Refurbish Your Public Company

Refurbish Your Public Company for Free

(Returned in 90 to 120 Days, in Much Better Shape)

While Enhancing Shareholder Value

The gist of the plan is that the principals of a company desiring to be public (the “Newco”) would, at a reduced cost, and a relatively modest initial cost, take over a public entity (the “Target Company”), use it for 90 to 120 days, long enough for the effectiveness of a Form S-1 registration statement or a tier 2 Regulation A+, spinning off Newco as a dividend to the shareholders of the Target Company. A Form S-1, Form 10 or Regulation A+, would also simultaneously be filed for the Target Company. Very simply, Newco would effectively borrow the Target Company, reward the shareholders with a dividend, and return the target company as an upgraded, fully reporting – 15(d) or 12(g), or alternatively reporting, pursuant to the provisions of Regulation A (or leave it as a nonreporting company, as desired by the parties), far more valuable than when it started, with much happier shareholders, owning shares in both companies. Included within this arrangement, Newco would pay for a reorganization in accordance with the provisions of Delaware Section 251(g). This would cleanse the Target Company of all harmful debt and leave the Target Company without the debilitating debt structure from which it may suffer. Following the reorganization, the Target Company may wish to assume any debt it wishes to pay.

Newco must be a compelling company, preferably with substantial profits. It must also be able to pay the costs associated with this initiative. It should also be able to pay not the full cost of acquiring a public entity (which would be between $110,000 and $130,000 for a non-reporting entity), but at least $50,000-$60,000, to pay for (i) professional fees, both legal fees and accounting fees, and (ii) providing for some payment to the Target Company.

Before the Form S-1 filing, Form 10 or Regulation A+, is effective, within 90 to 120 days, Newco will probably have a need to issue stock in the Target Company, to investors, requiring stock in the public Target Company. Frequently, the Target Company would have to assume a certain aged debt (constituting a security) of Newco.

While our experiences with this program are quite limited (given that it was only recently conceived), so far it appears that this is well received in the marketplace. It is to be contrasted from the typical takeover of the company followed by a massive toxic reverse split depriving the shareholders of any value. By contrast, this is a dividend and the issuance to the shareholders of shares in yet another company, as well as retaining their shares in the existing company. Shareholders prefer this arrangement.

After the spinoff, all of the stock issued that had not been sold (in particular, the control block) would be returned to the Target Company, Newco providing the requisite incentive to do so. To the extent of any shares of the Target Company common stock that are not relinquished and/or that had been sold, Newco would have to make up such shares, by issuing free trading, registered Newco shares, perhaps by a factor of 1.5 to 1. In any case, some of the shares of Newco would be retained by the Target Company thus further enhancing the value for Target Company.

Should the Target Company desire, the Target Company could be the spinoff company, in lieu of Newco being the spinoff company. If so desired, the Newco could remain as a nonreporting company and the shareholders would receive Target Company stock in the spinoff, retaining their shares in the predecessor company which would become the Newco. If both companies become reporting entities, which could be accomplished at virtually no additional cost, the greatest bargain is created. Not only does Newco become a fully reporting company, with a robust shareholder base, for a fraction of the typical cost of between $350,000 and $450,000.

An additional significant benefit is that Newco should be a great asset to put into the Target Company. It certainly should help the stock price/liquidity, for the benefit of all, particularly shareholders. Effectively, the shareholders would own shares in both companies.

The objective of this memorandum is to elicit discussions that would permit tailoring to the specific requirements of both the Target Company and the Newco. We would like to discuss how to satisfy those needs, at which time we can refine the details, including likely time span, as well as legal, accounting/audit and filing costs.

I welcome your comments.

Randall S. Goulding 847-948-5431

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