INVESTMENT PROCESS

BHG has a clear seven step investment process:

Step 1: Submission/Review of the Business Plan

BHG receives a large number of prospects for funding. Every venture capitalist values deal flow, but submissions of a business plan without any knowledge of the BHG criteria or prior relationships with the BHG team have little chance of consideration. Nonetheless, BHG will strive to read and evaluate every business plan submitted in accordance with the BHG investment criteria.

BHG often will reject business plans due to the following:

• Out of scope
• Lack new technology
• Bad timing (too early/too mature)
• Too narrow/small a market - no market potential

BHG will seek to respond with an opinion within 1-2 weeks.

Step 2: First meeting with Management Team

If the prospect looks promising, the next step is to arrange a meeting so that the entrepreneur has the opportunity to give a more detailed presentation of the company. BHG prefers a short investor presentation with a maximum of thirty minutes in which the idea, business model, strategy, status of the company, references, financials, valuation and capital requirement, exit strategy, and management team is detailed.

After this presentation, BHG will offer the opportunity to engage each presentation with a detailed dialogue of the core issues of the prospect/presentation. In addition, BHG is happy to present an overview of the BHG Business System and Venture Prism Strategy.

Step 3: Business Evaluation

Based on the business plan and the first meeting, BHG will internally discuss and evaluate the prospect immediately after the initial meeting. The basic question that will be posed is whether the prospect is sufficiently strong and unique to meet BHG's "rule-of-thumb" criterion; the potential for 20-fold return on investment. The issues involved in the evaluation are typically the following:

• Business model
• Technology
• Management
• Market potential/timing
• Synergy with BHG portfolio companies
• Exit strategies

The first 3 steps will typically be completed within 4-5 weeks.

Step 4: Business/Strategic Due Diligence

If the new venture is accepted, BHG will commence a verification process to test/verify the critical success factors of the prospect.

This process is time consuming and will not be concluded until a series of meetings on strategy, divisions of responsibility and other factors such as the following are completed:

• Market research/competitor analysis
• Involvement of BHG external advisors
• Technology/IPR check
• Key people criteria: quality, chemistry and commitment
• Check BHG portfolio company synergy
• Timing

As mentioned above, the objective at this stage is to check the prospect and commit the parties to a mutually agreed upon strategy for the new company. The process will be completed with an investment summary covering the findings and recommendations of the "due diligence".

Step 5: Term Sheet Agreement

If the conclusions of the investment summary are positive, a term sheet will be drawn up, outlining the structure of the deal. The term sheet agreement will cover various terms such as:

• Investment size & structure
• Valuation and equity stake in the company
• Management
• Board representation
• General terms

Steps 4 and 5 function simultaneously and will usually be completed within 6 weeks.

Step 6: Financial & Legal Due Diligence

At this stage BHG will conduct a formal financial and legal due diligence process. The due diligence process is a check of various issues including:

• Annual accounts
• Cash flow
• Budgets
• Contractual obligations
• Intellectual property rights
• Labour contracts
• Legal disputes

Step 7: Final Decision - Investment Agreement

If the financial and legal due diligence is concluded without any unresolved issues, the management of BHG will approve the investment. Based on the term sheet agreement, the investment agreement will then be completed and finally, the investment will be transferred to the company and shares will be issued.

The whole investment process will often be completed within 3-4 months. There may be instances when the investment process only takes 1-2 months or can take up to 9 months. It all depends on the complexity of the case. The investment process, especially the strategic due diligence, takes time. But once completed, decisions are made swiftly and through the application of the BHG Business System, risk is minimized, speed to market is increased and returns are maximized for all parties.