© Confidential, All Rights Reserved. November 2013 The Arizona Commerce Authority & Arizona...

© Confidential, All Rights Reserved.

November 2013

The Arizona Commerce Authority &

Arizona Innovation Accelerator Fund


What is the Arizona Commerce Authority (ACA)?

The ACA is the state’s leading economic development organization

Our mission is to strengthen Arizona’s economy using a three-pronged approach: Recruit, Grow, Create

1. Recruit out-of-state companies to expand their operations in Arizona

2. Work with existing companies to Grow their business in Arizona

3. Partner with entrepreneurs and companies to Create new jobs and

businesses in targeted industries

Key Teams within the ACA: Business Attraction, Business Expansion, Business Creation, Workforce, Small Business

Annually administers ~$1Billion of incentives including grants, tax incentives & credits, bonds, and loans

Arizona Jobs

Create

GrowRecruit


Targeted Industries, Partners & Benefits

Targeted Industries– Science & technology, renewable energy & sustainability, manufacturing,

aerospace & defense, semiconductors, optics, and bioscience

Targeted Lenders / Partners– Regional & community banks, CDFI, IDA, local economic developers– Arizona Associations, Chambers of Commerce– Angel Investors, Private Equity and Venture Capital firms– Small and large businesses

Partnership Benefits– Access to AZ growth oriented programs such as:

• Quality Jobs Tax Credit - $90.0mm annually• Job Training Grants - $13.6mm available (reimbursable)• Angel Investment Tax Credit – Up to 35%

What is the Arizona Innovation Accelerator Fund?


Program Basics– $18.2 million Loan Participation Program– Participation up to 49.9%– Loans range from $50k up to $2,000,000– Potential to provide subordinated financing– Potential “Grace Period” which may defer P&I payments for up to 2 yrs– Interest rate reduction for every net new “quality job” created (up to 2.50%)

Loan Terms – Maturities typically inside 5 yrs (Revolvers and Term Loans)– Commitment and annual fees of 1-3% of the participation amount or loan balance– If pari passu, interest rate is equal to or less than bank – If subordinated, interest rate is at 100-300bps above the bank’s rate– After any grace period, interest rate is no less than 1% above the bank


Traditional Lender

Arizona Commerce Authority

Borrower

Private Capital

Equity and/or

DebtDebt

AIAFFunds

Traditional Lender

Arizona Commerce Authority

Borrower

Debt

AIAF Funds

Traditional Lender as Partner(Bank, Credit Union, CDFI, IDA)

Non-Traditional Lender as Partner(Angels, PE, VC )

Paths for Loan Participation…How It Works


Progress To Date

Timeline– Nov. 2011 - Received 1st of 3 tranches of $6M each– Feb. 2012 - Launched AIAF program– Aug 2012 - First deals close (~$1M of AIAF deployed, 73 FTEs)– Sept. 2013 - Received 2nd of 3 tranches of funding– Oct 2013 - 20+ deals closed (~$7.0M of AIAF $ deployed, 791 FTEs)

Current Status– Continue to reach out to lending and investing partners

(one-on-ones, board meetings, lending associations, local economic developers)– Reached 70+ potential lending partners (Bank, CDFI, IDA, ABL, Angel, PE, etc…)– Several new lenders and investors are actively working deals to partner

with the AIAF program– Over 2 dozen deals in the pipeline

Traklight

Business: Provides small businesses, entrepreneurs, and investors with services that help identify and protect IP within their businesses

Goals: Complete product development

Finance working capital

Challenge: Company in early growth stage

Deal Details: $250k line of credit ($50k AIAF / $200k Lead Lender)

AIAF pari passu with bank

Loan secured by stocks

Results: 5.0x SSBCI Leverage

52 New FTEs ($962/job)

$35k Average salary


Serious Integrated

Business: Tech company focusing on enabling manufacturers to add user friendly graphics and touch screen panels to products; AIC winner

Goal: To finance working capital and support company’s growth

Challenges: Early stage/start-up status

Company needed additional financial flexibility

Deal Details: $150k Total RLOC: (100% AIAF participation)

$400k+ Equity investment from angel investors

80% Advance on A/R; 60% Advance on inventory


29 New FTEs ($5.2k/job)

$40k Average salary


Composite Mirror Applications

Business: Defense contractor specializing in lightweight optics and optic systems

Goals: Consolidate debt

Purchase new equipment

Make tenant improvements

Challenges: Aggressive loan to value ratio

Deal Details: $499,000 term loan ($249k AIAF/ $250k Bank)

60 month term loan with 9 month interest only draw period

AIAF subordinated to bank



$70k Average salary


http://www.compositemirrors.com/products/optics/screen-shot-2010-05-20-at-3-22-59-pm

Kirin Manufacturing

Business: Manufacturer and finisher for OEMs

Goal: Purchase the building in which it operates

Challenges: Loan exposure above bank’s threshold prior to AIAF participation

Kirin was acquired a year earlier, rendering it a “new” company

Deal Details: $552.5k term loan (41% AIAF/ 59% Bank)

20 year amortization with AIAF portion maturing in 5 years

$65k provided by owner and $32.5k financed by seller carry-back note



$31.2k Average salary

$147K Follow-on RLOC financing closed Oct. 2013


Pride Group

Business: Special events management provider

Goal: Expand operations by acquiring equipment

Consolidate debt

Challenges: “New” company Historical financial noise

Deal Details: $3.5M term loan: (50% AIAF/ 50% bank)

54 months fully amortizing with 6 months interest only

$500k RLOC: (100% Bank)



$50k Average salary

Up to 500 PTEs ($17.5/hr)


333 North Central Avenue, Suite 1900Phoenix, AZ 85004

602.845.1200 800.542.5684www.azcommerce.com/incentives

© Confidential, All Rights Reserved. November 2013 The Arizona Commerce Authority & Arizona...

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