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To: cardcounter who wrote (543)	8/8/1998 10:46:00 AM
From: Chloe R	Respond to of 690

cardcounter, It would actually work out something like this (oversimplified): Since the post-offering number of shares in HST is around 12.6 million, I'll use that figure. This number would then represent 90% of the new company. The final structure would therefore have a total of 14 million shares of which 12.6 mill (90%) go the owners of HST and 1.4 mill (10%) go to the owners of the shell (of which Halter owns 65% or so.) Therefore Halter is, in fact, only receiving 6.5% directly with the rest going to regular joe blows and jane does that were shareholders in the old company. The shell will first undergo a forward split at the ratio of 2.8 for 1 (usually it's a reverse split but it looks like Halter's shells have already undergone a share restructure to begin with.) That would increase the shell's number of outstanding shares from 500,000 to the 1.4 million that will represent 10% of the new company. The shell will then issue 12.6 million new shares in which to acquire HST. The shareholders of HST then become the majority shareholders and rename the company, put in a new board of directors, etc. The total authorized number of shares will then be adjusted to a sensible level. The rationale is that the increase in company value (by virtue of being a public company with a public valuation) outweighs the ten percent required to become public. The shareholders, therefore, aren't "wormed" :o), because their per-share value is actually greater after the merger. This, of course, requires communicating the relevant facts to the investment community in order to facilitate a smooth transition and to build initial value. The transaction could happen a number of ways, but this approach seems the most typical. This structure for shares only is of great benefit to HST. These clean shells are now commanding about $200,000 in addition to shares. I believe the investor would be more upset seeing 20% of the proceeds being required for the shell. It appears that FMV and HST have negotiated a very favorable deal (especially when considering that HFG has NEVER done a reverse merger for a company with no revenues.) They have put a lot of faith in HST to perform. Hope that explanation helps, Clo

To: cardcounter who wrote (543)	8/8/1998 10:55:00 AM
From: Chloe R	Read Replies (1) \| Respond to of 690

Oh, and don't forget, the first market maker will be "advised" and "assisted" on the initial pricing. He or she will take into account the lower risk (of being fully funded), the greater potential (of having the funds to close on the initial quotes), and the greater visibilty and credibility of the company, etc. and will most probably price the security considerably higher than $1 per share. I'm sure FMV has a target of $2 or $3 in mind so that the stock only has to double or so to be in the magic solicitation range. Clo