHORSPHQWQRWRQO\LQHQKDQFLQJ
WKHLUFDUHHUVEXWDOVRLQPDNLQJPHDQLQJIXOFRQWULEXWLRQVWRWKH
FRPSDQ\
VSURJUHVV
6RJRLQJDOOWKHZD\EDFNWRWKHEHJLQQLQJRIWKHFRPSDQ\%LOODQG,
KDYHSODFHGJUHDWIDLWKDQGWUXVWLQ+3SHRSOH:HH[SHFWWKHPWREH
RSHQDQGKRQHVWLQWKHLUGHDOLQJVZLWKRWKHUVDQGZHWUXVWWKH\ZLOO
UHDGLO\DFFHSWUHVSRQVLELOLW\
,OHDUQHGHDUO\LQP\FDUHHURIVRPHRIWKHSUREOHPVWKDWFDQEH
FDXVHGE\DFRPSDQ\
VODFNRIWUXVWLQLWVSHRSOH,QWKHODWHV
ZKHQ,ZDVZRUNLQJIRU*HQHUDO(OHFWULFLQ6FKHQHFWDG\WKH
FRPSDQ\ZDVPDNLQJDELJWKLQJRISODQWVHFXULW\,
PVXUHRWKHUV
ZHUHWRR*(ZDVHVSHFLDOO\]HDORXVDERXWJXDUGLQJLWVWRRODQG
SDUWVELQVWRPDNHVXUHHPSOR\HHVGLGQ
WVWHDODQ\WKLQJ)DFHGZLWK
WKLVREYLRXVGLVSOD\RIGLVWUXVWPDQ\HPSOR\HHVVHWRXWWRSURYHLW
MXVWLILHGZDONLQJRIIZLWKWRROVRUSDUWVZKHQHYHUWKH\FRXOG
(YHQWXDOO\*(

'$9,'3$&.$5'

WRROVDQGSDUWVZHUHVFDWWHUHGDOODURXQGWRZQLQFOXGLQJWKHDWWLFRI
WKHKRXVHLQZKLFKDQXPEHURIXVZHUHOLYLQJ,QIDFWZHKDGVR
PXFKHTXLSPHQWXSWKHUHWKDWZKHQZHWKUHZWKHVZLWFKWKHOLJKWV
RQWKHHQWLUHVWUHHWZRXOGGLP
7KHLURQ\LQDOORIWKLVLVWKDWPDQ\RIWKHWRROVDQGSDUWVZHUHEHLQJ
XVHGE\WKHLU*(RZQHUVWRZRUNRQHLWKHUMREUHODWHGSURMHFWVRU
VNLOOHQKDQFLQJKREELHVDFWLYLWLHVWKDWZRXOGOLNHO\LPSURYHWKHLU
SHUIRUPDQFHRQWKHMRE
:KHQ+3JRWXQGHUZD\WKH*(PHPRULHVZHUHVWLOOVWURQJDQG,
GHWHUPLQHGWKDWRXUSDUWVELQVDQGVWRUHURRPVVKRXOGDOZD\VEH
RSHQ6RPHWLPHVQRWHYHU\RQHJHWVWKHZRUGKRZHYHUZKLFK
DFFRXQWVIRUDQLQFLGHQWWKDWRFFXUUHGVRPH\HDUVODWHU&RPLQJLQWR
WKHSODQWRQHZHHNHQGWRGRVRPHZRUN%LOO+HZOHWWVWRSSHGRIIDWD
FRPSDQ\VWRUHURRPWRSLFNXSDPLFURVFRSH)LQGLQJWKHHTXLSPHQW
FDJHORFNHGKHEURNHRSHQWKHODWFKDQGOHIWDQRWHLQVLVWLQJWKDWWKH
URRPQRWEHORFNHGDJDLQ
.HHSLQJVWRUHURRPVDQGSDUWVELQVRSHQZDVDGYDQWDJHRXVWR+3LQ
WZRLPSRUWDQWZD\V)URPDSUDFWLFDOVWDQGSRLQWWKHHDV\DFFHVVWR
SDUWVDQGWRROVKHOSHGSURGXFWGHVLJQHUVDQGRWKHUVZKRZDQWHGWR
ZRUNRXWQHZLGHDVDWKRPHRURQZHHNHQGV$VHFRQGUHDVRQOHVV
WDQJLEOHEXWLPSRUWDQWLVWKDWWKHRSHQELQVDQGVWRUHURRPVZHUHD
V\PERORIWUXVWDWUXVWWKDWLVFHQWUDOWRWKHZD\+3GRHVEXVLQHVV
2XUSROLF\RIRSHQVWRUHURRPVFRQWLQXHV$OWKRXJK

7+(+3:$<

SURGXFWLRQVWRFNLVUHVWULFWHGODEVWRFN DUHODWLYHO\VPDOOVXSSO\RI
RXUEHVWSDUWVDQGHTXLSPHQW LVVWLOOJHQHUDOO\RSHQ

)OH[LEOH+RXUV
3HUKDSVWKHPRVWZLGHO\SXEOLFL]HGH[DPSOHRIWUXVWDW+3LVWKH
FRPSDQ\
VSURJUDPRIIOH[LEOHZRUNKRXUV,WZDVLQLWLDWHGDWRXU
SODQWLQ%REOLQJHQ*HUPDQ\LQDQGZHZHUHWKHILUVW
FRPSDQ\LQWKH8QLWHG6WDWHVWRXVHLW,WLVQRZLQZLGHXVH
WKURXJKRXW+3DQGWKURXJKRXWLQGXVWU\8QGHUWKH+3SURJUDPDQ
LQGLYLGXDOPD\FRPHWRZRUNYHU\HDUO\LQWKHPRUQLQJRUSHUKDSVDV
ODWHDV$0WKHQOHDYHDIWHUZRUNLQJDVWDQGDUGQXPEHURI
KRXUV,WLVQRWDSSURSULDWHIRUDOOMREVEXWFHUWDLQO\IRUPRVW
7RP\PLQGIOH[WLPHLVWKHHVVHQFHRIUHVSHFWIRUDQGWUXVWLQ
SHRSOH,WVD\VWKDWZHERWKDSSUHFLDWHWKDWRXUSHRSOHKDYHEXV\
SHUVRQDOOLYHVDQGWKDWZHWUXVWWKHPWRGHYLVHZLWKWKHLUVXSHUYLVRU
DQGZRUNJURXSDVFKHGXOHWKDWLVSHUVRQDOO\FRQYHQLHQW\HWIDLUWR
RWKHUV
7ROHUDQFHIRUWKHGLIIHULQJQHHGVRILQGLYLGXDOVLVDQRWKHUHOHPHQWRI
WKH+3:D\2QRFFDVLRQVLWXDWLRQVDULVHLQZKLFKSHRSOHKDYH
SHUVRQDOSUREOHPVWKDWWHPSRUDULO\DIIHFWWKHLUSHUIRUPDQFHDQG
DWWLWXGHDQGLWLVLPSRUWDQWWKDWSHRSOHLQWKHVHFLUFXPVWDQFHVEH
WUHDWHGZLWKVHQVLWLYLW\DQGXQGHUVWDQGLQJZKLOHWKHSUREOHPVDUH
EHLQJUHVROYHG

'$9,'3$&.$5'

0DQ\FRPSDQLHVKDYHDSROLF\VWDWLQJWKDWRQFHHPSOR\HHVOHDYHWKH
FRPSDQ\WKH\DUHQRWHOLJLEOHIRUUHHPSOR\PHQW2YHUWKH\HDUVZH
KDYHKDGDQXPEHURISHRSOHOHDYHEHFDXVHRSSRUWXQLWLHVVHHPHG
JUHDWHUHOVHZKHUH:H
YHDOZD\VWDNHQWKHYLHZWKDWDVORQJDVWKH\
KDYHQRWZRUNHGIRUDGLUHFWFRPSHWLWRUDQGLIWKH\KDYHDJRRG
ZRUNUHFRUGWKH\DUHZHOFRPHGEDFN7KH\NQRZWKHFRPSDQ\
QHHGQRUHWUDLQLQJDQGXVXDOO\DUHKDSSLHUDQGEHWWHUPRWLYDWHGIRU
KDYLQJKDGWKHDGGLWLRQDOH[SHULHQFH6HYHUDO\HDUVDJRRQHRIRXU
VHQLRUH[HFXWLYHVOHIW+3IRUZKDWKHFRQVLGHUHGDJUHDWHU
RSSRUWXQLW\+HODWHUUHWXUQHGDQGDOWKRXJKKHKDGEHHQJRQHIRU
VRPH\HDUVKHTXLFNO\UHVXPHGKLVFDUHHUZLWKXVDQGHDUQHG
LQFUHDVLQJPDQDJHPHQWUHVSRQVLELOLW\XQWLOKLVUHWLUHPHQW
6RPHSHRSOHKDYHOHIW+3DQGKDYHVXFFHVVIXOO\VWDUWHGWKHLURZQ
FRPSDQLHV7KHUHDUHDWOHDVWDGR]HQRIWKHVHHQWUHSUHQHXUVDQG
WKHLUFRPSDQLHVQRZHPSOR\PRUHWKDQIRUW\WKRXVDQGSHRSOH$UH
ZHXSVHWWKDWWKH\OHIWXV"2QWKHFRQWUDU\%LOODQG,XQGHUVWDQG
DQGUHVSHFWWKHLUHQWUHSUHQHXULDOVSLULWDQGZHDUHSOHDVHGDQG
SURXGWKDWWKH\RQFHZRUNHGZLWKXVDQGKDYHGRQHVRZHOO:H
UH
DOVRIODWWHUHGWKDWLQEXLOGLQJWKHLUFRPSDQLHVWKH\KDYHDGRSWHG
PDQ\RIWKHPDQDJHPHQWSULQFLSOHVDQGSUDFWLFHVHPERGLHGLQWKH
+3:D\

&KDSWHU
*URZLQJWKH2UJDQL]DWLRQ
$125*$1,=$7,21$/6758&785(RQFHFUHDWHGVKRXOGEHIOH[LEOH
DQGUHVSRQVLYHWRWKHGHYHORSLQJQHHGVRIWKHRUJDQL]DWLRQDQG
FKDQJHVLQWKHPDUNHWSODFH,QWKHFDVHRI+HZOHWW3DFNDUGZHGLG
QRWPXFKFRQFHUQRXUVHOYHVZLWKRUJDQL]DWLRQDOPDWWHUVXQWLOZHOO
LQWRWKHV7KHUHZDVQRQHHGWR:HKDGDZHOOGHILQHGOLQHRI
UHODWHGSURGXFWVGHVLJQHGDQGPDQXIDFWXUHGLQRQHORFDWLRQVROG
WKURXJKDQHVWDEOLVKHGQHWZRUNRIVDOHVUHSUHVHQWDWLYHVDQGKDGD
KLJKO\FHQWUDOL]HGFRPSDQ\LQZKLFKPDQDJHPHQWZDVRUJDQL]HGRQ
DIXQGDPHQWDOEDVLVZLWKYLFHSUHVLGHQWVIRUPDUNHWLQJ
PDQXIDFWXULQJ5 'DQGILQDQFH$VWKHFRPSDQ\FRQWLQXHGLWV
VWHDG\JURZWKDQGEHJDQWRGLYHUVLI\%LOODQG,UHDOL]HGZHZRXOG
KDYHWRFRQVLGHUVRPHVRUWRIGHFHQWUDOL]HGVWUDWHJ\LQRUGHUWR
UHWDLQRXUHPSKDVLVRQLQGLYLGXDOUHVSRQVLELOLW\DQGDFKLHYHPHQW

'$9,'3$&.$5'

:HDOVRZRUULHGWKDWWKHSHUVRQDOHOHPHQWVRIWKH+3:D\PLJKW
GLVDSSHDU
'LYLVLRQDOL]DWLRQILUVWRFFXUUHGLQRXUSURGXFWGHYHORSPHQWODERUDWRU\
ZKHUHDV,KDYHPHQWLRQHGZHGLYLGHGRXUGHYHORSPHQWDFWLYLWLHV
LQWRIRXUJURXSVHDFKZLWKUHVSRQVLELOLW\IRULWVRZQIDPLO\RI
SURGXFWVDQGHDFKKHDGHGE\DPDQDJHUUHSRUWLQJWR%DUQH\2OLYHU
YLFHSUHVLGHQWRIUHVHDUFKDQGGHYHORSPHQW7KDWZDVLQ2WKHU
GLYLVLRQDOL]LQJVWHSVVRRQIROORZHGVSXUUHGE\RXUJHRJUDSKLF
H[SDQVLRQWKDWHVWDEOLVKHGPDQXIDFWXULQJRSHUDWLRQVLQ&RORUDGRDQG
*HUPDQ\DQGE\RXUHDUO\DFTXLVLWLRQVRIQHZEXVLQHVVHV
%\WKHPLGVZHKDGPRUHWKDQDGR]HQRSHUDWLQJGLYLVLRQV
HDFKDQLQWHJUDWHGVHOIVXVWDLQLQJRUJD

/HIWWRULJKW%LOO+HZOHWW%DUQH\2OLYHUDQG/HH'H)RUHVW
WKH
LQYHQWRURIWKHYDFXXPWXEHDW+3/DEVLQ

7+(+3:$<

QL]DWLRQUHVSRQVLEOHIRUGHYHORSLQJPDQXIDFWXULQJDQGPDUNHWLQJLWV
RZQSURGXFWV$SULPDU\JRDOLQVHWWLQJXSWKHVHGLYLVLRQVZDVWR
JLYHHDFKRQHFRQVLGHUDEOHDXWRQRP\FUHDWLQJDQHQYLURQPHQWWKDW
IRVWHUHGLQGLYLGXDOPRWLYDWLRQLQLWLDWLYHDQGFUHDWLYLW\DQGWKDW
JDYHDZLGHODWLWXGHRIIUHHGRPLQZRUNLQJWRZDUGFRPPRQJRDOV
DQGREMHFWLYHV:HZDQWHGWRDYRLGEXUHDXFUDF\DQGWREHVXUHWKDW
SUREOHPVROYLQJGHFLVLRQVEHPDGHDVFORVHDVSRVVLEOHWRWKHOHYHO
ZKHUHWKHSUREOHPRFFXUUHG:HDOVRZDQWHGHDFKGLYLVLRQWRUHWDLQ
DQGQXUWXUHWKHNLQGRILQWLPDF\WKHFDULQJIRUSHRSOHDQGWKHHDVH
RIFRPPXQLFDWLRQWKDWZHUHFKDUDFWHULVWLFRIWKHFRPSDQ\ZKHQLW
ZDVVPDOOHU
2YHUWKH\HDUV%LOO+HZOHWWDQG,KDGVSHFXODWHGPDQ\WLPHVDERXW
WKHRSWLPXPVL]HRIDFRPSDQ\:HGLGQRWEHOLHYHWKDWJURZWKZDV
LPSRUWDQWIRULWVRZQVDNH+RZHYHUFRQWLQXRXVJURZWKZDV
HVVHQWLDOIRUXVWRDFKLHYHRXURWKHUREMHFWLYHVDQGWRUHPDLQ
FRPSHWLWLYH6LQFHZHSDUWLFLSDWHLQILHOGVRIDGYDQFHGDQGUDSLGO\
FKDQJLQJWHFKQRORJLHVWRUHPDLQVWDWLFLVWRORVHJURXQG$OVRZH
GHSHQGHGRQDWWUDFWLQJKLJKFDOLEHUSHRSOHWRWKHFRPSDQ\SHRSOH
ZDQWLQJWRDOLJQWKHLUFDUHHUVRQO\ZLWKDFRPSDQ\WKDWRIIHUHG
DPSOHRSSRUWXQLW\IRUSHUVRQDOJURZWKDQGSURJUHVV
%\WKHODWH6WKHQHHGIRUGLYHUVLILFDWLRQZDVFOHDU:HZHUH
EHFRPLQJWKHODUJHVWVXSSOLHULQPRVWRIWKHPDMRUVHJPHQWVRIWKH
HOHFWURQLFLQVWUXPHQWDWLRQEXVLQHVV%XWWKHVHVHJPHQWVLQWRWDO
ZHUHJURZLQJDWRQO\SHUFHQWSHU\HDUZKHUHDVZHKDGEHHQ
JURZLQJRXWRIRXUSURILWVDWSHUFHQW2EYLRXVO\WKDWNLQGRI

'$9,'3$&.$5'

JURZWKFRXOGQRWFRQWLQXHZLWKRXWGLYHUVLILFDWLRQ,QZHIRUPHG
DQDIILOLDWH+3$VVRFLDWHVWRHQJDJHLQVROLGVWDWHUHVHDUFKDQG
GHYHORSPHQW$QGODWHULQZHFUHDWHGWKH+3/DERUDWRULHVD
FRUSRUDWHODEHQJDJHGLQDGYDQFHGUHVHDUFKDFWLYLWLHVWRKHOSOHDG
WKHFRPSDQ\LQWRQHZWHFKQRORJLHVDQGSURGXFWGLYHUVLILFDWLRQ

*URZWKE\$FTXLVLWLRQ
%LOODQG,KDGQRGHVLUHWRVHH+3EHFRPHDFRQJORPHUDWHVLQFHDV
,
YHDOUHDG\SRLQWHGRXWPRUHFRPSDQLHVGLHIURPLQGLJHVWLRQWKDQ
VWDUYDWLRQ,QWKHVKRZHYHUVRPHRSSRUWXQLWLHVFDPHDORQJ
IRUXVWRDFTXLUHFRPSDQLHVZKRVHWHFKQRORJLHVDQGSURGXFWV
FRPSOHPHQWHGRXURZQ2XUILUVWDFTXLVLWLRQWKH)/0RVHOH\
&RPSDQ\KDGRFFXUUHGLQ/RFDWHGLQ3DVDGHQD&DOLIRUQLD
0RVHOH\PDGH;<UHFRUGHUVDQGRWKHULQVWUXPHQWVWKDWZHUHDJRRG
FRPSOHPHQWWRRXURZQSURGXFWOLQH7KHFRPSDQ\KDGEHHQ
IRXQGHGE\)UDQFLV0RVHOH\DYHU\LQYHQWLYHHQJLQHHUZKRODWHU
VHUYHGDVDYDOXHGPHPEHURIRXUERDUGRIGLUHFWRUV+LV
PDQDJHPHQWSKLORVRSK\DQGSUDFWLFHVZHUHYHU\VLPLODUWRRXURZQ
7KHODUJHVWILUPZHDFTXLUHGLQWKHVZDVWKH6DQERUQ
&RPSDQ\LQ:DOWKDP0DVVDFKXVHWWV6DQERUQZKLFKKDG
HPSOR\HHVDQGDQQXDOVDOHVRIPRUHWKDQPLOOLRQSURGXFHG
HOHFWURFDUGLRJUDSKVDQGRWKHUWHVWDQGPHDVXUHPHQWLQVWUXPHQWV
XVHGE\

7+(+3:$<

WKHPHGLFDOSURIHVVLRQ7KHDFTXLVLWLRQDFFRPSOLVKHGWKURXJKDQ
H[FKDQJHRIVWRFNJDYHXVDQHQWU\LQWRWKHPHGLFDOILHOGZKLFK
JUHZLQWRDPDMRUPDUNHWIRU+3:HODWHUDFTXLUHGDVPDOOHU
FRPSDQ\) 06FLHQWLILFZKLFKSURYLGHGXVZLWKDVLPLODUHQWU\LQWR
WKHILHOGRILQVWUXPHQWDWLRQIRUFKHPLFDODQDO\VLV
:KLOHDFTXLVLWLRQVDUHRIWHQXVHIXOLQH[SDQGLQJDFRPSDQ\
V
WHFKQRORJLHVDQGJDLQLQJDTXLFNHQWU\LQWRQHZPDUNHWVWKH\DUH
QRWZLWKRXWWKHLUSUREOHPV&KLHIDPRQJWKHVHLVWKHGLIILFXOW\LQ
EOHQGLQJWZRFXOWXUHVRSHUDWLQJSKLORVRSKLHVDQGPDQDJHPHQW
VW\OHV,WLVGLIILFXOWXQGHUVWDQGDEO\VRIRUWKHPDQDJHPHQWRIWKH
DFTXLUHGFRPSDQ\WRJLYHXSLWVLQGHSHQGHQFH$QGWKHDFTXLULQJ
FRPSDQ\XVXDOO\ILQGVWKDWWKHWDVNRISURYLGLQJJXLGDQFHDQG
UHVRXUFHVWRLWVQHZDGGLWLRQUHTXLUHVPXFKPRUHPDQDJHPHQWWLPH
DQGHQHUJ\WKDQLWHYHUDQWLFLSDWHG
,UHPHPEHUWKHSUREOHPVRQHSDUWLFXODUDFTXLVLWLRQFDXVHGXVEDFN
LQWKHPLGV:HDFTXLUHGDFRPSDQ\FDOOHG$XWRG\QDPLFV
KHDGTXDUWHUHGLQ6DFUDPHQWR&DOLIRUQLD,WVSHFLDOL]HGLQXVLQJ
XOWUDVRQLFHQHUJ\WRGHWHFWIODZVLQPHWDOV7KLVZDVEHIRUHWKHXVH
RIXOWUDVRXQGLQPHGLFDODSSOLFDWLRQV,WKDGDSURGXFWFDOOHG
0XVWDQJDIXOOUDFNRIHOHFWURQLFHTXLSPHQW,QWKHFHQWHURIWKHUDFN
WKHFRPSDQ\KDGVFUHZHGDPHWDOPXVWDQJWDNHQIURPD)RUG
0XVWDQJZKLFKZDVQHZDWWKHWLPH,UHPHPEHUORRNLQJDWWKH
IODVK\FKURPHKRUVHPRXQWHGRQWKHHOHFWURQLFHTXLSPHQWDQG
WKLQNLQJWKDWLWGLGQ
WTXLWHILW+3
VZD\RIWKLQNLQJDERXWRXU
SURGXFWVDVVFLHQWLILFLQVWUXPHQWV

'$9,'3$&.$5'

7KHUHZHUHRWKHUSUREOHPVDVZHOO7KHFRPSDQ\KDGDFRQWUDFWWR
EXLOGVRPHXOWUDVRXQGPDFKLQHVIRUWHVWLQJURFNHWFDVLQJV:H
LQKHULWHGWKHFRQWUDFWDQGVRRQOHDUQHGWKDWWKHPDFKLQHZRXOGQ
WGR
ZKDWWKHFRPSDQ\VDLGLWZRXOGGR:HUHVFXHGWKDWFRQWUDFWZLWK
PRQH\DQGVRPHWHFKQLFDOH[SHUWLVHIURP+3/DEV%XWZLWKLQHLJKW
PRQWKVRUVRZHIROGHGXSWKHZKROHRSHUDWLRQ

&KDQJHVLQ6DOHV2UJDQL]DWLRQ
,QWKHVZHPDGHVWLOORWKHURUJDQL]DWLRQDOFKDQJHVWKHVH
UHODWHGWRRXUILHOGVDOHVDFWLYLW\LQWKH8QLWHG6WDWHV6LQFHWKHHDUO\
GD\VRIWKHFRPSDQ\VDOHVRI+3SURGXFWVKDGEHHQKDQGOHG
WKURXJKDQHWZRUNRIVDOHVUHSUHVHQWDWLYHILUPVORFDWHGLQYDULRXV
SDUWVRIWKHFRXQWU\7KHVHILUPVDERXWWHQLQQXPEHUUHSUHVHQWHG
DQGVROGWKHSURGXFWVRIRWKHUQRQFRPSHWLQJHOHFWURQLFV
PDQXIDFWXUHUVDVZHOODVWKRVHRI+3
7KRXJKWKLVDUUDQJHPHQWKDGZRUNHGYHU\ZHOOVRPHSUREOHPVKDG
EHJXQWRDULVHLQWKHHDUO\VPRVWRIWKHPVWHPPLQJIURP+3
V
UDSLGJURZWK6DOHVRIRXUSURGXFWVUHSUHVHQWHGDQLQFUHDVLQJVKDUH
LQVRPHFDVHVDGLVSURSRUWLRQDWHVKDUHRIWKHVDOHVUHSUHVHQWDWLYHV

EXVLQHVV7KHUHZDVDOVRWKHSRWHQWLDOZLWKWKHJURZLQJ
GLYHUVLILFDWLRQRISURGXFWOLQHVRIFRPSHWLWLYHFRQIOLFWVDULVLQJDPRQJ
SURGXFWVVROGE\DVLQJOHUHSUHVHQWDWLYH,WZDVLQVKRUWWLPHWR
HVWDEOLVKRXURZQVDOHVRUJDQL]DWLRQ:HDFFRPSOLVKHGWKLVQRWE\
EUHDN

7+(+3:$<

LQJWLHVZLWKRXUH[LVWLQJUHSUHVHQWDWLYHVDQGEXLOGLQJDQ
RUJDQL]DWLRQIURPVFUDWFKEXWE\DSSURDFKLQJPRVWRIRXU
UHSUHVHQWDWLYHVWRVHHLIWKH\ZRXOGEHLQWHUHVWHGLQEHFRPLQJVDOHV
GLYLVLRQVRI+HZOHWW3DFNDUG7KHUHVSRQVHZDVSRVLWLYHDQG
YLUWXDOO\DOORIWKHVHILUPVDJUHHGWREHDFTXLUHGE\+3HLWKHUE\DQ
H[FKDQJHRIVWRFNRUE\FDVKSXUFKDVH1RHO(OGUHGRXUYLFH
SUHVLGHQWRIPDUNHWLQJKDGZRUNHGZLWKWKHUHSUHVHQWDWLYHVIRU
VHYHUDO\HDUVDQGSOD\HGDNH\UROHLQRXUQHJRWLDWLRQVZLWKWKHP
,KDYHPHQWLRQHGWKDWE\WKHPLGVZHKDGPRUHWKDQDGR]HQ
RSHUDWLQJGLYLVLRQVHDFKUHVSRQVLEOHIRUGHYHORSLQJPDQXIDFWXULQJ
DQGPDUNHWLQJWKHLURZQSURGXFWV,QDGGLWLRQWKHDFTXLVLWLRQRIRXU
86VDOHVUHSUHVHQWDWLYHVDGGHGDQRWKHUJURXSRIXQLWVUHSRUWLQJ
LQWR3DOR$OWR:HKDGH[SDQGHGRXULQWHUQDWLRQDOPDUNHWVDVZHOO,Q
(XURSHZHKDGVHWXSRXURZQVDOHVRUJDQL]DWLRQKHDGTXDUWHUHGLQ
*HQHYDDQGKDGHVWDEOLVKHGPDQXIDFWXULQJSODQWVLQ*HUPDQ\DQG
(QJODQG$QGLQ-DSDQRXUMRLQWYHQWXUHFRPSDQ\KDGEHFRPH
RSHUDWLRQDO6RZLWKLQDIHZVKRUW\HDUVZHKDGJURZQIURPDKLJKO\
FHQWUDOL]HGUDWKHUQDUURZO\IRFXVHGFRPSDQ\LQWRRQHZLWKPDQ\
ZLGHO\GLVSHUVHGGLYLVLRQVDQGDFWLYLWLHV$QGRXUIDPLO\RISURGXFWV
KDGVXEVWDQWLDOO\LQFUHDVHGERWKLQVL]HDQGGLYHUVLW\
7KLVWUDQVLWLRQSUHVHQWHGXVZLWKDJRRGPDQ\PDQDJHPHQW
FKDOOHQJHV$PRQJWKHVHZDVWKHSUREOHPRIVWDIILQJVRPHRIRXU
QHZRSHUDWLQJXQLWVZLWKHIIHFWLYHPDQDJHUV:HZHUHVXFFHVVIXOLQ
GRLQJWKLVWKDQNVLQODUJHSDUWWRUHFUXLWLQJHIIRUWVDQGWUDLQLQJ
SURJUDPV

'$9,'3$&.$5'

:HKDGZHOOTXDOLILHGSHRSOHZLWKLQ+3WRILOONH\PDQDJHPHQW
SRVLWLRQV
$VWKHFRPSDQ\EHFDPHPRUHGHFHQWUDOL]HGRXUREMHFWLYHVDQG
SROLFLHVGLGQRWFKDQJHLQDQ\VLJQLILFDQWZD\$WWKDWWLPHZHZHUH
VWLOOODUJHO\LQWKHEXVLQHVVRIJHQHUDOSXUSRVHHOHFWURQLF
LQVWUXPHQWDWLRQDQGRXUJURZWKZDVGHULYHGDOPRVWHQWLUHO\IURP
QHZSURGXFWV:HFRQWLQXHGWRIRFXVRXUHIIRUWVRQWKRVHWHFKQLFDO
DUHDVZKHUHZHWKRXJKWZHFRXOGPDNHDJRRGFRQWULEXWLRQDQGZH
ZHUHQRWWDNLQJRQDQ\QHZSURMHFWVMXVWIRUWKHVDNHRIJURZLQJ
$VWLPHZHQWRQVRPHRIRXUROGHUGLYLVLRQVJUHZWRDVXEVWDQWLDO
VL]HSURGXFLQJPDQ\GLIIHUHQWSURGXFWVDQGHPSOR\LQJDVPDQ\DV
SHRSOH$WWKDWSRLQWOLQHVRIFRPPXQLFDWLRQDUHVWUHWFKHGWR
WKHOLPLWPDQDJHPHQWEHFRPHVPRUHGLIILFXOWDQGSHRSOHEHJLQWR
ORVHWKHLULGHQWLILFDWLRQZLWKWKHSURGXFWVDQGWKHLUSULGHLQZKDWWKH
GLYLVLRQLVGRLQJ6RLWEHFDPHRXUSROLF\VWLOOREVHUYHGWRGD\WR
VSOLWRIISDUWRIWKHGLYLVLRQJLYLQJLWUHVSRQVLELOLW\IRUDQHVWDEOLVKHG
SURILWDEOHSURGXFWOLQHDQGXVXDOO\PRYLQJLWWRDQHZEXWQHDUE\
ORFDWLRQ7KLVORFDOGHFHQWUDOL]DWLRQDV,VXSSRVHLWFRXOGEHFDOOHG
KDVEHHQVXFFHVVIXOO\LPSOHPHQWHGLQ&DOLIRUQLD&RORUDGR
0DVVDFKXVHWWVYLUWXDOO\HYHU\ZKHUHZHKDYHPDMRUIDFLOLWLHVDQG
RSHUDWLRQV
,QUDSLGO\JURZLQJFRPSDQLHVRUJDQL]DWLRQDOFKDQJHVRFFXUTXLWH
IUHTXHQWO\DQGLQ+3
VFDVHRXUQH[WWUDQVLWLRQRFFXUUHGLQ
:LWKWKHQXPEHURIRSHUDWLQJGLYLVLRQVDQGWKHLUSURGXFWOLQHV
VWHDGLO\LQFUHDVLQJZHJUDGXDOO\DGRSWHGDJURXSVWUXFWXUH

7+(+3:$<

7KLVLQYROYHGFRPELQLQJRUJDQL]DWLRQDOO\GLYLVLRQVZLWKUHODWHG
SURGXFWOLQHVDQGPDUNHWVLQWRDJURXSKHDGHGE\DJURXSPDQDJHU
ZLWKDVPDOOVWDII(DFKJURXSZDVUHVSRQVLEOHIRUWKHFRRUGLQDWLRQRI
GLYLVLRQDODFWLYLWLHVDQGWKHRYHUDOORSHUDWLRQVDQGILQDQFLDO
SHUIRUPDQFHRILWVPHPEHUV:HKDGWZRREMHFWLYHVWRHQDEOH
FRPSDWLEOHXQLWVWRZRUNWRJHWKHUPRUHHIIHFWLYHO\RQDGD\WRGD\
EDVLVDQGWREHJLQWRGHFHQWUDOL]HVRPHWRSPDQDJHPHQWIXQFWLRQV
VRWKDWWKHQHZJURXSVZRXOGEHUHVSRQVLEOHIRUVRPHRIWKH
SODQQLQJDFWLYLWLHVDQGRWKHUIXQFWLRQVSUHYLRXVO\DVVLJQHGWR
FRUSRUDWHYLFHSUHVLGHQWV
7KHJURXSVWUXFWXUHDOVRH[WHQGHGWRRXUILHOGVDOHVRUJDQL]DWLRQ
ZKHUHLWKDGEHFRPHGLIILFXOWLIQRWLPSRVVLEOHIRUDQ+3VDOHV
HQJLQHHUWRXQGHUVWDQGDQGVHOOWKHHQWLUHOLQHRI+3SURGXFWV8QGHU
WKHQHZVWUXFWXUHWKHVDOHVHQJLQHHUEHFDPHWKHUHSUHVHQWDWLYHRID
VSHFLILFJURXSVHOOLQJDQGVXSSRUWLQJRQO\WKDWJURXS
VSURGXFWV
$VWKHFRPSDQ\PRYHGWRDJURXSVWUXFWXUH,VWUHVVHGWRRXUSHRSOH
WKDWWKLVFKDQJHGLGQRWUHSUHVHQWDQ\GHYLDWLRQIURPRXUWUDGLWLRQDO
SKLORVRSK\RIPDQDJHPHQW)URPWKHEHJLQQLQJZHKDGDVWURQJ
EHOLHIWKDWJURXSVRISHRSOHVKRXOGEHJLYHQUHVSRQVLELOLW\IRUVSHFLILF
DUHDVRIDFWLYLW\ZLWKZLGHODWLWXGHWRGHYHORSWKHLURZQSODQVDQG
PDNHWKHLURZQGHFLVLRQV2XUQHZRUJDQL]DWLRQGLGQRWDOWHUWKLV
EDVLFFRQFHSWEXWVWUHQJWKHQHGLW%\WKHHDUO\V+3KDG
VL[W\ILYHGLYLVLRQVRUJDQL]HGLQWRWKLUWHHQSURGXFWJURXSV

'$9,'3$&.$5'

7KH3HULOVRI&HQWUDOL]DWLRQ
,WKDVEHHQP\H[SHULHQFHWKDWPRVWEXVLQHVVH[HFXWLYHVDUHTXLFN
WRSUDLVHWKHFRQFHSWRIGHFHQWUDOL]DWLRQ%XWZKHQLWFRPHVWRWKHLU
RZQRUJDQL]DWLRQPDQ\DUHUHOXFWDQWWRDGRSWLW3HUKDSVWKHLGHDRI
WXUQLQJRYHUDSRUWLRQRIWKHLUDXWKRULW\WRRWKHUVLVWRRXQVHWWOLQJ
)URPSHUVRQDOH[SHULHQFH,
YHOHDUQHGWKDWHYHQZLGHO\GHFHQWUDOL]HG
FRPSDQLHVVKRXOGEHDOHUWWRVLJQVRIFXPEHUVRPHFHQWUDOL]DWLRQ
+3KDGDUHDOWHVWLQWKLVUHJDUG%HJLQQLQJEDFNLQWKHVZKHQ
LWZDVFOHDUWKDWDJRRGGHDORIRXUIXWXUHEXVLQHVVOD\LQFRPSXWHUV
DQGFRPSXWHUUHODWHGSURGXFWVPDQ\+3PDQDJHUVEHJDQWRORRNDW
,%0DVWKHPRGHOFRPSDQ\,%0
VRUJDQL]DWLRQDOVWUXFWXUHZDVKLJKO\
FHQWUDOL]HGDQGPDQ\WKRXJKWWKDWZDVWKHZD\WRJR$QRWKHU
IDFWRUSXVKLQJWKHWUHQGWRZDUGFHQWUDOL]DWLRQZDVWKHQHZGHPDQGV
SODFHGRQWKH+3RUJDQL]DWLRQE\WKHFRPSXWHUEXVLQHVV3ULRUWR
HQWHULQJWKHFRPSXWHUILHOGWKH+3RUJDQL]DWLRQZDVVWUXFWXUHGIRU
WKHLQVWUXPHQWEXVLQHVVZLWKGHFHQWUDOL]HGGLYLVLRQVUHVSRQVLEOHIRU
ZHOOGHILQHGSURGXFWOLQHVDQGRSHUDWLQJZLWKDJRRGDPRXQWRI
LQGHSHQGHQFH7KLVVWUXFWXUHKDGZRUNHGYHU\ZHOOIRULQVWUXPHQWV
DQGVRPHWKRXJKWLWFRXOGEHDSSOLHGZLWKHTXDOHIIHFWLYHQHVVWR
FRPSXWHUV
%XWZRUNLQJDJDLQVWWKDWLGHDZHUHWZRSULQFLSDOFKDUDFWHULVWLFVRI
WKHFRPSXWHUEXVLQHVV2QHQHZWR

7+(+3:$<

+3ZDVWKHZKROHDUHDRIVRIWZDUH+RZGR\RXRUJDQL]HWRSURGXFH
VRIWZDUH":KHUHGRHVLWUHSRUW":KDWW\SHVRISHRSOHDQGVNLOOVGR
\RXQHHG"6HFRQGWKHFRPSXWHUEXVLQHVVLVDV\VWHPVEXVLQHVV,W
UHTXLUHVPDQ\HOHPHQWVVRIWZDUHPDLQIUDPHVSHULSKHUDOV
RSHUDWLQJV\VWHPVWREHFRPELQHGLQWRVDOHDEOHSURGXFWVVXSSRUWHG
E\VWURQJVHUYLFHDQGPDLQWHQDQFH*RRGFRRUGLQDWLRQLVHVVHQWLDO
+3UHVSRQGHGWRWKHVHFKDOOHQJHVE\WU\LQJYDULRXVIRUPVRI
RUJDQL]DWLRQ7KHUHZHUHGLYLVLRQVJURXSVWUXFWXUHVWKHQYDULRXV
WDVNIRUFHVFRXQFLOVDQGFRPPLWWHHVLQWHQGHGWRLPSURYH
FRRUGLQDWLRQ2YHUWLPHWKHVHHIIRUWVEHJDQWRFUHDWHDFRPSOLFDWHG
EXUHDXFUDF\3UREOHPVQHHGLQJSURPSWDQGLQWHOOLJHQWGHFLVLRQVZHUH
EHLQJUHIHUUHGWKURXJKOHYHODIWHUOHYHORIPDQDJHPHQWZLWKXQZLHOG\
FRPPLWWHHV'HFLVLRQVZHUHRIWHQSRVWSRQHGIRUZHHNVRUHYHQ
PRQWKV
%\ZHIDFHGDFULVLV&RPPLWWHHVKDGWDNHQRYHUWKH
GHFLVLRQPDNLQJSURFHVVDW+3DQGGHFLVLRQF\FOHWLPHVKDG
EDOORRQHG)RUH[DPSOHRQHFHQWUDOFRPPLWWHHWKH&RPSXWHU
%XVLQHVV([HFXWLYH&RPPLWWHHZDVLQWHQGHGWRDFKLHYHDEHWWHU
IRFXVDQGFRRUGLQDWLRQIRUFRPSXWHUDFWLYLWLHV,QVWHDGLWZDV
VORZLQJYLWDOGHFLVLRQVMXVWDVRXUFRPSDQ\HQWHUHGWKHOLJKWQLQJIDVW
FRPSHWLWLYHZRUOGRIFRPSXWHUVLQWKHV,QIDFWWKHSDUDO\VLV
ZDVVSUHDGLQJWRDUHDVRIWKHFRPSDQ\WKDWKDGQRWKLQJWRGRZLWK
FRPSXWHUV7KDWZHZHUHVWUXJJOLQJZDVQRVHFUHWRXUVWRFNKDG
IDOOHQWR
$WWKDWWLPH%LOO+HZOHWWDQG,WKRXJKZHFRQWLQ

'$9,'3$&.$5'

XHGWREHDFWLYHRQWKHERDUGQRORQJHUSDUWLFLSDWHGLQWKH
GD\WRGD\PDQDJHPHQWRIWKHFRPSDQ\%XWZHFRXOGQRWKHOSEXW
EHDZDUHRIWKHSUREOHPV7KDQNVWRWKHFRPSDQ\
VORQJVWDQGLQJ
RSHQGRRUSROLF\ZHZHUHUHFHLYLQJYLVLWVIURPWURXEOHG+3
PDQDJHUVDVZHOODVDQLQFUHDVLQJQXPEHURIOHWWHUVIURPFRQFHUQHG
HPSOR\HHV$IWHUDZKLOH%LOODQG,DFWXDOO\EHJDQV\VWHPDWLFDOO\WR
YLVLWVHYHUDO+3IDFLOLWLHVDQGPHHWZLWKHPSOR\HHVDWDOOOHYHOVRIWKH
RUJDQL]DWLRQWRILQGRXWZKDWUHDOO\ZDVJRLQJRQ
(YHQWXDOO\ZHNQHZZKDWZHQHHGHGWRGR7RRPDQ\OD\HUVRI
PDQDJHPHQWKDGEHHQEXLOWLQWRWKHRUJDQL]DWLRQ:HUHGXFHGWKHP
:HEURXJKWDJLIWHG\RXQJHUPDQDJHU/HZ3ODWWLQWRWKHH[HFXWLYH
FRPPLWWHHDVFKLHIH[HFXWLYH+LVSUHGHFHVVRU-RKQ<RXQJWKH
VNLOOHGH[HFXWLYHZKRKDGPDQDJHGWKHFRPSDQ\
VH[SORVLYHJURZWK
WKURXJKWKHODWHVDQGVZDVSDUWRIWKHJURXSWKDW
VHOHFWHG/HZ ,Q/HZZDVSURPRWHGRQFHDJDLQWRFKDLUPDQ
RIWKHERDUGRI+HZOHWW3DFNDUG
1HHGOHVVWRVD\WKH&RPSXWHU%XVLQHVV([HFXWLYH&RPPLWWHHZDV
GLVEDQGHGDVZDVPXFKRIWKHEXUHDXFUDF\0RVWLPSRUWDQW
FRPSXWHURSHUDWLQJXQLWVZHUHJLYHQJUHDWHUIUHHGRPWRFUHDWHWKHLU
RZQSODQVDQGPDNHWKHLURZQGHFLVLRQVUHVXOWLQJLQDPXFKPRUH
IOH[LEOHDQGDJLOHFRPSDQ\
%\RXUVWRFNZDVXSWR$VRIWKLVZULWLQJLW
VRYHU
DQGDERXWWREHVSOLW
+3V\VWHPVLQFUHDVLQJO\LQFOXGHSURGXFWVIURPGLIIHUHQWJURXSVDQG
GLYLVLRQVDQGHYHQWKRXJKDQRUJDQL

7+(+3:$<

]DWLRQLVKLJKO\GHFHQWUDOL]HGLWVSHRSOHVKRXOGEHUHJXODUO\
UHPLQGHGWKDWFRRSHUDWLRQEHWZHHQLQGLYLGXDOVDQGFRRUGLQDWHG
HIIRUWVDPRQJRSHUDWLQJXQLWVDUHHVVHQWLDOWRJURZWKDQGVXFFHVV
$OWKRXJKZHPLQLPL]HFRUSRUDWHGLUHFWLRQDW+3ZHFRQVLGHU
RXUVHOYHVRQHVLQJOHFRPSDQ\ZLWKWKHIOH[LELOLW\RIDVPDOOFRPSDQ\
DQGWKHVWUHQJWKVRIDODUJHRQHWKHDELOLW\WRGUDZRQFRUSRUDWH
UHVRXUFHVDQGVHUYLFHVVKDUHGVWDQGDUGVYDOXHVDQGFXOWXUH
FRPPRQJRDOVDQGREMHFWLYHVDQGDVLQJOHZRUOGZLGHLGHQWLW\

&KDSWHU
0DQDJLQJWKH2UJDQL]DWLRQ
1223(5$7,1*32/,&<KDVFRQWULEXWHGPRUHWR+HZOHWW3DFNDUG
V
VXFFHVVWKDQWKHSROLF\RIPDQDJHPHQWE\REMHFWLYH$OWKRXJKWKH
WHUPLVUHODWLYHO\QHZWRWKHOH[LFRQRIEXVLQHVVPDQDJHPHQWE\
REMHFWLYHKDVEHHQDIXQGDPHQWDOSDUWRI+3
VRSHUDWLQJSKLORVRSK\
VLQFHWKHYHU\HDUO\GD\VRIWKHFRPSDQ\
0%2DVLWLVIUHTXHQWO\FDOOHGLVWKHDQWLWKHVLVRIPDQDJHPHQWE\
FRQWURO7KHODWWHUUHIHUVWRDWLJKWO\FRQWUROOHGV\VWHPRI
PDQDJHPHQWRIWKHPLOLWDU\W\SHZKHUHSHRSOHDUHDVVLJQHGDQG
H[SHFWHGWRGRVSHFLILFMREVSUHFLVHO\DVWKH\DUHWROGDQGZLWKRXW
WKHQHHGWRNQRZPXFKDERXWWKHRYHUDOOREMHFWLYHVRIWKH
RUJDQL]DWLRQ0DQDJHPHQWE\REMHFWLYHRQWKHRWKHUKDQGUHIHUVWR
DV\VWHPLQZKLFKRYHUDOOREMHFWLYHVDUHFOHDUO\VWDWHGDQGDJUHHG
XSRQDQGZKLFKJLYHVSHRSOHWKHIOH[LELOLW\WRZRUNWRZDUGWKRVH
JRDOVLQZD\VWKH\GHWHUPLQHEHVWIRUWKHLURZQDUHDVRI
UHVSRQVLELOLW\,WLV

7+(+3:$<

WKHSKLORVRSK\RIGHFHQWUDOL]DWLRQLQPDQDJHPHQWDQGWKHYHU\
HVVHQFHRIIUHHHQWHUSULVH
0RUHDQGPRUHFRPSDQLHVDUHUHFRJQL]LQJWKHYHU\UHDOEHQHILWV
SURYLGHGE\GHFHQWUDOL]DWLRQDQGPDQDJHPHQWE\REMHFWLYH7KH\DUH
DOVRILQGLQJWKDWWKHFRQFHSWRISHRSOHZRUNLQJWRJHWKHUXQGHU
FRPPRQREMHFWLYHVDQGLQDQDWPRVSKHUHRILQGLYLGXDOIUHHGRPLV
QRWKLQJQHZ,WZDVGHPRQVWUDWHGE\$WKHQVDJDLQVW6SDUWDPRUH
WKDQWZHQW\FHQWXULHVDJR7KHUHLVPXFKHYLGHQFHERWKIURP
KLVWRU\DQGIURPFXUUHQWEXVLQHVVH[SHULHQFHWRVKRZWKDWDQ
RUJDQL]DWLRQRIIHULQJRSSRUWXQLW\IRULQGLYLGXDOLQLWLDWLYHSHUIRUPV
EHWWHUWKDQRUJDQL]DWLRQVRSHUDWLQJZLWKFRUSRUDWHGLUHFWLYHVDQG
WLJKWFRQWUROV
,VKRXOGSRLQWRXWWKDWWKHVXFFHVVIXOSUDFWLFHRIPDQDJHPHQWE\
REMHFWLYHLVDWZRZD\VWUHHW0DQDJHUVDWDOOOHYHOVPXVWEHVXUH
WKDWWKHLUSHRSOHFOHDUO\XQGHUVWDQGWKHRYHUDOOREMHFWLYHVDQGJRDOV
RIWKHFRPSDQ\DVZHOODVWKHVSHFLILFJRDOVRIWKHLUSDUWLFXODU
GLYLVLRQRUGHSDUWPHQW7KXVPDQDJHUVKDYHDVWURQJREOLJDWLRQWR
IRVWHUJRRGFRPPXQLFDWLRQDQGPXWXDOXQGHUVWDQGLQJ&RQYHUVHO\
WKHLUSHRSOHPXVWWDNHVXIILFLHQWLQWHUHVWLQWKHLUZRUNWRZDQWWR
SODQLWWRSURSRVHQHZVROXWLRQVWRROGSUREOHPVDQGWRMXPSLQ
ZKHQWKH\KDYHVRPHWKLQJWRFRQWULEXWH
3HWHU'UXFNHUWKHZHOONQRZQPDQDJHPHQWFRQVXOWDQWH[SUHVVHG
KLVWKRXJKWVRQWKLVVXEMHFWLQDQLQWHUYLHZLQWKHVSULQJLVVXH
RIWKH+DUYDUG%XVLQHVV5HYLHZ'UXFNHUWDONVDERXWZKDWKHFDOOV
WKH3RVW&DSLWDOLVW6RFLHW\,QWKLVQHZVRFLHW\DQGFRUSRUDWH

'$9,'3$&.$5'

HQYLURQPHQW'UXFNHUVD\VPDQDJHUVZLOOKDYHWROHDUQWRPDQDJH
LQVLWXDWLRQVZKHUH\RXGRQ
WKDYHFRPPDQGDXWKRULW\ZKHUH\RX
DUHQHLWKHUFRQWUROOHGQRUFRQWUROOLQJ+HODWHUSRLQWVRXWWKDWLQWKH
WUDGLWLRQDORUJDQL]DWLRQWKHRUJDQL]DWLRQRIWKHODVW\HDUVWKH
VNHOHWRQRULQWHUQDOVWUXFWXUHZDVDFRPELQDWLRQRIUDQNDQGSRZHU
,QWKHHPHUJLQJRUJDQL]DWLRQLWKDVWREHPXWXDOXQGHUVWDQGLQJDQG
UHVSRQVLELOLW\
7KRXJK+HZOHWW3DFNDUGLVKDUGO\DQHPHUJLQJRUJDQL]DWLRQPXWXDO
XQGHUVWDQGLQJDQGUHVSRQVLELOLW\KDYHEHHQIRUPDQ\\HDUVNH\
FKDUDFWHULVWLFVRIWKH+3VW\OHRIPDQDJHPHQW
0DQDJHUVPXVWEHVXUHWKDWWKHLUSHRSOHFOHDUO\XQGHUVWDQGWKH
REMHFWLYHVDQGVSHFLILFJRDOVRIWKHLUGLYLVLRQRUGHSDUWPHQWDV,
KDYHVDLG,WLVDOVRHVVHQWLDOWKDWWKHPDQDJHUKDYHDWKRURXJK
NQRZOHGJHDQGXQGHUVWDQGLQJRIWKHZRUNRIKLVRUKHUJURXS7KLV
EULQJVXSWKHGHEDWHWKDWKDVEHHQFDUULHGRQE\EXVLQHVVSHRSOHIRU
PDQ\\HDUV6RPHVD\JRRGPDQDJHUVFDQPDQDJHDQ\WKLQJWKH\
FDQPDQDJHZHOOZLWKRXWUHDOO\NQRZLQJZKDWWKH\DUHWU\LQJWR
PDQDJH,W
VWKHPDQDJHPHQWVNLOOVWKDWFRXQW
,GRQ
WDUJXHWKDWWKHMREFDQ
WEHGRQHWKDWZD\EXW,GRDUJXH
VWURQJO\WKDWWKHEHVWMREFDQEHGRQHZKHQWKHPDQDJHUKDVD
JHQXLQHDQGWKRURXJKXQGHUVWDQGLQJRIWKHZRUN,GRQ
WVHHKRZ
PDQDJHUVFDQHYHQXQGHUVWDQGZKDWVWDQGDUGVWRREVHUYHZKDW
SHUIRUPDQFHWRUHTXLUHDQGKRZWRPHDVXUHUHVXOWVXQOHVVWKH\
XQGHUVWDQGLQVRPHGHWDLOWKHVSHFLILFQDWXUHRIWKHZRUNWKH\

7+(+3:$<

DUHWU\LQJWRVXSHUYLVH:HKDYHKHOGFORVHO\WRWKLVSKLORVRSK\DW+3
DQG,KRSHZLOOFRQWLQXHWRGRVR
:HKDYHDWHFKQLTXHDW+3IRUKHOSLQJPDQDJHUVDQGVXSHUYLVRUV
NQRZWKHLUSHRSOHDQGXQGHUVWDQGWKHZRUNWKHLUSHRSOHDUHGRLQJ
ZKLOHDWWKHVDPHWLPHPDNLQJWKHPVHOYHVPRUHYLVLEOHDQG
DFFHVVLEOHWRWKHLUSHRSOH,W
VFDOOHG0%:$PDQDJHPHQWE\ZDONLQJ
DURXQG7KHWHUPDJRRGRQHZDVFRLQHGPDQ\\HDUVDJRE\RQH
RIRXUPDQDJHUVWKRXJKWKHWHFKQLTXHLWVHOIJRHVEDFNWRP\GD\V
DW*HQHUDO(OHFWULF

6ROYLQJWKH,JQLWURQ3UREOHP
$V,PHQWLRQHGHDUOLHUZKHQ,ZDVZLWK*(LQLWVYDFXXPWXEH
HQJLQHHULQJGHSDUWPHQWLWZDVKDYLQJSUREOHPVPDQXIDFWXULQJ
LJQLWURQVDQG,ZDVJLYHQWKHMRERIILQGLQJRXWZK\VRPDQ\ZHUH
IDLOLQJGXULQJWHVWLQJ
,OHDUQHGHYHU\WKLQJ,FRXOGDERXWWKHFDXVHVRIIDLOXUHDQGGHFLGHG
WRVSHQGPRVWRIP\WLPHRQWKHIDFWRU\IORRUPDNLQJVXUHHYHU\
VWHSLQWKHPDQXIDFWXULQJSURFHVVZDVGRQHFRUUHFWO\,IRXQG
VHYHUDOLQVWDQFHVZKHUHWKHZULWWHQLQVWUXFWLRQVSURYLGHGWKH
PDQXIDFWXULQJSHRSOHZHUHLQDGHTXDWHDQG,ZRUNHGZLWKWKHPRQ
HDFKVWHSLQWKHSURFHVVWRPDNHVXUHWKHUHZHUHQRPLVWDNHV7KLV
SDLQVWDNLQJDWWHQWLRQWRGHWDLOSDLGRIIDQGHYHU\WXEHLQWKHQH[W
EDWFKSDVVHGLWVILQDOWHVW
$V,ORRNEDFNP\GHFLVLRQWRZRUNRQWKDWLJQLWURQSUREOHPZLWKWKH
SHRSOHLQWKHIDFWRU\KDGDSURIRXQG

'$9,'3$&.$5'

LQIOXHQFHRQWKHPDQDJHPHQWSROLFLHVZHGHYHORSHGIRUWKH
+HZOHWW3DFNDUG&RPSDQ\7KDWZDVWKHJHQHVLVRIZKDWKDVEHHQ
FDOOHG0%:$,OHDUQHGWKDWTXDOLW\UHTXLUHVPLQXWHDWWHQWLRQWR
HYHU\GHWDLOWKDWHYHU\RQHLQDQRUJDQL]DWLRQZDQWVWRGRDJRRG
MREWKDWZULWWHQLQVWUXFWLRQVDUHVHOGRPDGHTXDWHDQGWKDWSHUVRQDO
LQYROYHPHQWLVHVVHQWLDO
:HKDYHIRXQGWKDWSHUVRQDOLQYROYHPHQWWREHYHU\LPSRUWDQWDWDOO
OHYHOVLQWKHFRPSDQ\,DOVRIRXQGLWXVHIXOZKHQ,VHUYHGLQ
:DVKLQJWRQDV86GHSXW\VHFUHWDU\RIGHIHQVH
$W+3ZHGLVFRYHUHGWKDWWKHSUDFWLFHVRI0%:$DQG0%2ZHUH
JHQHUDOO\DVHIIHFWLYHDWRXURYHUVHDVVLWHVDVWKH\ZHUHLQWKH
8QLWHG6WDWHV2XULQWHUQDWLRQDOGLYLVLRQVW\SLFDOO\ZHUHVWDUWHGE\
VHDVRQHG+3PDQDJHUVZKRKDGJURZQXSLQWKHFRPSDQ\DQGZHUH
ZHOOYHUVHGLQRXUSULQFLSOHVDQGSUDFWLFHV
'LYLVLRQUHYLHZVRXWVLGHWKH8QLWHG6WDWHVXVXDOO\RFFXUUHGDQQXDOO\
%LOODQG,DWWHQGHGWKHVHPHHWLQJVWRJHWKHU2XUYLVLWVDOZD\V
LQFOXGHGDZDONDURXQGWKHIDFLOLWLHVJLYLQJXVWKHRSSRUWXQLW\WR
PHHWDQGFKDWLQIRUPDOO\ZLWKRXUHPSOR\HHVDQGVHHWKHZRUNWKH\
ZHUHGRLQJ

7KH2SHQ'RRU3ROLF\
6WUDLJKWIRUZDUGDVLWVRXQGVWKHUHDUHVRPHVXEWOHWLHVDQG
UHTXLUHPHQWVWKDWJRZLWK0%:$)RURQHWKLQJQRWHYHU\PDQDJHU
ILQGVLWHDV\DQGQDWXUDOWRGR$QGLI

7+(+3:$<

LW
VGRQHUHOXFWDQWO\RULQIUHTXHQWO\LWMXVWZRQ
WZRUN,WQHHGVWREH
IUHTXHQWIULHQGO\XQIRFXVHGDQGXQVFKHGXOHGEXWIDUIURP
SRLQWOHVV$QGVLQFHLWVSULQFLSDODLPLVWRVHHNRXWSHRSOH
VWKRXJKWV
DQGRSLQLRQVLWUHTXLUHVJRRGOLVWHQLQJ
/LQNHGZLWK0%:$LVDQRWKHULPSRUWDQWPDQDJHPHQWSUDFWLFHDW
+HZOHWW3DFNDUGDQGDEDVLFWHQHWRIWKH+3:D\,W
VFDOOHGWKH
RSHQGRRUSROLF\/LNH0%:$WKLVSROLF\LVDLPHGDWEXLOGLQJ
PXWXDOWUXVWDQGXQGHUVWDQGLQJDQGFUHDWLQJDQHQYLURQPHQWLQ
ZKLFKSHRSOHIHHOIUHHWRH[SUHVVWKHLULGHDVRSLQLRQVSUREOHPVDQG
FRQFHUQV
7KHRSHQGRRUHQFRXUDJHVHPSOR\HHVVKRXOGWKH\KDYHSUREOHPVRI
HLWKHUDSHUVRQDORUMREUHODWHGQDWXUHWRGLVFXVVWKHVHZLWKDQ
DSSURSULDWHPDQDJHU,QWKHYDVWPDMRULW\RIFDVHVWKLVZLOOEHWKH
HPSOR\HH
VLPPHGLDWHVXSHUYLVRU%XWVKRXOGWKHHPSOR\HHEH
XQFRPIRUWDEOHWDONLQJZLWKWKHVXSHUYLVRUKHRUVKHFDQJRXSWKH
OLQHWRGLVFXVVPLVXQGHUVWDQGLQJVRUDQ\RWKHUSUREOHPVZLWKD
KLJKHUOHYHOPDQDJHU:H
YHIRXQGWKDWSHRSOHGRQRWVHHPWREH
SDUWLFXODUO\DYHUVHWREULQJLQJXSDQ\SUREOHPVRUFRQFHUQVWKH\
PD\KDYHDQGPDQDJHUVXVXDOO\DUHDEOHWRILQGVDWLVIDFWRU\
VROXWLRQVIDLUO\TXLFNO\,WPXVWEHFOHDUO\XQGHUVWRRGE\VXSHUYLVRUV
DQGPDQDJHUVWKDWSHRSOHXVLQJWKHRSHQGRRUDUHQRWWREH
VXEMHFWHGWRUHSULVDOVRUWRDQ\RWKHUDGYHUVHFRQVHTXHQFHV
,DPRFFDVLRQDOO\DVNHGWKHH[WHQWWRZKLFKWKHRSHQGRRUSROLF\LV
XVHGDW+3,WLVXVHGTXLWHIUHTXHQWO\DQGLQUHVSRQVHWRDQRWKHU
TXHVWLRQERWK%LOO+HZOHWW

'$9,'3$&.$5'

DQG,KDYHHDFKSDUWLFLSDWHGLQRSHQGRRUFRPPXQLFDWLRQVZLWK
HPSOR\HHVXVXDOO\DERXWLVVXHVRIJHQHUDOFRQFHUQUDWKHUWKDQ
SHUVRQDOJULHYDQFHV
7KHRSHQGRRUSROLF\LVYHU\LPSRUWDQWDW+3EHFDXVHLWFKDUDFWHUL]HV
WKHPDQDJHPHQWVW\OHWRZKLFKZHDUHGHGLFDWHG,WPHDQV
PDQDJHUVDUHDYDLODEOHRSHQDQGUHFHSWLYH(YHU\RQHDW+3
LQFOXGLQJWKH&(2ZRUNVLQRSHQSODQGRRUOHVVRIILFHV7KLVUHDG\
DYDLODELOLW\KDVLWVGUDZEDFNVLQWKDWLQWHUUXSWLRQVDUHDOZD\V
SRVVLEOH%XWDW+3ZH
YHIRXQGWKDWWKHEHQHILWVRIDFFHVVLELOLW\IDU
RXWZHLJKWKHGLVDGYDQWDJHV7KHRSHQGRRUSROLF\LVDQLQWHJUDOSDUW
RIWKHPDQDJHPHQWE\REMHFWLYHSKLORVRSK\$OVRLWLVDSURFHGXUH
WKDWHQFRXUDJHVDQGLQIDFWHQVXUHVWKDWWKHFRPPXQLFDWLRQIORZEH
XSZDUGDVZHOODVGRZQZDUG
+3LVFRQVLGHUHGXQXVXDOLQWKDWGXULQJWKHILUVWHLJKWHHQ\HDUVRIRXU
H[LVWHQFHZHRSHUDWHGZLWKRXWDSHUVRQQHOGHSDUWPHQW7KLVLVQRW
EHFDXVH%LOODQG,KDGDQ\QHJDWLYHIHHOLQJVWRZDUGSHUVRQQHO
GHSDUWPHQWVRUSHUVRQQHOPDQDJHUVEXWEHFDXVHRIWKHHPSKDVLVZH
SODFHGRQUHODWLRQVKLSVEHWZHHQRXUPDQDJHUVDQGWKHLUSHRSOH
SDUWLFXODUO\WKHQHHGIRUPDQDJHUVWREHDFFHVVLEOHWRWKHLUSHRSOH
DQGWREHVHQVLWLYHWRWKHLUSUREOHPVDQGFRQFHUQV:HIHOWWKDWWKH
SUHVHQFHRIDSHUVRQQHOIXQFWLRQPLJKWVXSSODQWRULQWHUIHUHZLWK
WKLVGLUHFWPDQDJHUHPSOR\HHUHODWLRQVKLS6RLQZKHQZH
HVWDEOLVKHGDFRUSRUDWHSHUVRQQHOGHSDUWPHQWZHZHUHFDUHIXOLQ
GHILQLQJLWVUROHDQGUHVSRQVLELOLWLHV,WZDVWRVXSSRUWPDQDJHPHQW
QRWVXSSODQWLW
9LVLWRUVWR+3RIWHQQRWLFHDQGFRPPHQWWRXVDERXW

7+(+3:$<

DQRWKHUIDFHWRIWKH+3:D\RXULQIRUPDOLW\DQGRXUXVHRIILUVW
QDPHVLQDGGUHVVLQJHDFKRWKHU%LOODQG,KDYHDOZD\VEHOLHYHGWKDW
ZHDOORSHUDWHPRUHHIIHFWLYHO\DQGFRPIRUWDEO\LQDWUXO\LQIRUPDO
DQGILUVWQDPHDWPRVSKHUH/LNHDOOODUJHFRPSDQLHV+3KDV
RUJDQL]DWLRQFKDUWV$QGDVLQJURZLQJFRPSDQLHVHYHU\ZKHUHRXU
FKDUWVXQGHUJRIUHTXHQWFKDQJHV:HWKLQNRIWKHPRQO\DVSURYLGLQJ
DJHQHUDOJXLGHOLQHWRWKHVWUXFWXUHRIDQ+3RUJDQL]DWLRQZKHWKHULW
EHDGLYLVLRQDJURXSRUWKHFRUSRUDWLRQLWVHOI,QQRZD\GRFKDUWV
GLFWDWHWKHFKDQQHOVRIFRPPXQLFDWLRQXVHGE\+3SHRSOH:HZDQW
RXUSHRSOHWRFRPPXQLFDWHZLWKRQHDQRWKHULQDVLPSOHDQGGLUHFW
ZD\JXLGHGE\FRPPRQVHQVHUDWKHUWKDQE\OLQHVDQGER[HVRQD
FKDUW7RJHWWKHMREGRQHDQLQGLYLGXDOLVH[SHFWHGWRVHHN
LQIRUPDWLRQIURPWKHPRVWOLNHO\VRXUFH
,W
VLPSRUWDQWWKDWLQGLYLGXDOVKDYHWKHLUSHUIRUPDQFHHYDOXDWHGRQD
UHJXODUEDVLV,W
VDOVRLPSRUWDQWWKDWWKH\EHNHSWXSWRGDWHRQKRZ
WKHLUSDUWLFXODUGLYLVLRQRUGHSDUWPHQWLVSHUIRUPLQJ7RILOOWKLV
EURDGHUQHHG+3PDQDJHUVPDNHJRRGXVHRIFRIIHHWDONVDQGRWKHU
LQIRUPDOHPSOR\HHJDWKHULQJV(PSOR\HHSXEOLFDWLRQVILOPVDQG
YLGHRWDSHVDUHXVHIXOFRPPXQLFDWLRQVPHGLDEXWQRWKLQJEHDWV
SHUVRQDOWZRZD\FRPPXQLFDWLRQIRUIRVWHULQJFRRSHUDWLRQDQG
WHDPZRUNDQGIRUEXLOGLQJDQDWWLWXGHRIWUXVWDQGXQGHUVWDQGLQJ
DPRQJHPSOR\HHV

'$9,'3$&.$5'

0DQDJHPHQW6XFFHVVLRQ
$QLPSRUWDQWUHVSRQVLELOLW\RIPDQDJHUVLVWKHVHOHFWLRQDQGWUDLQLQJ
RIWKHLUSRWHQWLDOVXFFHVVRUV0DQDJHPHQWVXFFHVVLRQLVHVSHFLDOO\
FULWLFDODWWKHXSSHUOHYHOVRIDQRUJDQL]DWLRQZKHUHDPDQDJHUPD\
EHUHVSRQVLEOHIRUDZLGHVFRSHRIFRPSOH[DFWLYLWLHVLQYROYLQJWKH
H[SHQGLWXUHRIPDQ\PLOOLRQVRIGROODUVDQGWKHHIIRUWVRIPDQ\
WKRXVDQGVRISHRSOH
'XULQJWKHHDUO\\HDUVRI+HZOHWW3DFNDUGDVZLWKDQ\VPDOO
FRPSDQ\ZHGLGQ
WJLYHPXFKWKRXJKWWRPDQDJHPHQWVXFFHVVLRQ
%XWDVWKHFRPSDQ\JUHZWKHVHOHFWLRQRIWKHEHVWTXDOLILHGSHUVRQ
WRILOODVSHFLILFSRVLWLRQEHFDPHPXFKPRUHFKDOOHQJLQJ7KHJURZLQJ
VL]HDQGGLYHUVLW\RI+3
VRSHUDWLRQVOHGWRDVLPLODUJURZWKLQ
PDQDJHPHQWSRVLWLRQVDQGPDGHLWLPSRUWDQWWKDWZHGHYHORSDQ
HIIHFWLYHPDQDJHPHQWVHOHFWLRQSURFHVV
7KHSURFHVVKDVVHYHUDOHOHPHQWVEXWLWVURRWVDUHLQRXU
ORQJHVWDEOLVKHGSROLF\RIPDQDJHPHQWE\REMHFWLYH8QGHUWKH0%2
SULQFLSOHPDQDJHUVDWDOOOHYHOVDUHJLYHQDQRSSRUWXQLW\WRVKRZ
WKHLUDELOLWLHVWRGHYHORSSODQVWRPDNHDQGHYDOXDWHGHFLVLRQVDQG
WRSURYLGHOHDGHUVKLSIRUWKHLUSHRSOH0DQDJHUVRIWHQKDYHPDQ\
UHVSRQVLELOLWLHVDQGSHUKDSVWKLVLVQREHWWHULOOXVWUDWHGWKDQLQWKH
MRERIPDQDJLQJDQ+3GLYLVLRQRUEXVLQHVVXQLW7KHVHPDQDJHUV
XQGHU0%2DQGRXU

7+(+3:$<

GHFHQWUDOL]HGVWUXFWXUHDUHJLYHQIXOOSURGXFWOLQHUHVSRQVLELOLW\DQG
3 /DFFRXQWDELOLW\,QHIIHFWWKH\DUHUXQQLQJDVPDOOEXVLQHVVZLWK
DOOWKDWWKDWHQWDLOV$QGPRVWDUHGRLQJLWUHDVRQDEO\HDUO\LQWKHLU
FDUHHUV7KLVWHQGVWRSURGXFHJHQHUDWLRQDIWHUJHQHUDWLRQRI\RXQJ
PDQDJHUVDOUHDG\H[SHULHQFHGLQUXQQLQJDQ+3EXVLQHVV
:HKDYHDOZD\VWULHGWRKDYHRXUWRSPDQDJHPHQWWHDPEHFRPH
DFTXDLQWHGZLWKWKH\RXQJHUPDQDJHUVLQWKHFRPSDQ\2QHRIWKH
ZD\VZHGLGWKLVLQWKHSDVWZDVWKURXJKRXUGLYLVLRQDOUHYLHZ
PHHWLQJV(DFKGLYLVLRQZRXOGEHYLVLWHGDWOHDVWRQFHD\HDUE\%LOO
DQGPHSOXV%DUQH\2OLYHU1RHO(OGUHGDQGRWKHUWRSPDQDJHUV
:HVSHQWDIXOOGD\UHYLHZLQJWKHGLYLVLRQ
VRSHUDWLRQVFRQFHQWUDWLQJ
RQLWVSURGXFWGHYHORSPHQWSURJUDPV$WWKHVHPHHWLQJVZHDVNHG
ERWKWKHGLYLVLRQPDQDJHUDQGWKHNH\SHRSOHUHSRUWLQJWRKLPWR
PDNHDSUHVHQWDWLRQ7KLVJDYHXVDQRSSRUWXQLW\WRDSSUDLVHWKH
DELOLWLHVRIWKH\RXQJHUPDQDJHUVDQGDOVRWRDVVHVVKRZZHOOWKHLU
ERVVHVZHUHFDUU\LQJRXWWKHLUWUDLQLQJDQGGHYHORSPHQW
UHVSRQVLELOLWLHV$GLQQHULQFRQMXQFWLRQZLWKWKHPHHWLQJDOVRKHOSHG
XVEHFRPHDFTXDLQWHGLQDPRUHLQIRUPDOZD\ZLWKPDQ\RIWKH
GLYLVLRQPDQDJHUV
7RGD\LWLVQRWSRVVLEOHIRU+3
VWRSPDQDJHPHQWWRFRQGXFWDQ
DQQXDOUHYLHZRIHDFKRIWKHFRPSDQ\
VPDQ\GLYLVLRQV,QVWHDGWKH
GLYLVLRQVDUHUHJXODUO\UHYLHZHGE\WKHLUUHVSHFWLYHJURXS
PDQDJHPHQWDQGWKHJURXS
VRSHUDWLRQVE\WRSPDQDJHPHQW
7KRXJKWKH

'$9,'3$&.$5'

IRUPDWLVGLIIHUHQWWKHLQKHUHQWEHQHILWVGHULYHGIURPWKHUHYLHZ
SURFHVVKDYHEHHQSUHVHUYHG6WDUWLQJPDQ\\HDUVDJR%LOODQG,
HVWDEOLVKHGDVLPLODUUHYLHZSURFHVVZLWKLQWKHFRPSDQ\
VERDUGRI
GLUHFWRUVPHHWLQJV,WLVWKHXVXDOSUDFWLFHDWHDFKERDUGPHHWLQJWR
KDYHDQRUJDQL]DWLRQDOXQLWZLWKLQ+3VXFKDVDSURGXFWJURXSD
VDOHVXQLWRUDFRUSRUDWHGHSDUWPHQWJLYHDSUHVHQWDWLRQDERXWLWV
DUHDRIRSHUDWLRQ7KLVKDVWKHDGYDQWDJHRIHQDEOLQJRXURXWVLGH
GLUHFWRUVWREHFRPHPRUHIDPLOLDUERWKZLWKWKHFRPSDQ\DQGZLWK
PDQ\RIWKHSHRSOHZKRPDQDJHLW(YHQWXDOO\VRPHRIWKHPRUH
VHQLRU+3PDQDJHUVWKHPVHOYHVDUHHOHFWHGWRWKHERDUGDQGLWLV
LPSRUWDQWWKDWHDFKGLUHFWRUEHFRPHDFTXDLQWHGZLWKWKHVH
PDQDJHUVDQGWKHLUDELOLWLHVSULRUWRWKHHOHFWLRQ
,QUHFHQW\HDUVWKHFRPSDQ\KDVGHYHORSHGDGGLWLRQDOPRUH
VWUXFWXUHGZD\VRIHYDOXDWLQJPLGGOHPDQDJHUVDQGWKHLUSRWHQWLDO
IRUJUHDWHUUHVSRQVLELOLW\2QDUHJXODUEDVLVWKH&(2QRZ/HZ3ODWW
JDWKHUVKLVWRSPDQDJHUVIRUDOHQJWK\UHYLHZRIJURXSPDQDJHPHQW
SHUIRUPDQFH7KH\GLVFXVVHDFKJURXS
VSURILWJHQHUDWLRQDVVHW
XWLOL]DWLRQUHYHQXHJURZWKSURGXFWTXDOLW\FXVWRPHUVDWLVIDFWLRQ
SHUVRQQHOLVVXHVDQGRWKHUPDWWHUVIRUZKLFKWKHJURXSPDQDJHULV
UHVSRQVLEOH/HZDOVRPHHWVSHULRGLFDOO\ZLWKDFRPPLWWHHRIWKH
ERDUGRIGLUHFWRUVWKH2UJDQL]DWLRQ5HYLHZDQG1RPLQDWLQJ
&RPPLWWHHWRUHYLHZWKHSHUIRUPDQFHRINH\PDQDJHUV

7+(+3:$<

3URPRWLQJ)URP:LWKLQ
,KDYHDOZD\VIHOWWKDWWKHPRVWVXFFHVVIXOFRPSDQLHVKDYHD
SUDFWLFHRISURPRWLQJIURPZLWKLQ8QWLOWKH6ZKHQZHHQWHUHG
WKHFRPSXWHUEXVLQHVVLWZDVUDUHWRILQGDNH\PDQDJHUZKRKDG
QRWJURZQXSZLWKLQWKHFRPSDQ\2XUHQWU\LQWRWKHFRPSXWHU
EXVLQHVVFKDQJHGWKDWDELW:HQHHGHGWRDFTXLUHVRPHH[SHUWLVHLQ
FRPSXWHUVFLHQFHDQGDJRRGSDUWRIWKDWH[SHUWLVHZDVDYDLODEOH
RQO\IURPRXWVLGHWKHFRPSDQ\0RVWRIWKRVHZKRMRLQHGXVLQ
DGGLWLRQWRPDNLQJLPSRUWDQWFRQWULEXWLRQVWRRXUVWUHQJWKLQ
FRPSXWHUWHFKQRORJ\DGDSWHGTXLWHUHDGLO\WRWKH+3FXOWXUH$IHZ
GLGQRWDQGFKRVHWROHDYH
/RQJEHIRUHZHUHDFKHGUHWLUHPHQW%LOODQG,KDGEHHQWKLQNLQJDQG
WDONLQJDERXWZKRPLJKWVXFFHHGXV-RKQ<RXQJZDVRXUFKRLFHIRU
PDQ\UHDVRQVDQGLQWKHSUHVLGHQW
VWLWOHSDVVHGWRKLP%LOO
UHPDLQHGDV&(2DQG,DVFKDLUPDQ7KLVSURYLGHGDJRRGWUDQVLWLRQ
WRWKHWLPHZKHQ%LOOUHWLUHGLQDQG-RKQEHFDPH&(2LQ
DGGLWLRQWREHLQJSUHVLGHQW+HVHUYHGLQWKLVGXDOFDSDFLW\XQWLO
ZKHQKHWXUQHGVL[W\DQGUHWLUHGIURPWKHFRPSDQ\-RKQKDG
GRQHDQRXWVWDQGLQJMREIRUXV-RKQ
VUHWLUHPHQWDOORZHGWKHERDUG
WRHOHFW/HZ3ODWWWRVXFFHHGKLPZKLOH%LOODQG,ZHUHVWLOODURXQGWR
PDQDJHWKHWUDQVLWLRQ/HZQRZVHUYHVDVFKDLUPDQ&(2DQG
SUHVLGHQW
9LUWXDOO\DOOWKHPDQDJHUVZKRKDYHVHUYHGRUDUH

'$9,'3$&.$5'

VHUYLQJLQWRSSRVLWLRQVDW+HZOHWW3DFNDUGKDYHKDGDWHFKQLFDO
EDFNJURXQG-RKQ<RXQJIRUH[DPSOHKROGVDQHOHFWULFDOHQJLQHHULQJ
GHJUHHDQG/HZ3ODWWDPHFKDQLFDOHQJLQHHULQJGHJUHH7KH\DOVR
EHQHILWHGIURPKDYLQJDYDULHW\RIMREVZLWKLQWKHFRPSDQ\LQFOXGLQJ
DVVLJQPHQWVUHTXLULQJDJRRGNQRZOHGJHRIHOHFWURQLFVDQGFRPSXWHU
WHFKQRORJ\
,QUHFHQW\HDUVPDQ\RIWKH\RXQJSHRSOHFRPLQJLQWR+3KDYHKDG
WZRGHJUHHVRQHLQHQJLQHHULQJRUVFLHQFHDQGWKHRWKHUDQ0%$
$OWKRXJK,
PQRWDVWURQJDGYRFDWHRIDIRUPDOEXVLQHVVVFKRRO
HGXFDWLRQWKHUH
VQRTXHVWLRQWKDWDQ\RQHDVSLULQJWRDQLPSRUWDQW
PDQDJHPHQWSRVLWLRQDW+3VKRXOGEHZHOOJURXQGHGLQDOODVSHFWVRI
EXVLQHVVDQGILQDQFH

&KDSWHU
5HVSRQVLELOLW\WR6RFLHW\
,+$9(67521*UHFROOHFWLRQVRIWKHGHSUHVVLRQ\HDUVLQ3XHEOR
&RORUDGRLQWKHV$OWKRXJKQRRQHLQRXUQHLJKERUKRRGZDV
FRQVLGHUHGZHDOWK\WKHUHZHUHSRRUIDPLOLHVZLWKYLUWXDOO\QR
LQFRPH7KRVHZKRZHUHIRUWXQDWHHQRXJKWRKDYHPHDQVWRVXSSRUW
WKHLURZQIDPLOLHVVKDUHGZLOOLQJO\DQGYROXQWDULO\ZLWKWKRVHZKR
FRXOGQRWSURYLGHIRRGFORWKLQJRUVKHOWHUIRUWKHPVHOYHV7KLV
SHUVRQDOH[SHULHQFHOHIWDODVWLQJLPSUHVVLRQZLWKPHRIWKH
LPSRUWDQFHRISHUVRQDOFDULQJDQGLQYROYHPHQW
$PRQJWKH+HZOHWW3DFNDUGREMHFWLYHV%LOO+HZOHWWDQG,VHWGRZQ
ZDVRQHUHFRJQL]LQJWKHFRPSDQ\
VUHVSRQVLELOLW\WREHDJRRG
FRUSRUDWHFLWL]HQ
5HVSRQVLELOLW\WRWKHVRFLHW\LQZKLFKDFRPSDQ\RSHUDWHVLVQRZ
ZLGHO\UHFRJQL]HGDQGDFFHSWHGE\$PHULFDQEXVLQHVV%XWLWZDVQ
W
DOZD\VVR,UHFDOODFRQIHUHQFH,DWWHQGHGLQWKHODWH6WKDW
LQFOXGHG

'$9,'3$&.$5'

SHRSOHIURPYDULRXVLQGXVWULHVDQGRUJDQL]DWLRQV:HEHJDQWDONLQJ
DERXWZKHWKHUEXVLQHVVHVKDGUHVSRQVLELOLWLHVEH\RQGPDNLQJDSURILW
IRUWKHLUVKDUHKROGHUV,H[SUHVVHGP\YLHZWKDWZHGLGWKDWZHKDG
LPSRUWDQWUHVSRQVLELOLWLHVWRRXUHPSOR\HHVWRRXUFXVWRPHUVWRRXU
VXSSOLHUVDQGWRWKHZHOIDUHRIVRFLHW\DWODUJH,ZDVVXUSULVHGDQG
GLVDSSRLQWHGWKDWPRVWRIWKHRWKHUVGLVDJUHHGZLWKPH7KH\IHOW
WKHLURQO\UHVSRQVLELOLW\ZDVWRJHQHUDWHSURILWVIRUWKHLU
VKDUHKROGHUV
/RRNLQJEDFN,VXSSRVH,VKRXOGQ
WKDYHEHHQVXUSULVHG'XULQJWKH
HDUO\GHFDGHVRIWKHWZHQWLHWKFHQWXU\SURILWZDVWKHEXVLQHVVPDQ
V
VROHREMHFWLYH/DERUZDVFRQVLGHUHGDFRPPRGLW\WKDWFRXOGEH
ERXJKWDQGVROGRQWKHPDUNHW
7RGD\+HZOHWW3DFNDUGRSHUDWHVLQPDQ\GLIIHUHQWFRPPXQLWLHV
WKURXJKRXWWKHZRUOG:HVWUHVVWRRXUSHRSOHWKDWHDFKRIWKHVH
FRPPXQLWLHVPXVWEHEHWWHUIRURXUSUHVHQFH7KLVPHDQVEHLQJ
VHQVLWLYHWRWKHQHHGVDQGLQWHUHVWVRIWKHFRPPXQLW\LWPHDQV
DSSO\LQJWKHKLJKHVWVWDQGDUGVRIKRQHVW\DQGLQWHJULW\WRDOORXU
UHODWLRQVKLSVZLWKLQGLYLGXDOVDQGJURXSVLWPHDQVHQKDQFLQJDQG
SURWHFWLQJWKHSK\VLFDOHQYLURQPHQWDQGEXLOGLQJDWWUDFWLYHSODQWV
DQGRIILFHVRIZKLFKWKHFRPPXQLW\FDQEHSURXGLWPHDQV
FRQWULEXWLQJWDOHQWHQHUJ\WLPHDQGILQDQFLDOVXSSRUWWRFRPPXQLW\
SURMHFWV
:HKDYHDORQJKLVWRU\DW+3RIHQFRXUDJLQJRXUSHRSOHDV
LQGLYLGXDOVWRSDUWLFLSDWHLQSURMHFWVDQGRUJDQL]DWLRQVDLPHGDW
EHQHILWLQJWKHLUORFDOFRPPXQLWLHVRUWKHEURDGHUVRFLHW\%LOO+HZOHWW
DQG,EHJDQWR

7+(+3:$<

EHLQYROYHGLQDFWLYLWLHVRXWVLGH+3DVHDUO\DVZKHQ,EHJDQ
VHUYLQJRQWKH3DOR$OWRVFKRROERDUG%LOOLQWKHPHDQWLPHZDV
DFWLYHLQWKH,QVWLWXWHRI5DGLR(QJLQHHUVWKHQDWLRQDOVRFLHW\IRU
HOHFWULFDOHQJLQHHUVDQGVHUYHGDVLWVSUHVLGHQWLQ,QWKLV
FDSDFLW\%LOOEHFDPHDFTXDLQWHGZLWKPHPEHUVRIWKH,5(DOODFURVV
WKHFRXQWU\6LQFHPDQ\RIWKHVHHQJLQHHUVZHUHSUHVHQWRUSRWHQWLDO
+3FXVWRPHUV%LOO
VSUHVLGHQF\ZDVYHU\KHOSIXOWRWKHFRPSDQ\
6HUYLFHDV6WDQIRUG7UXVWHH
,Q,ZDVDVNHGWRMRLQWKH6WDQIRUGERDUGRIWUXVWHHV:DOO\
6WHUOLQJKDGEHHQDSSRLQWHGSUHVLGHQWRIWKHXQLYHUVLW\DQGSODQV
KDGEHHQPDGHWRLQFUHDVHDQGVWUHQJWKHQWKHIDFXOW\DQGWRPRYH
WKHPHGLFDOVFKRROIURP6DQ)UDQFLVFRWRWKHFDPSXVLQ3DOR$OWR
:KHQ,EHFDPHDPHPEHURIWKHERDUG-LP%ODFNDIHOORZWUXVWHH
DQGWKHSUHVLGHQWRIWKH3DFLILF*DVDQG(OHFWULFFRPSDQ\ZDVYHU\
KHOSIXOWRPH+HNQHZWKHSUHVLGHQWVRIWKHERDUGVRIWKHWRS
SULYDWHXQLYHUVLWLHVLQWKHFRXQWU\DQGWKURXJK-LP,EHFDPH
DFTXDLQWHGZLWKWKHP
-XDQ7ULSSHSUHVLGHQWRI3DQ$PHULFDQ$LUOLQHVKHDGHGWKHERDUGRI
<DOH8QLYHUVLW\DQG1HLO0F(OUR\ZDVSUHVLGHQWRIWKH+DUYDUGERDUG
7KH\DQGWKHERDUGSUHVLGHQWVRIDQXPEHURIWKHRWKHUSUHVWLJLRXV
SULYDWHXQLYHUVLWLHVWKRXJKWWKHVHVFKRROVVKRXOGEHFRQVLGHUHGEHOO
FRZXQLYHUVLWLHVOHDGHUVRIWKHSDFNVRWR

'$9,'3$&.$5'

VSHDN,ZDVHOHFWHGSUHVLGHQWRIWKH6WDQIRUGERDUGLQDQGVR
,ZDVLQFOXGHGLQWKLVJURXS,UHFDOORXUKDYLQJDPHHWLQJZLWK
&RQJUHVVPHQ0HOYLQ/DLUGDQG-RKQ)RJDUW\RI:LVFRQVLQDQG5KRGH
,VODQGUHVSHFWLYHO\7KHLUFRPPLWWHHWKH+HDOWK(GXFDWLRQDQG
:HOIDUHDQG/DERU6XEFRPPLWWHHRIWKH+RXVH&RPPLWWHHRQ
$SSURSULDWLRQVZDVWKHFRQJUHVVLRQDOJURXSWKDWDXWKRUL]HG
RYHUKHDGDOORZDQFHVRQIHGHUDOUHVHDUFKFRQWUDFWVZLWKXQLYHUVLWLHV
:HDVNHGWKHFRPPLWWHHWRDXWKRUL]HDSHUFHQWDOORZDQFHIRUWKH
EHOOFRZXQLYHUVLWLHVWRZKLFKLWDJUHHG,PHW0HO/DLUGRQO\RQWKLV
RQHRFFDVLRQEHIRUHKHZDVDSSRLQWHG86VHFUHWDU\RIGHIHQVHDQG
EHFDPHP\ERVVDWWKH3HQWDJRQDERXWWHQ\HDUVODWHU
'XULQJWKHPLGVWKHEHOOFRZXQLYHUVLWLHVWRRNWKHOHDGLQ
HOLPLQDWLQJ527&SURJUDPVIURPWKHLUFDPSXVHVDQGLQVRPHFDVHV
VXSSRUWLQJDFWLYLWLHVWKDW,WKRXJKWZHUHQRWLQWKHXQLYHUVLWLHV
EHVW
LQWHUHVW$WWKH&RXQFLORI)RXQGDWLRQVLQ1HZ<RUN&LW\,PDGHD
VSHHFKWKDWUHFHLYHGFRQVLGHUDEOHDWWHQWLRQ,XUJHGLQFUHDVHG
FRUSRUDWHVXSSRUWLQWKHIRUPRIODUJHUFRQWULEXWLRQVWRXQLYHUVLWLHV
EXWVXJJHVWHGWKDWWKHVHFRQWULEXWLRQVEHHDUPDUNHGIRUVSHFLILF
XVHV0DQ\XQLYHUVLW\SHRSOHWRRNH[FHSWLRQWRWKLVEXWWKDWLVKRZ,
IHOWDWWKHWLPH
'XULQJP\VL[WHHQ\HDUVRQWKH6WDQIRUGERDUGWKHWUXVWHHVDQGWKH
XQLYHUVLW\ZHUHIDFHGZLWKVRPHPDMRUFKDOOHQJHVDQGEHFDPH
LQYROYHGLQVRPHLPSRUWDQWSURMHFWV2QHZDVWKHIXUWKHU
GHYHORSPHQWRISRUWLRQVRIWKH6WDQIRUGODQGVIRUFRPPHUFLDODQG
LQGXVWULDOXVH

7+(+3:$<

$IWHUVHWWLQJDVLGHQHDUO\KDOIRI6WDQIRUG
VDFUHVIRUIXWXUH
FDPSXVDQGDFDGHPLFXVHXQLYHUVLW\WUXVWHHVDQGPDQDJHUV
HPEDUNHGRQDSURJUDPRIVHOHFWLYHO\OHDVLQJSRUWLRQVRIWKH
UHPDLQLQJODQGV7KXVZDVERUQWKHKLJKO\VXFFHVVIXO6WDQIRUG
6KRSSLQJ&HQWHUDQGODWHUWKH6WDQIRUG,QGXVWULDO3DUNZKRVHLQLWLDO
WHQDQWZDV9DULDQ$VVRFLDWHV7KHSDUNLVQRZKRPHWRVFRUHVRI
KLJKWHFKQRORJ\FRPSDQLHVLQFOXGLQJ+HZOHWW3DFNDUG
$VPHQWLRQHGHDUOLHURQHRIWKHPDMRUHYHQWVGXULQJP\WHUPDV
ERDUGSUHVLGHQWZDVWKH6WDQIRUGPHGLFDOVFKRRODQGKRVSLWDO
VPRYH
IURP6DQ)UDQFLVFRWR3DOR$OWRZKHUHDQHZPHGLFDOFHQWHUDQG
KRVSLWDOZHUHEXLOWRQWKH6WDQIRUGFDPSXV&RQVWUXFWLRQZDVDMRLQW
SURMHFWRI6WDQIRUGDQGWKHFLW\RI3DOR$OWR7KHPHGLFDOVFKRROKDG
EHHQLQ6DQ)UDQFLVFRIRUGHFDGHVDQGPDQ\RILWVGRFWRUVZHUH
UHOXFWDQWDQGVRPHUHVHQWIXOWRPRYHWR3DOR$OWR,QWKHHQG
KRZHYHUWKHPRYHZDVPDGHDQGSURYHGWREHRIJUHDWEHQHILWWR
WKHPHGLFDOIDFXOW\DQGVWDIIWR6WDQIRUGDQGWRWKHFRPPXQLW\%LOO
+HZOHWWZKRDOZD\VKDVKDGDNHHQLQWHUHVWLQPHGLFLQHDQG
HGXFDWLRQVHUYHGDVSUHVLGHQWRIWKHPHGLFDOFHQWHUDQGKRVSLWDO
IURPWR
,ZDVSULYLOHJHGGXULQJP\WHQXUHRQWKH6WDQIRUGERDUGWRKDYH
IRUPHUSUHVLGHQW+HUEHUW+RRYHUDVDIULHQGDQGPHQWRU3UHVLGHQW
+RRYHUZDVLQIDFWDPHPEHURI6WDQIRUG
VILUVWJUDGXDWLQJFODVV+H
VHUYHGDVD6WDQIRUGWUXVWHHIURPXQWLOKLVGHDWKLQ
+RRYHU
VGHYRWLRQWRWKHZHOIDUHRIPDQNLQGZDVDPRWLYDWLQJIDFWRU
WKURXJKRXWKLVOLIH+LVPDQ\\HDUV

'$9,'3$&.$5'

RISXEOLFVHUYLFHKDGDJUHDWHIIHFWLQFRQWULEXWLQJWRDKLJKHUHWKLF
%XWKHZDVYHU\ILUPLQVXSSRUWLQJWKHSRVLWLRQVKHEHOLHYHGLQ
'XULQJP\WHUPDVFKDLUPDQRIWKH6WDQIRUGERDUGRIWUXVWHHV,KDG
RQHSDUWLFXODUO\WLFNOLVKHQFRXQWHUZLWK3UHVLGHQW+RRYHU+HZDV
FRQFHUQHGWKDW:DOO\6WHUOLQJWKHQSUHVLGHQWRI6WDQIRUGZDVJRLQJ
WROHWWKHIDFXOW\WDNHRYHUWKHDSSRLQWPHQWRIWKHERDUGRI
RYHUVHHUVRIWKH+RRYHU,QVWLWXWLRQDW6WDQIRUG
3UHVLGHQW+RRYHUZDQWHGKLVLQVWLWXWLRQWRGHPRQVWUDWHWKHHYLOVRI
FRPPXQLVP7KHIDFXOW\PDLQWDLQHGWKDWWKHLQVWLWXWLRQ
VUHVHDUFK
VKRXOGQRWKDYHLWVRXWFRPHGHWHUPLQHGLQDGYDQFH,VSHQWVRPH
FRQVLGHUDEOHWLPHWU\LQJWRUHFRQFLOHWKHVHWZRYLHZSRLQWV2QFHD
PRQWK,
GMRXUQH\WR1HZ<RUN&LW\WREUHDNIDVWZLWK3UHVLGHQW
+RRYHULQWKHVXQQ\FRUQHURIKLVDSDUWPHQWDWWKH:DOGRUI7RZHUV
7KHVLWXDWLRQZDVSDUWLFXODUO\GLIILFXOWIRUPHEHFDXVH/XFLOHDQG,
ZHUHYHU\JRRGIULHQGVZLWK(DVWRQ5RWKZHOOGLUHFWRURIWKH+RRYHU
,QVWLWXWLRQDQG3UHVLGHQW+RRYHUZDQWHGKLPUHSODFHGZLWK*OHQQ
&DPSEHOOZKRP3UHVLGHQW+RRYHUKDGNQRZQIRUVRPHWLPH
:HILQDOO\VROYHGWKHSUREOHP7KHGRQRU3UHVLGHQW+RRYHUKDGD
ULJKWWRVD\ZKDWKHZDQWHGKLVLQVWLWXWLRQWRGR$WWKHVDPHWLPH
UHVHDUFKVKRXOGEHEURDGDQGREMHFWLYHDQGQRWVXEMHFWWRDQ\
SUHFRQFHLYHGRXWFRPH8QIRUWXQDWHO\3UHVLGHQW+RRYHUZDVQRWVXUH
WKHWUXVWHHVZRXOGKROGWRWKDWSRVLWLRQVRKHWRRNKLVSHUVRQDO
SDSHUVWRKLVKRPHLQ:HVW%UDQFK,RZD
,QODWHU\HDUV3UHVLGHQW+RRYHURIWHQLQYLWHG/XFLOH

7+(+3:$<

3UHVLGHQW+HUEHUW+RRYHUZLWK/XFLOH3DFNDUGF7KH
SKRWRJUDSKLVLQVFULEHGWR0UV3DFNDUGZLWKDIIHFWLRQ+HUEHUW
+RRYHU
DQGPHWRYLVLWKLPDWKLVKRXVHERDWLQ.H\/DUJR)ORULGDIRUD
ZHHNLQ-DQXDU\7KLVJDYHXVDQXQXVXDORSSRUWXQLW\WRNQRZKLP
:HZHUHWKHUHWKHZHHNLQZKHQ3UHVLGHQW-RKQ.HQQHG\ZDV
LQDXJXUDWHG3UHVLGHQW+RRYHUIOHZXSWR:DVKLQJWRQEXWLWZDV
VQRZLQJVRKHUHWXUQHGWR.H\/DUJRZKHUH/XFLOHDQG,DQGWKH
SUHVLGHQWZDWFKHGWKHLQDXJXUDWLRQRQ79
3UHVLGHQW+RRYHUZDVDQDUGHQWILVKHUPDQ+HZDVWRRROGWRJRRXW
ILVKLQJZKHQZHYLVLWHG.H\/DUJREXWKHDOZD\VKDGKLVIDYRULWH
JXLGHDYDLODEOHWRWDNH/XFLOHDQGPHRXWERQHILVKLQJ+HZRXOGJR
GRZQRQWKHGRFNWRVHHXVRIIDQGEHWKHUHWRJUHHWXVZKHQZH
UHWXUQHG+HKDGZULWWHQDERRNFDOOHG)LVKLQJIRU)XQDQGWR:DVK
<RXU6RXO+HVDLGLQKLVERRNWKDWDOOPHQDUHFUHDWHGHTXDOEHIRUH
ILVK:HVSHQWPDQ\HQMR\DEOH

'$9,'3$&.$5'

HYHQLQJVOLVWHQLQJWRKLVVWRULHVDERXWKLVHYHQWIXOOLIH0DQ\RWKHU
+3SHRSOHKDYHVHUYHGDVWUXVWHHVRIWKHLUDOPDPDWHUVLQFOXGLQJ%LOO
+HZOHWW 6WDQIRUG $QGRIFRXUVHWKRXVDQGVPRUHKDYH
HQJDJHGLQIXQGUDLVLQJDQGRWKHUDFWLYLWLHVEHQHILWLQJQRWRQO\WKHLU
RZQXQLYHUVLWLHVEXWDOOOHYHOVRIHGXFDWLRQWKURXJKRXWWKH8QLWHG
6WDWHVDQGDEURDG6RPHRIRXUSHRSOHKDYHWDNHQOHDYHIURPWKHLU
MREVRUKDYHEHHQORDQHGE\WKHFRPSDQ\WRWHDFKRUWRFUHDWH
VSHFLDOHGXFDWLRQDOSURJUDPV
,QWKHLUORFDOFRPPXQLWLHV+3SHRSOHRIWHQVHUYHRQSODQQLQJ
FRPPLVVLRQVVFKRROERDUGVWUDQVLWGLVWULFWVFLW\FRXQFLOVDQGRWKHU
RUJDQL]DWLRQVFKDUJHGZLWKFRPPXQLW\UHVSRQVLELOLW\6RPHVHUYHDV
HOHFWHGRIILFLDOVRWKHUVYROXQWHHUWKHLUH[SHUWLVH,QWKHODWWHU
FDWHJRU\ZDVDWHDPRI+3HQJLQHHUVKHDGHGE\9LFH3UHVLGHQW
%DUQH\2OLYHUZKRLQKHOSHGVROYHDWUDLQGHWHFWLRQZDUQLQJ
SUREOHPLQWKH6DQ)UDQFLVFR%D\$UHD
VQHZUDSLGWUDQVLWV\VWHP
%$57 7KHVROXWLRQGHYLVHGE\WKH+3WHDPRIYROXQWHHUV
SUHVHQWHGDWQRFRVWWR%$57HQDEOHGWKHV\VWHPWRRSHUDWHZLWK
IXOOHIIHFWLYHQHVVDQGVDIHW\
+3SHRSOHKDYHVWRRGIRURIILFHLQORFDOHOHFWLRQV,QWKHVRXU
FROOHJHFODVVPDWH(G3RUWHUVHUYHGDVD3DOR$OWRFLW\FRXQFLOPDQDQG
DVPD\RUIRUILYHFRQVHFXWLYHRQH\HDUWHUPVHYHQEHFRPLQJKHDG
RIWKH/HDJXHRI&DOLIRUQLD&LWLHVDKLJKWULEXWHIRUDPD\RURIDFLW\
RIRQO\DERXWILIW\WKRXVDQGSHRSOH
%XWWKHLQYROYHPHQWRI+3SHRSOHLQWKHLUORFDOFRPPXQLWLHVLVQRW
DOZD\VZLWKRXWVXUSULVHVDQGGLIIL

7+(+3:$<

FXOWLHV,QWKHVDQHPEDUUDVVLQJLQFLGHQWRFFXUUHGLQWKH+3
SODQWFRPPXQLW\RI/RYHODQG&RORUDGR,QWKHORFDOHOHFWLRQWKUHH
+3HPSOR\HHVZHUHFDQGLGDWHVIRUWKHFLW\FRXQFLODQGDOOKDG
GHFODUHGWKHLUFDQGLGDF\XQEHNQRZQVWWRRQHDQRWKHURQWKHODVW
GD\WKH\FRXOGGRVR6RPHPHPEHUVRIWKHFRPPXQLW\ZHUHQRW
KDSS\KDYLQJWKUHHSHRSOHIURPWKHVDPHHPSOR\HUUXQQLQJIRU
RIILFHDWWKHVDPHWLPHDQGRQHRIRXU/RYHODQGPDQDJHUVWULHGWR
SHUVXDGHDWOHDVWRQHRIWKHFDQGLGDWHVWRGURSRXW+HZDV
XQVXFFHVVIXOEXWEHFDXVHRIWKHSXEOLFLW\DOOWKUHHRIWKH+3
FDQGLGDWHVORVW7KRXJKWKHLQFLGHQWZDVHPEDUUDVVLQJLWFOHDUO\
GHPRQVWUDWHGWKDWWKHLQYROYHPHQWRIDQ+3HPSOR\HHLQFRPPXQLW\
DFWLYLWLHVLVDQLQGLYLGXDOPDWWHU
,QWKHVDVRXUFRPSDQ\EHJDQWRJURZDQGH[SDQGRXWRI3DOR
$OWRWKHSRWHQWLDOWRSURYLGHEHQHILWVWRERWKFRPSDQ\DQG
FRPPXQLW\JXLGHGXVLQVHOHFWLQJVLWHVIRUIXWXUHSODQWV7KURXJKWKH
\HDUVZHKDYHFKRVHQVLWHVWKDWDUHFORVHWRJRRGXQLYHUVLWLHVDQG
DLUSRUWVWKDWSURYLGHDVXSSO\RIVNLOOHGZRUNHUVWKDWKDYHVWURQJ
HQYLURQPHQWDOVWDQGDUGVDQGWKDWDUHDWWUDFWLYHSODFHVWROLYHDQG
ZRUN
,WDOVRLVLPSRUWDQWWKDWWKHSURVSHFWLYHFRPPXQLW\ZDQWWKH
FRPSDQ\UDWKHUWKDQVLPSO\SXWWLQJXSZLWKLWVSUHVHQFH7KH
FRPPXQLW\PXVWEHFRQYLQFHGWKDWLWVQHZQHLJKERULQDGGLWLRQWR
SURYLGLQJMREVZLOOEHDJRRGFRUSRUDWHFLWL]HQDQGDFDWDO\VWIRU
FRPPXQLW\EHWWHUPHQW
2QWKHVWDWHQDWLRQDODQGLQWHUQDWLRQDOOHYHOV%LOODQG,KDYHDOZD\V
HQFRXUDJHGRXUSHRSOHWRH[HUFLVH

'$9,'3$&.$5'

WKHLUULJKWWRYRWHDQGWRVSHDNRXWRQLVVXHVGLUHFWO\DIIHFWLQJQRU
RQO\EXVLQHVVEXWDOVRVRFLHW\DWODUJH,VWURQJO\EHOLHYHZHKDYHD
UHVSRQVLELOLW\WRYRWHQRPDWWHUZKDWRXUVWDQGRQFDQGLGDWHVDQG
LVVXHV
$SSO\LQJ+30DQDJHPHQW3ROLFLHVDWWKH'HIHQVH'HSDUWPHQW
+HZOHWW3DFNDUGKDVVROGLWVSURGXFWVWRWKH'HSDUWPHQWRI'HIHQVH
'2' IURPWKHYHU\HDUO\\HDUVSULPDULO\IURPRXUFRPPHUFLDOOLQH
RIHOHFWURQLFPHDVXULQJLQVWUXPHQWV%XWZHKDYHDOVRVROGSURGXFWV
PDGHWRPLOLWDU\GHVLJQVDQGVSHFLILFDWLRQV,KDGQHYHUJLYHQD
WKRXJKWWRDQ\SHUVRQDOLQYROYHPHQWDWWKH'2'XQWLO,UHFHLYHGD
WHOHSKRQHFDOOIURP0HO/DLUGWKDWUHVXOWHGLQP\VHUYLQJDVKLV
GHSXW\LQDQG,DOVRVHUYHGRQVHYHUDODGYLVRU\
FRPPLVVLRQVLQWKH\HDUVWKDWIROORZHG

7KH&DOO
,Q'HFHPEHU%LOODQG,ZHUHKXQWLQJDWRXUUDQFKLQ0HUFHG
ZKHQ,UHFHLYHGDFDOOIURP0HO/DLUGZKRP,KDGQRWVHHQVLQFHRXU
PHHWLQJDERXWEHOOFRZXQLYHUVLWLHVLQ+HDVNHGPHWRJLYH
KLPVRPHQDPHVIURPWKHEXVLQHVVFRPPXQLW\ZKRPKHPLJKW
FRQVLGHUIRUKLVVWDIIDWWKH3HQWDJRQ+HKDGMXVWEHHQ

7+(+3:$<

GHVLJQDWHGE\3UHVLGHQWHOHFW5LFKDUG1L[RQWREHWKHVHFUHWDU\RI
GHIHQVH
,VHQWKLPVRPHQDPHVRISHRSOHKHFRXOGFRQVLGHUDQGKHFDOOHG
PHEDFNDQGDVNHGPHWRPHHWKLPLQ:DVKLQJWRQ6RZHPHWDWWKH
%DOWLPRUHDLUSRUWHDUO\RQHHYHQLQJ:HGURYHWRKLVWUDQVLWLRQ
KHDGTXDUWHUVDWWKH&DUOWRQ+RWHODQGGLVFXVVHGVRPHRIWKHWKLQJV
KHZDQWHGWRGRZKHQKHWRRNRIILFH$IWHUDIHZKRXUVRIGLVFXVVLRQ
KHVDLGKHZDQWHGPHWRMRLQKLPDVKLVGHSXW\VHFUHWDU\7KLV
VRXQGHGLQWULJXLQJEXWWKHFRQIOLFWRILQWHUHVWUHTXLUHPHQWVZHUH
YHU\VWULFW,ZRXOGKDYHWRJLYHDOORIWKHLQFRPHIURPP\+3VWRFN
DQGDQ\LQFUHDVHLQSULQFLSDOWRFKDULW\GXULQJP\WHUPDWGHIHQVH,
WROGKLP,ZDVLQWHUHVWHGLQMRLQLQJKLPDQGWKDW,ZRXOGOHWKLP
NQRZLQDIHZGD\VZKHWKHU,FRXOGGRVR,WROGKLP,ZRXOGKDYHWR
GLVFXVVKLVRIIHUZLWKP\ZLIH/XFLOHZLWK%LOO+HZOHWWDQGWKH
GLUHFWRUVRIRXUFRPSDQ\DQGZLWKVHYHUDORIP\IULHQGVZKRNQHZ
VRPHWKLQJDERXWWKH'HIHQVH'HSDUWPHQW
,UHWXUQHGWR3DOR$OWRDQGVSHQWDZHHNRUVRFRQVLGHULQJWKLV
RSSRUWXQLW\/XFLOHWKRXJKW,QHHGHGDFKDQJHDQGWKDW,VKRXOGGR
LW,NQHZWKDW%LOO+HZOHWWFRXOGPDQDJHWKHFRPSDQ\MXVWDVZHOODV
,FRXOGDQGWKDWKHKDGDVWURQJWHDPRIPDQDJHPHQWSHRSOHWR
VXSSRUWKLP7KHUHZHUHVRPHFKDULWLHVWKDW,ZDQWHGWRKHOSDQG
FRQVLGHULQJDOODVSHFWVRIWKHVLWXDWLRQLQFOXGLQJWKHIDFWWKDW,
WKRXJKWLWZDVP\GXW\WRVHUYHP\FRXQWU\,GHFLGHG,ZRXOGMRLQ
0HO/DLUGDVKLVGHSXW\VHFUHWDU\
,WROG0HOWKDW,ZRXOGWDNHWKHMREDQG,VSHQWPRVW

'$9,'3$&.$5'

RIWKHWLPHEHIRUHWKHLQDXJXUDWLRQLQ-DQXDU\ZRUNLQJZLWK0HOWR
SODQZKDWZHZRXOGGR
,NQHZWKDW5REHUW0F1DPDUDVHFUHWDU\RIGHIHQVHGXULQJWKH
.HQQHG\DQG-RKQVRQ\HDUVKDGDOLHQDWHGWKHSURIHVVLRQDOPLOLWDU\
SHRSOHLQWKHGHSDUWPHQW7KHUHZHUHPDQ\VWRULHVRI0F1DPDUD
V
FODVKHVZLWKWKHEUDVV2QHRIWKHVHZDVDERXWWKHEORFNDGHWRVWRS
WKHEXLOGXSRI6RYLHWPLVVLOHVLQ&XEDDVLWXDWLRQWKDWEHFDPH
NQRZQDVWKH&XEDQ0LVVLOH&ULVLV
%REDQGKLVGHSXW\FDOOHG$GPLUDO*HRUJH$QGHUVRQWKHFKLHIRI
QDYDORSHUDWLRQVWRJLYHKLPVRPHLQVWUXFWLRQVDERXWWKHEORFNDGH
$GPLUDO$QGHUVRQ
VUHSO\ZDVVDLGWREH<RXDQG\RXUGHSXW\JR
EDFNWR\RXURIILFHV7KHQDY\LVUXQQLQJWKLVEORFNDGH,WKLQN%RE
0F1DPDUDZDVULJKW+HVKRXOGKDYHKDGDVD\DVSDUWRIWKH
DGPLQLVWUDWLRQDERXWKRZWKHEORFNDGHZDVWREHKDQGOHG

3DUWLFLSDWRU\0DQDJHPHQW
0HOZDQWHGWRLPSOHPHQWDSODQKHFDOOHGSDUWLFLSDWRU\PDQDJHPHQW
DQGWKLVILWZHOOZLWKWKH+3SROLFLHV,ZDQWHGWRSXWLQWRHIIHFWWKHUH
6KRUWO\DIWHUP\DUULYDODWWKH3HQWDJRQ,FDOOHGRQDOOIRXURIWKH
-RLQW&KLHIVLQWKHLURIILFHVDQGWROGWKHP,ZDQWHGWRZRUNZLWKWKHP
DQGWKDW,QHHGHGWKHLUKHOS
%LOODQG,KDGDGHHUKXQWHYHU\\HDUDWRXU6DQ)HOLSHUDQFK
VRXWKHDVWRI6DQ-RVH+HDQG,EURXJKWDOOWKH

7+(+3:$<

IRRGDQGZHFRRNHGDQGVHUYHGWKHPHDOVDQGZDVKHGWKHGLVKHV
RXUVHOYHVZLWKWKHKHOSRIRXUJXHVWV,QWKHVSLULWRIIULHQGVKLSDQG
FROODERUDWLRQ,LQYLWHGWKH-RLQW&KLHIVWRMRLQXVDWWKHGHHUKXQWLQ
7KH\FDPHDQGHDFKJRWDGHHU:KHQLWZDVWLPHWRZDVKWKH
GLVKHVWKH\UROOHGXSWKHLUVOHHYHVDQGKHOSHGXV7KDWKXQWKHOSHG
HVWDEOLVKDJRRGUDSSRUWZLWKWKH-RLQW&KLHIV,QWKHIROORZLQJ\HDUV
ZHKDGDFDWHUHUWRVHUYHWKHIRRGDQG,FRQWLQXHGWRLQYLWHVRPHRI
WKH-RLQW&KLHIVWRKXQWZLWKXVHYHU\\HDU,ZDVDWWKH3HQWDJRQDQG
IRUDQXPEHURI\HDUVDIWHU,UHWXUQHGWR+3,QIDFW,JRWWREH
SUHWW\JRRGIULHQGVZLWKDOORIWKHP

'DYH3DFNDUGEHLQJVZRUQLQDV86GHSXW\VHFUHWDU\RIGHIHQVHLQ
/HIWWRULJKW0HOYLQ/DLUGVHFUHWDU\RIGHIHQVH/XFLOH
3DFNDUGDQG'DYH3DFNDUG

'$9,'3$&.$5'

7KHUHZDVDQXQGHUVHFUHWDU\
VFRPPLWWHHWKDWSUHSDUHGDOORIWKH
GRFXPHQWVRQVHFXULW\PDWWHUVIRU1L[RQ
VFDELQHW+HQU\.LVVLQJHU
ZDVFKDLUPDQ,UHSUHVHQWHGWKH'2''LFN+HOPVWKH&,$(OOLRW
5LFKDUGVRQWKH6WDWH'HSDUWPHQW/HH'XEULGJHDQGWKHQ(G'DYLG
ZHUHWKHSUHVLGHQW
VVFLHQFHDGYLVHUV-LP6FKOHVLQJHUUHSUHVHQWHG
WKH%XUHDXRIWKH%XGJHWDQGVRPHWLPHVRWKHUVZHUHLQYROYHG
GHSHQGLQJRQWKHVXEMHFWWREHFRQVLGHUHG
2XUILUVWDVVLJQPHQWIRU3UHVLGHQW1L[RQZDVWRFRQVLGHUKRZPXFK
WKHGHIHQVHEXGJHWFRXOGEHUHGXFHGWRSURYLGHPRUHPRQH\IRU
GRPHVWLFSURJUDPV7KLVZDVWRLPSOHPHQWWKH1L[RQ'RFWULQHZKLFK
ZDVWRDVNWKHFRXQWULHVZHZHUHVXSSRUWLQJWRSURYLGHIRUWKHLURZQ
VHFXULW\ZLWKKHOSIURPXVWRZRUNIRUZRUOGSHDFHDQGWRUHO\RQ
QHJRWLDWLRQUDWKHUWKDQDUPHGFRQIOLFW
,VXSSRUWHGWKLVFKDOOHQJLQJLQLWLDWLYHEHFDXVH,WKRXJKWLWZDVWKH
ULJKWZD\WRJR%XWWKHSROLF\FRXOGQRWZRUNXQOHVVLWZDV
VXSSRUWHGE\PLOLWDU\VWUHQJWKDQG,IHOWTXLWHVXUHZHFRXOGSURYLGH
DGHTXDWHVWUHQJWKZLWKDORZHUOHYHORIIXQGLQJ,WROGWKHPLOLWDU\
FKLHIVWKDW,ZDQWHGWKHPWRSDUWLFLSDWHLQGHFLGLQJZKHUHUHGXFWLRQV
LQWKHEXGJHWPLJKWEHPDGH,DOVRWROGWKHPWKDWDIWHU,PDGHD
GHFLVLRQ,ZRXOGDVNHDFKRIWKHVHUYLFHVLQYROYHGWRKDYHDKHDULQJ
EHIRUH,ZRXOGSUHVHQWWKHSURSRVHGUHGXFWLRQWRWKH
XQGHUVHFUHWDULHVFRPPLWWHH
:HKDGWRPDNHVXEVWDQWLDOFXWVLQMXVWDIHZZHHNVDQGZHKDG
YHU\JRRGVXSSRUWIURPWKHSURIHVVLRQDOPLOLWDU\SHRSOH

7+(+3:$<

3URFXUHPHQW
2QHXQIRUWXQDWHOHJDF\RIWKHSULRUDGPLQLVWUDWLRQZDVWKHWRWDO
SDFNDJHSURFXUHPHQWSODQ8QGHUWKDWSODQFRQWUDFWRUVZKRZDQWHG
WRELGRQPLOLWDU\ZHDSRQVZHUHUHTXLUHGWRELGIRUWKHHQWLUHMRERI
GHYHORSLQJWHVWLQJDQGPDQXIDFWXULQJWKHP7KLVPLJKWEHDJRRG
WKHRU\EXWLWZDVVLPSO\LPSRVVLEOHWRPDNHDELGRQDZHDSRQV
V\VWHPWKDWKDGQRW\HWEHHQGHVLJQHG
$OPRVWDOORIWKHSURJUDPVXQGHUWKHWRWDOSDFNDJHSURFXUHPHQW
SROLF\ZHUHLQWURXEOHDQGZHKDGWRILJXUHRXWKRZWRGHDOZLWK
WKHP7KH&$ZDVDODUJHWUDQVSRUWSODQHZKRVHVSHFLILFDWLRQV
FRXOGKDYHEHHQUHOD[HGLQDQXPEHURISODFHVZLWKRXWVHULRXVO\
UHGXFLQJLWVFDSDELOLW\:KHQZHRIIHUHGWRUHGXFHWKHUHTXLUHPHQWV
WKHODZ\HUVVDLGZHKDGWRUHGXFHWKHSULFHEHFDXVHLWZDVDYDOLG
FRQWUDFW7KLVSXWXVLQDYHU\GLIILFXOWSRVLWLRQDQGLQWKHHQG,KDG
WRJREDFNWR&RQJUHVVWRJHWVRPHPRUHPRQH\WRVDYHWKHVH
SURJUDPV
2QHSURFXUHPHQWSUREOHPWKDWFDPHXSVKRUWO\DIWHU,WRRNRIILFH
FRQFHUQHGVXSSOLHVZHERXJKWIURPWKUHHVRXWKHUQWH[WLOHPLOOV7KH
SUHYLRXVDGPLQLVWUDWLRQOHIWWKLVSUREOHPIRUXVWRGHDOZLWKDQGWKH\
WKRXJKWZHZRXOGWULSXSRQLW7KHVHPLOOVKDGQRWPHWWKHOHYHORI
PLQRULW\HPSOR\PHQWWKH\ZHUHREOLJHGWRDFKLHYH
)RUWXQDWHO\,
GKDGVRPHSUHYLRXVH[SHULHQFHLQDUHODWHGVLWXDWLRQ
ZKHQZHKDGH[SHQGHGFRQVLGHUDEOH

'$9,'3$&.$5'

HIIRUWDW+3LQWU\LQJWRLQFUHDVHWKHRSSRUWXQLWLHVIRUWKHSHRSOHLQ
(DVW3DOR$OWRDSUHGRPLQDWHO\EODFNFRPPXQLW\:KLOHZHDW+3
ZHUHVWUXJJOLQJZLWKWKLVLVVXH,KHDUGRI5HYHUHQG/HRQ6XOOLYDQ
ZKRVH2SSRUWXQLWLHV,QGXVWULDO&HQWHU 2,& KDGDFKLHYHGSRVLWLYH
UHVXOWVIRUPLQRULW\LQGXVWULDOZRUNHUVLQ3KLODGHOSKLD,DVNHGKLPWR
FRPHRXWDQGKHOSPHHVWDEOLVKDVLPLODUSURJUDPLQ(DVW3DOR$OWR
DQGWRJHWKHUZHVHWXSWKH2SSRUWXQLWLHV,QGXVWULDO&HQWHU:HVW
2,&: 7RPDNHWKLVZRUN,LQYLWHGDOORIWKHFKLHIH[HFXWLYHRIILFHUV
RIWKHFRPSDQLHVLQWKHDUHDWRMRLQXVWRPDNHVXUHJUDGXDWHVIURP
2,&:ZRXOGKDYHMREVDQGWKHSURMHFWZDVDJUHDWVXFFHVV
,GHFLGHG,ZRXOGGRWKHVDPHWKLQJZLWKWKHVHWKUHHVRXWKHUQWH[WLOH
PLOOV,SHUVRQDOO\NQHZWZRRIWKHFKLHIH[HFXWLYHVRIWKHVHPLOOV
DQG,FRQWDFWHGDOOWKUHHRIWKHP,WROGWKHP,ZRXOGDZDUGWKH
FRQWUDFWVWRWKHPLIWKH\SURPLVHGPHWKDWWKH\ZRXOGEHFRPH
LQYROYHGDQGPDNHVXUHDGHTXDWHSURJUHVVZDVDFKLHYHG$OOWKUHH
DJUHHGWRGRVR
,DZDUGHGWKHFRQWUDFWVRQWKDWEDVLVDQGLPPHGLDWHO\6HQDWRU7HG
.HQQHG\DVNHGPHWRFRPHEHIRUHKLVVXEFRPPLWWHHDQGGLVFXVV
ZKDW,KDGGRQH,H[SODLQHGWRKLPWKDW,GLGWKLVEHFDXVH,KDG
OHDUQHGIURPP\H[SHULHQFHLQ3DOR$OWRWKDWLWZRXOGZRUN,WROG
KLPZHQHHGHGWKHPDWHULDODQGLIWKH\GLGQRWPDNHJRRGSURJUHVV,
ZRXOGKDYHRWKHURSSRUWXQLWLHVWRGRVRPHWKLQJDERXWLW
,QKHDULQJVRIWKLVNLQGPHPEHUVRIWKH6HQDWHIURPWKH
DGPLQLVWUDWLRQ
VSDUW\ZRXOGDSSHDUWRVXSSRUWWKH

7+(+3:$<

SHUVRQDWWKHKHDULQJ6HQDWRU(YHUHWW'LUNVHQDSSHDUHGDWWKLV
SDUWLFXODUKHDULQJDQGVXSSRUWHGPH,ZLOOQHYHUIRUJHWKRZKHVDLG
LQKLVJUDYHOO\YRLFHDERXWZKDW,KDGGRQH+HLVULJKWDVUDLQ

7KH3URWRW\SH3URJUDP
,EHJDQWRORRNDWPLOLWDU\ZHDSRQVDFTXLVLWLRQV\VWHPVXVHGE\
RWKHUFRXQWULHVDQGVRPHRIWKHVXFFHVVIXOSURJUDPVRIWKH'2',
OHDUQHGWKDWWKH'HVDXOW&RPSDQ\LQ)UDQFHKDGEHHQDEOHWRGHVLJQ
EXLOGDQGGHOLYHUDSURWRW\SHILJKWHUDLUFUDIWWRWKH)UHQFKPLOLWDU\
IRUDERXWPLOOLRQ,QWKH8QLWHG6WDWHVWKH/RFNKHHGVNXQN
ZRUNVUXQE\.HOOH\-RKQVRQKDGGHOLYHUHGDQXPEHURI
UHFRQQDLVVDQFHDLUFUDIWLQDUHODWLYHO\VKRUWWLPHDQGDWDUHDVRQDEOH
FRVW
,GLVFXVVHGWKHVHSURJUDPVZLWK'U-RKQ)RVWHUWKH3HQWDJRQ
V
KHDGRIUHVHDUFKDQGHQJLQHHULQJ%DUU\6KLOOLWRWKHDVVLVWDQW
VHFUHWDU\RIWKHQDY\DQGDQXPEHURIRWKHUSHRSOHDQG,
FRQFOXGHGWKDWDSURWRW\SHSURJUDPVKRXOGEHVHWXSWRSURGXFHWZR
SURWRW\SHILJKWHUSODQHVDQGDQXPEHURIRWKHULWHPV:HJRWPL[HG
XSDELWE\GHVFULELQJWKHSURWRW\SHSURJUDPE\WKHSKUDVH)O\
EHIRUH\RXEX\EHFDXVH\RXFDQQRWGRH[DFWO\WKDWZLWKRXW
VWUHWFKLQJRXWWKHSURJUDPIDUWRRORQJ
,ZDQWHGWREXLOGWZRSURWRW\SHILJKWHUSODQHVDQGXVHWKHSURWRW\SH
V\VWHPRQDQXPEHURIRWKHUSURMHFWV&RQJUHVVZDQWHGXVWRWDNH
WKHPRQH\IRUWKHSURWRW\SH

'$9,'3$&.$5'

SURJUDPRXWRIWKHRYHUDOOEXGJHWWKH\KDGDSSURYHG,UHVLVWHG
EHFDXVHRIWKHVXEVWDQWLDOFXWVHDFKVHUYLFHKDGDOUHDG\WDNHQ
&RQJUHVVILQDOO\DOORZHGPHWRKDQGOHWKHSURJUDPWKHZD\,WKRXJKW
EHVW:HJDYH0F'RQDOG'RXJODVRQHFRQWUDFWDQGWKH\SURGXFHGD
SURWRW\SHSODQHWKH)1RUWKUXSJRWWKHRWKHUFRQWUDFWIRUD
SURWRW\SHSODQHWKH)
7KH)KDVEHFRPHWKHEHVWDLUIRUFHILJKWHUSODQHDQGWKH
)UHQDPHGWKH)KDVEHFRPHWKHEHVWQDY\ILJKWHU

5HOLDELOLW\
%H\RQGRXUSURFXUHPHQWGLIILFXOWLHVWKHUHZDVDVHULRXVSUREOHP
ZLWKWKHUHOLDELOLW\RIWKHYDFXXPWXEHHTXLSPHQWXVHGRQDOORIRXU
SODQHV7KH)ZKLFKDWWKHWLPHZDVRXUEHVWILJKWHUSODQHKDGD
PHDQWLPHEHWZHHQIDLOXUHPHDVXUHGLQGD\V,Q9LHWQDPWKDWPHDQW
DQ)FRXOGIO\RQO\DIHZVRUWLHVEHIRUHJRLQJLQIRUUHSDLU7KLV
SUREOHPZDVVROYHGZKHQZHXVHGODUJHVFDOHLQWHJUDWHGFLUFXLWVD
IHZ\HDUVODWHU

7KH-RLQW&KLHIVDQG8QLILHG&RPPDQG
,UHDOO\GLGQRWNQRZYHU\PXFKDERXWKRZWKH'2'ZDVPDQDJHG
EXW,VRRQUHDOL]HGWKDWLQIDFWLWKDG

7+(+3:$<

EHHQPDQDJHGE\DFRPPLWWHHWKH-RLQW&KLHIV,QWKHRU\WKHIRXU
VHUYLFHVDFTXLUHGWKHZHDSRQVDQGWUDLQHGWKHIRUFHV7KHVHUYLFHV
WKHQSURYLGHGWKHZHDSRQVDQGIRUFHVIRUFRPEDWWRWKH6SHFLILHG
DQG8QLILHG&RPPDQGV7KHPRVWLPSRUWDQW6SHFLILHG&RPPDQGZDV
WKH6WUDWHJLF)RUFH&RPPDQGXQGHU*HQHUDO&XUWLV/H0D\ZLWKLWV
KHDGTXDUWHUVDW2PDKD1HEUDVNDDQGLWV1XFOHDU&RPPDQG3RVWLQ
&KH\HQQH0RXQWDLQDW&RORUDGR6SULQJV%HFDXVH*HQHUDO/H0D\
ZDVDIRUFHIXOOHDGHUWKLVFRPPDQGZRUNHGZHOO
7KH8QLILHG&RPPDQGVZHUHLQDEDGVWDWHEHFDXVHHDFKVHUYLFH
GHFLGHGZKHUHWRVWDWLRQLWVZHDSRQVDQGIRUFHVDQGWKH8QLILHG
&RPPDQGHUKDGOLWWOHWRVD\DERXWWKHLUSODFHPHQW,QDGGLWLRQWR
WKDWWKHVHUYLFHVSDLGOLWWOHDWWHQWLRQWRKRZWKHLUIRUFHVZRUNHGZLWK
WKHIRUFHVRIWKHRWKHUVHUYLFHV7KHPDULQHV
UDGLRHTXLSPHQWFRXOG
QRWFRPPXQLFDWHZLWKWKHQDY\
VUDGLRHTXLSPHQW7KHDLUIRUFHKDG
DIOHHWRI%ERPEHUVVWDWLRQHGRQ*XDP:KHQWKHVH%VZHUH
FDOOHGLQWRERPELQ&DPERGLDWKH\GLGQRWKDYHDVHFXUHUDGLR
FKDQQHOVRWKH9LHW&RQJNQHZZKHUHWKHERPEHUVZRXOGVWULNH
ZKHQWKH\OHIW*XDPDQGWKHVHUDLGVZHUHHVVHQWLDOO\ZRUWKOHVV
,GLGQRWOHDUQDERXWDOORIWKHVHW\SHVRISUREOHPVGXULQJWKHWKUHH
\HDUV,ZDVDWWKH3HQWDJRQEXW,OHDUQHGHQRXJKWRUHDOL]HWKDWD
PDMRUFKDQJHKDGWREHPDGH,DOVROHDUQHGWKDWWKLVLVZKDW
3UHVLGHQW(LVHQKRZHUPHDQWLQKLVIDUHZHOODGGUHVVZKHQKHZDUQHG
RIWKHGDQJHURIWKHPLOLWDU\LQGXVWULDOFRPSOH[7KHPLOLWDU\
VHUYLFHVKDGWRRPXFKSROLWLFDO

'$9,'3$&.$5'

SRZHUDQGKHFRXOGQRWPDNHWKHFKDQJHVQHFHVVDU\WRUHGXFHWKDW
SRZHUZKHQKHZDVLQRIILFH$IWHUOHDYLQJP\SRVWDVGHSXW\
VHFUHWDU\,VHUYHGRQVHYHUDOFRPPLVVLRQVIRUWKH'HIHQVH
'HSDUWPHQWPRVWUHFHQWO\DVFKDLUPDQRIWKH%OXH5LEERQ
&RPPLVVLRQRQ'HIHQVH0DQDJHPHQWIRU3UHVLGHQW5HDJDQ:H
ZRUNHGFORVHO\ZLWK6HQDWRUV%DUU\*ROGZDWHUDQG'RQ1LFNHOVLQ
JHWWLQJWKHFKDLUPDQRIWKH-RLQW&KLHIVWREHWKHVROHXQLIRUPHG
RIILFHUWREHDGYLVHUWRWKHSUHVLGHQWRQQDWLRQDOVHFXULW\LVVXHV
,W
VP\EHOLHIDQGPDQ\PLOLWDU\DQDO\VWVKDYHDJUHHGZLWKPHWKDW
RXUVXFFHVVLQWKH*XOI:DUZDVGLUHFWO\DWWULEXWDEOHWRWKHFOHDU
FKDLQRIFRPPDQGIURP3UHVLGHQW%XVKWR&KDLUPDQ&ROLQ3RZHOO
DQGLQWXUQWR*HQHUDO1RUPDQ6FKZDU]NRSIDQGKLVVXERUGLQDWH
FRPPDQGHUV
%HIRUH,ZHQWWR:DVKLQJWRQHYHQWKHSHRSOHZKRHQFRXUDJHGPHWR
JRZDUQHGPHWKDWDFDUHHULQEXVLQHVVZRXOGLOOSUHSDUHPHIRUWKH
IUXVWUDWLRQVRIJRYHUQPHQWEXUHDXFUDF\$QGWKH\ZHUHULJKW$WWKH
WLPH,FRPPHQWHGWKDWZRUNLQJZLWKWKH:DVKLQJWRQEXUHDXFUDF\
ZDVOLNHSXVKLQJRQRQHHQGRIDIRUW\IRRWURSHDQGWU\LQJWRJHW
WKHRWKHUHQGWRGRZKDW\RXZDQW
7KH:DVKLQJWRQ\HDUVZHUHDOVRKDUGRQWKHIDPLO\,QWKHILUVWIHZ
ZHHNV/XFLOHORVWVL[WHHQSRXQGV$VVKHVDLGDWWKHWLPH(DFK
PRUQLQJZKHQ,WXUQHGRQWKHUDGLRWKH\
GEHVD\LQJVRPHWKLQJ
WHUULEOHDERXW\RXDQGWKDWVSRLOHGEUHDNIDVW7KHQDWQRRQZKHQ,
G
OLVWHQ

7+(+3:$<

DJDLQLWZRXOGEHZRUVHDQGWKDWVSRLOHGOXQFK7KHQ\RX
GJHW
KRPHDQGWHOOPHZKDWDQDZIXOGD\\RX
GKDGDQGWKDWVSRLOHG
GLQQHU6RZKHQZDV,VXSSRVHGWRHDW"
%XWDIWHUDZKLOHVKHMXVWVWRSSHGOLVWHQLQJWRWKHUDGLR
%\WKHHQGRIDIWHUWKUHH\HDUVLQ:DVKLQJWRQ,KDQGHGLQP\
UHVLJQDWLRQDQGUHWXUQHGWR&DOLIRUQLD'XULQJWKDWWLPH+3VWRFNKDG
LQFUHDVHGLQYDOXHDQG,HVWLPDWHGWKDW,
GJLYHQDZD\DERXW
PLOOLRQ
,FRQWLQXHGWRVHUYHRQVHYHUDOGHIHQVHUHODWHGJURXSVRYHUWKH
\HDUVRIWHQZLWKJRRGHIIHFW,QWKHHQG,ZDVZHOOSOHDVHGDWWKH
VXFFHVVZHKDGHQMR\HGLQDSSO\LQJVRXQGPDQDJHPHQWSULQFLSOHVDW
'2'/RRNLQJEDFNWRGD\,IHHOWKDW0HO/DLUG
VWHDPFRQWULEXWHGWR
DSRVLWLYHFKDQJHLQ86PLOLWDU\FDSDELOLW\%XWWKHUHLVDGHILQLWH
OLPLWWRWKHH[WHQWWKDWFLYLOLDQFULWHULDFDQEHDSSOLHGWRWKHPLOLWDU\
0LOLWDU\RIILFHUVRSHUDWHXQGHUWKHVWULFWHVWVWDQGDUGVRIFRQGXFW
7KH\NQRZWKDWFKRRVLQJDPLOLWDU\FDUHHUPHDQVFRPPLWWLQJWKHLU
OLYHVWRWKHLUFRXQWU\7KH\DUHUHVSRQVLEOHRQWKHEDWWOHILHOGNQRZLQJ
WKHLUIDLOXUHPD\PHDQQRWRQO\ORVVRIWKHEDWWOHEXWWKHORVVRID
ZDURUHYHQWKHORVVRIWKHLUFRXQWU\7KHLUUHZDUGLVWKHUHFRJQLWLRQ
WKDWWKH\SHUIRUPHGWKHLUGXW\ZLWKKRQRU,IWKH\IDLOWKH\DUH
UHOLHYHGRIWKHLURSHUDWLRQDOGXWLHVDQGUHOHJDWHGWRDQRWKHUSRVW

'$9,'3$&.$5'

5HWXUQWR+3
:KHQ,JRWEDFNWR&DOLIRUQLD,UHVXPHGP\SRVLWLRQDVFKDLUPDQRI
WKHERDUGDW+3DQG%LOO+HZOHWWFRQWLQXHGDVFKLHIH[HFXWLYHDUROH
KHKDGILOOHGVLQFH,
GOHIWIRU:DVKLQJWRQ,DOVRDJUHHGWRVHUYHDV
KHDGRI3UHVLGHQW1L[RQ
VUHHOHFWLRQFDPSDLJQLQ&DOLIRUQLDDWDVN
WKDWRFFXSLHGDJUHDWGHDORIP\WLPHIRUWKH\HDUDIWHUP\UHWXUQ
IURP:DVKLQJWRQ
2YHUWKH\HDUV+HZOHWW3DFNDUGSHRSOHKDYHVHUYHGQRWRQO\
FRPPXQLW\RUJDQL]DWLRQVDQGJRYHUQPHQWERGLHVEXWDOVRLQGXVWU\
DQGSURIHVVLRQDODVVRFLDWLRQV(DUOLHU,GHVFULEHGWKHFUHDWLRQLQ
RIZKDWZDVNQRZQDVWKH:HVW&RDVW(OHFWURQLFV
0DQXIDFWXUHUV$VVRFLDWLRQ :&(0$ ,WZDVERUQODUJHO\RXWRI
IUXVWUDWLRQ:HVW&RDVWILUPVZHUHUHFHLYLQJRQO\DVPDOOIUDFWLRQRI
:RUOG:DU,,FRQWUDFWVFRPLQJRXWRI:DVKLQJWRQ7KHUHZHUHRWKHU
SUREOHPVWREHDGGUHVVHGDVZHOODQGZKHQWKHZDUHQGHG:&(0$
FRQWLQXHGWRJURZDQGWREHDQLQFUHDVLQJO\HIIHFWLYHYRLFHIRUWKH
LQGXVWU\
%LOO+HZOHWWDQG,VHUYHGDQGVLQFHWKHQYLUWXDOO\HYHU\+3RIILFHU
KDVEHHQLQYROYHGDWRQHWLPHRUDQRWKHULQWKHXSSHUHFKHORQVRI
WKHJURXS,WLVQRZDQDWLRQDORUJDQL]DWLRQNQRZQDVWKH$($
$PHULFDQ(OHFWURQLFV$VVRFLDWLRQ 7KHQHHGIRUWKH$($DQGVLPLODU
RUJDQL]DWLRQVLVXQGHUVFRUHGE\DQLPSRUWDQWFKDUDFWHULVWLFRIWKH
HOHFWURQLFVDQGFRPSXWHULQGXV

7+(+3:$<

WULHV7KHLQGXVWULHVFRPSULVHOLWHUDOO\WKRXVDQGVRIVPDOOEXVLQHVVHV
PRVWRIWKHPWRRVPDOOWRKDYHWKHLUYRLFHVKHDUGRUWKHLURSLQLRQV
FRQVLGHUHG7KH\QHHGWREDQGWRJHWKHUWRDGGUHVVFRPPRQ
SUREOHPVDQGFRQFHUQVWRGHYHORSLQGXVWU\YLHZVDQGSRVLWLRQVRQ
LPSRUWDQWLVVXHVDQGWRKHOSVKDSHJRYHUQPHQWLQWHUDFWLRQZLWKWKH
LQGXVWU\

3KLODQWKURS\
*RRGFRUSRUDWHFLWL]HQVKLSLQFOXGHVDFRPPLWPHQWWRSURYLGLQJVRPH
PHDVXUHRIILQDQFLDOVXSSRUWWRQHHG\DQGGHVHUYLQJRUJDQL]DWLRQVLQ
RXUVRFLHW\&RUSRUDWHSKLODQWKURS\DOWKRXJKQRZZLGHVSUHDGLVD
UHODWLYHO\UHFHQWGHYHORSPHQW%HIRUHLWKDGQRWEHHQFOHDUO\
HVWDEOLVKHGWKDWDEXVLQHVVFRUSRUDWLRQKDGWKHDXWKRULW\WRPDNH
FKDULWDEOHJLIWV$ERXWWKDWWLPHKRZHYHUVRPHHQOLJKWHQHG
EXVLQHVVOHDGHUVEHJDQWRPDNHFKDULWDEOHFRQWULEXWLRQVWRSULYDWH
LQVWLWXWLRQVLQFOXGLQJPDQ\XQLYHUVLWLHV6XFKFRQWULEXWLRQVZHUH
FKDOOHQJHGLQDOHJDODFWLRQWKDWZHQWWRWKH6XSUHPH&RXUW,Q
WKH&RXUWUXOHGWKDWIRUSURILWFRUSRUDWLRQVGLGLQGHHGKDYHWKH
DXWKRULW\WRPDNHFKDULWDEOHJLIWVZKHQWKHJLIWZRXOGDGYDQFHWKH
JHQHUDOLQWHUHVWVRIWKHFRUSRUDWLRQDQGLWVVKDUHKROGHUV$OVRWKH
86WD[ODZVZHUHFKDQJHGWRDOORZWKHGHGXFWLRQRIFKDULWDEOH
FRQWULEXWLRQVXSWRSHUFHQWRISURILWEHIRUHWD[HV6LQFHWKHQWKH
OHYHORIFRUSRUDWHJLYLQJLQWKH8QLWHG6WDWHVKDVULVHQGUDPDWLFDOO\
DQGQRZH[FHHGVELOOLRQD\HDU

'$9,'3$&.$5'

-XOLH3DFNDUGDQG'DYH3DFNDUGLQDWWKHRSHQLQJRIWKH
0RQWHUH\%D\$TXDULXPRQHRIWKHLQWHUHVWVRIWKH3DFNDUGIDPLO\
IRXQGDWLRQ

7+(+3:$<

+HZOHWW3DFNDUGLVDPRQJWKHPRVWJHQHURXVFRUSRUDWLRQVZLWK
JUDQWVRIPRQH\DQGHTXLSPHQWLQDPRXQWLQJWRPLOOLRQ
&RQWULEXWLRQVDUHGLUHFWHGIRUWKHPRVWSDUWE\FRPPLWWHHVRI
HPSOR\HHYROXQWHHUV6RPHHTXLSPHQWJUDQWVLQFOXGHDFRPELQDWLRQ
RISURGXFWVDQGHPSOR\HHYROXQWHHUVLQWKHVDOHVDQGVXSSRUW
RUJDQL]DWLRQVDUHFULWLFDOWRHQVXULQJWKHHTXLSPHQWLVFRQILJXUHG
LQVWDOOHGDQGRSHUDWHGSURSHUO\WRVDWLVI\WKHQHHGVRIUHFLSLHQW
RUJDQL]DWLRQV*UDQWVRIHTXLSPHQWDUHPDGHWRILOOVSHFLILF
ZHOOGHILQHGQHHGV
7KHZRUGSKLODQWKURS\LVGHULYHGIURPD*UHHNZRUGWKDWPHDQV
ORYHURIPDQNLQG3ULYDWHHQGHDYRUVIRUWKHEHQHILWRIVRFLHW\KDYH
H[LVWHGVLQFHDQFLHQWWLPHV8QUHODWHGWRWKHFRUSRUDWHSKLODQWKURS\
RIWKH+HZOHWW3DFNDUG&RPSDQ\DUHWKHSKLODQWKURSLFIRXQGDWLRQ
HVWDEOLVKHGE\P\ODWHZLIHDQGPHLQDQGWKH:LOOLDPDQG
)ORUD+HZOHWW)RXQGDWLRQLQFRUSRUDWHGLQ
7KHUHDUHFRXQWOHVVZD\VLQZKLFKDEXVLQHVVHQWHUSULVHDVD
FRUSRUDWHERG\DQGWKURXJKWKHLQGLYLGXDOHIIRUWVRILWVSHRSOHFDQ
PDNHLPSRUWDQWFRQWULEXWLRQVWRLWVFRPPXQLW\DQGWRWKHODUJHU
VRFLHW\LQZKLFKLWRSHUDWHV7KHEHWWHUPHQWRIRXUVRFLHW\LVQRWD
MREWREHOHIWWRDIHZLWLVDUHVSRQVLELOLW\WREHVKDUHGE\DOO

(SLORJXH
:+(1,7+,1.2)WKHSKHQRPHQDOJURZWKRIWKHHOHFWURQLFVLQGXVWU\
RYHUWKHODVWILIW\\HDUV,UHDOL]HKRZIRUWXQDWH%LOO+HZOHWWDQG,
ZHUHWREHLQRQWKHJURXQGIORRU%XWLWUHPLQGVPHRIDVWRU\,OLNH
WRWHOORQP\VHOI,QP\VRSKRPRUH\HDUDW6WDQIRUG,WRRNDFRXUVH
LQ$PHULFDQKLVWRU\DQGKDGWKHRSSRUWXQLW\WRVWXG\WKHZHVWZDUG
PRYHPHQWEHJLQQLQJZLWKWKHHDUO\SLRQHHUVDQGFRQWLQXLQJ
WKURXJKRXWWKHQLQHWHHQWKFHQWXU\,UHPHPEHUODPHQWLQJWKDW,KDG
EHHQERUQRQHKXQGUHG\HDUVWRRODWHWKDWDOOWKHIURQWLHUVKDGEHHQ
FRQTXHUHGDQGWKDWP\JHQHUDWLRQZRXOGEHGHSULYHGRIWKH
SLRQHHULQJRSSRUWXQLWLHVRIIHUHGRXUIRUHEHDUV%XWLQIDFWZHZHQW
RQWRPDNHEUHDWKWDNLQJDGYDQFHVLQWKHWZHQWLHWKFHQWXU\
'XULQJWKLVFHQWXU\VFLHQFHEHFDPHWKHGRPLQDWLQJIDFWRULQWKH
SURJUHVVRIWKHZRUOG7KHUHZHUHWZRZRUOGZDUVWKDWWRRNWKHOLYHV
RIPLOOLRQVRISHRSOH%XWDWWKHHQGRIWKHFHQWXU\WKHUHLVDUHDO
SURVSHFWWKDWWKHUHZLOOEHQRPRUHZRUOGZDUVDOWKRXJKLWVHHPV

'$9,'3$&.$5'

WKDWWKHVHQVHOHVVNLOOLQJRISHRSOHLQQXPHURXVUHOLJLRXVDQGHWKQLF
JURXSVZLOOFRQWLQXHIRUVRPHWLPH
,QWKHWZHQWLHWKFHQWXU\ZHKDYHH[SHULHQFHGGL]]\LQJSURJUHVV
PRVWRILWIRXQGHGRQVFLHQWLILFSULQFLSOHVHVWDEOLVKHGRYHUPDQ\
\HDUVLQWKHSDVW7KLVVFLHQFHODUJHO\LQSODFHE\WKHHQGRIWKH
QLQHWHHQWKFHQWXU\ZDVEDVHGRQWKHFRQFHSWWKDWWKHDWRPZDVWKH
VPDOOHVWSDUWLFOHLQWKHXQLYHUVHDQGWKDWLWVVWUXFWXUHFRQVLVWHGRID
QXFOHXVRISURWRQVDQGQHXWURQVVXUURXQGHGE\ULQJVRIHOHFWURQV
)URPWKLVFRQFHSWWKHSHULRGLFWDEOHVZHUHFRQVWUXFWHGDQGWKHDWRP
ERPEGHYHORSHG
$WWKHHQGRI:RUOG:DU,,ZHDQGRXUDOOLHVDQGWKH6RYLHW8QLRQ
HPEDUNHGRQDPDVVLYHSURJUDPRIKLJKHQHUJ\SK\VLFVLQWKHTXHVW
WRVHFXUHPLOLWDU\DGYDQWDJH1HLWKHUVLGHHYHUDFKLHYHGWKLVJRDO
EXWLQWKHSURFHVVLWZDVGLVFRYHUHGWKDWWKHDWRPZDVQRWWKH
VPDOOHVWSDUWLFOHLQWKHXQLYHUVHEXWWKDWWKHDWRPLWVHOIFRQWDLQHG
WHQVPDOOHUSDUWLFOHVZLWKZHDNIRUFHVDQGVWURQJIRUFHVWKDWGLGQRU
REH\WKH1HZWRQLDQODZVRIJUDYLW\8VLQJWKHROGQRWLRQRIWKH
DWRPZHFRXOGVLPXODWHPDWHULDOVWKDWRFFXUUHGLQQDWXUHVXFKDV
GLDPRQGV%XWZLWKWKHQHZXQGHUVWDQGLQJRIWKHDWRPZHFDQ
FUHDWHPDWHULDOVWKDWGRQRWRFFXULQQDWXUHPDWHULDOVWKDWDUH
KDUGHUWKDQGLDPRQGVJODVVWKDWLVGXFWLOH7KLVGLVFRYHU\KDV
XQOHDVKHGWKHZKROHQHZILHOGRIJHQHWLFHQJLQHHULQJRIIHULQJD
ZKROHQHZZRUOGRIVFLHQWLILFRSSRUWXQLW\(YHU\ZKHUH,ORRN,VHH
WKHSRWHQWLDOIRUJURZWKIRUGLVFRYHU\IDUJUHDWHUWKDQDQ\WKLQJZH
KDYHVHHQLQWKHWZHQWLHWKFHQWXU\
([SRQHQWLDOJURZWKLVEDVHGRQWKHSULQFLSOHWKDWWKH

7+(+3:$<

VWDWHRIFKDQJHLVSURSRUWLRQDOWRWKHOHYHORIHIIRUWH[SHQGHG7KH
OHYHORIHIIRUWZLOOEHIDUJUHDWHULQWKHWZHQW\ILUVWFHQWXU\WKDQLW
KDVEHHQLQWKHWZHQWLHWKFHQWXU\+HZOHWW3DFNDUG&RPSDQ\LVD
JRRGFDVHLQSRLQW,WWRRNIRUW\\HDUVIRUWKHFRPSDQ\%LOO+HZOHWW
DQG,VWDUWHGLQWRUHDFKRQHELOOLRQGROODUVLQDQQXDOVDOHVDQG
DPDMRUSDUWRIWKDWZDVIURPLQIODWLRQ,QWKHILVFDO\HDUWKDW
HQGHGODVW2FWREHUZHEHJDQWKH\HDUZLWKWZHQW\ELOOLRQGROODUVLQ
ZRUOGZLGHVDOHVDQGDGGHGILYHELOOLRQWRWKDWE\\HDU
VHQG7KLV
RFFXUUHGZLWKHVVHQWLDOO\QRLQIODWLRQ2WKHUWHFKQRORJ\FRPSDQLHV
KDYHVKRZQVLPLODUJURZWK
-XVWDVLWKDVLQWKHSDVWRXUJURZWKLQWKHIXWXUHZLOOFRPHIURP
QHZSURGXFWV,QZHVSHQWWZRELOOLRQGROODUVLQQHZSURGXFW
GHYHORSPHQW%HJLQQLQJLQZHJHQHUDWHGDWOHDVWVL[GROODUVRI
SURILWVSUHDGRYHUILYHRUVL[\HDUVIRUHYHU\GROODUVSHQWRQQHZ
SURGXFWGHYHORSPHQW%\QHZSURGXFWV,PHDQSURGXFWVWKDWPDNH
UHDOFRQWULEXWLRQVWRWHFKQRORJ\QRWSURGXFWVWKDWFRS\ZKDW
VRPHRQHHOVHKDVGRQH7KLVPXVWEHRXUVWDQGDUGLQWKHIXWXUHMXVW
DVLWKDVEHHQLQWKHSDVW
5HFHQWO\WKHUHKDVEHHQPXFKGLVFXVVLRQDERXWGHYHORSLQJDQ
LQIRUPDWLRQVXSHUKLJKZD\7KLVFDQEHDFFRPSOLVKHGZLWKSURGXFWV
DQGWHFKQRORJ\DOUHDG\LQSODFH7KHWZHQW\ILUVWFHQWXU\KRZHYHU
ZLOOEHPXFKPRUHWKDQDQLQIRUPDWLRQDJH,WZLOOEHDQDJHLQZKLFK
PDQ\NLQGVRIQHZSURGXFWVFRQWULEXWHWRDEHWWHUOLIHIRUDOORIWKH
SHRSOHLQWKHZRUOG2XUFRPSDQ\ZLOOZRUNKDUGWRFRQWULEXWHLWV
VKDUH

$SSHQGL[
+LVWRULFDO+LJKOLJKWVRI+HZOHWW3DFNDUG&RPSDQ\

'DYHDQG/XFLOH3DFNDUGPRYHGLQWRKRXVHDW$GGLVRQ$YHQXH
3DOR$OWR&DOLIRUQLD%LOO+HZOHWWUHQWHGFRWWDJHEHKLQGWKHKRXVH
DQG%LOODQG'DYHEHJDQSDUWWLPHZRUNLQWKHJDUDJHZLWK

3DUWQHUVKLSIRUPHG-DQXDU\FRLQWRVVGHFLGHGFRPSDQ\
QDPH

0RYHGIURPJDUDJHWRUHQWHGEXLOGLQJQH[WWR7LQNHU%HOO
V)L[LW
6KRSDWWKHFRUQHURI3DJH0LOO5RDGDQG(O&DPLQR5HDO3DOR$OWR
6DOHVHPSOR\HHVSURGXFWV

&RQVWUXFWHGILUVW+3RZQHGEXLOGLQJ3DJH0LOO5RDG3DOR$OWR
5HGZRRG%XLOGLQJ 

'$9,'3$&.$5'


,QFRUSRUDWHG$XJXVW,
6DOHVHPSOR\HHV

6DOHVPLOOLRQHPSOR\HHV

)LUVWSXEOLFVWRFNRIIHULQJ1RYHPEHU
+3FRUSRUDWHREMHFWLYHVZULWWHQ
+3EHJDQPDQXIDFWXULQJLQLWVILUVWEXLOGLQJLQ6WDQIRUG,QGXVWULDO
3DUN3DOR$OWR

+3
VILUVWDFTXLVLWLRQ)/0RVHOH\&RPSDQ\RI3DVDGHQD
&DOLIRUQLDSURGXFHURIKLJKTXDOLW\JUDSKLFUHFRUGHUV
6DOHVPLOOLRQHPSOR\HHVSURGXFWV

(VWDEOLVKHGSUHVHQFHRYHUVHDVZLWK(XURSHDQPDUNHWLQJ
RUJDQL]DWLRQLQ*HQHYD6ZLW]HUODQGDQGILUVWPDQXIDFWXULQJSODQW
RXWVLGH3DOR$OWRLQ%REOLQJHQ:HVW*HUPDQ\

(VWDEOLVKHGILUVW86PDQXIDFWXULQJSODQWRXWVLGH3DOR$OWRLQ
/RYHODQG&RORUDGR

(QWHUHGPHGLFDOILHOGZLWKSXUFKDVHRI6DQERUQ&RPSDQ\:DOWKDP
0DVVDFKXVHWWV
/LVWHGRQ1HZ<RUNDQG3DFLILF6WRFN([FKDQJHV

7+(+3:$<


)LUVW+3OLVWLQJRQ)RUWXQHPDJD]LQH
VOLVWRIWKHODUJHVW86
LQGXVWULDOFRUSRUDWLRQVQR

)LUVWMRLQWYHQWXUH ZLWK<RNRJDZD(OHFWULF:RUNV 
<RNRJDZD+HZOHWW3DFNDUG7RN\R-DSDQ

7ZHQW\ILIWKDQQLYHUVDU\\HDU
'DYH3DFNDUGHOHFWHGFKDLUPDQ%LOO+HZOHWWHOHFWHGSUHVLGHQW

+3HQWHUHGWKHDQDO\WLFDOLQVWUXPHQWDWLRQILHOGZLWKWKHDFTXLVLWLRQ
RI) 06FLHQWLILF&RUSRUDWLRQ$YRQGDOH3HQQV\OYDQLD
6DOHVPLOOLRQHPSOR\HHV

+3/DERUDWRULHVIRUPHG7KHFRPSDQ\
VFHQWUDOUHVHDUFKIDFLOLW\LW
LVRQHRIWKHZRUOG
VOHDGLQJHOHFWURQLFVLQGXVWU\UHVHDUFKFHQWHUV

'DYH3DFNDUGDSSRLQWHG86GHSXW\VHFUHWDU\RIGHIHQVH VHUYHG
WKURXJK 

6DOHVPLOOLRQHPSOR\HHV

'$9,'3$&.$5'


-RKQ<RXQJQDPHG+3SUHVLGHQW DSSRLQWHG&(2LQ 

6DOHVELOOLRQHPSOR\HHV

+3/DERUDWRULHVRSHQHGUHVHDUFKIDFLOLW\LQ%ULVWRO(QJODQG
6DOHVELOOLRQHPSOR\HHV

%LOO+HZOHWWUHWLUHGDVYLFHFKDLUPDQRIWKHERDUGRIGLUHFWRUV
:DOWHU+HZOHWW VRQRI%LOO DQG'DYLG:RRGOH\3DFNDUG VRQRI
'DYH HOHFWHGWRWKHERDUGRIGLUHFWRUV

6XUSDVVHGELOOLRQLQRUGHUVIRUWKHILUVWWLPH
+3OLVWHGRQ7RN\RVWRFNH[FKDQJHILUVWOLVWLQJRXWVLGHWKH8QLWHG
6WDWHV
+3PRYHGLQWRWRSRQ)RUWXQHOLVWLQJQR

)LIWLHWKDQQLYHUVDU\\HDU
+3OLVWHGRQIRXU(XURSHDQVWRFNH[FKDQJHV/RQGRQ=ULFK3DULV
DQG)UDQNIXUW
$FTXLUHG$SROOR&RPSXWHU&KHOPVIRUG0DVVDFKXVHWWVZRUNVWDWLRQ
PDQXIDFWXUHU

+3/DERUDWRULHVRSHQHGUHVHDUFKIDFLOLW\LQ7RN\R-DSDQ
6DOHVELOOLRQHPSOR\HHV

7+(+3:$<


/HZ3ODWWQDPHG+3SUHVLGHQWDQG&(2

'DYH3DFNDUGUHWLUHGDVFKDLUPDQRIWKHERDUGRIGLUHFWRUV
/HZ3ODWWQDPHGFKDLUPDQSUHVLGHQWDQGFKLHIH[HFXWLYHRIILFHU
6KLSSHGWHQPLOOLRQWK+3/DVHU-HWSULQWHU
6DOHVELOOLRQHPSOR\HHV

6DOHVELOOLRQHPSOR\HHV
'RQDWHGPRUHWKDQPLOOLRQWRHGXFDWLRQDQGRWKHUQRQSURILW
RUJDQL]DWLRQV

,QWKH+3JDUDJH IDUOHIW ZDVGHVLJQDWHGD&DOLIRUQLD6WDWH


+LVWRULFDO/DQGPDUNDVWKHELUWKSODFHRI6LOLFRQ9DOOH\%LOO+HZOHWW
DQG'DYH3DFNDUGDWWKHGHGLFDWLRQFHUHPRQ\

$SSHQGL[
3URGXFW,QQRYDWLRQDW+3
:KHQLQWURGXFHGHDFKRIWKHLQYHQWLRQVOLVWHGEHORZUHSUHVHQWHGD
PDMRUDGYDQFHPHQWLQVWDWHRIWKHDUWWHFKQRORJ\:KLOHE\QR
PHDQVDOOLQFOXVLYHWKHOLVWFRQYH\VWKHSDFHDWZKLFKWHFKQRORJ\
HYROYHGDQGDGYDQFHGLQWKHODVWILIW\IRXU\HDUVDQGWKHDJLOLW\ZLWK
ZKLFK+HZOHWW3DFNDUG&RPSDQ\ZDVDEOHWRUHDFWWRQHZ
WHFKQRORJLFDORSSRUWXQLWLHV

%LOO+HZOHWW
V6WDQIRUGVWXG\RIQHJDWLYHIHHGEDFNUHVXOWHGLQ+3
V
ILUVWSURGXFWDQDXGLRRVFLOODWRU7KHSULQFLSOHRIIHHGEDFNSURYLGHG
WKHIRXQGDWLRQIRURWKHUHDUO\+3SURGXFWVVXFKDVDKDUPRQLFZDYH
DQDO\]HUDQGVHYHUDOGLVWRUWLRQDQDO\]HUV

+3ILUVWHQWHUHGWKHPLFURZDYHILHOGZLWKVLJQDOJHQHUDWRUV
GHYHORSHGIRUWKH1DYDO5HVHDUFK/DERUDWRU\DQGDUDGDUMDPPLQJ
GHYLFH$FRPSOHWHOLQHRIPLFURZDYHWHVWSURGXFWVIROORZHG:RUOG
:DU,,5 ':LWKPDQ\FRQWULEXWLRQVLQWKHIUHTXHQF\UDQJH
EHWZHHQDXGLRDQGPLFURZDYH+3EHFDPHWKHDFNQRZOHGJHGOHDGHU
LQVLJQDOJHQHUDWRUV

'$9,'3$&.$5'


7KHPHDVXUHPHQWRIIUHTXHQF\ZDVUHYROXWLRQL]HGE\+3
VDFFXUDWH
DQGHDV\WRXVHKLJKVSHHGIUHTXHQF\FRXQWHU

$Q+3RVFLOORVFRSHZDVWKHILUVWWRXVHQHZVDPSOLQJWHFKQLTXHVWR
YLHZWKHIDVWHUGLJLWDOZDYHIRUPVXVHGLQFRPSXWHUWHFKQRORJ\

7KHFRPPHUFLDODSSOLFDWLRQRIIUHTXHQF\V\QWKHVLVUHVXOWHGLQWKH
ILUVWV\QWKHVL]HUWRJHQHUDWHDQHOHFWULFDOVLJQDODWWKHSUHFLVH
IUHTXHQF\GHVLUHG7KLVSURGXFWWKHUHVXOWRIDFRQFHUWHGWHDP
HIIRUWSURYLGHGDOPRVWXQKHDUGRIUHVROX

+3
VDWRPLFFORFNLVFDUULHGDERDUGD6ZLVVDLUMHWDW.HQQHG\$LUSRUW
LQ1HZ<RUNSULRUWRWDNHRIIIRU6ZLW]HUODQGWRV\QFKURQL]H
LQWHUQDWLRQDOWLPHVWDQGDUGV

7+(+3:$<

WLRQ,WKDGDQDGGHGDGYDQWDJHLQWKDWLWZDVHOHFWULFDOO\
SURJUDPPDEOHDQLPSRUWDQWIHDWXUHLQWKHUDSLGO\GHYHORSLQJZRUOG
RIDXWRPDWHGWHVWLQJ

+3
VPLFURZDYHVSHFWUXPDQDO\]HUZDVWKHILUVWWRPDNH
GLUHFWUHDGLQJFDOLEUDWHGDQDO\VLVRILQGLYLGXDOVLJQDOVZLWKLQD
IUHTXHQF\EDQG

+3LQWURGXFHGLWVILUVWFRPSXWHU,WZDVGHYHORSHGDVDYHUVDWLOH
LQVWUXPHQWFRQWUROOHUIRU+3
VJURZLQJIDPLO\RISURJUDPPDEOHWHVW
DQGPHDVXUHPHQWSURGXFWV7KLVFRPELQDWLRQRIFRPSXWHUDQG
PHDVXUHPHQWWHFKQRORJLHVJDYH+3DFRPSHWLWLYHHGJHWKDWH[LVWVWR
WKLVGD\

1RQLQYDVLYHIHWDOKHDUWUDWHPRQLWRUGHYHORSHGE\+3*PE+LQ
*HUPDQ\KHOSHGEDELHVE\GHWHFWLQJIHWDOGLVWUHVVGXULQJODERU
)RUDQXPEHURI\HDUV+3KDGKDGDQLQWHUHVWLQWKHDFFXUDWH
PHDVXUHPHQWRIIUHTXHQF\DQGWLPHZLWKPRVWRIWKHHIIRUW
H[SHQGHGRQIUHTXHQF\+RZHYHUWKHFRPSDQ\IHOWLWVKRXOGSXUVXH
WKHGHYHORSLQJILHOGRIDWRPLFVWDQGDUGV,Q+3KDGGHYHORSHG
DKLJKO\DFFXUDWHSRUWDEOHFHVLXPEHDPVWDQGDUGDQGE\+3
HQJLQHHUVKDGIORZQWKHLUFORFNVXWLOL]LQJWKLVVWDQGDUGWRHLJKWHHQ
FRXQWULHVWRV\QFKURQL]HLQWHUQDWLRQDOWLPHVWDQGDUGV(YHQWXDOO\
FHVLXPEHDPVWDQGDUGVEHFDPHWKHLQWHUQDWLRQDOVWDQGDUGVIRUWLPH

:RUOG
VILUVWSURJUDPPDEOHVFLHQWLILFGHVNWRSFDOFXODWRULQWURGXFHG
E\+37KHFDOFXODWRUUHDOO\DGHVNWRSFRPSXWHU

'$9,'3$&.$5'

FRPELQHGUHYHUVH3ROLVKQRWDWLRQZLWKDVSHFLDODOJRULWKPWKDWFRXOG
KDQGOHWULJRQRPHWULFDQGORJDULWKPLFIXQFWLRQV+3LQWURGXFHGLWVILUVW
OLJKWHPLWWLQJGLRGHVPDNLQJDVLJQLILFDQWDGYDQFHLQGLVSOD\
WHFKQRORJ\

)LUVWURERWLFVDPSOHLQMHFWRUIRUFKURPDWRJUDSK\DOORZHGVDPSOHVWR
EHDQDO\]HGZKLOHV\VWHPZDVXQDWWHQGHG
+3PDUNHWHGLWVILUVWWLPHVKDUHGRSHUDWLQJV\VWHPRQD
PLQLFRPSXWHUVXSSRUWLQJXSWRVL[WHHQXVHUV

$IXOO\DXWRPDWHGPLFURZDYHQHWZRUNDQDO\]HUZDVLQWURGXFHG,W
EHFDPHDQLQGLVSHQVDEOHWRROIRUWKHGHVLJQDQGPDQXIDFWXUHRI
PLFURZDYHV\VWHPV

:RUNZLWKODVHUVSURGXFHGDODVHULQWHUIHURPHWHUFDSDEOHRI
PHDVXULQJWRPLOOLRQWKVRIDQLQFK7KH+3ODVHULQWHUIHURPHWHULVVWLOO
WKHWRRORIFKRLFHLQFKLSPDQXIDFWXULQJ6LPLODUWHFKQRORJ\SURGXFHG
DODVHULQVWUXPHQWWKDWODWHUUHVXOWHGLQWKHILUVWHOHFWURQLFVXUYH\LQJ
WRROV

+3WRRNVFLHQWLILFFDOFXODWLRQWRWKHKDQGKHOGOHYHO7KH+3
KDQGKHOGFDOFXODWRUZDVDQLQVWDQWVXFFHVVPDNLQJWKHVOLGHUXOH
REVROHWH

+3
VVPDOOJHQHUDOSXUSRVHFRPSXWHUV\VWHPZDVWKHLQGXVWU\
V
ILUVWFRPPHUFLDOO\GLVWULEXWHGGDWDSURFHVVLQJV\VWHP
,QWKHODWHVWKHFRPSDQ\KDGEHJXQWRGHVLJQLQVWUX

7+(+3:$<

PHQWVXVLQJLQWHJUDWHGFLUFXLWVDQG+3HQJLQHHUVVRRQGLVFRYHUHG
WKDWWKHRVFLOORVFRSHZKLFKKDGEHHQFULWLFDOWRDQDORJGHVLJQZDV
GHILFLHQWIRUGLJLWDOORJLFGHVLJQ6R+3GHYHORSHGORJLFDQDO\]HUV
7KH\EHFDPHWKHWRROVRIFKRLFHIRUHQJLQHHUVLQWKHIDVWJURZLQJ
ILHOGRIGLJLWDOHOHFWURQLFV

)LUVWPLQLFRPSXWHUWREHEDVHGRQ.G\QDPLFUDQGRPDFFHVV
VHPLFRQGXFWRUV '5$0V LQVWHDGRIPDJQHWLFFRUHV
7KHILUVW+3GHVNWRSHOHFWURQLFFDOFXODWRULQWURGXFHGLQZDV
SURJUDPPDEOHVWRULQJSURJUDPVRQVPDOOPDJQHWLFFDUGV,Q
+3EXLOWDKDQGKHOGFDOFXODWRUWKDWKDGERWKSURJUDPPDELOLW\DQG
PDJQHWLFFDUGUHDGZULWHFDSDELOLW\,QWHJUDWHGFLUFXLWVJUHDWO\
H[SDQGHGWKHPHPRU\DQGKDUGZDUHFDSDELOLWLHVRIWKHXQLW

+3GHFLGHGWRVLPSOLI\LQVWUXPHQWV\VWHPVE\FUHDWLQJDVWDQGDUG
LQWHUIDFH,QWKHLQGXVWU\DGRSWHGWKH+3,%LQWHUIDFHEXVDVDQ
LQWHUQDWLRQDOVWDQGDUGDOORZLQJRQHRUDQXPEHURILQVWUXPHQWVWR
FRQQHFWHDVLO\WRDFRPSXWHU

+3LQWURGXFHGDPLFURSURJUDPPHGVRIWZDUHSDFNDJHWKDWDOORZHG
WHFKQLFDOFRPSXWHUSURJUDPVVXFKDV)2575$1WRUXQWHQWLPHV
IDVWHU

+3HQJLQHHUVFUHDWHGDQHZFRPSXWHUODQJXDJHFDOOHG(&*&ULWHULD
/DQJXDJH (&/ 2QHRIWKHILUVWDUWLILFLDOLQWHOOLJHQFHV\VWHPVLW
HQDEOHG+3FRPSXWHUV\VWHPVWRDQDO\]HHOHFWURFDUGLRJUDPVLQD
ZD\VLPLODUWRWKDWRIDGRFWRU

'$9,'3$&.$5'


+3LQWURGXFHGIXVHGVLOLFDFDSLOODU\FROXPQVWRVLPSOLI\FKHPLFDO
DQDO\VLVDQGDOORZPRUHFRPSRXQGVWREHDQDO\]HG
$QHZGLRGHDUUD\GHWHFWRUIRUFKHPLFDODQDO\VLVSURYLGHGUDSLG
UHVXOWVE\PHDVXULQJPXOWLSOHZDYHOHQJWKVRIOLJKWVLPXOWDQHRXVO\

$VL[W\IRXUFKDQQHOFDUGLDFXOWUDVRXQGSURGXFWZDVLQWURGXFHG
IDVWHQRXJKWRSURGXFHUHDOWLPHPRYLQJLPDJHVRIWKHKHDUW
EHDWLQJ
+3LQWURGXFHGWKHILUVWODVHUSULQWHUIDVWDQGLQH[SHQVLYHHQRXJKIRU
XVHRXWVLGHDFHQWUDOFRPSXWHUURRP

+3
V1026,,,WHFKQRORJ\SURGXFHGDVLOLFRQFKLSZLWK
WUDQVLVWRUVPRUHWKDQDQ\RWKHUFKLSRQWKHPDUNHWIRUPDQ\\HDUV
WRFRPH

(OHFWURQLFPDLOV\VWHPGHYHORSHGE\+3/WGLQWKH8QLWHG.LQJGRP
ZDVWKHILUVWPDMRUZLGHDUHDFRPPHUFLDOQHWZRUNRILWVNLQGEDVHG
RQPLQLFRPSXWHUV
+3
V6LJQDO'DWD1HWZRUNZDVWKHILUVWWRUHOD\GDWDIDVWHQRXJKWR
DOORZPRQLWRULQJRIWZHQW\IRXUKRVSLWDOEHGVIURPRQHFHQWUDO
VWDWLRQ

7KHUPDOLQNMHWWHFKQRORJ\GHYHORSHGDW+3ZDVLQWURGXFHGLQD
KLJKTXDOLW\ORZSULFHSHUVRQDOSULQWHU
+3LQWURGXFHGWKH+3/DVHU-HWQRZWKHZRUOG
VPRVWSRSXODU
SHUVRQDOGHVNWRSSULQWHU

7+(+3:$<


:RUOG
VILUVWPLFURSURFHVVRUEDVHGQHWZRUNDQDO\]HUDOORZHGXVHUV
WRPDNHIDVWDQGFRQYHQLHQWPDJQLWXGHRUSKDVHUHVSRQVH
PHDVXUHPHQWVLQQHDUUHDOWLPHDFURVVSUHYLRXVO\XQKHDUGRI
IUHTXHQF\UDQJHV

+3ZDVWKHILUVWPDMRUFRPSXWHUFRPSDQ\WRLQWURGXFHDSUHFLVLRQ
DUFKLWHFWXUHEDVHGRQUHGXFHGLQVWUXFWLRQVHWFRPSXWLQJ 5,6& 
%RWK<RNRJDZD+HZOHWW3DFNDUGDQGWKH%REOLQJHQ,QVWUXPHQW
'LYLVLRQLQWURGXFHGVHPLFRQGXFWRUWHVWV\VWHPVWKDWEHFDPHOHDGHUV
LQWKHLQGXVWU\

'LJLWDO0XOWLPHWHUPDGHKLJKIUHTXHQF\KLJKDFFXUDF\DQG
KLJKUHVROXWLRQYROWDJHPHDVXUHPHQWVZLWKRQHLQVWUXPHQW
+31HZ:DYHVRIWZDUHHQYLURQPHQWXVHGDJUDSKLFLQWHUIDFH
PDNLQJFRPSXWHUVHDVLHUWRXVHPHUJLQJGLIIHUHQWW\SHVRIGDWDDQG
DXWRPDWLQJURXWLQHWDVNV
1HZDQLPDWLRQVXSHUZRUNVWDWLRQVKRZHGPRWLRQIRUXVHVVXFKDV
ZHDWKHUIRUHFDVWLQJPHGLFDOLPDJLQJDQGPHFKDQLFDOGHVLJQ
$QDO\]HUDEOHWRPHDVXUHWKHWHUDKHUW]WUDQVPLVVLRQEDQGZLGWKV
GHYHORSHGIRUXVHLQRSWLFDOWHOHFRPPXQLFDWLRQV

+3
VQHZDWRPLFHPLVVLRQGHWHFWRUZDVWKHILUVWDQDO\WLFDO
LQVWUXPHQWFDSDEOHRIGHWHFWLQJDOORIWKHHOHPHQWVLQJDV
FKURPDWRJUDSK\H[FHSWKHOLXP
+3LQWURGXFHG706/ 7HVWDQG0HDVXUHPHQW6\VWHPV

'$9,'3$&.$5'

/DQJXDJH WRVROYHWKHSUREOHPRIKDYLQJWRZULWHVRIWZDUHWR
FRPPXQLFDWHZLWKGLIIHUHQWLQVWUXPHQWVLQDWHVWV\VWHP706/ZDV
RSHQHGDVWKHEDVLVIRUDQHZLQGXVWU\FRPPXQLFDWLRQVVWDQGDUG

$EUHDNWKURXJKLQVHPLFRQGXFWRUWHFKQRORJ\UHVXOWHGLQWKH&026
FKLSJLYLQJKLJKHQGPLQLFRPSXWHUVWKHSRZHURIPDLQIUDPHV
+3HQWHUHGWKHVDPSOHSUHSDUDWLRQILHOGZLWKLWVQHZVXSHUFULWLFDO
IOXLGH[WUDFWRU

7KH+3FRORUVFDQQHUDOORZHGFRPSXWHUVWRUHDGSKRWRJUDSKVDQG
RWKHUYLVXDOLPDJHV
%DVHGRQLQNMHWWHFKQRORJ\+3LQWURGXFHGDSODLQSDSHUFRORU
SULQWHUWRWKHKRPHDQGRIILFHPDUNHW
+3
VSDOPWRSSHUVRQDOFRPSXWHUZDVDEUHDNWKURXJK7KH.3&
ZHLJKVHOHYHQRXQFHVLVWKHVL]HRIDFKHFNERRNDQGLQFRUSRUDWHV
LQIUDUHGZLUHOHVVFRPPXQLFDWLRQFDSDELOLWLHV

+3LQWURGXFHGDLQFKGLVNGULYH7KHZRUOG
VVPDOOHVWGLVNGULYH
WKH.LWW\KDZNSHUVRQDOVWRUDJHPRGXOHZDVGHVLJQHGIRUXVHLQYHU\
VPDOOEDWWHU\SRZHUHGFRPSXWLQJGHYLFHV
$QHZFDUGLRYDVFXODUXOWUDVRXQGV\VWHPSURGXFHGDQLPDJHRID
KHDUWDOORZLQJGRFWRUVWRSHUIRUPQRQLQYDVLYHFDUGLDFDQDO\VLVLQ
UHDOWLPH
7KH2SWLFDO6SHFWUXP$QDO\]HUZDVDQLPSRUWDQWQHZSURGXFWIRU
XVHLQWKHIDVWJURZLQJRSWLFDOFRPPXQLFDWLRQVILHOG

7+(+3:$<

+3
VQHZPRGXODURVFLOORVFRSHZDVLQWURGXFHGWREHXVHGLQWKH
GHVLJQRIKLJKVSHHGGLJLWDOHOHFWURQLFVSURGXFWV

&DSLOODU\HOHFWURSKRUHVLVDQDO\WLFDOV\VWHPRIIHUHGQHZVHSDUDWLRQ
FDSDELOLWLHVIRUELRVFLHQWLVWV
1HWZRUNPRQLWRULQJV\VWHPLQWURGXFHGJLYLQJWHOHFRPSURYLGHUV
UHDOWLPHGDWDRQQHWZRUNSUREOHPV,WDOVRLQFOXGHGLQYHVWLJDWLRQ
DQGGLDJQRVWLFFDSDELOLWLHV
+3LQWURGXFHGWKHVPDOOHVWOLJKWHVWSRUWDEOHSHUVRQDOFRPSXWHURQ
WKHPDUNHW:HLJKLQJOHVVWKDQWKUHHSRXQGVLWUXQVIRUHLJKWKRXUV
RQ$$EDWWHULHV

+3SURGXFHGWKHZRUOG
VEULJKWHVW/('V:LWKEULJKWRXWSXW
UHOLDELOLW\DQGORZSRZHUFRQVXPSWLRQWKH\UHSODFHGLQFDQGHVFHQW
ODPSVLQPDQ\QHZDSSOLFDWLRQV

$SSHQGL[
9LQWDJH&KDUWV

7KHVHJUDSKVUHSUHVHQW+3SURGXFWRUGHUVE\\HDURILQWURGXFWLRQ
(DFKEDULQGLFDWHVWKH\HDU
VWRWDOSURGXFWVRUGHUVZLWK

'$9,'3$&.$5'

WKHWRSVHFWLRQRIHDFKEDUVKRZLQJRUGHUVIRUSURGXFWVLQWURGXFHGLQ
WKDW\HDU
7KHPRVWUHFHQWJUDSKLOOXVWUDWHVWKHNH\UROHQHZSURGXFWVSOD\HGLQ
+3
VJURZWKLQUHFHQW\HDUV
%\FRPSDULVRQWKHHDUOLHUJUDSKVKRZVWKHORQJHYLW\RI+3SURGXFWV
EHIRUHWKHSUHGRPLQDQFHRISHUVRQDOFRPSXWHUVDQGRWKHUGLJLWDO
SURGXFWV

You might also like