Private Placement Memoranda Business plans do not provide information about the technical structure of an offering. The structure of an offering allows you to raise debt financing from a number of investors instead of trying to find one with the entire amount of capital you require. The PPM sets forth critical information such as: the purchase price per note, how many notes are being sold to investors, maturity date, rate of return, etc. These are crucial items that must be presented to a potential investor in proper form or they will not invest. • A Subscription Agreement for purchasing the notes. Don't expect investors to give you capital based on a handshake. Would you invest funds into a company without signing a document that sets forth the terms and conditions of the loan? The Subscription Agreement sets forth these terms and conditions - this is the document the investor signs and gives you with their investment check. You will have a very hard time raising debt capital without this basic document. Another example would be the • Promissory Note Agreement the note is the actual loan agreement between the investor and the company. You can't have a business loan without a loan agreement.

An equity offering is where the subject company sells an ownership stake in the company to investors. Equity is usually preferred by early stage companies that need flexibility regarding capitalization. In an equity situation investors profit as the company profits since they are partial owners. This provides the advantage of not having a debt service payment draining revenue from the company in its early stages of growth. Most companies sell 10-30% of their company for a first round funding - obviously there are exceptions but this is the average. We recommend using either a "C" Corporation (where you would sell stock to investors) or a Limited Liability Corporation LLC (where you sell a membership unit to investors). Investors typically profit in two ways from an equity deal; via their proportionate "per share" percentage of company profit (called a dividend) and via the final sale of the security through an exit strategy (example: the company buying the securities back from the investors, the company and its issued and outstanding securities being bought out by another company, going public and selling on the open market, etc.) A debt offering functions much like a private business loan where, the company sells a promissory note to investors. The note sets forth the terms and conditions of the loan arrangement between the company and the investor. Thus a note would provide a certain interest rate typically paid annually to investors with a maturity date that dictates when the principal is paid back in full to investors. The notes are sold in fractional amounts providing flexibility for accommodating investors - thus a typical debt offering for $100,000 would be the sale of 20 notes at $5,000 per note. An investor investing $10,000 would get two notes. If the interest rate was 12% then he would get $1,200 paid to him annually based on the $10,000 investment. If the maturity date was 36 months then at the end of the 36 months the company would pay back the $10,000 to the investor. Many early stage companies that lack the required equity or operating history for conventional bank financing will use private debt from investors for a short period of time (12-36 months) to establish a credit and operating history. They then have the capability to take out the private debt loan from the investors with a standard bank business loan at a lower interest rate.

Changes to Small Business Administration lending requirements intended to channel more credit to African-American borrowers and other minorities will be announced Tuesday, according to the paper. "Beginning July 1, lenders will no longer have to perform an analysis of cash flow or debt-service coverage on loans of $350,000 or less, provided business owners meet the agency's credit standards," the Journal reports. SBA administrator Maria Contreras-Sweet said the changes "will simplify and streamline the lending process, which will incentivize banks to do more small-dollar loans in order to get more loans into the hands of traditionally underserved entrepreneurs." The Securities and Exchange Commission has launched probes into a number of major "dark pools" — private electronic trading platforms that allow investors to anonymously buy and sell orders. "Investigators are exploring whether the trading systems are properly disclosing to clients how they operate, treating all investors fairly and protecting confidential client information, among other concerns," according to anonymice. The housing market will continue to be hobbled by the precarious financial circumstances of Americans in their 20s and early 30s, according to John Carney and Justin Lahart. "Banks will see tepid demand for mortgages" as younger Americans struggle with student loan debt, limited job opportunities and sluggish income growth, the authors write. They predict President Obama's decision to expand student loan debt relief will make only a modest dent in the problem. "Better help would come from a drastic recovery in employment and incomes that would allow them to put their costly educations to work," Carney and Lahart write.

Citigroup C -2.92% and Bank of America BAC -4.24% are seen by many as the weak links in the big-bank chain. Their fourth-quarter results did little to dispel the notion. Both were saddled with charges related to legal and mortgage costs that ate into net profit, underscoring that they remain works in progress. Until these two can show consistent profitability, and less noisy quarters, their valuations are likely to remain below tangible book value. That is in contrast to rivals J.P. Morgan JPM -0.81% Chase and Wells Fargo, WFC -0.17% which trade at a premium to this measure of net worth. Even after stripping out changes in the value of its own debt and restructuring charges, Citi missed earnings estimates: Adjusted for these items, they came in at 69 cents a share for the quarter versus expectations of 96 cents. Investors were also worried by higher-than-expected legal expenses that seemed to foreshadow some sort of looming action. At BofA, earnings of three cents a share were a penny ahead of estimates, but only modestly positive following its announcement a week earlier of a big settlement with Fannie Mae FNMA +2.57% over mortgages. And despite taking $3.8 billion in charges related to that deal and the national foreclosure-review settlement, BofA also took an additional $900 million in legal expense. Efforts by both Citi and BofA to deal with legacy issues led to woeful returns. Citi's return on equity for 2012 was just 4.1%. At BofA, it was 1.27%. J.P. Morgan and Wells made 13% and 11%, respectively. New Citi chief Michael Corbat, presenting his first set of results, said the bank was "not satisfied with these bottom-line earnings." But he also signaled it will take time to make progress. While declining as yet to set specific performance targets, Mr. Corbat walked back one set by his predecessor, Vikram Pandit. That was for a return on assets in Citi's core businesses of 1.25% to 1.5%. Mr. Corbat said this wasn't "practical" in the short term, adding "we'll be resetting that," without specifying when or by how much. For 2012, Citi's return on assets for its core businesses was 0.82%; for the bank as a whole, it was about 0.4% The good news is that both BofA and Citi are making progress on expense reduction. And the issues facing them center in large part on their earnings potential. Their balance sheets, once the main worry for investors, continue to show improvement. BofA said its Tier 1 common ratio estimated under new Basel III rules rose to about 9.25%, compared with just below 9% the previous quarter. Citi said its ratio rose slightly from the prior quarter to 8.7%. Both banks also managed to buck the trend of falling net interest margins seen elsewhere. Generally, these margins—the difference between what banks make borrowing and lending money—have fallen in the face of superlow interest rates. Part of the reason Citi and BofA were able to increase their margins slightly is that both have aggressively cut the amount of long-term debt they have outstanding. This reduces their funding costs. Meanwhile, one contributing factor to Citi's miss, a release of loan-loss reserves of just $100 million, compared with $900 million the previous quarter, shows the bank is maintaining a conservative outlook on housing. That is a positive. Still, as the paltry returns show, both banks are coming up short. So the goal, as Mr. Corbat said, is quite clear: "We have to get to a point where we stop destroying our shareholders' capital." That such an obvious point has to be stated shows how much more work the banks need to do.

DRC has relationship with Local Community and Business Banks /Finance Related Services: • Determining Appropriate Finance • Determining Appropriate Financing Source • Loan Structuring All data is supplied and supported by Daniel, Russell & Charles Co. and made available to our clients to enhance their long term business goals. Daniel, Russell & Charles Co. believe a small business can be difficult, if not impossible to operate, when conditions in the business or the marketplace are not handled properly by its owner and/or management. If key rules and procedures, that initiate a process to operate and control the day to day activities of the business, have not been established; DRC can provide the following as a basis for operating the business in a manner in which you have envisioned and planned. • Establish a basic operating philosophy. It is essential for business owners, and entrepreneurs to conduct his/her day-to-day business affairs, from an internal as well as an external perspective; with personnel, customers, vendors, bankers, investors, etc. • Spell out the mission of the company. A mission statement that reveals the objective and general goals in relation to the production and delivery of its products or services to its customers. • Know and religiously practice the objectives of the company. A purpose that an owner or entrepreneur has established as an external event, quite independent of that which might be considered emotional or imaginative in nature. • Frame the policies and procedures around the company's mission. A beneficial structure involves an owner or entrepreneur that is established as being the best possible means to manage and to operate the business. • An overview of the owner or entrepreneur to fully integrate its basic operating philosophy, mission, and objective into workable policies and procedures is necessary, to be legitimately followed by members of a company on a consistent basis.

Investing private equity / venture capital /private placement memorandum Daniel, Russell & Charles Co., is a leading private growth equity investor. We have one of the longest records (17 years) in private capital investing, transitioning through three major long-term investment cycles. We have invested over $150 million across multiple highly diversified funds and partner with created over $400,000 million in fund liquidations. We have over $10 million in active portfolio investments. Daniel, Russell & Charles Co., invests mainly in the United States with a focus on our three sectors of expertise: outsourced services, information technology, green projects bio fuel, biomass, renewable energy and healthcare businesses. We invest for expansion and growth in small and mid-size companies with established business models, high internal growth rates, and large-market leadership potential. With deep portfolio company involvement we help companies achieve highly profitable leadership positions in large markets. Daniel, Russell & Charles Co., is typically the lead (or sole) outside investor and invests up to $25 million. Daniel, Russell & Charles Co., works closely with its portfolio companies in many areas including: • Strategy • Recruitment • Sales and marketing • Corporate development A unique approach is key to success as we build and maintain broad, deep, long-term domain expertise through a research and investment focus that encompasses both the private and public companies in our sectors of expertise. Relative to traditional approaches, this approach enables Daniel, Russell & Charles Co., to add unique value as an investor through: • Superior understanding of our industries, for assistance with strategic planning • Broader and deeper networks of industry contacts, for assistance with recruitment, marketing, and selling • Better understanding of the institutional investor community, for subsequent financings • A longer-term perspective on company development—well beyond the PPM.

Companies ready for global expansion have a wide range of needs and choices in accessing capital. Here are some ideas for how to raise cash depending on your company’s size and operations: • A company with one or more international operating subsidiaries— each with an estimated borrowing need of $10 million or more—may use its international operating subsidiaries as borrowers along with its U.S. parent company. By doing so, it will increase the potential to borrow as it maximizes efficiency and liquidity. • A company that has multiple international operating subsidiaries in different countries may find that, individually, these entities are too small. But together, they can create a reasonable borrowing need to source the working capital necessary to get started. • A parent company that has small (but growing) international businesses in various operating subsidiaries—or, in a number of countries, each with a negligible amount of assets—may be able to fold those operating subsidiaries and their assets into the parent company’s credit facility, once a critical mass has been reached. • A company that currently has no foreign subsidiaries but has plans to grow internationally may preprogram a credit facility for the addition of international subsidiaries as borrowers in designated jurisdictions.

The owner or entrepreneur of a small business must realize that the sales process is an integral part of the marketing concept and a key element of a company's revenue producing capabilities. Without sales, there would be no company or the need to consider establishing one in the first place. Determining whether a transaction is a sale of goods or whether it falls under another category is imperative due to legislative restrictions or requirements, such as taxes. Promotion strives to increase the demand of a product, thus minimizing the importance of the product's price in customer decision making. The following elements are essential when considering the mix of promotion strategies. Retail sales of products or services are generally made without written contracts except, in special cases, where there are implicit contracts between the parties to the transaction. Otherwise, most manufacturing, retailing, wholesaling, distributing, franchising, real estate construction sales, etc. must be based on written contractual obligations, which are enforceable under the law of the Uniformed Commercial Code in California and throughout the United States. The sales process must be considered fully since it is not just the act of selling alone, but generally also includes the following peripheral component parts: Advertising Personalized Selling Sales Promotion Events Public Relations As previously reviewed during the "Marketing Process" chapter, promotion represents information that serves a legally marketed product or service. Promotion has three objectives in mind: Inform Persuade Remind