summit 05 cd session 13b presentation

October 25, 2005

Leaving Purgatory:Realizing Shareholder Value

Through the CPC Program

NAO Summit

October 2, 2005

October 25, 2005

Panel Agenda

1. Overview of CPC Program

Kevan Cowan, TSX Venture Exchange

2. Panel Discussion

Cameron McDonald, Canaccord Capital Corporation

Andy Wilson, YTW Growth Capital

Michael Thomson, Naples Capital Corp.

Ungad Chadda, TSX Venture Exchange

October 25, 2005

Overview of Capital Pool Company® (CPC) Program

Kevan Cowan

Senior Vice President

TSX Venture Exchange

October 25, 2005

Disclaimer

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.

October 25, 2005

Objectives

1. Demonstrate why you should become a CPC Founder

2. Outline why you should consider vending your portfolio company into a CPC

October 25, 2005

Presentation Outline

1. Market Overview

2. How the CPC Program Works

3. Why Become a CPC Founder

4. Why Use a CPC to Take Your Company Public

5. CPC Success Stories

October 25, 2005

TSX Group of Companies

October 25, 2005

Financing Options

October 25, 2005

Canadian Markets at a Glance

YTD August 2005 YTD August 2005 YTD August 2005

Listed Companies 222 1,980 1,506

Total Market Cap $608.2 M $28.65 B $1,787.0 B

Median Market Cap $0.6M $ 4.5M $141.1 M

Average Market Cap $2.7 M $14.4 M $1.2 B

Financings $67.2 M $3.45 B $32.9 B

Average Financing $0.7 M $2.4 M $65.7 M

Going Public Activity 55* 145* 151

Graduates 44 to TSX Venture 24 to TSX -

• Includes IPOs, CPCs, RTOs, QTs, TSX comedowns and Other

October 25, 2005

Graduate Performance(1 Year prior to Graduation)

Does not include NEX. Data Compiled by TSX Group as of August 31, 2005

302%

223%251%

60%

6%

127%107%

135%

195%

28% 18%

61%

2000 2001 2002 2003 2004 YTDAugust2005

Avg. Market Cap Grow th Avg. Share Price Grow th

302%

223%251%

60%

6%

127%107%

135%

195%

28% 18%

61%

2000 2001 2002 2003 2004 YTDAugust2005


# of Grads: 45 26 25 2447 58

October 25, 2005

Total Financings

Compiled by TSX Group Inc., as of August 31, 2005 (TSX financing includes supplementary financing)

TSX Venture Toronto Stock Exchange

2004 YTD Aug 2005

2004 YTD Aug 2005

Total Financings $4.1 B $3.45 B $47.8 B $32.9 B

Average Deal Size $1.9 M $2.4 M $56.1 M $65.7 M

Median Deal Size $0.6 M $1.0 M $14.3 M $25.2 M

October 25, 2005


1. Market Overview





October 25, 2005

Program Growth to Date

• Unique way to list, introduced in 1987

• 1,542 listed since inception

• 1,322 CPCs have completed qualifying transaction since 1987

• More than $626 million raised in seed and IPO financings since 1987

• 195 former CPCs now on senior exchanges

• 40% of TSX Venture Exchange graduates to Toronto Stock Exchange of YTD June 2005 were CPC issuers

Compiled by TSX Group Inc. as of June 2005

October 25, 2005

Stage 1 – seed financing of the company

Stage 2 – a small prospectus offering to create a

corporate vehicle with public distribution

Stage 3– the Qualifying Transaction (“QT”) - an operating company

is identified, disclosed and acquired

3 Stage Process

October 25, 2005

IPO Process

Qualifying TransactionListing CPC Process

Unique Listing Vehicle

October 25, 2005

Seed Financing and Prospectus

Public Offe

ring

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 Q

ualifying Transactio

n

CP

C P

LA

YE

RS

CP

C P

RO

CE

SS

24 Months Maximum

CPC Founders

Dealer (CF) Dealer (CF)

Advisors

Retail Brokers

CPC Process & Stakeholders

October 25, 2005


1. Market Overview





October 25, 2005

3-5 Founders create CPC:

– $100,000 to $500,000 in seed funding

IPO of the CPC is completed:

– President’s List

– Broker’s List

Founders Set Up CPC

October 25, 2005

Shares Price Total

Founder (seed) 1,000,000 $0.10 $100,000

Public (prospectus) 5,000,000 $0.20 $1,000,000

CPC – trading public company

6,000,000 $1,100,000

CPC Share Structure Post-IPO

October 25, 2005

Existing Portfolio Company:

Significant Growth Opportunity

Strong Management

Capital Needs: $1 M to $5 M

Close to Commercialization

Stock Options and Acquisition Currency

Portfolio Company = CPC Candidate

October 25, 2005

Ownership of Private Company

Shares Price Ownership

Angel Investor 5,000,000 $0.20 40%

Management Shareholders 7,500,000 BST 60%

Total for Private Company 12,500,000

October 25, 2005

CPCSeed (Founder) =

1.0 M shares @ $0.10IPO =

5.0 M shares @ $0.20

New TSX Venture Company

Qualifying Transaction

New Financing = $2.25 M

Private CompanyAngel = 40%

Management = 60%Value = $6.25 M

Anatomy of a QT

October 25, 2005

Angel$1.1 M

6.0 M Shares26%

New TSX Venture Company

Resulting Share Structure

Public$1.0 M

5.0 M Shares21%

Private Company

ShareholdersBST

7.5 M Shares33%

New Financing$2.25 M

4.5 M Shares20%

Market Value of Company:23.0 M Shares @ $0.50 = $11.5 M

October 25, 2005

Shares Price Invested Market @ $0.50

Ownership

Founder (Angel) 1,000,000 $0.10 $100,000 $0.5 M

5,000,000 $0.20 $1.0 M $2.5 M 26%

Public 5,000,000 $0.20 $1.0 M $2.5 M 21%

Private Company Shareholders

7,500,000 BST $3.75 M 33%

New Financing 4,500,000 $0.50 $2.25 M $2.25 M 20%

Totals 23,000,000 $0.50 $11.5 M 100%

Resulting Share Structure

October 25, 2005

Graduate Performance(1 Year prior to Graduation)

Does not include NEX. Data Compiled by TSX Group as of August 31, 2005

302%

223%251%

60%

6%

127%107%

135%

195%

28% 18%

61%

2000 2001 2002 2003 2004 YTDAugust2005


302%

223%251%

60%

6%

127%107%

135%

195%

28% 18%

61%

2000 2001 2002 2003 2004 YTDAugust2005


# of Grads: 45 26 25 2447 58

October 25, 2005

Scenario 1: Angel Seeds $100,000

Scenario 2: Angel Seeds $500,000

Founder (Angel) Shares 6,000,000 10,000,000

CPC QT Price $0.50 $0.50

Graduates One Year Later – Using average one year price growth for 2004 graduates (61%)

$0.81 $0.81

Value of Angel’s Shares $4.86 M $8.1 M

Initial Investment $1.1 M $1.5 M

Return on Investment 342%

Not Annualized

440%

Not Annualized

Founders’ Reward Upon Graduation

October 25, 2005

Leverage private equity with public dollars

High risk / high reward (graduate performance)

Control structuring, timing and financing

Consolidation tool

Incentive for management and employees

Early investment with full benefits realized on graduation to TSX, including reduced escrow time

Spread risk (further syndication)

Why Become a CPC Founder

October 25, 2005


1. Market Overview





October 25, 2005

When and Why to Consider a CPC

Junior Company Wants/Needs

+

Market Conditions

+

Critical Success Factors

Successful CPC

October 25, 2005

Junior Company Wants/Needs

Alternative Access to Capital

Want to be Public Company

Greater Flexibility in the Process

Greater Certainty and Maintain Greater Control

– going public risk reduced

Simple/Clean Way to Go Public

October 25, 2005

Company is at too early a stage for a broadly distributed regular IPO

IPO market is not strong enough in general

VC financing is not viable or management prefers not to use

Market Conditions

October 25, 2005

Critical Success Factors

Management

Long Term Strategy to Grow as a Public Company

Reasonable Valuation = Viable Share Structure

Investor Support

Advisors (lawyer, broker, investment banker)

October 25, 2005


1. Market Overview





October 25, 2005

RailPower Technologies Corp.(TSX:P)

• Based in Vancouver, provides hybrid yard locomotive technology solutions for rail operators

• Went public on TSX Venture in 2001 as a CPC

• Raised $20.2 million on TSX Venture

• Graduated to TSX March 2004

• Market cap of $245 million (as of October 17, 2005)

October 25, 2005

0

1

2

3

4

5

6

7

July-2001 January-2002 July-2002 December-2002 April-2003 September-2003 January-2004 July-2004 December-2004

Pri

ce (

C$)

0

20

40

60

80

100

120

140

160

180

200

Market C

apitalizatio

n (C

$ Millio

ns)

Market Cap Price

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 MMarch 2004

Graduated to TSX

October 25, 2005

Resverlogix Corp. (TSX:RVX)

• Calgary-based biotech company focused on research in cardiovascular disease, cancer and fibrotic diseases

• Raised $10 Million on TSX Venture in 2004

• Graduated to Toronto Stock Exchange January 2005

• Share price has grown 25% since Graduation

(January 17 to October 17, 2005)

October 25, 2005

Resverlogix Corp. (TSX:RVX)

$0

$10

$20

$30

$40

$50

$60

$70

$80

April 2003 August 2003 December 2003 April 2004 August 2004 December 2004 January 2005

Ma

rke

t C

ap

ita

liza

tio

n (

$ M

illio

n)

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

Pri

ce

Market Cap Price

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 KDecember 2004

PP $7.9 M

January 2005

PP $3.1 M

January 2005

Graduated to TSX

PP = Private PlacementSFO = Short Form Offering

October 25, 2005

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

Went public on TSX Venture as a CPC in 2000

Raised $6.5 million while on TSX Venture

Graduated to TSX in 2003

Has since completed 3 private placements on TSX for a total raise of $121 million ($57 million just raised in May 2005)

Killam Properties Inc. (KMP)

October 25, 2005

Killam Properties Inc. (KMP)

$0

$50

$100

$150

$200

$250

Dec 2000 Jun 2001 Dec 2001 Jun 2002 Dec 2002 Jun 2003 Dec 2003 Jun 2004 Dec 2004 Mar 2005 May 2005

Mar

ket C

apita

lizat

ion

($ M

illio

n)

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

Pri

ce

Market Cap Price

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

October 25, 2005

Panel Discussion

Cameron McDonald, Canaccord Capital




October 25, 2005

Kevan Cowan, TSX Venture Exchange

416-365-2207 [email protected]

Cameron McDonald, Canaccord Capital Corporation








Speaker Contact Information

October 25, 2005

Appendix

Recent Policy Amendments

October 25, 2005

CPC Program Recent Amendments to Policy 2.4 - Capital Pool Companies

Use of Proceeds Excluded Agents’ commission from the 30% limit on Use of Proceeds

Pro Group Participation in Seed and IPO stage financing Allowed Pro Group Participation in both stages of financing provided the following; Compliance with client priority rules of the IDA, Pre-IPO rounds will be subject to 3 year escrow, IPO participation is limited to the 2% subscription restriction.

Seed Capital Limit Removed the limit of $500,000 but restricted the discounted seed capital to $500,000.

Cancellation of Non-Arm’s Length Discount Seed Shares Generally allowed retention of 50% of discount seed shares

October 25, 2005


Timeline for Completion of a QT Increased the time frame for a CPC to complete its QT from 18 to 24 months

Foreign non-resource Qualifying Transaction Allowed CPCs who are reporting issuers in Ontario to undertake a foreign non resource QT. Ontario Issuer must file a prospectus with the OSC in connection with the Transaction

Jurisdictions of Incorporation 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.

October 25, 2005


Extension of Option Expiration Period 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.

Revised Definition of Non-Arm’s Length QT 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.

Revised Representation of Management’s Abilities. 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.

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