Arête's Acquisition Criteria: Arête recruits companies from selected industry sectors with:
(1) Established products in proven market niches that have significant growth potential;
(2) Professional management teams with industry expertise and experience and a proven successful track record within the entity;
(3) Existing revenue streams and near-term break-even potential;
(4) Accounting and financial systems and controls as well as proper corporate governance systems relative to the age and size of the entity; and
(5) A management team and ownership that exhibits genuine willingness to undergo a rigorous due-diligence examination and to undertake the duties and responsibilities of corporate financial and securities disclosure requirements.

Arête provides client companies a flexible and adaptable program to maximize their ability to raise growth capital and execute their business plans without having to unnecessarily divert scarce capital and human resources to the process of going public, or to expose the business owners and their investors to risk of failure in that process. The Arête Dividend Spin-off or Rights Offering Programs allow a client company to execute their growth plan prior to going public and upon entering the public market, to realize a market capitalization based on real fundamental values, rather than pure speculation, as in the case of Start-ups. These Programs can quickly get companies in their early to middle growth stages fully functioning at high performance. The Program is executed in carefully implemented stages that assure development of a self-sustaining enterprise.

Intake and First Level Analysis: Arête recruits client companies for acquisition and spin-off in a registered dividend spin-off or registered rights offering of its common stock to the Arête shareholder base of over 8,000 public shareholders (July 2002). Typically, a candidate will be acquired into a newly formed wholly owned subsidiary of Arête in an asset purchase or reverse merger transaction, with the original owners retaining a negotiated control position in the new Arête subsidiary.

Upon execution of the acquisition and spin-off Engagement Agreement, Arête will undertake an extensive due-diligence analysis of the candidate company and the parties jointly work together to develop and structure a viable business, financial and marketing plan. The Engagement Agreement may include agreements relating to corporate and capital structure, private placement terms and conditions, hiring additional administration and management staff, budgets, manufacturing and marketing plans, product roll-out and contingency plans, financial and public relations programs, among others designed to focus the management team on pursing the most effective and successful programs to develop sales and revenue growth, maximize gross and net profit margins and, in general, to assure that the business becomes self-sustaining in the shortest possible time frame with the least amount of capital commitment. The intake process may also focus on developing funding commitments from Arête affiliates, capital sources developed by the candidate and institutional debt, equity or convertible debt investors recruited by Arête or introduced from other sources.

Execution of Acquisition Letter of Intent and Detailed Due-Diligence Review: Following the signing of the Engagement Agreement and arriving at a go forward decision, an acquisition letter of intent is signed, spelling out terms and conditions and establishes the performance benchmarks and time lines for closing the acquisition as well as execution of the business, financial and marketing plan. Arête works with the management team of the prospective portfolio company to develop the necessary legal, financial and operational documentation to transfer ownership of the business to the newly formed Arête subsidiary, and conducts a thorough examination of the candidate financial, legal, corporate and operational records. Further detailed evaluations and refinement of the candidate business plan and growth strategy are worked out and fundraising documents are prepared as precursors to the ultimate registration statement that will be filed with state and federal securities regulatory authorities, and distributed to potential investors for evaluation and comments.

Additional Services Contracts: Arête shapes, packages, and presents the business to the capital markets. This includes business plans, financial analysis and modeling, capital structuring, and Investment Banking. This engagement is to provide private capital prior to execution of the spin-off transaction, as needed, and is intended to provide investor-side representation, communication, control, and accountability between the candidate and investors.

Synergistic Initiatives: Arête works with companies to determine how to best leverage core competencies, maximizing existing opportunities and identifying new ones. This is a Board of Director level service focusing on broad initiatives and long-range planning. Arête can be retained to consult directly or through independent contractors when this capability is deemed necessary by the various parties based on the deficits in the available skill set of the current management of the candidate.

Acquisition Closing and the Incubation Period

Either before or immediately after the acquisition transaction is closed, the business plan is funded and the roll-out is initiated. Arête supervises and advises the management team during plan execution, retaining contractual oversight and control of the process of employing the investment capital committed to the program. Arête commits to the dividend spin-off transaction or the registered rights offering based on achievement of performance benchmarks by the portfolio company. The purpose of these benchmarks is to provide incentive to the portfolio company's management team to obtain the values projected in the business and roll-out plan developed in the earlier stages, and to ensure that the portfolio company achieves maximum value and growth momentum prior to being taken public through the Program.

All the research, documentation, and financial information compiled in the previous stages are employed in the process of filing registration statements with the Securities and Exchange Commission and the respective state securities administrative agencies, as well as the stock exchange or quotation system chosen by the portfolio company for listing.

Final Execution

Ultimately, within a range of 60 to 120 days following initiation of the registration process, the registration statement covering the securities to be distributed by dividend or sold in the rights offering is declared effective by the Securities and Exchange Commission, the dividend or rights offering is executed, and certain of the securities of the portfolio company owned by Arête are distributed to its shareholder base on a pro-rata basis. If the Program is to distribute a dividend to the Arête shareholders, all or a portion of the securities owned by Arête are distributed to its shareholder base as registered and free trading securities. If the Program is to distribute or conduct a rights offering, the Arête shareholders are given the right to purchase securities of the portfolio company for a certain price. Usually, in such instance of a rights offering, if any Arête shareholder fails to exercise his or her rights to purchase stock of the subsidiary, a stand-by underwriter will be employed to place the rights with outside investors.

If you are interested in participating in our Spin-off program, please Contact Arête.