Smart Start Presentation by Steve Gersz

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A deck from Steve Gersz of Underberg & Kessler LLC, as presented to the Rochester Open Coffee Club meeting on April 8, 2011.

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Smart Start Presentation by Steve Gersz

  1. 1. UNDERSTANDING CAPITAL STRUCTURESteven R. Gersz, Esq.Underberg & Kessler LLP300 Bausch & Lomb PlaceRochester, New York 14604(585) 258-2817sgersz@underbergkessler.com © 2010 Steven R. Gersz, Esq. Underberg & Kessler. All Rights Reserved.
  2. 2. Capital Comes from the Right Side ofYour Balance Sheet Precision Technology Corporation Balance Sheet Current Assets Current Liabilities Cash Accounts Payable Marketable Securities Notes Payable Inventories Salaries Payable Interest Payable Investments in other companies Income Taxes Payable Current Portion of Long-term Debt Property, Plant, and Equipment Land Long-term Liabilities Buildings Long-term Notes Payable Less: Accumulated Depreciation Long-term Borrowings Equipment Bonds Payable Less: Accumulated Depreciation Intangible Assets Stockholders Equity Patents Preferred Stock Common Stock Trademarks Goodwill Additional Paid-in Capital, Preferred Stock Additional Paid-in Capital, Common Stock Retained Earnings Total Assets Total Liabilities and Stockholders Equity
  3. 3. Source of Growth Capitall  Grantsl  Loansl  Equityl  Strategic Alliances
  4. 4. Types of Debtl  Trade Debt / Accounts Payablel  Notesl  Debenturesl  Bonds
  5. 5. Debt Can Be In Ordered Layersl  Bank Debt (Senior Debt)l  Senior Subordinated Debtl  Junior Subordinated Debtl  Trade DebtDebt Can be Secured or Unsecured
  6. 6. Types of Equityl  Common Stockl  Preferred Stock
  7. 7. Preference Itemsl  Votingl  Dividendsl  Liquidation Proceedsl  Redemption Rights (Call/Put)
  8. 8. Hybridsl  Convertible Debtl  Convertible Preferred Stockl  Detachable Warrants
  9. 9. Financing Sourcesl  Angel Financingl  Private Placements ●  Friends and Family ●  Broker/Dealer Placedl  Institutional Venture Capital ●  Seed Funds ●  Early Stage Funds ●  Growth Funds ●  Buy-out Funds
  10. 10. Important Structural Conceptsl  Future Purchase Rights ●  Right of Refusal ●  Pre-Emptive Rightsl  Ratchet Clause ●  Weighted Average Dilution ●  Full Ratchet
  11. 11. Important Structural Concepts(Continued)l  Control Provisions ●  Board Seats ●  Board Flips ●  Transaction Restrictions ●  Redemption Rights on Insider Stock ●  Right of Refusal and/or Co-Sale Rights on Insider Sales
  12. 12. Important Structural Concepts(Continued)l  Registration Rights ●  Lock-up on IPO ●  Piggyback ●  Demand ●  Restrictions on Future Grants of Reg. Rights ●  Participation Rights Among Reg. Rights Holders
  13. 13. Important Structural Concepts(Continued)l  Exit Strategy ●  Liquidity Events (Timing) ●  Merger ●  Sale of Assets ●  Time Based (mandatory redemption) ●  Put by Investor ●  Call by Company ●  Pricing l  Fixed Value l  Formula (compounded annual return) l  Appraisal
  14. 14. Questions
  15. 15. UNDERSTANDING CAPITAL STRUCTURESteven R. Gersz, Esq.Underberg & Kessler LLP300 Bausch & Lomb PlaceRochester, New York 14604(585) 258-2817sgersz@underbergkessler.com © 2010 Steven R. Gersz, Esq. Underberg & Kessler. All Rights Reserved.

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