Summit 05 Cd Session 13b Presentation

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  • Summit 05 Cd Session 13b Presentation

    1. 1. <ul><li>Leaving Purgatory: </li></ul><ul><li>Realizing Shareholder Value Through the CPC Program </li></ul><ul><li>NAO Summit </li></ul><ul><li>October 2, 2005 </li></ul>
    2. 2. Panel Agenda <ul><li>Overview of CPC Program </li></ul><ul><ul><li>Kevan Cowan, TSX Venture Exchange </li></ul></ul><ul><li>Panel Discussion </li></ul><ul><ul><li>Cameron McDonald, Canaccord Capital Corporation </li></ul></ul><ul><ul><li>Andy Wilson, YTW Growth Capital </li></ul></ul><ul><ul><li>Michael Thomson, Naples Capital Corp. </li></ul></ul><ul><ul><li>Ungad Chadda, TSX Venture Exchange </li></ul></ul>
    3. 3. <ul><li>Overview of Capital Pool Company ® (CPC) Program </li></ul><ul><li>Kevan Cowan </li></ul><ul><li>Senior Vice President </li></ul><ul><li>TSX Venture Exchange </li></ul>
    4. 4. <ul><li>Disclaimer </li></ul><ul><li>This document is for information purposes only and is not an invitation to purchase securities listed on Toronto Stock Exchange and/or TSX Venture Exchange or Natural Gas Exchange. TSX Group Inc. and its affiliates do not endorse or recommend any securities referenced in this document. Please seek professional advice to evaluate specific securities. While the information herein is collected and compiled with care, neither TSX Group Inc. nor any of its affiliated companies represents, warrants or guarantees the accuracy or the completeness of the information. You agree not to rely on the information contained herein for any trading, business or financial purpose. This information is provided with the express condition, to which by making use thereof you expressly consent, that no liability shall be incurred by TSX Group Inc. and/or any of its affiliates as a result of any errors or inaccuracies herein or any use or reliance upon this information. </li></ul>
    5. 5. Objectives <ul><li>Demonstrate why you should become a CPC Founder </li></ul><ul><li>Outline why you should consider vending your portfolio company into a CPC </li></ul>
    6. 6. Presentation Outline <ul><li>Market Overview </li></ul><ul><li>How the CPC Program Works </li></ul><ul><li>Why Become a CPC Founder </li></ul><ul><li>Why Use a CPC to Take Your Company Public </li></ul><ul><li>CPC Success Stories </li></ul>
    7. 7. TSX Group of Companies
    8. 8. Financing Options
    9. 9. Canadian Markets at a Glance <ul><li>Includes IPOs, CPCs, RTOs, QTs, TSX comedowns and Other </li></ul>$141.1 M $ 4.5M $0.6M Median Market Cap - 151 $65.7 M $32.9 B $1.2 B $1,787.0 B 1,506 YTD August 2005 YTD August 2005 YTD August 2005 44 to TSX Venture 55* $0.7 M $67.2 M $2.7 M $608.2 M 222 $2.4 M Average Financing 24 to TSX 145* $3.45 B $14.4 M $28.65 B 1,980 Financings Total Market Cap Average Market Cap Graduates Going Public Activity Listed Companies
    10. 10. Graduate Performance (1 Year prior to Graduation) Does not include NEX. Data Compiled by TSX Group as of August 31, 2005 # of Grads: 45 26 25 24 47 58
    11. 11. Total Financings Compiled by TSX Group Inc., as of August 31, 2005 (TSX financing includes supplementary financing) Toronto Stock Exchange TSX Venture $25.2 M $14.3 M $1.0 M $0.6 M Median Deal Size $65.7 M $56.1 M $2.4 M $1.9 M Average Deal Size $32.9 B $47.8 B $3.45 B $4.1 B Total Financings YTD Aug 2005 2004 YTD Aug 2005 2004
    12. 12. Presentation Outline <ul><li>Market Overview </li></ul><ul><li>How the CPC Program Works </li></ul><ul><li>Why Become a CPC Founder </li></ul><ul><li>Why Use a CPC to Take Your Company Public </li></ul><ul><li>CPC Success Stories </li></ul>
    13. 13. Program Growth to Date <ul><li>Unique way to list, introduced in 1987 </li></ul><ul><li>1,542 listed since inception </li></ul><ul><li>1,322 CPCs have completed qualifying transaction since 1987 </li></ul><ul><li>More than $626 million raised in seed and IPO financings since 1987 </li></ul><ul><li>195 former CPCs now on senior exchanges </li></ul><ul><li>40% of TSX Venture Exchange graduates to Toronto Stock Exchange of YTD June 2005 were CPC issuers </li></ul>Compiled by TSX Group Inc. as of June 2005
    14. 14. <ul><li>Stage 1 </li></ul><ul><ul><li>seed financing of the company </li></ul></ul><ul><li>Stage 2 </li></ul><ul><ul><li>a small prospectus offering to create a corporate vehicle with public distribution </li></ul></ul><ul><li>Stage 3 </li></ul><ul><ul><li>the Qualifying Transaction (“QT”) - an operating company is identified, disclosed and acquired </li></ul></ul>3 Stage Process
    15. 15. Unique Listing Vehicle IPO P rocess Qualifying Transaction Listing CPC Process
    16. 16. Seed Financing and Prospectus Public Offering Trade as CPC Announce QT File Disclosure Statement Trade as Venture Company CPC Acquires Business Public Financing and CPC Trades Prospectus Receipt Close Transaction Seed President’s List Private Company Private Placement (Institution, Accredited Investor) Identify Qualifying Transaction CPC PLAYERS CPC PROCESS 24 Months Maximum CPC Founders Dealer (CF) Dealer (CF) Advisors Retail Brokers CPC Process & Stakeholders
    17. 17. Presentation Outline <ul><li>Market Overview </li></ul><ul><li>How the CPC Program Works </li></ul><ul><li>Why Become a CPC Founder </li></ul><ul><li>Why Use a CPC to Take Your Company Public </li></ul><ul><li>CPC Success Stories </li></ul>
    18. 18. <ul><li>3-5 Founders create CPC: </li></ul><ul><ul><li>$100,000 to $500,000 in seed funding </li></ul></ul><ul><li>IPO of the CPC is completed: </li></ul><ul><ul><li>President’s List </li></ul></ul><ul><ul><li>Broker’s List </li></ul></ul>Founders Set Up CPC
    19. 19. CPC Share Structure Post-IPO $1,100,000 6,000,000 CPC – trading public company $1,000,000 $0.20 5,000,000 Public (prospectus) $100,000 $0.10 1,000,000 Founder (seed) Total Price Shares
    20. 20. <ul><li>Existing Portfolio Company: </li></ul><ul><li>Significant Growth Opportunity </li></ul><ul><li>Strong Management </li></ul><ul><li>Capital Needs: $1 M to $5 M </li></ul><ul><li>Close to Commercialization </li></ul><ul><li>Stock Options and Acquisition Currency </li></ul>Portfolio Company = CPC Candidate
    21. 21. Ownership of Private Company 12,500,000 Total for Private Company 60% BST 7,500,000 Management Shareholders 40% $0.20 5,000,000 Angel Investor Ownership Price Shares
    22. 22. CPC Seed (Founder) = 1.0 M shares @ $0.10 IPO = 5.0 M shares @ $0.20 New TSX Venture Company Qualifying Transaction New Financing = $2.25 M Private Company Angel = 40% Management = 60% Value = $6.25 M Anatomy of a QT
    23. 23. Angel $1.1 M 6.0 M Shares 26% New TSX Venture Company Resulting Share Structure Public $1.0 M 5.0 M Shares 21% Private Company Shareholders BST 7.5 M Shares 33% New Financing $2.25 M 4.5 M Shares 20% Market Value of Company: 23.0 M Shares @ $0.50 = $11.5 M
    24. 24. Resulting Share Structure $11.5 M $2.25 M $3.75 M $2.5 M $2.5 M $0.5 M Market @ $0.50 20% $2.25 M $0.50 4,500,000 New Financing 21% $1.0 M $0.20 5,000,000 Public $100,000 $0.10 1,000,000 Founder (Angel) BST $1.0 M Invested 100% $0.50 23,000,000 Totals 33% 7,500,000 Private Company Shareholders 26% $0.20 5,000,000 Ownership Price Shares
    25. 25. Graduate Performance (1 Year prior to Graduation) Does not include NEX. Data Compiled by TSX Group as of August 31, 2005 # of Grads: 45 26 25 24 47 58
    26. 26. Founders’ Reward Upon Graduation $8.1 M $4.86 M Value of Angel’s Shares $1.5 M $1.1 M Initial Investment $0.81 $0.81 Graduates One Year Later – Using average one year price growth for 2004 graduates (61%) $0.50 $0.50 CPC QT Price 10,000,000 6,000,000 Founder (Angel) Shares 440% Not Annualized 342% Not Annualized Return on Investment Scenario 2: Angel Seeds $500,000 Scenario 1: Angel Seeds $100,000
    27. 27. Why Become a CPC Founder <ul><li>Leverage private equity with public dollars </li></ul><ul><li>High risk / high reward (graduate performance) </li></ul><ul><li>Control structuring, timing and financing </li></ul><ul><li>Consolidation tool </li></ul><ul><li>Incentive for management and employees </li></ul><ul><li>Early investment with full benefits realized on graduation to TSX, including reduced escrow time </li></ul><ul><li>Spread risk (further syndication) </li></ul>
    28. 28. Presentation Outline <ul><li>Market Overview </li></ul><ul><li>How the CPC Program Works </li></ul><ul><li>Why Become a CPC Founder </li></ul><ul><li>Why Use a CPC to Take Your Company Public </li></ul><ul><li>CPC Success Stories </li></ul>
    29. 29. When and Why to Consider a CPC Junior Company Wants/Needs + Market Conditions + Critical Success Factors Successful CPC
    30. 30. Junior Company Wants/Needs <ul><li>Alternative Access to Capital </li></ul><ul><li>Want to be Public Company </li></ul><ul><li>Greater Flexibility in the Process </li></ul><ul><li>Greater Certainty and Maintain Greater Control </li></ul><ul><ul><ul><li>– going public risk reduced </li></ul></ul></ul><ul><li>Simple/Clean Way to Go Public </li></ul>
    31. 31. <ul><li>Company is at too early a stage for a broadly distributed regular IPO </li></ul><ul><li>IPO market is not strong enough in general </li></ul><ul><li>VC financing is not viable or management prefers not to use </li></ul>Market Conditions
    32. 32. Critical Success Factors <ul><li>Management </li></ul><ul><li>Long Term Strategy to Grow as a Public Company </li></ul><ul><li>Reasonable Valuation = Viable Share Structure </li></ul><ul><li>Investor Support </li></ul><ul><li>Advisors (lawyer, broker, investment banker) </li></ul>
    33. 33. Presentation Outline <ul><li>Market Overview </li></ul><ul><li>How the CPC Program Works </li></ul><ul><li>Why Become a CPC Founder </li></ul><ul><li>Why Use a CPC to Take Your Company Public </li></ul><ul><li>CPC Success Stories </li></ul>
    34. 34. RailPower Technologies Corp. (TSX:P) <ul><li>Based in Vancouver, provides hybrid yard locomotive technology solutions for rail operators </li></ul><ul><li>Went public on TSX Venture in 2001 as a CPC </li></ul><ul><li>Raised $20.2 million on TSX Venture </li></ul><ul><li>Graduated to TSX March 2004 </li></ul><ul><li>Market cap of $245 million (as of October 17, 2005) </li></ul>
    35. 35. RailPower Technologies Corp. (TSX:P) *CPC listing: Envirotrain Capital Corp. (EC) **Amalgamated with RailPower Technologies Inc. and changed name to RailPower Technologies Corp. PP = Private Placement PO = Public Offering Nov 2000 CPC IPO $0.5 M* July 2001 Completed QT** Listing on OTCbb Dec 2001 PP $1.0 M Jan 2002 PP $0.5 M March 2002 2 PPs $2.5 M July 2003 PP $3.2 M Nov 3003 PP $12.5 M June 2004 PO $20.0 M Dec 2004 PO $41.6 M March 2004 Graduated to TSX
    36. 36. Resverlogix Corp. (TSX:RVX) <ul><li>Calgary-based biotech company focused on research in cardiovascular disease, cancer and fibrotic diseases </li></ul><ul><li>Raised $10 Million on TSX Venture in 2004 </li></ul><ul><li>Graduated to Toronto Stock Exchange January 2005 </li></ul><ul><li>Share price has grown 25% since Graduation </li></ul><ul><li>(January 17 to October 17, 2005) </li></ul>
    37. 37. Resverlogix Corp. (TSX:RVX) October 2001 CPC Listing: Aspley Management Group Inc. April 2003 QT: Resverlogix Corp. December 2003 PP $200 K SFO $2.0 M April 2004 PP $1.8 M October 2004 PP $400 K December 2004 PP $7.9 M January 2005 PP $3.1 M January 2005 Graduated to TSX PP = Private Placement SFO = Short Form Offering
    38. 38. <ul><li>Halifax-based real estate company focused on multi-family residential properties. Currently own and manage 71 properties with 7,832 apartment and manufactured home units </li></ul><ul><li>Went public on TSX Venture as a CPC in 2000 </li></ul><ul><li>Raised $6.5 million while on TSX Venture </li></ul><ul><li>Graduated to TSX in 2003 </li></ul><ul><li>Has since completed 3 private placements on TSX for a total raise of $121 million ($57 million just raised in May 2005) </li></ul>Killam Properties Inc. (KMP)
    39. 39. Killam Properties Inc. (KMP) Dec 2000 CPC IPO $0.4 M March 2002 Qualifying Transaction July 2002 PP $0.4 M Nov 2002 PP $5.8 M April 2003 Graduated to TSX Nov 2003 PP $22.0 M June 2004 PP $42.0 M May 2005 PP $57.5 M
    40. 40. <ul><li>Panel Discussion </li></ul><ul><li>Cameron McDonald, Canaccord Capital </li></ul><ul><li>Andy Wilson, YTW Growth Capital </li></ul><ul><li>Michael Thomson, Naples Capital Corp. </li></ul><ul><li>Ungad Chadda, TSX Venture Exchange </li></ul>
    41. 41. <ul><li>Kevan Cowan, TSX Venture Exchange </li></ul><ul><li>416-365-2207 [email_address] </li></ul><ul><li>Cameron McDonald, Canaccord Capital Corporation </li></ul><ul><li>514-284-1467 [email_address] </li></ul><ul><li>Andy Wilson, YTW Growth Capital </li></ul><ul><li>416-350-5002 [email_address] </li></ul><ul><li>Michael Thomson, Naples Capital Corp. </li></ul><ul><li>613-271-2106 [email_address] </li></ul><ul><li>Ungad Chadda, TSX Venture Exchange </li></ul><ul><li>416-365-2206 [email_address] </li></ul>Speaker Contact Information
    42. 42. Appendix Recent Policy Amendments
    43. 43. CPC Program Recent Amendments to Policy 2.4 - Capital Pool Companies <ul><li>Use of Proceeds </li></ul><ul><li>Excluded Agents’ commission from the 30% limit on Use of Proceeds </li></ul><ul><li>Pro Group Participation in Seed and IPO stage financing </li></ul><ul><li>Allowed Pro Group Participation in both stages of financing provided the following; </li></ul><ul><li>Compliance with client priority rules of the IDA, </li></ul><ul><li>Pre-IPO rounds will be subject to 3 year escrow, </li></ul><ul><li>IPO participation is limited to the 2% subscription restriction. </li></ul><ul><li>Seed Capital Limit </li></ul><ul><li>Removed the limit of $500,000 but restricted the discounted seed capital to $500,000. </li></ul><ul><li>Cancellation of Non-Arm’s Length Discount Seed Shares </li></ul><ul><li>Generally allowed retention of 50% of discount seed shares </li></ul>
    44. 44. CPC Program Recent Amendments to Policy 2.4 - Capital Pool Companies <ul><li>Timeline for Completion of a QT </li></ul><ul><li>Increased the time frame for a CPC to complete its QT from 18 to 24 months </li></ul><ul><li>Foreign non-resource Qualifying Transaction </li></ul><ul><li>Allowed CPCs who are reporting issuers in Ontario to undertake a foreign non resource QT. </li></ul><ul><li>Ontario Issuer must file a prospectus with the OSC in connection with the Transaction </li></ul><ul><li>Jurisdictions of Incorporation </li></ul><ul><li>Allows CPCs to be incorporated in non-Canadian jurisdictions other than those listed on the Financial Action Task Force on Money Laundering’s list of deficient countries/territories. </li></ul>
    45. 45. CPC Program Recent Amendments to Policy 2.4 - Capital Pool Companies <ul><li>Extension of Option Expiration Period </li></ul><ul><li>Increased the option expiration period from 90 days to 1 yr for Directors and Officers who hold options and do not continue with the Issuer after the QT. </li></ul><ul><li>Revised Definition of Non-Arm’s Length QT </li></ul><ul><li>Incorporated the concept of common Control Persons, which makes it clear that the threshold for control is material affect on control or a holding of at least 20% of the outstanding securities of the relevant entities, rather than a 50% threshold . </li></ul><ul><li>Revised Representation of Management’s Abilities. </li></ul><ul><li>Amended Form 3A with a representation that management believes that the CPC has sufficient human and financial resources to identify, investigate and acquire a Significant Asset. </li></ul>

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