Investor Briefing Reaching Liquidity

Public Financial

Services, LLCwww.WhyGoPublic.com

Investor Briefing Reaching Liquidity

Public Financial Services, LLC

Reaching Liquidity—Through Public

MarketsJoel Arberman, Managing Member√ Buy-side analyst for two money management firms.√ Sell-side analyst and partner of investment banking firm.√ Founded two companies. Took both public in Direct Public Offering.√ Has assisted several other companies through process as consultant.

Public Financial Services, LLC√ Our firm assists private companies through the complex process of

becoming publicly traded.√ Our team has a unique set of research, investment banking and corporate

finance experience. √ We have a proven track record with a 100% success rate.



MarketsWhy Go Public?

Why are private companies interested in going public?√ To raise capital quickly and more easily;√ To form mergers and acquire other companies;√ To gain more media attention and enhance their corporate image;√ To provide their shareholders with liquidity;√ To provide employee stock option benefits and compensation;√ To create wealth for the founders and original investors.

Why do founders and investors of private companies want to take their company public?√ To create significant wealth for themselves;√ To obtain loans from financial institutions using their stock as collateral;√ To increase the liquidity of the shares they own;√ To gain prestige and respect in their community;√ To improve access and raise capital from the public;√ To grow their business through mergers and acquisitions;√ To reduce the need for venture capital and bank financing.



MarketsLittle Known Facts About Going Public

√ You do not need a brokerage firm or investment banking firm to go public.√ You do not need to go public through a reverse merger.√ You do not need to give up control of your company.√ You can significantly increase your personal wealth by going public.√ You can provide yourself and your investors with an exit strategy and

liquidity.√ You can use newly issued stock to acquire other companies and grow your

business.√ You can generally raise capital easier, faster and at a lower cost after going

public.√ You can issue stock options to attract & retain high quality employees and

consultants.√ You do not need any minimum level of sales, profits or assets to become

public.



MarketsThree ways to go public:

1. Reverse Merger Transaction.√ Merge into a publicly traded company.

2. Underwritten Offering (IPO).√ Attract an investment banking firm to sponsor your offering.

3. Direct Public Offering (DPO).√ An offering directly to the public, without the use of an investment

banking firm or reverse merger transaction.



MarketsReverse Mergers:√ Advantages: You can be publicly traded in a matter of days/weeks.

√ Disadvantages: It is the highest cost way to go public and the private company inherits all traditional and contingent liabilities.

There are several costs, including:

Cash Component (approximately):$40,000 - $100,000+ Legal fees (depends on size & complexity).$10,000 - $100,000+ Accounting fees (depends on size & complexity).$10,000 - $ 15,000+ Third-party fees (e.g. SEC, Transfer Agent, etc.)$500,000 -$750,000+ Current market price for control of a clean public shell.$560,000 - $965,000+ Total cash cost for a Reverse Merger transaction.

Equity Component:5% - 20% If you want to go public through a reverse-merger,

the public shell will retain an additional 5% and 20% of the equity,



MarketsUnderwritten Offering:√ Advantages: An investment banking firm can raise funds and provide after

market support. Generally, there is more credibility assigned to companies who go public through an investment banking firm.

√ Disadvantages: Company will only retain investment banking firm if they are seeking substantial capital to generate commissions. Investment banking firm determines price per share and valuation. Offering is subject to market conditions. Company generally has to be a larger or sexy company. It takes 6 to 9+ months.


Cash Component (approximately):$40,000 - $100,000+ Legal fees (depends on size & complexity).$10,000 - $100,000+ Accounting fees (depends on size & complexity).$10,000 - $ 15,000+ Third-party fees (e.g. SEC, Transfer Agent, etc.)$ ??? Underwriting commissions (5% to 8% of funds raised).$60,000 - $215,000+ Total cash cost for a Reverse Merger transaction.



MarketsDirect Public Offering:√ Advantages: There is no minimum income, assets or revenue. Company

determines the valuation. Company determines how many shares are issued. Not affected by market conditions. Lowest cost alternative.

√ Disadvantages: It takes 6 to 9 months.


Cash Component (approximately):$40,000 - $100,000+ Legal fees (depends on size & complexity).$10,000 - $100,000+ Accounting fees (depends on size & complexity).$10,000 - $ 15,000+ Third-party fees (e.g. SEC, Transfer Agent, etc.)$60,000 - $215,000+ Total cash cost for a Reverse Merger

transaction.



MarketsIf going public:

√ Set realistic objectives and timeframes.√ Budget to cover costs of process.√ Assign corporate personnel responsible for transaction.√ Organize internal books and records.√ Engage the right consultants or do it yourself. √ Engage the right professionals.√ Think about the cost and obligations to maintain public trading status.√ Investor awareness / investor relations. √ If financing is required, think about how funds will be raised, what it will cost,

the timeframe for completion and likelihood of success.



MarketsExample: Maxim Mortgage Corporation√ Joel Arberman founded Maxim Mortgage Corporation in 2001.√ Took company public in a Direct Public Offering in early 2002.√ Initial market value: $2,301,700√ Employed over 125 people within nine months.√ Generated almost $3 million in sales during 2003.√ Business operation merged into a larger company in 2004, which left the

public company without an operating business.√ Within a few months, a private company looking to become public via a

merger transaction was identified.

…continued



MarketsProfile of “Thomas Equipment”

√ Was subsidiary of multi-billion dollar Canadian company.√ Employed several hundred people in several manufacturing plants

throughout Canada. √ Sales and marketing operations in several countries. Generating in excess of

$70 million in sales.√ Parent company seeking cash-sale of division. √ Sale price of approximately $37 million.√ Investor group identified opportunity and organized leveraged buyout of

division.√ $20+ million of purchase price was secured from an investment fund that

would only invest into a publicly traded company.√ The spin-out of Thomas Equipment, acquisition by the venture group,

financing of the purchase price and reverse merger – occurred simultaneously.

…continued



MarketsDuring the year following the merger:

√ Acquired Pnuetech, Inc. (approximately $60 million revenue).√ Raised $25 million investment from institutional investors.√ Entered into a strategic OEM and distribution relationship with Hyundai.√ Refinanced existing debt into more favorable terms.√ Expanded credit lines with favorable terms.√ Built and paid off a new manufacturing facility in South Korea.√ Registered original and private placement shares through Securities and

Exchange Commission.√ Became an official sponsor of the 2008 Beijing Olympics.√ Acquired Tovel Manufacturing.√ Approved for trading on the American Stock Exchange: symbol “THM”.



Markets

Summary:

√ Merger with Thomas Equipment closed in late 2004. √ The stock was approximately $0.30 before the merger and recently at $3.75

(+1,250%).√ Initial market value when Maxim Mortgage went public: $2,301,700√ Recent market value: $138,800,000

Thomas Equipment generated more than $75 million in revenue during 2005 and an analyst has forecasted that the company would generate more than $240 million in revenue during 2006.

By being public, the company was able to complete a sophisticated leverage buyout, acquire other companies

and raise significant investment capital.

Investor Briefing Reaching Liquidity

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