Methodology

The RHL Methodology…

Rhodes Holdings LLC (“RHL“) provides management consulting services for small- to mid-capitalization companies that want to ready themselves for a stable continued growth.  These companies can be private, publicly traded or those who would entertain going public as a means of achieving their business goals.  For your information, read our profile, BLOG, and about the RHL methodology or leave us  feedback.

At Rhodes Holdings LLC (“RHL“), we believe in a repeatable process wherein our best practices, gained by our principals over their business careers, is used in an open and documented manner.  Please find the complete phased process here on the site.  This will contain reference to all of our documents as well.

Phase 1 – Retain

This phase allows the client and RHL to determine if RHL’s services and parameters for engagement will be mutually satisfactory before investing a great deal of time and effort into our relationship.

1. Initial RHL contact with potential client
   Determine client adherence to our client requirements ($2M+ revenue with 10%+ net profit/EBITDA or any revenue with $200,000+ annual profit) and if RHL provides services that can help the client.  Startup financing will only be provided or reviewed on a paid consulting basis. Normally this will be done over a series of meetings or meals with majority owners of the business.
2. Mutual N/D/A – (RHL standard NDA)
   Our clients’ non public information will be guarded.
3. Initial due diligence – (RHL due diligence 1)
   Our process is very data intensive and requires our clients to be very open with our business analysts.  We require our clients to disclose most of what is required for an audit for our due diligence #1.  We schedule this with two meetings – one when we go over the due diligence requirement list and one a week after we receive the data and are able review it all.
   
   
4. Client retains RHL, agreement and retainer – (RHL agreement)
   Before RHL completes any work, RHL requires our clients to sign an RHL consulting agreement (customized for each client) and pay a retainer.  Very infrequently will RHL undertake any work without a retainer.

Phase 2 – Prepare

This phase is the integration and synthesis of all the information provided to RHL by the client.  The end product(s) include everything that RHL will use in order to provide in depth financing and / or consult with the client through the process of “going public”.

1. RHL Client Summary creation – (samples: Brianchi Stone, Hi Alloy)
   Based upon the information in the initial due diligence package from RHL’s client, RHL shall create a one page client summary that RHL will use to speak with merger or acquisition candidates, funding sources, and other professionals.
2. SEC Legal due diligence – (RHL due diligence 2: MS Word, PDF)
   After we have gotten the first round of due diligence material and have determined a course of action, now its time to get the in depth due diligence packet going.  This information will be the basis for an audit in the future, so this will obviously take a long time to get together.  Three copies should be made and put in binders – one for RHL, one for any buyers or funding sources, and one for the auditors.
3. RHL business plan creation – (sample: Systems Evolution Inc.)
   This is the most time consuming and analytical of RHL’s steps.  RHL will
4. RHL investor presentation creation – ()
   This is a 10 page slide presentation for use in PPM investor conferences.
5. Restructuring -
   Many times through the years of operations, the corporate structure becomes very muddled, may have financial commitments that are not easily un-entangled or described, or have structural pieces that are not conducive to funding, going public, or being audited.  At RHL, we will walk you through restructuring your corporate entity.  We recommend and use the Nevada Corporate Headquarters, Inc. for creating corporate entities out of state (Texas).

Phase 3 – Bridge Finance

The goal for the bridge financing is to help the RHL client company

1. Bridge financing – (RHL personal financial statement/PFS)
   Based upon step 3, RHL will immediately place the information gathered with one of our short term financing methods, including conventional bank lines of credit (Bank of Fort Bend and Enterprise Bank), conventional bank acquisition loans, leasing solutions (Axis Capital), general capitalization (Ideal Corporate Funding), and factoring (American Prudential).  All of these will, at some time, require a personal financial statement, so RHL recommends filling out the Small Business Administration’s PFS form, which is referenced above (except where they have a customized version).Bank of Fort Bend (Bruce Mercer) – Personal Financial Statement (PFS), PDF
   Enterprise Bank (Richard Booker) – PFS, Excel
   Axis Capital (Carly Ziober) - Application
   American Prudential (Eric Standlee)
   Nevada Corporate Headquarters, Inc. (Brent Riddle) – Corporate Credit
2. Private Placement Memorandum (“PPM”) placement -
   As part of the process for going public, a company is required to have at least 35 investors, which should either be “accredited investors” or investors intimate with officers or the inner workings of the company, such as vendors or clients.  Many times this round of financing is called the “friends and family” round.  If the companies are sold using a PPM, the SEC’s rule 144 currently requires these securities to be held for 2 years before being able to remove the restricted legend and sell them.
3. Regulation D Offerings (Texas 504) -
   If your company has put together a PPM and you want your accredited investors not to have any restrictions on their holdings in your company, putting your PPM into a 504 format is the next step.  Regulation D provides three exemptions from registration for securities – 504, 505, and 506.  In doing a 504 offering, the company is using an exemption from registration which further is regulated by each state (Texas info).

Phase 3 – Go Public

There are three ways to “go public” – one is the venerable “IPO” which is basically what large investment banking houses do and includes filing a registration statement (S1 or similar filing) to create a reporting public company, the second includes smaller companies filing an SEC form 15c211 (211 Q&A) with a market maker to create a non-reporting public company traded on the Pink Sheets (how to become a Pink Sheet company), and the third is doing a reverse merger with a public company already trading and known as a shell.  All of these are valid processes and require specialized experience in lining up the professionals required to accomplish this complex process.  We specialize in providing management consulting expertise to accomplish the second and third procedures.

1. Retain professionals
   This is not a process to do yourself, and in fact you cannot do it yourself.  The whole process really starts in filling out the forms required by the SEC, which always starts with PCOAB sanctioned audit and following on with the SEC counsel integrating the audit into the filing form.  There is also a division of labor that must be included that usually requires a secondary CPA and legal team to do the work that is then reported on by the auditor / SEC counsel – plus SEC counsel is usually much more expensive than the general counsel.PCOAB licensed auditor(s) – GBH CPA’s or Malone & Bailey
   SEC counsel - The Loev Law Firm, P.C.
   General counsel – Brad Bingham
   General CPA/accounting – Stephen Plumb at Clear Financials
   Transfer agent – Manhatten Transfer Registrar
2. Complete PCOAB audit
   This in and of itself is a bookshelf of books on this process, so let’s leave it to the professionals.
3. Complete the SEC form(s) – Form 211 (PDF)
   Completing the form can be done by any person for the company seeking to go public on the Pink Sheets (see references to their website above), but many of the questions will need to be “framed” by SEC counsel or by professionals that have completed SEC formal Registration statement previously – like the professionals at RHL.  The PCOAB audit isn’t required by FINRA, but no broker / dealer will file the form with the audit – the audit numbers must be included within the form.  Professionals that need to be referenced within the form:- General counsel
   - SEC counsel
   - Auditors
   - Officers
   - All shareholders
   - Transfer agent
4. Broker / Dealer files the Form 211 with FINRA
   First, only Broker Dealers (“B/D”) can file the form, not just SEC counsel or the company.  Currently, no B/D’s will file without PCOAB audited financials.  The form 211 gets filed with FINRA, not the SEC, although the SEC current does the review (and any SEC form review will be simultaneously done and synchronized).  This process can take any amount of time, although FINRA has 30 days to review the form before it becomes effective immediately – in practice, you can almost always depend upon 2 sets of comments coming back.

Phase 4 – Public Finance

Now that the client company is publicly quoted on Pink Sheets’ website or public traded on OTC:BB, NASDAQ, NYSE or other venue, now it is time to seek funding to provide for the growing company’s working capital needs.  Since RHL is not registered as a broker / dealer in any juridiction, we cannot seek funding for your companies.  What we can do is provide consulting services to help our client’s management to prepare for the search for capital, including:

• Creation of proposed funding transaction(s), including how it integrates with current financials.
• Revision of current business plans to include:
  • proposed funding transactions
  • use of proceed
• Introduction to brokers / dealers and their funding sources.

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• New Rhodes Holdings LLC offerings (rhodes-holdings.com)