Executive Summary

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TABLE OF CONTENTS

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• Investment Thesis ............................... 1
• Key Financials Snapshot ........................ 2
• Strategic Differentiators ...................... 3
• Investment Highlights .......................... 4
• Risk Factors .................................... 5
• Buyer Profile Fit & Ideal Acquirer ............. 6

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#### 1. Investment Thesis

Desert Sun HVAC presents a rare combination in the lower-middle-market HVAC segment: 22 years of operating history, 22% three-year revenue CAGR, and a 60%/40% recurring-contract-to-project revenue mix — all profitable at a 23%+ SDE margin. The Company has scaled from $1.6M to $2.4M in revenue over three years [VERIFIED — owner-stated] without margin compression, demonstrating that growth has been operationally efficient rather than acquisition-driven or pricing-driven.

The investment thesis rests on four pillars. First, the recurring maintenance contract base — covering approximately 1,800 residential and 24 light-commercial accounts — generates predictable annual cash flow and serves as a continuous lead-source for higher-margin replacement and project work. Second, the customer concentration profile is exceptionally clean for a service business of this size, with the largest customer at 18% [VERIFIED] and top-5 at 32% [VERIFIED] — well within SBA-friendly territory. Third, the asking price of $1,625,869 [CALCULATED] supports SBA 7(a) financing with a 2.13x DSCR [CALCULATED] — providing 70% cushion above the SBA minimum and a 163% year-one cash-on-cash return for an owner-operator buyer. Fourth, the owner's 12-month timeline and 90-day transition commitment offers a workable handoff window, with clear pre-listing improvements (SOP completion, customer-service playbook finalization) available to lift the multiple toward the 3.5x–3.75x range.

This is a stable, growing, profitable trades business with a clean financial profile and a defensible recurring-revenue moat — the type of opportunity that typically generates multiple LOIs within 60–90 days of a properly-prepared market launch.

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#### 2. Key Financials Snapshot

Weighted SDE: $500,268 [CALCULATED]

Asking Price (Base 3.25x): $1,625,869 [CALCULATED]

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#### 3. Strategic Differentiators

• 22-Year Operating Tenure. Long-duration trades businesses signal customer stickiness, brand recognition, and operational durability. Buyers credit tenure with a measurable multiple premium.

• 60% Recurring Maintenance Revenue Base. A ~$1.44M annualized recurring revenue stream (60% of 2025 revenue [CALCULATED — from Layer 1: 0.60 × $2,400,000]) provides downside protection and serves as a permanent lead generator for higher-margin replacement work.

• Diversified Customer Concentration. Largest customer 18% / Top-5 32% [VERIFIED] — within SBA-friendly territory and well below the 30%-single-customer threshold that triggers underwriter scrutiny.

• 24-Hour Emergency Service Coverage. Differentiates from new-construction-only competitors and locks in customer dependence — particularly valuable in residential markets where emergency response drives long-term retention.

• 22% Three-Year Revenue CAGR with Stable Margins. Growth without margin compression demonstrates operational discipline; this is the profile buyers pay multiple-expansion premiums for.

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#### 4. Investment Highlights

• Established HVAC operator with 22 years of continuous operation in Nevada [VERIFIED — owner-stated]
• Revenue growth from $1.6M (2023) to $2.4M (2025) [VERIFIED] — 22.47% CAGR [CALCULATED]
• 2025 SDE of $563,268 [CALCULATED] at 23.47% SDE margin [CALCULATED]
• Weighted SDE of $500,268 [CALCULATED] supporting an asking price of $1,625,869 [CALCULATED]
• 60% recurring contract revenue providing predictable cash flow and continuous customer touchpoints
• ~1,800 residential + 24 light-commercial accounts in active service file
• Largest customer at 18% / top-5 at 32% [VERIFIED] — diversified concentration profile
• Stable workforce of 10 FTE + 2 PT employees [VERIFIED]
• 24-hour emergency service capability differentiates from new-construction-only competitors
• SBA 7(a) qualified with 2.13x DSCR [CALCULATED] — 70% cushion above the 1.25x SBA minimum
• Year-1 buyer cash flow after debt service: $265,781 [CALCULATED]
• 163% Year-1 cash-on-cash return on $162,587 down payment [CALCULATED]
• Owner committed to 90-day transition with no long-term employment requirement

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#### 5. Risk Factors

Owner Dependency (Moderate). The owner works 55 hours per week and operates with only partial SOP documentation (installation procedures complete; customer-service playbook in progress). The 90-day transition window is shorter than the 6–12 month period preferred by SBA underwriters for owner-dependent operators. Pre-listing SOP completion would meaningfully reduce this risk.

Geographic Concentration (Low–Moderate). Single Nevada location creates exposure to local market conditions; partially offset by the 24-hour emergency service capability and the operational maturity of the residential customer base.

Documentation Gaps (Moderate). Lease terms, equipment-fleet condition, written-contract status on the recurring maintenance base, and pending-litigation/regulatory disclosures were not captured at intake. Each is fillable but represents a credibility flag for sophisticated buyers and lenders. Broker action: complete supplemental intake before listing.

Industry / Macro (Low). The HVAC industry faces favorable tailwinds — replacement-cycle demand, climate-driven utilization, and consolidation activity. Industry benchmark — not specific to this Company; broker to verify against current comp data.

Missing inputs: Lease terms, equipment fleet detail, written-contract verification, Phase-6 disclosures — Impact: Sophisticated buyers' and SBA lenders' diligence checklists require all four; absence either delays close or creates re-trade risk. Broker action: complete five-question supplemental intake before market launch.

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#### 6. Buyer Profile Fit & Ideal Acquirer

Primary Target: Owner-Operator with HVAC or Adjacent-Trades Background (SBA-Financed).

Profile: 8–15 years industry experience, $200K–$300K liquid for down payment + working capital, seeking established cash-flowing operation with growth runway. The 2.13x DSCR and 163% year-one cash-on-cash return are highly compelling for this profile. Asking price $1,625,869 [CALCULATED] is well-positioned for SBA 7(a) execution.

Secondary Target: Regional HVAC Roll-Up / PE-Backed Platform.

Profile: Multi-location HVAC operator using add-on acquisitions to build territory density. The Company's recurring-contract base, customer file, and crew tenure are platform-relevant. Strategic buyers can credit synergies (back-office, procurement, fleet) and may transact at the Optimistic 3.75x range ($1,876,003) [CALCULATED]. Industry benchmark — not specific to this Company; broker to verify against current comp data.

Tertiary Target: Industry Executive Buyer.

Profile: Former HVAC corporate executive deploying personal capital + SBA. Hybrid of operator competence and strategic vision. May not pay top-of-range but offers high close certainty.

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