Wiss & Company, LLP 354 Eisenhower Parkway Livingston, NJ 07039 Livingston • Iselin • New York

1. Wiss Food Industry GroupCommunity Food Security Coalition / FoodBIN ConferenceOctober 7, 2008by: James T. Duffy Wiss & Company, LLP 354 Eisenhower Parkway Livingston, NJ 07039 Livingston • Iselin • New York www.wiss.com

2. Structuring for Growth Choosing the right entity structure is dependent on many factors • Your vision regarding size/nature of your business • Profit/Loss projections • Likelihood of a public offering • The business’ vulnerability to lawsuits • Tax objectives • Number of investors • Desired management structure • Your need for access to cash out of the business for yourself

3. Entity Structure Choices Corporations • Advantages • Limited liability • Ability to raise capital through sale of stock • May be preferred by many sources of credit • Disadvantages • Set up is more expensive and time consuming • Increased regulatory environment • More formalities (issuing stock certificates, annual meetings, keeping minutes of meetings, electing directors, etc) • Harder to get money out of a corporation • Double taxation on distributions to shareholders • Reasonable compensation standards may limit deductible salaries • No preferential tax rate for capital gains

4. Entity Structure Choices Sole Proprietorship • Advantages • Simple and inexpensive to form • Informal and flexible • Owned and controlled by a single person • Income reported directly on personal income tax return (Schedule C) • Major Disadvantages • Unlimited personal liability • May be at a disadvantage in raising capital • Harder time attracting high-caliber employees • Other vehicles such as single-member LLC are much better in comparison

5. Entity Structure Choices • Partnerships (General, Limited, Limited Liability) • Subchapter S Corporations • Limited Liability Companies (LLC’s) Pass-through Entities

6. Entity Structure Choices • Partnerships • Advantages • Relatively easy to establish • More than one owner helps ability to raise capital • Prospective employees attracted to business if given opportunity to become a partner • Disadvantages • Partners are jointly and individually liable for actions of other partners • Profits shared • Since decisions are shared, disagreements can occur

7. Entity Structure Choices Subchapter S Corporations • Advantages • Limited liability of a C-Corporation, but avoid double tax on distributions • Ability to raise capital through sale of stock • Disadvantages • Set up is more expensive and time consuming • Subject to “reasonable compensation” standards • Only one class of stock permitted • Cannot specially allocate income

8. Entity Structure Choices • Advantages • Hybrid business structure • Limited liability features of a corporation • Tax efficiencies of a partnership • Operational flexibility • Disadvantages • Set up could become somewhat complex Limited Liability Corporation (LLC)

9. Form of Entity Comparison

10. Form of Entity Comparison

11. The Choice Entity Choice • THE LLC • Combines limited personal liability feature of a corporation with the tax advantages of a partnership/proprietorship. • Protects your personal assets from business creditors • Protects your business assets from personal creditors • Entrepreneur can retain control of business while enjoying tax benefits of a tax flow-through entity • No stock and not required to observe corporate formalities. • Has become the entity of choice over limited partnerships and S-Corps due to: • LLC does not need a general partner • LLC does not the costly legal maintenance of an S-Corp • Easily change to other structures, particularly a C-Corp structure

12. The Financial Crisis: Impact on Small & Emerging Business • “67% of small businesses reported being “impacted” by credit crunch” • (Aug 2008 National Small Business Assn Survey) • “72% have responded by taking home less money” • (Sept 2008 Small Business Watch Survey by Discover Fin Svcs) • “1/5th of small business owners have loans leveraged by 2nd home mortgages” Tightening Credit

13. The Financial Crisis: Impact on Small & Emerging Business • Tightening Credit • Banks are not lending or lending at high costs • LIBOR rate is rising rapidly • Banks are afraid to lend to each other • - “TED SPREAD” at a record high- hit 3.95% on Monday • (was only 1.04% on September 5th)

14. The Financial Crisis: Impact on Small & Emerging Business • Venture Capital Also Impacted • Initial Public Offerings

15. The Financial Crisis: Impact on Small & Emerging Business • Venture Capital Also Impacted • In 3rd quarter 2008, IPO’s and M&A deals were down 66% from the year-ago period • Headed towards lowest number of completed M&A deals/IPOs in a decade

16. The Financial Crisis: Impact on Small & Emerging Business • Other Signs • Feb 08 • Sept 08 • Shift in Peer-to-Peer Loan Profiles

17. The Financial Crisis: Impact on Small & Emerging Business • Other Signs • Percentage of Ibank.com postings viewed by potential lenders

18. Surviving the Crisis • CASH IS KING! • “42% of small business owners say they have temporary cash flow issues”(August 2008 Discover Financial Services Survey) • “With tightening credit market, cash flow becomes even more important”

19. Surviving the Crisis Lean & Mean • Streamline Operations • Tighten up supply chain • Limit over-investment in inventory • Cut production costs • Examine every line item for non-essential spending • Hold off on non-essential capital expenditures • Reevaluate pricing strategies; Consider discounts

20. Surviving the Crisis • Manage Cash-Flow • Tighten credit terms and policies • Negotiate with customers • Negotiate with suppliers • Focus on collections; Closely manage A/R Lean & Mean

21. Surviving the Crisis • Be Prepared for the Credit Crunch • Don’t assume that credit will be there. • Look and act like a legitimate business. • Communicate with credit sources; Keep in touch. • Check your credit report for inaccuracies.

22. Surviving the Crisis • Seek Alternative Credit Sources • Smaller commercial banks • Peer-to-peer lending • Factoring • Take advantage of credit terms with suppliers • Equipment leasing/leasebacks

23. The Silver Lining? • A Bail-Out Plan • or… • “A Firewall for Main Street”

24. The Silver Lining? • Some positives for small business: • Provision to help local community banks clear out $36 billion of worthless government sponsored assets (Freddie Mac and Fannie Mae) • Will lessen write-downs and provide more capital to lend to individuals and small businesses • Increased FDIC insurance limits from $100k to $250k • Provides confidence that small business banking assets are secure The Federal Rescue Plan

25. The Silver Lining? • The Federal Rescue Plan • Some positives for small business: • Alternative Minimum Tax patch • Provides tax relief for small businesses and owners • Extends R&D and Energy tax credits • Will assist start-ups in the R&D phase

26. The Silver Lining? • Other Benefits • Better deals out there for businesses • Commercial real estate rental rates • Advertising costs • Vehicles • Less competition • Increased talent pool available for small businesses

27. Wiss Food Industry GroupContact Information James T. Duffy, Partner-in-Charge jduffy@wiss.com Mike Lee, Partner mlee@wiss.com Matthew Barbieri, Manager mbarbieri@wiss.com