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Investment Strategy
Aegis SMB Fund II intends to make loans to privately held small businesses with annual revenues between $2 million and $25 million. The Fund may invest nationwide, but will focus its efforts in the Northeastern United States and Texas regions. Investment candidates may have current expenses in excess of their current revenues as they ramp up their sales and distributions efforts, but they will have to become cash flow positive within 12 months.

Investment Criteria
The Fund will only invest in companies with fully financed business plans (after giving effect to the current round of financing). As an exception to that principle, the Fund will make smaller investments to bridge a company through to a larger financing round in the near term if that larger financing will fully finance the business plan and the Principals feel there is a high degree of probability that the next round of financing will occur (and there is a contingency or back-up plan to pay back the loan in the event the follow-on capital raise does not occur as projected). In scenarios where near term milestones such as prototype approval, the completion of distribution agreements or the receipt of large pending orders are critical to (i) the potential solvency of the business or (ii) the valuation that was negotiated, the Fund may use controlled deposit accounts to monitor and manage the disbursement of the investment proceeds. Release of proceeds in these situations will generally be related to revenue or EBITDA growth (which could be achieved through cost reductions as well as sales growth in some circumstances) and sometimes will be tied directly to sales of units or customer acquisitions.

The Fund will pursue investments in portfolio companies with a combination of some or all of the following characteristics:

• Seasoned management with integrity, relevant experience, a successful track record and substantial equity incentives to align interests;

• Products or services targeting high growth, scaleable markets, with patents or other barriers to entry established in favor of the company;

• Rapid sales growth and experiencing, or approaching, positive cash flow;

• Well-formulated projections with an identifiable means of servicing interest payments and loan repayment;

• Attractive and defensible market positions;

• Well established and diversified, quality customer base or dependable and sustainable large customers;

• Endorsements from existing customers who can validate the company’s value proposition; and

• Viable exit strategy or sustainable, stand-alone business strategy.

In addition to focusing on strong management with viable products in attractive markets, the Fund intends to focus on opportunities, when available, where its management team has beneficial relationships to assist its portfolio companies with growth initiatives and the development of their businesses.