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Reverse TakeoversPrivate to Public

IMPLEMENTATION PLAN

SC CAPITAL PARTNERS

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Table of Contents

• Part I: Introduction to Reverse Takeovers (RTOs)

• Part II: SC Capital Partners (SCCP) Approach

• Part III: Value Creation Plan• Part IV: RTO Examples

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Part I: Introduction to RTOs

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Part I: Introduction to RTOs

• What is a Reverse Takeover (RTO)?• Why go public via RTO?• Who are the parties involved?• What is the process?• When does an RTO make sense?• Where will the company trade?

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Part I: What Is an RTO?• A publicly owned and trading shell company

acquires a private company in a reverse takeover (RTO)

• The shell company has – little or no assets– no operations– existing shareholders– existing market-makers

• Shell company usually gets 5% to 10% of the shares in “New Co”

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Part I: Why Go Public Via RTO?

• Greater access to capital• Increased liquidity• Premium valuation• Equity for acquisitions• Cost advantage over IPO• Significantly reduced lead time vs. IPO

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Part I: Public Cos Trade at PremiumValuation Ratio Private

Company Median

Public Company Median

Public Company Premium

Price/Net Sales 0.7 1.1 57.7%

Price/Gross Cash Flow 8.0 13.2 64.8%

Price/EBT 8.2 13.1 60.8%

Price/Net Income 9.3 18.2 96.2%

Based on data from 4,528 private company transactions and 397 public company transactions across all industry groups fromJanuary 1996 to August 2002. Universe restricted to transactions under $100 million.

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Part I: Cost and Time AdvantagesExchange # of Cos Cost of Shell Timing

Pink Sheets 4,500 $1 - 200,000 60 - 90

OTC BB 2,200 $250 – 750,000

60 - 120

AMEX 1,800 Varies 90 - 180

NASDAQ small cap

2,100 Varies 90 - 180

AIM London 1,500 $1,000,000 1 Year

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Part I: Who’s Involved?• Private Company

– Management– Counsel– Shareholders– Investment banker

• Shell Company Management– Management– Shareholders– Counsel

• Other– Investor Relations, Public Relations– Market Makers– NASD– SEC (if Bulletin Board shell is used)

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Part I: What Is The Process?

• Phase I: Prepare company for RTO• Phase II: Develop and recommend

strategy• Phase III: Execute transaction and funding• Phase IV: Post-transaction details

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Part I: When To Do an RTO?

• Need additional capital for growth or liquidity

• Sufficient milestones met– Appropriate revenues– Profitability on horizon

• Current capital market ideal for RTOs

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Part I: Where Will the Co Trade?

• Pink Sheets• Over the Counter Bulletin Board (OTCBB)• AMEX• NASDAQ

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Part II: SCCP Approach

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Part II: SCCP Approach

• We construct a custom-designed financial program to help the new public company effectively compete in the capital markets

• Services offered include:– Manage the RTO process– Sponsorship at investor conferences– Introductions to IR, legal and accounting firms

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Part II: SCCP Value Creation

• The RTO is a key component of the SC Capital value creation process– 120 day process

• Beyond the RTO– Engineer a series of accretive financings– Obtain a broad investor base– Positioned to progress to bigger markets

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Part III: Value Creation Plan

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Part III: RTO Process Phase I

• Prepare company for RTO– Due diligence on acquiring company– Prepare Investment Memorandum– Prepare list of available shells– Retain auditor and legal counsel– Begin audit

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Part III: RTO Process Phase II

• Develop and recommend strategy– Financing plan– Listing roadmap– Finish audit– Recommendation for RTO target and

transaction structure– Letter of Intent– Trial balloon for institutional funding

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Part III: RTO Process Phase III

• Execute transaction and funding– Due diligence on shell– Reorganization plan– Shareholder approvals (acquirer and shell)– Negotiation with institutional investor– Closing of RTO and institutional funding

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Part III: RTO Process Phase IV

• Post transaction details– Filings (e.g. 8-K, SB-2, 14C, 10-Q) if OTCBB

and press release issued– File 15C211 – Add market makers– Introduction of IR/PR and research firms– Schedule conferences– Trading begins

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Part IV: RTO Examples

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Part IV: RTO Examples

• Some of today’s leading companies had their roots in shell mergers– New York Stock Exchange– Berkshire Hathaway– Turner Broadcasting System– Occidental Petroleum– Blockbuster Entertainment– Radio Shack