1
September 2007
Investor Presentation
HAPC, Inc.


2
Disclosure
The
attached
presentation
was
filed
with
the
U.S.
Securities
and
Exchange
Commission
(“SEC”)
as
part
of
the
Form
8-K
filed
by
HAPC,
Inc.
(“HAPC”)
on
September
18,
2007.
HAPC
is
holding
presentations
for
its
stockholders
regarding
its
purchase
of
InfuSystem,
Inc.
(“InfuSystem”).
A
copy
of
the
complete
presentation
is
available
at
the
SEC’s
website
(http://www.sec.gov).
This
presentation
has
been
prepared
solely
by
HAPC.
Neither
InfuSystem
nor
its
affiliates
(including
its
parent,
I-Flow
Corporation)
have
approved
or
are
responsible
for
the
presentation
information.
HAPC
and
its
directors,
executive
officers,
affiliates
may
be
deemed
to
be
participants
in
the
solicitation
of
proxies
for
the
special
annual
meeting
of
HAPC’s
stockholders
to
be
held
to
approve
this
transaction
on
September
26,
2007.
The
directors
and
officers
of
HAPC
have
interests
in
the
merger,
some
of
which
may
differ
from,
or
may
be
in
addition
to
those
of
the
respective
stockholders
of
HAPC
generally.
Stockholders
of
HAPC
and
other
interested
persons
are
advised
to
read,
HAPC’s
definitive
proxy
statement
filed
with
the
SEC
on
August
8,
2007
in
connection
with
HAPC’s
solicitation
of
proxies
for
the
special
annual
meeting
to
approve
the
acquisition
because
the
definitive
proxy
statement
contains
important
information.
Such
persons
can
also
read
HAPC’s
periodic
reports
filed
with
the
SEC,
for
more
information
about
HAPC,
its
officers
and
directors,
and
their
interests
in
the
successful
consummation
of
this
business
combination.
Information
about
the
directors
and
officers
of
InfuSystem
as
well
as
updated
information
about
the
directors
and
officers
of
HAPC
is
included
in
the
definitive
proxy
statement.
On
August
8,
2007
the
definitive
proxy
statement
was
mailed
to
stockholders
of
record
as
of
August
6,
2007
in
connection
with
the
special
annual
meeting
to
vote
on
this
transaction.
Stockholders
and
other
interested
persons
may
also
obtain
a
copy
of
the
definitive
proxy
statement,
and
other
periodic
reports
filed
with
the
SEC,
without
charge,
by
visiting
the
SEC’s
Internet
site
at
(http://www.sec.gov).


3
Safe harbor
This
presentation
may
contain
forward-looking
statements
within
the
meaning
of
the
Private
Securities
Litigation
Reform
Act
of
1995,
about
HAPC,
InfuSystem
and
their
combined
business
after
completion
of
the
proposed
transaction.
Forward-looking
statements
are
statements
that
are
not
historical
facts.
Such
forward-looking
statements,
based
upon
the
current
beliefs
and
expectations
of
HAPC’s
management,
are
subject
to
risks
and
uncertainties,
which
could
cause
actual
results
to
differ
from
the
forward-looking
statements.
The
following
factors,
among
others,
could
cause
actual
results
to
differ
from
those
set
forth
in
the
forward-looking
statements:
continuous
infusion
treatment
protocol
trends,
including
factors
affecting
supply
and
demand;
labor
and
personnel
relations;
healthcare
payor
reimbursement
risks
affecting
HAPC’s
revenue
and
profitability;
conditions
in
financial
markets
that
impact
HAPC’s
ability
to
obtain
capital
to
finance
capital
expenditures;
changing
interpretations
of
generally
accepted
accounting
principles;
and
general
economic
conditions,
as
well
as
other
relevant
risks
detailed
in
HAPC’s
filings
with
the
SEC,
including
the
definitive
proxy
statement
filed
with
the
SEC
on
August
8,
2007
in
connection
with
the
acquisition
of
InfuSystem
and
HAPC’s
form
10-K
for
the
fiscal
year
ended
December
31,
2006.
The
information
set
forth
herein
should
be
read
in
light
of
such
risks.
HAPC
assumes
any
obligation
to
update
information
contained
in
this
presentation.
This
presentation
contains
disclosures
of
EBITDA
for
certain
periods,
which
may
be
deemed
to
be
non-GAAP
financial
measures
within
the
meaning
of
Regulation
G
promulgated
by
the
SEC.
Management
of
HAPC
believes
that
EBITDA,
or
earnings
before
interest,
taxes,
depreciation
and
amortization
are
appropriate
measures
of
evaluating
operating
performance
and
liquidity,
because
they
reflect
the
resources
available
for
strategic
opportunities
including,
among
others,
investments
in
the
business
and
strategic
acquisitions.
The
disclosure
of
EBITDA
may
not
be
comparable
to
similarly
titled
measures
reported
by
other
companies.
EBITDA
should
be
considered
in
addition
to,
and
not
as
a
substitute
for,
or
superior
to,
operating
income,
cash
flows,
revenue,
or
other
measures
of
financial
performance
prepared
in
accordance
with
generally
accepted
accounting
principles.
A
reconciliation
of
EBITDA
to
Net
Income
is
included
on
the
‘EBITDA
Reconciliation’
page
of
this
presentation.


4
Agenda
Summary
Financials and valuation
Growth strategy
InfuSystem overview
Industry overview
Overview


5
Acquisition details
Buyer:
HAPC, Inc. (OTCBB: HAPN, HAPNW, HAPNU) is a blank
check company (SPAC) formed for the purpose of
acquiring one or more operating businesses in the
healthcare sector
Target:
InfuSystem, Inc., (a subsidiary of I-Flow Corporation,
NASDAQ:
IFLO), a leading provider of ambulatory
infusion pump management services to oncologists and
their patients in the United States
Consideration1:
$85 million cash
$15 million debt
Record date:
August 6, 2007
Shareholder vote:
September 26, 2007
Anticipated acquisition closing:
September 28, 2007
1
On
September
12,
2007,
HAPC,
Iceland
Acquisition
Subsidiary,
Inc.,
InfuSystem
and
I-Flow
entered
into
a
non-binding
Memorandum
of
Intent
(the
“MOI”)
which
contemplates
an
amendment
to
the
Stock
Purchase
Agreement,
dated
as
of
September
29,
2006,
by
and
among
the
foregoing
parties,
pursuant
to
which
the
original
purchase
price
payable
by
HAPC
to
I-
Flow
for
InfuSystem
would
decrease
from
$140,000,000
to
$100,000,000.
The
cash
portion
of
the
purchase
price
payable
to
I-Flow
will
remain
at
$85,000,000,
less
the
amount
returned
to
stockholders
of
HAPC
exercising
their
conversion
rights
as
described
in
HAPC’s
Definitive
Proxy
Statement.
HAPC
will
also
deliver
a
promissory
note
to
I-Flow,
the
amount
of
which
will
range
from
$15,000,000
to
$35,000,000
depending
upon
the
number
of
HAPC
stockholders
who
exercise
their
conversion
rights.
The
MOI
contemplates
that
HAPC
would
pay
contingent
consideration
to
I-Flow,
provided
that
certain
conditions
related
to
the
operations
of
InfuSystem’s
business
are
met.
The
contingent
consideration
would
be
based
upon
the
compound
annual
growth
rate,
or
“CAGR”,
of
HAPC’s
consolidated
revenues
over
the
three-year
period
ended
December
31,
2010
and
would
be
paid
in
2011.
No
additional
payment
will
be
made
unless
HAPC
achieves
a
revenue
CAGR
of
at
least
40%
over
the
three-year
period.
The
payment
will
range
from
$3,000,000
to
$12,000,000
depending
upon
the
extent
to
which
revenue
CAGR
for
the
three-year
period
exceeds
40%.
The
maximum
potential
amount
of
the
contingent
consideration
is
$12,000,000
and
would
be
payable
to
I-Flow
if
HAPC
achieves
a
revenue
CAGR
of
50%
over
the
three-year
period.
The
parties
to
the
MOI
have
not
yet
amended
the
Stock
Purchase
Agreement
to
reflect
the
contemplated
changes
in
the
consideration
payable
by
HAPC
to
I-Flow
for
the
acquisition
of
InfuSystem,
nor
are
the
parties
under
any
obligation
to
enter
into
such
an
amendment.


6
Investment highlights
Nation’s largest continuous chemotherapy infusion services (DME) company in
a high growth, highly fragmented market
High barriers to entry
60% penetration of oncology offices
Contracts with managed care organizations representing 125 million
covered lives
Significant near-term opportunities to expand to other cancer treatments and
beyond (+25% growth anticipated)
32% revenue CAGR (5 year) without new initiatives and currently no
meaningful marketing efforts
Significant margins (2006)
Gross margin: 73%
EBITDA margin: 49%
High return on invested capital


7
Agenda
Summary
Financials and valuation
Growth strategy
InfuSystem overview
Industry overview
Overview


8
Continuous infusion cancer treatment
Continuous Infusion (CI) allows for gradual administration of chemotherapy via a
small portable pump over several days as opposed to traditional chemotherapy
treatments given in a single high dose over a short period of time (known as bolus
infusion)
CI has achieved increased acceptance and is becoming a market standard of care
for colorectal cancer (CRC) due to:
Increased efficacy and comfort for patients (lower toxicity)
Lower cost compared with hospitalization or home care
Higher margin to physicians due to changes in Medicare reimbursement
In 2004, sanofi-aventis and Pfizer introduced CRC treatment protocols FOLFOX and
FOLFIRI, which include courses of CI. Their marketing efforts have helped to
increase physician awareness of CI.
There are currently over 120 CI drug therapy clinical trials in progress
Recent drug protocol approvals for head and neck, lung, pancreatic, gastric and
other cancers


9
$368
$932
$1,517
$1,948
$2,127
$0
$500
$1,000
$1,500
$2,000
$2,500
2002
2003
2004
2005
2006
Representative growth of continuous infusion
Source: sanofi-aventis
Sales of Oxaliplatin (used in continuous infusion protocol)¹
1
sanofi-aventis’
Eloxatin (oxaliplatin) –
utilized in FOLFOX protocol in conjunction with continuous infusion of 5-FU (fluorouracil)


10
Market acceptance of CI growing and accelerating
Source:
Everett
Rogers
Diffusion
of
Innovations
model
InfuSystem’s early adopters and
innovators consist of 5 of the top
10 cancer centers in the US
Estimated position of continuous
infusion for cancer treatment


11
Near-term opportunities for continuous infusion in cancer
17,500 –
CRC
6,000 –
Other indications
Potential continuous infusion
market that requires no additional
regulatory approval and minimal
payor approval
$40mm
20,000
CRC –
Stage II
(high risk)
$494mm
247,030
Total
$43mm
21,260
Gastric
$74mm
37,170
Pancreatic
$35mm
17,600
Head & Neck
(Neoadjuvant)
$53mm
26,400
Head & Neck
(Chemo & RT)
$80mm
40,000
CRC –
Stage II
$169mm
84,600
CRC –
Stage III & IV
Opportunity1
Estimated
2007
new cases
Cancer type
Only represents near-term opportunity
1
Based on $2,000 revenue per year per case
Patients using InfuSystem pumps


12
Agenda
Summary
Financials and valuation
Growth strategy
InfuSystem overview
Industry overview
Overview


13
InfuSystem overview
Leading healthcare services company that provides ambulatory
infusion pumps for oncologists and their patients in the U.S.
Pumps are primarily used for the continuous infusion (CI) of
chemotherapy drugs for patients with colorectal cancer
InfuSystem provides a complete solution to doctor & patient:
Supplies equipment (pumps and related disposable supplies)
Handles billing and collection directly from the patients’
insurers and
from the patients for pump and supplies
Maintains, cleans & services equipment
Supports patient or doctor inquiries with 24/7 nurse-staffed hotline
InfuSystem also rents and sells other supplies to oncologists
InfuSystem has 110 employees and nationwide coverage


14
Compelling value proposition to all players
Physicians
Patients
Payors
Higher professional service
fees
Improved patient outcomes
Strengthens relationship with
patient
Lower administrative burden
Lower cost
Improved patient
outcomes
Continuity of care
Reduced side effects
Comfort and convenience
Lower cost
Patients Win
Payors Win
Physicians Win
Patients, Physicians and Payors all benefit with InfuSystem


15
Significant competitive advantages
Regional DME Providers
No significant scale
Limited pump selection
Limited insurance
contracts
Hospital
Hospitals unlikely to
support competing
hospitals
Limited capital budgets
Home care
Takes revenue from
physician office
More costly for patients
and payors
Less convenient for
patients
Physician owned Durable
Medical Equipment
(DME)
More time intensive and
costly for physicians
Biomed
On-call
Vast pump selection
Covers approximately 65% of
managed care lives
Bulk discount on pumps
Provides additional revenue
stream to physicians
24-hour staffed nurse hotline
to patients reduces load on
physicians staff
Servicing 60% of oncology
practices
InfuSystem operates in a highly fragmented market with the next
leading competitor being a fraction of InfuSystem’s size


16
Board and management team with deep healthcare expertise
Sean McDevitt, Chairman
Alterity Partners, founder (sold to FTN Midwest)
Goldman Sachs, investment banking
Pfizer, sales & marketing
U.S. Army Rangers, Captain (decorated)
Wayne Yetter, Director
Verispan, CEO
Odyssey Pharmaceuticals, President & CEO
Synavant, Chairman & CEO
Novartis Pharmaceuticals, U.S. President & CEO
Astra Merck, President & CEO
Current Board member of Noven Pharmaceuticals
(NOVN), Matria Healthcare (MATR) & EpiCept
(EPCT)
Jean-Pierre Millon, Director
PCS Health Systems, President & CEO
Eli Lilly, various senior executive positions including
President and General Manager of Lilly Japan
Current Board member of CVS/Caremark (CVS) &
Cypress Bioscience (CYPB)
John Voris, Director
Epocrates, Chairman (formerly CEO)
PCS Health Systems, Executive Vice President
Eli Lily, various senior executive positions
Current Board member of Oscient Pharmaceuticals
(OSCI), Epocrates & Gentiae Clinical Research
Steve Watkins, CEO
Co-founder of InfuSystem; serial entrepreneur
Former VP of Aventric Medical, a Midwest
distributor of high tech equipment
Dallas Durable Medical Inc., Officer
American Medical Finance, President
Jan Skonieczny, VP of Operations
Aventric Medical, Operations Manager
Charwood Cardiac Testing Lab, Supervisor
Tony Norkus, VP of Sales
Served as VP of international and domestic sales
for all equipment lines at I-Flow
Ambulatory pump products, product director
Parker Biomedical, national sales and marketing
manger
I-Flow, director of sales and marketing
CFO (to be determined)
Candidates identified
VP of Marketing
Already working with HAPC as consultant


17
Agenda
Summary
Financials and valuation
Growth strategy
InfuSystem overview
Industry overview
Overview


18
Growth strategy
Distribution of other products &
services through current channel of
oncologist
Drugs
Safety products
Disposables
Immediate Impact
Initiatives
1
Extend CI Services
2
Expand Product
Portfolio
3
2008 and Beyond
4
Untapped international CI market
Other cancer types
Acquire regional “mom & pop”
DME providers
Fragmented market
Companies typically have less
than $10m in revenue and can
be purchased at 4-6x EBITDA
Increase pump utilization to 75-80%
Invigorate sales force
New marketing initiatives
Expand deeper and wider within
current base
Extend to CRC stage II
Head and neck, lung, pancreatic,
gastric


19
1. Immediate Impact Initiatives
Goal:
Increase pump utilization from 60% to 75-80%
Invigorate sales force
New marketing initiatives
Expected Results:
Decreased capex
A 4% increase in pump utilization would have eliminated 2006 pump capex spending
Increased EBITDA –capex (cash flow)
75% pump utilization would allow for 2007 revenue growth of 27% with no
additional capex (a savings of over $7 million)
Pump utilization -->
65%
70%
75%
80%
Potential Pump Revenue
$34,503,313
$37,157,414
$39,811,515
$42,465,616
Potential Revenue Growth
10%
19%
27%
36%
Capex savings
$2,366,118
$4,732,237
$7,098,355
$9,464,473
Estimated 2007 revenue supported with no additional capex


20
2. Extend CI services
Goal:
Expand deeper & wider within current established base of oncologists
Extend continuous infusion services to CRC Stage II & other cancers indications
Other cancers are a growing part of InfuSystem’s business
Recent drug protocol approvals for head and neck, lung, pancreatic, gastric and
other cancers
Expected Results:
Sustained long-term financial performance
+ 25% revenue growth
+ 40% EBITDA margins


21
Agenda
Summary
Financials and valuation
Growth strategy
InfuSystem overview
Industry overview
Overview


22
InfuSystem financial performance
+40% Adjusted EBITDA margins
$10,292
$13,022
$19,349
$28,525
$31,716
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
2002
2003
2004
2005
2006
Revenue
26,424
27,320
26,996
28,621
28,893
25,000
25,500
26,000
26,500
27,000
27,500
28,000
28,500
29,000
Q1'06
Q2'06
Q3'06
Q4'06
Q1'07
Total patient billings
InfuSystem
Q1 '07
2006
2005
2004
Net rental revenue
7.9
31.7
28.5
19.3
Revenue growth
2%
11%
47%
49%
Cost of revenues
2.3
8.5
7.7
5.6
Gross profit
5.6
23.3
20.8
13.8
Gross margin
71%
73%
73%
71%
Selling & marketing exp.
1.0
3.8
4.3
3.2
G&A expense
1.8
7.2
7.1
4.7
Bad debt expense
1.7
4.0
1.3
1.3
Operating income
1.0
8.2
8.1
4.7
Operating margin
12.9%
25.8%
28.3%
24.0%
Interest expense
0.0
0.1
0.1
0.0
Income before income taxes
1.0
8.1
8.0
4.6
Income tax expense
0.4
3.1
2.9
1.7
Net income
0.6
5.0
5.1
2.9
EBITDA calculation:
Operating income
1.0
8.2
8.1
4.7
Depr. & amort.
1.0
3.7
3.3
1.8
EBITDA
2.0
11.9
11.3
6.5
Adjusted EBITDA calculation:
EBITDA
2.0
11.9
11.3
6.5
Stock based comp.
0.1
0.4
1.1
0.3
MI sales & use tax accrual
0.1
0.2
0.2
0.1
Bad debt exp. due to BCBS
billing delays
1.0
2.0
-
-
Proforma
revenue from
transition services agreement
0.2
1.1
0.7
0.3
Adjusted EBITDA
3.4
15.6
13.3
7.2
Adjusted EBITDA margin
43.2%
49.1%
46.7%
37.0%
Adjusted EBITDA less capex
2.1
11.9
5.3
0.5
Adjusted EBITDA less capex
growth
NA
125%
1030%
NA


23
Structure and valuation
Officers and Directors
4,166,667
20%
HAPN Public Stockholders
16,875,251
80%
Total Shares Outstanding
21,041,918
100%
Officers and Directors
4,166,667
20%
4,166,667
7%
HAPN Public Stockholders
16,875,251
80%
16,875,251
29%
Warrants
-
-
33,750,502
58%
Management Warrants
1,071,429
2%
UPO Shares
-
-
833,333
1%
UPO Warrants
-
-
1,666,666
3%
Total Shares Outstanding
21,041,918
100%
58,363,848
100%
Pre-Merger
Post-Merger
Basic
Fully-Diluted
80%
20%
87%
9%
4%
HAPN price per share in trust (2007Q2)
$5.94
2006 Proforma EBITDA
$15,574,550
Pro forma basic shares outstanding
21,041,918
Market Capitalization
$125,017,005
EV/2006 Proforma EBITDA
10.5x
Plus: in-the-money warrant value
$32,778,972
Peer Group:
Plus: debt (assuming no redemptions)
$15,000,000
EV/2006 EBITDA
20.7x
Less: cash
($10,000,000)
Implied Enterprise Value
$162,795,976
Post-Transaction Metrics
Implied Transaction EV Multiples


24
Public company comparables
Source: Reuters & Capital IQ
Note: Market cap & enterprise value calculated as of 8/17/07 on a fully diluted basis
*
Currently in the process of being acquired by Walgreens Corp.
High Growth/Margin Healthcare Companies
($ in millions)
Market
Enterprise
Revenue Growth
EBITDA Margin
EV / Revenue
EV / EBITDA
Company
Ticker
Cap
Value
2007P
2008P
2007P
2008P
2006A
2007P
2008P
2006A
2007P
2008P
Healthways, Inc.
HWAY
1,854
$    
2,112
$    
51%
29%
21%
23%
4.8x
3.1x
2.5x
21.8x
14.3x
10.6x
HMS Holdings Corp.
HMSY
641
        
647
        
65%
15%
27%
29%
7.6
4.6
4.0
34.1
17.0
13.8
Integra LifeSciences Holdings Corp.
IART
1,446
     
1,775
     
31%
13%
22%
23%
4.2
3.2
2.9
19.3
15.0
12.2
Matria Healthcare Inc.
MATR
580
        
876
        
6%
10%
23%
24%
2.6
2.4
2.2
11.6
10.6
9.1
NightHawk Radiology Holdings, Inc.
NHWK
625
        
606
        
71%
39%
29%
30%
6.6
3.8
2.8
18.1
13.1
9.2
Option Care, Inc.
*
OPTN
719
        
823
        
24%
14%
7%
7%
1.2
1.0
0.9
19.3
15.5
13.2
Mean
41%
20%
21%
23%
4.5x
3.0x
2.5x
20.7x
14.3x
11.4x
Median
41%
14%
22%
24%
4.5
3.2
2.6
19.3
14.6
11.4
High
71%
39%
29%
30%
7.6
4.6
4.0
34.1
17.0
13.8
Low
6%
10%
7%
7%
1.2
1.0
0.9
11.6
10.6
9.1


25
Agenda
Summary
Financials and valuation
Growth strategy
InfuSystem overview
Industry overview
Overview


26
Summary
Business historically run for cash will be free to grow
Significant near-term opportunities for growth with minimal execution risk
Achievable growth strategy
Increase pump utilization to 75-80%
Extend CI services
Expand coverage
Use of leverage in purchase price will increase ROE
High margin business with high barriers to entry