70% increase ownership in IM3NY.pros vs cons, page-12

The obvious pro to lifting their equity stake in iM3NY is the additional optionality it can afford MNS in bringing an equity party into that company.

Firstly, that they converted the loan into equity I think is significant in that the MNS Board (as the ultimate insiders) would have a very clear view on what is currently on the table via the term sheets that have been put to iM3NY. So they obviously see value in the additional equity in iM3NY (and most likely, near term value).

Here is one possible scenario (and the numbers are just illustrative) :

1) Party X proposes to buy into iM3NY at an existing US$1,000m valuation - let's say they are offering US$700m to match the prospective US$700m US Government loan to provide iM3NY with US$1,400m to expand from 1.8GWh to 5Gwh.

2) For their US$700m, then assume they are looking to hold (700/(700+1,000) =) 41.2% of the enlarged iM3NY entity.

3) At the old equity holding of 61.42%, MNS would be watered down to a holding of 36.1% of the enlarged iM3NY entity. At the now 73% equity holding, they are watered down to a holding of 42.9% of the enlarged iM3NY entity.

This increase in equity holding is material in the context of control - MNS does not lose control to the incoming equity participant(s) - rather they are on (roughly) equal footing, otherwise MNS risks becoming a "passenger" to the incoming equity participant(s) in the future of iM3NY.

I think the reason they elected to convert into further iM3NY equity either relates to the above scenario (ie managing control of an enlarged iM3NY) or otherwise to allow MNS to potentially sell some iM3NY equity (whilst still retaining a large / meaningful position) into the new equity participants and so monetise some of the iM3NY holdings for the benefit of progressing AAM and Nachu.

The other two elements that reinforce this from my perspective are:

(1) that the recent equity raise was structured to $5m (capped to a max of $10m - with the higher figure being where it finally came in at) suggesting that the Board has expectations of additional funds flowing into MNS in the near term. Again, my take is I think they are feeling confident that a deal will be cut or grant funds raised sufficient to allow progress on their other activities.

(2) alongside (1) above, that Frank and Hoshi participated in the raise. My take - they personally feel confident in the near term position of the business

Irrespective, it is all meaningless unless and until they can execute on a deal. Great that there seems to be confidence by the MNS "insiders" that a deal will be struck given these recent activities, but this not a guarantee of a successful deal outcome.

So, we watch and wait......