Standards

Monticello Capital is a private US investment banking firm with pride in its recognized prestige and standing. Its business principles and the culture of the firm require adherence to scrupulously high standards of ethics. These standards apply especially to the firm's investments.

All potential investments and their executive principals must be of the highest quality, operate in an advanced technology industry, advance some useful social purpose, and show the clear capability for rapid growth with acceleration capital.

Candidate investments are by referral only. Monticello Capital finds its investment possibilities rather than the other way around. With regret, this firm will not invest in “cold call” entreaties or “over the transom” business plans.

Financial Criteria

Pre-investment EBIT is positive upon Monticello Capital’s analytical restatement of the income statement in the form of US GAAP.

Pre-investment EBITDA margins are positive for at least the most recent two financial quarters upon Monticello Capital’s analytical restatement of the income statement in the form of US GAAP.

The pre-investment current ratio for existing operations is at or better than 2.5.

The pre-investment acid test ratio for existing operations is at or better than 1.8.

The pre-investment cash flow to debt service ratio is greater than 1.75 to 1.

Minimum post-investment pro-forma first-year marginal revenues should be $3 million to $7 million
(€2.5 million to €6 million).

Post-investment pro-forma annual revenue growth is greater than 15 percent.

The target internal rate of return for investment is between 37.5 percent and 50 percent in a 30-month to three-year period. Note that this criterion is a benchmark and not necessarily a statement of expectations for an exit event.

Strategy

Acquisition strategy is almost always “buy and hold.” Development of the investment for a five- to seven-year period or longer must be expected. Rapid harvest will not occur in a Monticello Capital investment.

All investment will be for the company’s acceleration/expansion capitalization to fund growth and market entry. Monticello Capital’s investments are always for the expansion of productivity and always confer a technological advantage.

Use of Capital

The capital must be applied to the growth of the company and for no other purpose.

Acceleration capitalization only is funded. There will be no payoff of old debt or buyout of existing shareholders.

The Investment

Investments are in the range of $500K to $6 million (€400K to €5 million). Investment can take the form of straight debt with deferred servicing, convertible debenture, or preferred convertible equity issue. Common equity is not preferred. There is flexibility here as to form.

A majority stake is not required. Equity stake percentage (or equivalent conversion from debt) depends on the firm’s enterprise valuation.

Monticello Capital is the only investment principal. Michael N. Pocalyko, Managing Director of Monticello Capital, will ultimately make the investment decision. Staff analysts and Monticello Capital’s retained consultants will advise the investment. All of the capital provided is Mr. Pocalyko’s. There are no other outside investors and there is no investment committee.

Agents Excluded

No agents will be compensated and no investment will be made if the company has any agreement, explicit or implicit, to compensate an agent or consultant advising the transaction.

Investment Company Parameters

Corporate domicile and registration should be in the United States, Canada, or a country that is a current member of the European Union, the Organization of American States, the Asia-Pacific Economic Cooperation, or the Arab League. Companies in other national domiciles will be considered on the basis of the home nation's geo-economic stability. As a general guideline, no nation is excluded and the economics of market risk and return prevail over any political considerations.

The company must be closely held and private. Its equity may not be not publicly traded on any exchange.

The investment must be in an entrepreneurial stand-alone company, not in a subsidiary of a holding company. No complex ownership or offshore financial complexities can exist.

The company’s principals must stand up to personal due diligence by Monticello Capital in terms of US business ethics and reliability. The corporate leadership must speak English in the course of business.

No distress situations, turnarounds, or third-party acquisitions will be considered.

Corporate financial statements must be in a form that can be rendered into US GAAP.

An existing operating history is required. “Young” companies are acceptable and desirable, but pure start-up companies - “idea guys” - are excluded.

No financially significant pending litigation or potential for toxic torts may exist.

No change to current ownership and management may be anticipated by the company - i.e., no generational change or pending merger.

Oversight

The company should anticipate that Monticello Capital will name a qualified individual to a seat on the governing board or to an operationally equivalent position of oversight and consultative guidance in the case of a debt or financial hybrid investment. The outside executive from Monticello Capital will be concerned with financial/governance oversight and will take no active management role.