SECURED INCOME GROUP INC. A California Corporation

Transcription

1 Memorandum Number: SECURED INCOME GROUP INC. A California Corporation PRIVATE PLACEMENT MEMORANDUM SERIES C SECURED DEBENTURES Maximum Offering Amount: $50,000,000 6 MONTH MATURITY AT 6.50% PER ANNUM 12 MONTH MATURITY AT 7.00% PER ANNUM 24 MONTH MATURITY AT 8.00% PER ANNUM 36 MONTH MATURITY AT 9.00% PER ANNUM Minimum Investment Amount: $5,000 APRIL 1, 2017 Secured Income Group, Inc., (the Company or SIG ) is a California corporation. The Company is hereby offering (the Offering ) by means of this private placement memorandum (the Memorandum ) a third series of Secured Debentures ( Series C Secured Debentures or Secured Debentures ) of up to Fifty Million Dollars ($50,000,000). The Offering shall be on an as needed basis to accredited investors (See Investor Suitability below). The Company was formed with the purpose of funding, financing, and originating loans ( Loans ) secured by real property located across the United States with a primary focus in Southern California. Prospective investors who execute a subscription agreement will acquire Series C Secured Debentures from the Company and will become a holder of the Series C Secured Debentures once the Company deposits the Investor s investment into the Company s main operating account and subject to the terms and conditions in this Private placement memorandum and Subscription Agreement. (See The Offering below). i

2 Prospective investors should understand and consider the income tax associated with investing in the Series C Secured Debentures. (See Income Tax Considerations below.) The Series C Secured Debentures shall be offered at varying interest rates and varying terms. (See Exhibit C). Debenture Term Interest Rate 6 months 6.50% per annum 12 months 7.00% per annum 24 months 8.00% per annum 36 months 9.00% per annum This Offering shall be conducted on an ongoing and best efforts basis. The Offering will continue subject to the sole and absolute discretion of the Company to shorten or extend the offering period. No minimum offering amount has been set. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PRIVATE PLACEMENT MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THIS OFFERING IS MADE IN RELIANCE ON AN EXEMPTION FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION PROVIDED BY SECTION 4(2) OF THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT ), RULE 506(C) OF REGULATION D, AND REGULATION S PROMULGATED THEREUNDER. ii

3 CERTAIN TERMS OF THE OFFERING THIS PRIVATE PLACEMENT MEMORANDUM HAS BEEN PREPARED SOLELY FOR THE BENEFIT OF AUTHORIZED PERSONS INTERESTED IN THE OFFERING. IT CONTAINS CONFIDENTIAL INFORMATION AND MAY NOT BE DISCLOSED TO ANYONE OTHER THAN AUTHORIZED PERSONS SUCH AS ACCOUNTANTS, FINANCIAL PLANNERS OR ATTORNEYS RETAINED FOR THE PURPOSE OF RENDERING PROFESSIONAL ADVICE RELATED TO THE PURCHASE OF SECURITIES OFFERED HEREIN. IT MAY NOT BE REPRODUCED, DIVULGED OR USED FOR ANY OTHER PURPOSE UNLESS WRITTEN PERMISSION IS OBTAINED FROM THE COMPANY. THIS PRIVATE PLACEMENT MEMORANDUM DOES NOT CONSTITUTE AN OFFER OR SOLICITATION TO ANY PERSON EXCEPT THOSE PARTICULAR PERSONS WHO SATISFY THE SUITABILITY STANDARDS DESCRIBED HEREIN. THE SALE OF SECURED DEBENTURES COVERED BY THIS PRIVATE PLACEMENT MEMORANDUM HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON THE EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS SET FORTH IN SECTION 4(2) OF THE ACT AND RULE 506(C) OF REGULATION D AND REGULATION S THEREUNDER. THESE SECURIITES HAVE NOT BEEN QUALIFIED OR REGISTERED IN ANY STATE IN RELIANCE UPON THE EXEMPTIONS FROM SUCH QUALIFICATION OR REGISTRATION UNDER STATE LAW. THESE SECURITIES ARE RESTRICTED SECURITIES AND MAY NOT BE RESOLD OR OTHERWISE DISPOSED OF UNLESS A REGISTRATION STATEMENT COVERING DISPOSITION OF SUCH SECURED DEBENTURES IS THEN IN EFFECT OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. THERE IS NO PUBLIC MARKET FOR THE SECURED DEBENTURES AND NONE IS EXPECTED TO DEVELOP IN THE FUTURE. NON-U.S. INVESTORS HAVE CERTAIN RESTRICTIONS ON RESALE AND HEDGING UNDER REGULATION S OF THE ACT. DISTRIBUTIONS UNDER THIS OFFERING MIGHT RESULT IN A TAX LIABILITY FOR THE NON-U.S. INVESTORS. EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT HIS, HER OR ITS OWN TAX ADVISOR OR PENSION CONSULTANT TO DETERMINE HIS, HER OR ITS TAX LIABILITY. NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THIS OFFERING TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THAT INFORMATION AND THOSE REPRESENTATIONS SPECIFICALLY CONTAINED IN THIS PRIVATE PLACEMENT MEMORANDUM; ANY OTHER INFORMATION OR REPRESENTATIONS SHOULD NOT BE RELIED UPON. ANY PROSPECTIVE PURCHASER OF THE SECURED DEBENTURES WHO RECEIVES ANY OTHER INFORMATION OR REPRESENTATIONS SHOULD CONTACT THE COMPANY IMMEDIATELY TO DETERMINE THE ACCURACY OF SUCH INFORMATION AND REPRESENTATIONS. NEITHER THE DELIVERY OF THIS PRIVATE PLACEMENT MEMORANDUM NOR ANY SALES HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR IN THE INFORMATION SET FORTH HEREIN SINCE THE DATE OF THIS PRIVATE PLACEMENT MEMORANDUM SET FORTH ABOVE. PROSPECTIVE PURCHASERS SHOULD NOT REGARD THE CONTENTS OF THIS PRIVATE PLACEMENT MEMORANDUM OR ANY OTHER COMMUNICATION FROM THE COMPANY AS A SUBSTITUTE FOR CAREFUL AND INDEPENDENT TAX AND FINANCIAL PLANNING. EACH POTENTIAL INVESTOR IS ENCOURAGED TO CONSULT WITH HIS, HER OR ITS OWN iii

4 INDEPENDENT LEGAL COUNSEL, ACCOUNTANT AND OTHER PROFESSIONALS WITH RESPECT TO THE LEGAL AND TAX ASPECTS OF THIS INVESTMENT AND WITH SPECIFIC REFERENCE TO HIS, HER OR ITS OWN TAX SITUATION, PRIOR TO SUBSCRIBING FOR THE SECURED DEBENTURES. THE PURCHASE OF SECURED DEBENTURES BY AN INDIVIDUAL RETIREMENT ACCOUNT, KEOGH PLAN OR OTHER QUALIFIED RETIREMENT PLAN INVOLVES SPECIAL TAX RISKS AND OTHER CONSIDERATIONS THAT SHOULD BE CAREFULLY CONSIDERED. INCOME EARNED BY QUALIFIED PLANS AS A RESULT OF AN INVESTMENT IN THE COMPANY MAY BE SUBJECT TO FEDERAL INCOME TAXES, EVEN THOUGH SUCH PLANS ARE OTHERWISE TAX EXEMPT. (SEE INCOME TAX CONSIDERATIONS AND ERISA CONSIDERATIONS. ) THE SECURED DEBENTURES ARE OFFERED SUBJECT TO PRIOR SALE, ACCEPTANCE OF A LOAN, AND TO WITHDRAWAL OR CANCELLATION OF THE OFFERING WITHOUT NOTICE. THE COMPANY RESERVES THE RIGHT TO REJECT ANY SUBSCRIPTIONS IN WHOLE OR IN PART FOR ANY OR NO REASON. THE COMPANY WILL MAKE AVAILABLE TO ANY PROSPECTIVE INVESTOR AND HIS, HER OR ITS ADVISORS THE OPPORTUNITY TO ASK QUESTIONS AND RECEIVE ANSWERS CONCERNING THE TERMS AND CONDITIONS OF THE OFFERING, THE COMPANY OR ANY OTHER RELEVANT MATTERS, AND TO OBTAIN ANY ADDITIONAL INFORMATION TO THE EXTENT THAT THE COMPANY POSSESSES SUCH INFORMATION. THE INFORMATION CONTAINED IN THIS PRIVATE PLACEMENT MEMORANDUM HAS BEEN SUPPLIED BY THE COMPANY. THIS PRIVATE PLACEMENT MEMORANDUM CONTAINS SUMMARIES OF DOCUMENTS NOT CONTAINED IN THIS PRIVATE PLACEMENT MEMORANDUM, BUT ALL SUCH SUMMARIES ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCES TO THE ACTUAL DOCUMENTS. COPIES OF DOCUMENTS REFERRED TO IN THIS PRIVATE PLACEMENT MEMORANDUM, BUT NOT INCLUDED AS AN EXHIBIT, WILL BE MADE AVAILABLE TO QUALIFIED PROSPECTIVE INVESTORS UPON REQUEST. iv

5 TABLE OF CONTENTS CONTENTS SUMMARY OF THE OFFERING... 1 FORWARD LOOKING STATEMENTS... 2 TERMS OF THE OFFERING... 2 INVESTOR SUITABILITY... 4 Investors: Minimum and Maximum Offering... 5 How to Subscribe... 5 Subscription Agreements... 5 Restrictions on Transfer... 6 EVIDENCE OF INDEBTEDNESS AND SECURITY INTEREST... 6 USE OF PROCEEDS... 7 BUSINESS STRATEGY... 7 INVESTMENT STANDARDS AND POLICIES... 8 Sale of Loans Borrowing/Hypothecation COLLATERAL ASSIGNMENT OF SECURED LOAN PORTFOLIO COMPENSATION OFFICERS AND DIRECTORS RISK FACTORS INVESTMENT RISKS No Registration: Limited Governmental Review Limited Transferability of Interests Size of the Offering Investors Not Independently Represented BUSINESS RISKS Reliance on Key Personnel Lack of Regulation Tax and ERISA Risks Possible Repeal of Usury Exemption KEY PERSONNEL LEGAL PROCEEDINGS INCOME TAX CONSIDERATIONS Federal Income Tax Aspects Tax Law Subject to Change State and Local Taxes ERISA CONSIDERATIONS LEGAL MATTERS FINANCIAL INFORMATION ADDITIONAL INFORMATION AND UNDERTAKINGS HOW TO SUBSCRIBE FOR A SECURED DEBENTURE EXHIBITS Exhibit A Exhibit B How to Subscribe for a Secured Debenture Subscription Agreement v

6 Exhibit C Exhibit D Exhibit E Exhibit F Form of Secured Debenture: Series C Secured Debenture Security Agreement Financial Information Articles and Bylaws vi

7 NASAA UNIFORM LEGEND IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FORGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTION TO THE CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE MADE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. NOTICE REQUIREMENTS IN STATES WHERE SECURED DEBENTURES MAY BE SOLD ARE AS FOLLOWS: ALABAMA. THESE SECURITIES ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION UNDER THE ALABAMA SECURITIES ACT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS NOT BEEN FILED WITH THE ALABAMA SECURITIES COMMISSION. THE COMMISSION DOES NOT RECOMMEND OR ENDORSE THE PURCHASE OF ANY SECURITIES, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF THIS PRIVATE PLACEMENT MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE PURCHASE PRICE OF THE INTEREST ACQUIRED BY A NON- ACCREDITED INVESTOR RESIDING IN THE STATE OF ALABAMA MAY NOT EXCEED 20% OF THE PURCHASER S NET WORTH. ALASKA. THE SECURITIES OFFERED HAVE BEEN REGISTERED WITH THE ADMINISTRATOR OF SECURITIES OF THE STATE OF ALASKA UNDER PROVISIONS OF 3 AAC AAC THE INVESTOR IS ADVISED THAT THE ADMINSTRATOR HAS MADE ONLY A CURSORY REVIEW OF THE REGISTRATION STATEMENT AND HAS NOT REVIEWED THIS DOCUMENT SINCE THE DOCUMENT IS NOT REQUIRED TO BE FILED WITH THE ADMINSTRATOR. THE FACT OF REGISTRATION DOES NOT MEAN THAT THE ADMINISTRATOR HAS PASSED IN ANY WAY UPON THE MERITS, RECOMMENDED, OR APPROVED THE SECURITIES. ANY REPRESENTATION TO THE CONTRARY IS A VIOLATION OF A.S THE INVESTOR MUST RELY ON THE INVESTOR S OWN EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED, IN MAKING AN INVESTMENT DECISION ON THESE SECURITIES. ARIZONA. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF ARIZONA AND, THEREFORE, CANNOT BE RESOLD UNLESS THEY ARE REGISTERED UNDER SUCH ACT OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE. vii

8 ARKANSAS. THESE SECURITIES ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION UNDER SECTION 14(b)(14) OF THE ARKANSAS SECURITIES ACT AND SECTION 4(2) OF THE SECURITIES ACT OF A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS NOT BEEN FILED WITH THE ARKANSAS SECURITIES DEPARTMENT OR WITH THE SECURITIES AND EXCHANGE COMMISSION. NEITHER THE DEPARTMENT NOR THE COMMISSION HAS PASSED UPON THE VALUE OF THESE SECURITIES, MADE ANY RECOMMENDATIONS AS TO THEIR PURCHASE; APPROVED OR DISAPPROVED THE OFFERING, OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. THE PURCHASE PRICE OF THE INTEREST ACQUIRED BY AN UNACCREDITED INVESTOR RESIDING IN THE STATE OF ARKANSAS MAY NOT EXCEED 20% OF THE PURCHASER S NET WORTH. CALIFORNIA. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE CALIFORNIA CORPORATIONS CODE, BY THE REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION FROM REGISTRATIONS IS AVAILABLE. The certificates representing all such subject to such a restriction on transfer, whether upon initial issuance or upon any transfer thereof, shall bear on their face a legend, prominently stamped or printed thereon in capital letters of not less than 10-point size, reading as follows: IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFORE, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER S RULES. COLORADO. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE COLORADO SECURITIES ACT OF 1981, BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. CONNECTICUT. THESE SECURITES HAVE NOT BEEN REGISTERED UNDER SECTION OF THE CONNECTICUT UNIFORM SECURITIES ACT AND THEREFORE CANNOT BE RESOLD UNLESS THEY ARE REGISTERED UNDER SUCH ACT OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE. DELAWARE. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE DELAWARE SECURITIES ACT AND ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION UNDER SECTION 7309(b)(9) OF THE DELAWARE SECURITIES ACT AND RULE 9(b)(9)(II) THEREUNDER. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. viii

9 DISTRICT OF COLUMBIA. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE DISTRICT OF COLUMBIA SECURITIES ACT SINCE SUCH ACT DOES NOT REQUIRE REGISTRATION OF SECURITIES ISSUED. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. FLORIDA. THE SHARE REFERRED TO HEREIN WILL BE SOLD TO, AND ACQUIRED BY, THE HOLDER IN A TRANSACTION EXEMPT UNDER OF THE FLORIDA SECURITIES ACT. THE SECURED DEBENTURES HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE OF FLORIDA. IN ADDITION, ALL FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE OF VOIDING THE PURCHASE WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE ISSUER, AN AGENT OF THE ISSUER OR AN ESCROW AGENT OR WITHIN THREE DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER. GEORGIA. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR SECTION OF THE GEORGIA SECURITIES ACT OF 1973 AND ARE BEING ISSUED AND SOLD IN RELIANCE UPON CODE SECTION UNDER GEORGIA SECURITIES LAW. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE INVESTMENT IS SUITABLE IF IT DOES NOT EXCEED 20% OF THE INVESTOR S NET WORTH. HAWAII. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE HAWAII UNIFORM SECURITIES ACT (MODIFIED), BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABITLIY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. IDAHO. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE IDAHO SECURITIES ACT AND MAY BE TRANSFERRED OR RESOLD BY RESIDENTS OF IDAHO ONLY IF REGISTREED PURSUANT TO THE PROVISIONS OF THE ACT OR IF AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE INVESTMENT IS SUITABLE IF IT DOES NOT EXCEED 10% OF THE INVESTOR S NET WORTH. ILLINOIS. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECRETARY OF STATE OF ILLINOIS OR THE STATE OF ILLINOIS, NOR HAS THE SECRETARY OF STATE OF ILLINOIS OR THE STAE OF ILLINOIS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ix

10 INDIANA. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER SECTION 3 OF THE INDIANA BLUE SKY LAW AND ARE OFFERED PURSUANT TO AN EXEMPTION PURSUANT TO SECTION (b)(10) THEREOF AND MAY BE TRANSFERRED OR RESOLD ONLY IF SUBSEQUENTLY REGISTERED OR IF AN EXEMPTION FROM REGISTRATION IS AVAILABLE. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. INDIANA REQUIRES INVESTOR SUITABILITY STANDARDS OF A NET WORTH (EXCLUSIVE OF HOME, FURNISHINGS, AND AUTOMOBILES) OF THREE TIMES THE INVESTMENT BUT NOT LESS THAN $75,000 OR A NET WORTH (EXCLUSIVE OF HOME, FURNISHINGS, AND AUTOMOBILES) OF TWICE THE INVESTMENT BUT NOT LESS THAN $30,000 AND GROSS INCOME OF $30,000. IOWA. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE IOWA UNIFORM SECURITIES ACT AND ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION UNDER SECTION (9) OF THE ACT. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. KANSAS. THESE SECURITIES ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION UNDER THE KANSAS SECURITIES ACT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS NOT BEEN FILED WITH THE KANSAS SECURITIES COMMISSION. THEREFORE, THESE SECURITIES CANNOT BE RESOLD OR OTHERWISE TRANSFERRED UNLESS THEY ARE REGISTERED UNDER APPLICABLE SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. KENTUCKY. THESE SECURITIES ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION UNDER THE KENTUCKY SECURITIES ACT. THE KENTUCKY SECURITIES ADMINISTRATOR NEITHER RECOMMENDS NOR ENDORSES THE PURCHASE OF ANY SECURITY, NOR HAS THE ADMINISTRATOR PASSED UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION PROVIDED HEREIN. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. LOUISIANA. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE LOUISIANA SECURITIES LAW, BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE INVESTMENT IS SUITABLE IF IT DOES NOT EXCEED 25% OF THE INVESTOR S NET WORTH. MAINE. THESE SECURITIES ARE BEING SOLD PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE BANK SUPERINTENDENT OF THE STATE OF MAINE UNDER SECTION 10502(2) (R) OF TITLE 32 OF THE MAINE REVISED STATUTES. THESE SECURITIES MAY BE DEEMED RESTRICTED SECURITIES AND AS SUCH THE HOLDER MAY NOT BE ABLE TO RESELL THE SECURITIES UNLESS PURSUANT TO REGISTRATION UNDER STATE OR FEDERAL SECURITIES LAWS OR UNLESS AN EXEMPTION UNDER SUCH LAWS EXISTS. x

11 MARYLAND. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE MARYLAND SECURITIES ACT, BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENLY REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. MASSACHUSETTS. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE MASSACHUSETTS UNIFORM SECURITIES ACT, BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. MICHIGAN. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER SECTION OF THE MICHIGAN UNIFORM SECURITIES ACT AND MAY BE TRANSFERRED OR RESOLD BY RESIDENTS OF MICHIGAN ONLY IF REGISTERED PURSUANT TO THE PROVISIONS OF THE ACT OR IF AN EXEMPTION FROM REGISTRATION IS AVAILABLE. AT LEAST 48 HOURS BEFORE A SALE, ISSUER WILL PROVIDE EACH OFFEREE WITH A PRIVATE PLACEMENT MEMORANDUM THAT WILL INCLUDE THE FOLLOWING STATEMENT FOR RESIDENTS OF MICHIGAN: TO MICHIGAN RESIDENTS: THIS OFFERING MEMORANDUM INCLUDES STATEMENTS ABOUT: I. THE APPLICATION OR USE OF PROCEEDS. II. A STATEMENT THAT THE ASSETS OF THE OPERATION WILL GENERATE SUFFICIENT CASH FUNDS TO MEET THE OBLIGATIONS AS THEY COME DUE, AND/OR THAT THE ASSETS EXCEED THE OBLIGATIONS UNDERTAKEN BY THE OFFEROR. III. AN OUTLINE DISCLOSING REMUNERATION TO CONSULTANTS. IV. A STATEMENT THAT CALIFORNIA IS THE JURISDICTION OF THE OFFERING AND THE OFFEROR. V. A STATEMENT THAT THE OFFEROR SHALL PRESENT AN ACCOUNTING OF DISTRIBUTION OF FUNDS AT LEAST ANNUALLY. MINNESOTA. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER CHAPTER 80A OF THE MINNESOTA SECURITIES LAWS AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO REGISTRATION, OR AN EXEMPTION THEREFROM. MISSISSIPPI. THESE SECURITIES ARE OFFERED PURSUANT TO A CERTIFICATE OF REGISTRATION ISSUED BY THE SECRETARY OF STATE OF MISSISSIPPI PURSUANT TO RULE 477, WHICH PROVIDES A LIMITED REGISTRATION PROCEDURE FOR CERTAIN OFFERINGS. xi

12 THE SECRETARY OF STATE DOES NOT RECOMMEND OR ENDORSE THE PURCHASE OF ANY SECURITIES, NOR DOES THE SECRETARY OF STATE PASS UPON THE TRUTH, MERITS, OR COMPLETENESS OF ANY OFFERING MEMORANDUM FILED WITH THE SECRETARY OF STATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. MISSOURI. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE MISSOURI UNIFORM SECURITIES ACT, BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. MONTANA. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES ACT OF MONTANA, BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRSNFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. NEBRASKA. THESE SECURITIES HAVE NOT BEEN REGISTERED UNER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES ACT OF NEBRASKA, BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REIGSTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. NEVADA. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE NEVADA SECURITIES ACT, BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. NEW HAMPSHIRE. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE NEW HAMPSHIRE UNIFORM SECURITIES ACT, BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE INVESTMENT IS SUITABLE IF IT DOES NOT EXCEED 10% OF THE INVESTOR S NET WORTH. NEW JERSEY. THE ATTORNEY GENERAL OF THE STATE OF NEW JERSEY HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. THE FILING OF THE WITHIN OFFERING WITH THE BUREAU OF SECURITIES DOES NOT CONSTITUTE APPROVAL OF THE ISSUE OR THE SALE THEREOF BY THE BUREAU OF SECURITIES OR THE DEPARTMENT OF LAW AND PUBLIC SAFETY OF THE STATE OF NEW JERSEY. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. xii

13 NEW MEXICO. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES BUREAU OF THE NEW MEXICO DEPARTMENT OF REGULATION AND LICENSING, NOR HAS THE SECURITIES BUREAU PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. NEW YORK. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE NEW YORK FRAUDULENT PRACTICES (.MARTIN.) ACT, BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE NEW YORK FRAUDULENT PRACTICES (.MARTIN.) ACT, IF SUCH REGISTRATION IS REQUIRED. THIS PRIVATE OFFERING MEMORANDUM HAS NOT BEEN FILED WITH OR REVIEWED BY THE ATTORNEY GENERAL PRIOR TO ITS ISSUANCE AND USE. THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. PURCHASE OF THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. THIS PRIVATE OFFERING MEMORANDUM DOES NOT CONTAIN AN UNTRUE STATEMENT OF A MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS MADE, IN THE LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING. IT CONTAINS A FAIR SUMMARY OF THE MATERIAL TERMS OF DOCUMENTS PURPORTED TO BE SUMMARIZED HEREIN. NORTH CAROLINA. THESE SECURITIES ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION UNDER THE NORTH CAROLINA SECURITIES ACT. THE NORTH CAROLINA SECURITIES ADMINISTRATOR NEITHER RECOMMENDS NOR ENDORSES THE PURCHASE OF ANY SECURITY, NOR HAS THE ADMINISTRATOR PASSED UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION PROVIDED HEREIN. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. NORTH DAKOTA. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES COMMISSIONER OF THE STATE OF NORTH DAKOTA NOR HAS THE COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. OHIO. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE OHIO SECURITIES ACT, BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. IN ACCORDANCE WITH SECTION OF THE OHIO REVISED CODE, PURCHASERS ARE ENTITLED TO A FULL REFUND OF THEIR PURCHASE PROVIDED SUCH A REQUEST IS MADE WITHIN TWO (2) WEEKS FROM THE DATE OF SAID PURCHASE. HOWEVER, NO PURCHASER IS ENTITLED TO THE BENEFIT OF SECTION WHO HAS FAILED TO ACCEPT A REFUND WITHIN THIRTY (30) DAYS FROM THE DATE OF SUCH OFFER. xiii

14 OKLAHOMA. THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE OKLAHOMA SECURITIES ACT. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED FOR VALUE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OF THEM UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND/OR THE OKLAHOMA SECURITIES ACT, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR ACTS. OREGON. IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THE DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933 AS AMENDED, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE INVESTOR MUST RELY ON THE INVESTOR S OWN EXAMINTATION OF THE COMPANY CREATING THE SECURITIES AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED IN MAKING AN INVESTMENT DECISION ON THESE SECURITIES. PENNSYLVANIA. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE 1933 SECURITIES ACT, BEING EXEMPTED FROM REGISTRATION BY SAID ACT. THE AVAILABILITY OF THAT EXEMPTION DOES NOT MEAN THAT THE SECURITIES ADMINSTRATOR HAS PASSED IN ANY WAY UPON THE MERITS, OR QUALIFICATIONS OF, THESE SECURITIES OR THEIR OFFER OF SALE IN THE STATE OF PENNSYLVANIA. ANY REPRESENTATION INCONSISTENT WITH THE FOREGOING IS UNLAWFUL. INVESTORS MUST PURCHASE THESE SECURITIES ONLY FOR THEIR OWN BENEFIT AND MAY NOT SELL THESE SECURITIES FOR A PERIOD OF NO LESS THAN 12 MONTHS FROM THE DATE OF PURCHASE. NOTICE PURSUANT TO SECTION 203(m) OF THE ACT: THE ISSUER MUST OBTAIN THE WRITTEN AGREEMENT OF EACH PURCHASER NOT TO SELL, EXCEPT IN ACCORDANCE WITH REGULATION , THE SECURITY WITHIN TWELVE MONTHS AFTER THE DATE OF PURCHASE AND FILE WITH THE COMMISSION A COPY OF THE PROPOSED AGREEMENT THAT INVESTORS WILL BE ASKED TO SIGN. THE SECURED DEBENTURES OFFERED HEREBY HAS NOT BEEN REGISTERED UNDER SECTION 201 OF THE PENNSYLVANIA SECURITIES ACT OF 1972 (THE ACT ) AND MAY BE RESOLD BY RESIDENTS OF PENNSYLVANIA ONLY IF REGISTERED PURSUANT TO THE PROVISIONS OF THAT ACT OR IF AN EXEMPTION FROM REGISTRATION IS AVAILABLE. xiv

15 EACH PERSON WHO ACCEPTS AN OFFER TO PURCHASE SECURITIES EXEMPTED FROM REGISTRATION BY SECTION 203(d), (f), (p), or (r), DIRECTLY FROM AN ISSUER OR AFFILIATE OF AN ISSUER, SHALL HAVE THE RIGHT TO WITHDRAW HIS ACCEPTANCE WITHOUT INCURRING ANY LIABILITY TO THE SELLER, UNDERWRITER (IF ANY), OR ANY OTHER PERSON WITHIN TWO BUSINESS DAYS FROM THE DATE OF RECEIPT BY THE ISSUER OF HIS WRITTEN BINDING CONTRACT OF PURCHASE OR, IN THE CASE OF A TRANSACTION IN WHICH THERE IS NO WRITTEN BINDING CONTRACT OF PURCHASE, WITHIN TWO BUSINESS DAYS AFTER HE MAKES THE INITIAL PAYMENT FOR THE SECURITIES BEING OFFERED. TO ACCOMPLISH THIS WITHDRAWAL A LETTER OR TELEGRAM SHOULD BE SENT TO: Secured Income Group, Inc E. 17 th Street, Suite 100 Tustin, CA IT IS PRUDENT TO SEND SUCH NOTICE CERTIFIED MAIL, RETURN RECEIPT REQUESTED. A WRITTEN ACKWNOLEDGEMENT WILL BE RETURNED. NEITHER THE PENNSLYVANIA SECURITIES COMMISSION NOR ANY OTHER AGENCY HAS PASSED ON OR ENDORSED THE MERITS OF THE OFFERING, AND ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. PENNSYLVANIA SUBSCRIBERS MAY NOT SELL THEIR INTERESTS FOR ONE YEAR FROM THE DATE OF PURCHASE IF SUCH A SALE WOULD VIOLATE SECTION 203(d) OF THE PENNSYLVANIA SECURITIES ACT. RHODE ISLAND. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE BLUE SKY LAW OF RHODE ISLAND, BY REASON OF SPECIFIC SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. SOUTH CAROLINA. IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. xv

16 SOUTH DAKOTA. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER CHAPTER OF THE SOUTH DAKOTA SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF FOR VALUE EXCEPT PURSUANT TO REGISTRATION, EXEMPTION THEREFROM, OR OPERATION OF LAW. EACH SOUTH DAKOTA RESIDENT PURCHASING ONE OR MORE WHOLE OR FRACTIONAL UNITS MUST WARRANT THAT HE HAS EITHER (1) A MINIMUM NET WORTH (EXCLUSIVE OF HOME, FURNISHING AND AUTOMOBILES) OF $30,000 AND A MINIMUM ANNUAL GROSS INCOME OF $30,000 OR (2) A MINIMUM NET WORTH (EXCLUSIVE OF HOME, FURNISHINGS AND AUTOMBILES) OF $75,000. ADDITIONALLY, EACH INVESTOR WHO IS NOT AN ACCREDITED INVESTOR OR WHO IS AN ACCREDITED INVESTOR SOLELY BY REASON OF HIS NET WORTH, INCOME OR AMOUNT OF INVESTMENT, SHALL NOT MAKE AN INVESTMENT IN THE PROGRAM IN EXCESS OF 20% OF HIS NET WORTH (EXCLUSIVE OF HOME, FURNISHING AND AUTOMOBILES). TENNESSEE. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE TENNESSE SECURITIES ACT OF 1980, BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. TEXAS. THESE SECURITIES ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION UNDER THE TEXAS SECURITIES ACT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS NOT BEEN FILED WITH THE TEXAS SECURITIES COMMISSION. THEREFORE, THESE SECURITIES CANNOT BE RESOLD OR OTHERWISE TRANSFERRED UNLESS THEY ARE REGISTERED UNDER APPLICABLE SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. UTAH. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE UTAH UNIFORM SECURITIES ACT, BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. VERMONT. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE VERMONT SECURITIES ACT, BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. WASHINGTON. THE ADMINISTRATOR OF SECURITIES HAS NOT REVIEWED THE OFFERING OR THE MEMORANDUM AND THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF THE STATE OF WASHINGTON, CHAPTER RCW, AND, THEREFORE, CANNOT BE RESOLD UNLESS THEY ARE REGISTERED UNDER THE SECURITIES ACT OF THE STATE OF WASHINGTON CHAPTER RCW OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. xvi

17 WEST VIRGINIA. THESE SECURITIES ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION UNDER THE UNIFORM SECURITIES ACT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS NOT BEEN FILED WITH THE WEST VIRIGINA SECURITIES COMMISSIONER. THE COMMISSIONER DOES NOT RECOMMEND NOR ENDORSE THE PURCHASE OF ANY SECURITIES, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF THIS PRIVATE PLACEMENT MEMORANDUM. ANY REPRESENTATIONS TO THE CONTRARY IS A CRIMINAL OFFENSE. WISCONSIN. THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE WISCONSIN UNIFORM SECURITIES LAW, BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. WYOMING. THESE SECURITIES ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION UNDER THE WYOMING SECURITIES ACT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS NOT BEEN FILED WITH THE WYOMING SECRETARY OF STATE. FOR RESIDENTS OF ALL STATES. THE PRESENCE OF A LEGEND FOR ANY GIVEN STATE REFLECTS ONLY THAT A LEGEND MAY BE REQUIRED BY THAT STATE AND SHOULD NOT BE CONSTRUED TO MEAN AN OFFER OR SALE MAY BE MADE IN ANY PARTICULAR STATE. THIS MEMORANDUM MAY BE SUPPLEMENTED BY ADDITIONAL STATE LEGENDS. IF YOU ARE UNCERTAIN AS TO WHETHER OR NOT OFFERS OR SALES MAY BE LAWFULLY MADE IN ANY GIVEN STATE, YOU ARE ADVISED TO CONTACT THE COMPANY FOR A CURRENT LIST OF STATES IN WHICH OFFERS OR SALES MAY BE LAWFULLY MADE. AN INVESTMENT IN THIS OFFERING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF FINANCIAL RISK. ACCORDINGLY, PROSPECTIVE INVESTORS SHOULD CONSIDER ALL OF THE RISK FACTORS DESCRIBED BELOW. UNITED STATES TERRITORIES AND POSSESSIONS. THESE SECURITIES ARE NOT AUTHORIZED FOR OFFERING OR SALE IN ANY TERRITORY OR POSSESSION OF THE UNITED STATES IN LIEU OF APPLICABLE SECURITIES LAWS TO THE CONTRARY. SECURITIES AND/OR CAPITAL GUARDIANSHIPS ARE NOT AUTHORIZED FOR SALE IN SUCH TERRITORIES OR POSSESSIONS. xvii

18 SUMMARY OF THE OFFERING The following information is only a brief summary of, and is qualified in its entirety by, the detailed information appearing elsewhere in this Private Placement Memorandum (this Private Placement Memorandum or the Memorandum ). This Private Placement Memorandum, together with the exhibits attached including, but not limited to, the Articles of Incorporation and Bylaws of the Company (respectively, the Articles and the Bylaws ), copies of which are attached hereto as Exhibit E, should be carefully read in their entirety before any investment decision is made. If there is a conflict between the terms contained in this Private Placement Memorandum and the Articles or Bylaws, the Articles and Bylaws shall prevail and no Investor should rely on any reference herein to the Articles or Bylaws without consulting the actual underlying documents. The Company Business Compensation Suitability Standards Offering of Secured Debentures Prior Experience Prepayment of Note Origination, Servicing and Management Secured Income Group, Inc. (the Company or SIG ) is a California corporation. The Company is hereby offering (the Offering ) by means of this Private Placement Memorandum (the Memorandum ) a third series of Secured Debentures ( Series C Secured Debentures or Secured Debentures ) on a best efforts basis to qualified investors who meet the Investor Suitability standards as set forth herein (See Investor Suitability below). The Company was formed with the purpose of funding, financing, and originating loans ( Loans ) secured by real property located across the United States with a primary focus in Southern California. Officers and directors of the Company will receive compensation for their services to the Company. (See Compensation and Officers and Directors below.) Secured Debentures are offered exclusively to certain individuals, Keogh plans, individual retirement accounts and other qualified investors who meet certain minimum standards of income and/or net worth. Each Investor must execute a Subscription Agreement making certain representations and warranties to the Company, including such purchaser s qualifications as an Accredited Investor as defined by the Securities and Exchange Commission in Rule 501(a) of Regulation D may be allowed to purchase Secured Debentures in this offering. (See Investor Suitability below.) The Company will be offering a maximum of Fifty Million Dollars ($50,000,000) of Series C Secured Debentures. The minimum investment amount for a Series C Secured Debenture is Five Thousand Dollars ($5,000). The officers and directors of the Company have extensive prior experience in the real estate and mortgage industry. (See Key Personnel below.) The Company may prepay all or a portion of any Secured Debenture before the Maturity Date (as defined below) of the Secured Debenture in the Company s sole and absolute discretion. The Company will not incur any penalties for prepaying any Secured Debenture at any time. SIG (or its designated third party agent or representative) will originate its own investment opportunities for Loans, and service and manage any Loans in which it may invest or otherwise participate. 1

19 FORWARD LOOKING STATEMENTS Investors should not rely on forward-looking statements because they are inherently uncertain. Investors should not rely on forward-looking statements in this Memorandum. This Memorandum contains forward-looking statements that involve risks and uncertainties. We use words such as anticipated, projected, forecasted, estimated, prospective, believes, expects, plans future intends,, should, can, could, might, potential, continue, may, will, and similar expressions to identify these forward-looking statements. Investors should not place undue reliance on these forwardlooking statements, which may apply only as of the date of this Memorandum. TERMS OF THE OFFERING This Offering is made to a limited number of qualified investors to invest in Secured Debentures that are issued by the Company. These Secured Debentures will generally have the features described below. The proceeds from the sale of Secured Debentures shall be utilized to increase the Company s origination, funding and/or making of Loans. The brief summary of the features of the Secured Debentures provided below is qualified in its entirety by the terms and provisions of the actual Secured Debentures. In the event of any conflict between the short summary presented below and the actual terms and provisions of the Secured Debentures, the latter shall govern. 2

20 1. Interest. The Company intends to offer Secured Debentures to investors at a fixed Interest Rate (as defined below) per annum in each year through the Maturity Date payable on a quarterly basis. Interest on the unpaid principal balance will accrue interest starting on the date (the Interest Date ) on which the investment proceeds have been distributed by the Investor to, or on behalf of, the Company following acceptance of the Investor s subscription agreement by the Company. Subject to the terms of the Secured Debentures, Interest payments shall be made on a quarterly basis on March 31, June 30, September 30, and December 31 of each calendar year. For those Investors who acquire a Secured Debenture mid-quarter, interest payments shall be calculated on a per-diem basis on a 360 day calendar year. Interest payments will continue until the Secured Debenture is fully paid, with any and all unpaid principal and interest due and payable on the date that is exactly the Secured Debenture term from the effective date of the Secured Debenture (the Maturity Date ), unless such Maturity Date is extended or renewed as provided in the Secured Debenture or as otherwise agreed to in writing by Investor and Company. 2. Interest Rate and Maturity Date. The Investor shall select the term and interest rate of the Secured Debenture they are to acquire. The interest rates and term of each Secured Debenture shall vary as follows: Secured Debenture Term Interest Rate 6 months 6.50% per annum 12 months 7.00% per annum 24 months 8.00% per annum 36 months 9.00% per annum Investment in Series C Secured Debentures will be subject to SIG review. SIG, in its sole and absolute discretion, may reject and/or postpone an Investor s subscription, for any reason. 3. Prepayment Ability. The Company may (in its sole and absolute discretion) prepay the Secured Debentures early at any time for any reason (or no reason) without any prepayment premium or penalty. 4. Payments. Investors will receive quarterly payments from the Company as set forth in greater detail in the Secured Debenture. The Company shall make these quarterly payments as interestonly and shall not be required to make any payment of the principal balance until the Maturity Date. Payments shall be made on the last day of each quarter of the calendar year: March 31, June 30, September 30, and December Roll-Over / Principal Additions. Investors must notify SIG no later than ninety (90) days prior to the Maturity Date of their intention to either Rollover or redeem their Debenture Investment. Investors may elect to Rollover all or any portion of their Secured Debenture investment by delivering written confirmation of their intent to SIG. All Rollovers will be executed under the current pricing of the Debenture Offering at the time of a Rollover election. SIG will also allow, at its discretion, a principal addition to an original Debenture Investment prior to its Maturity date. Any principal additions to an existing Debenture Investment will be subject to the same terms and conditions of the original Debenture, with interest on a principal addition starting once funds are cleared through SIG s bank account. 3

21 6. Financial Information. At the Investor s specific written request, within one hundred and twenty (120) days following the end of each fiscal year of Company (subsequent to the date of the Secured Debentures and prior to the Maturity Date), the Company will deliver a copy of its annual financial statements to the Investors. All Company financial statements shall be prepared by GAAP standards. 7. Early Withdrawal. An Investor may request an early withdrawal of the original principal balance of his, her or its Secured Debenture. The Company may fulfill an early withdrawal request at its sole and absolute discretion and has no commitment (implied or express) to complete a request for early withdrawal. Upon approval by SIG, there will be no fees, charges, or penalties assessed to the Debenture holder for early withdrawal. INVESTOR SUITABILITY Each person (the Investor ) acquiring Secured Debentures will be required to represent that he, she, or it is purchasing for his, her, or its own account for investment purposes and not with a view to resale or distribution. The Company will sell Secured Debentures to an unlimited number of Accredited Investors only. All investors who are not deemed Accredited must have such knowledge and experience in financial matters, either alone or together with a purchaser representative, to make them capable of evaluating the merits and risks of such an investment in the Secured Debentures being offered. To qualify as an Accredited Investor an investor must meet ONE of the following conditions: 1. Any natural person who had an individual income in excess of Two Hundred Thousand Dollars ($200,000) in each of the two most recent years or joint income with that person s spouse in excess of Three Hundred Thousand Dollars ($300,000) in each of those years and who has a reasonable expectation of reaching the same income level in the current year; 2. Any natural person whose individual net worth or joint net worth, with that person s spouse, at the time of their purchase exceeds One Million Dollars ($1,000,000.00) (excluding the value of such person s primary residence); 3. Any bank as defined in Section 3(a)(2) of the Act, or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to Section 15 of the Securities and Exchange Act of 1934 (the Exchange Act ); any insurance company as defined in Section 2(13) of the Exchange Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; any Small Business Investment Company (SBIC) licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a State, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000.00; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment advisor, or if the employee benefit plan has total assets in excess of Five Million Dollars ($5,000,000.00) or, if a self-directed plan, with investment decisions made solely by persons who are Accredited Investors; 4. Any private business development company as defined in Section 202(a)(22) of the Investment Advisors Act of 1940; 4

22 5. Any organization described in Section 501(c)(3)(d) of the Internal Revenue Code of 1986, as amended (the Code ), corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of Five Million Dollars ($5,000,000.00); 6. Any director or executive officer, or Company of the issuer of the securities being sold, or any director, executive officer, or Company of a Company of that issuer; 7. Any trust, with total assets in excess of Five Million Dollars ($5,000,000.00), not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Section 506(b)(2)(ii) of the Code; or 8. Any entity in which all the equity owners are accredited investors as defined above. Investors: Minimum and Maximum Offering The maximum offering amount of this Private Placement Memorandum is Fifty Million Dollars ($50,000,000) (the Maximum Offering Amount ) and the minimum investment amount is Five Thousand Dollars ($5,000) ( Minimum Offering Amount ). The Company may, at its sole and absolute discretion, at any time during the period of the Offering, increase or decrease the Maximum Offering Amount or the Minimum Investment Amount. The maximum gross proceeds will be the Maximum Offering Amount which will comprise, subject to adjustments as described elsewhere in this Private Placement Memorandum, the total capitalization of the Company. This Offering may, however, be terminated at the sole discretion and option of the Company at any time before the Maximum Offering Amount is received hereunder. Any monies raised during this Offering may be immediately used by the Company as and when received to originate loans on real property. The Company intends to use funds loaned to the Company by prospective Investors as the funds are received and the Company accepts the applicable subscription agreement of the prospective Investor. How to Subscribe To subscribe with the Company and purchase Secured Debentures, a prospective investor must meet certain eligibility and suitability standards, some of which are set forth above (See Investor Suitability ). Additionally, a prospective investor must execute and deliver a Subscription Agreement in the form attached hereto as Exhibit B, together with a check or wire in the amount of the purchase price payable to the Company. By executing the Subscription Agreement, an investor makes certain representations and warranties upon which the Company will rely in accepting subscriptions. Subscription Agreements Subscription Agreements from prospective investors will be accepted or rejected by the Company within five (5) days after their receipt. The Company reserves the sole and absolute right to reject any subscription tendered for any reason or no reason, or to accept it in part only. (See Use of Proceeds below.) 5

23 Subscription Agreements are non-cancelable and irrevocable by the Investor and subscription funds are non-refundable for any reason, except with the express written consent of the Company or as expressly set forth herein or in the Subscription Agreement. If accepted by the Company, an Investor shall become an Investor only when the Company deposits the Investor s contribution into the Company s main operating bank account. Until such time, an Investor s subscription agreement is non-revocable, and subscription funds shall be held by the Company and may, at the sole discretion of the Company, be deposited in a call account (the Subscription Account ). Notwithstanding the previous paragraph, should the process from depositing an Investor s funds into the Subscription Account and acceptance as an Investor take longer than five (5) business days, the Investor may request in writing to recover his, her or its investment funds. If, upon receipt of such request in writing, the Company has not yet accepted the Investor, then the Company may, in its sole and absolute discretion, return the Investor s funds to the investor and revoke the Subscription Agreement within ten (10) business days of receipt of such request from the Investor. Restrictions on Transfer As a condition to this Offering, restrictions have been placed upon the ability of Investors to resell or otherwise transfer any Secured Debentures purchased hereunder. Specifically, no Investor may resell or otherwise transfer any Secured Debentures without the satisfaction of certain conditions designed to ensure compliance with applicable tax and securities laws including, without limitation, the requirement that certain legal opinions be provided to the Company with respect to such matters and the requirement that any transfer of shares to a transferee does not violate any state or federal securities laws. To the extent required by applicable law or in the sole and absolute discretion of the Company, legends shall be placed on all instruments or certificates evidencing ownership of the Secured Debentures stating that the Secured Debentures have not been registered under the federal securities laws and setting forth limitations on resale, and notations regarding these limitations shall be made in the appropriate records of the Company with respect to all Secured Debentures offered through this Offering. A Secured Debenture will be signed by an officer of the Company to evidence the loan from the Investor. The Secured Debenture will be held by the Company or an agent of the Company as determined by the Company in its sole and absolute discretion. The Secured Debenture will not be recorded. However, the Secured Debenture will be evidenced on the Company s books and records. The Investor will receive an original copy of the Secured Debenture. EVIDENCE OF INDEBTEDNESS AND SECURITY INTEREST Each Secured Debenture will be signed by an authorized officer of the Company to evidence the Company s obligation to the Debenture Holder. Each Secured Debenture shall be secured by a Security Agreement granting the Debenture holder a security interest in all promissory notes receivable by the Company that are secured by deeds of trust encumbering real property, whether said notes are currently existing or hereafter received. All Secured Debentures issued pursuant to this Offering will be reflected on the Company s books, records and financial statements. Each Debenture Holder will receive a fully and duly executed original copy of his, her or its Secured Debenture, Security Agreement and corresponding Subscription Agreement. 6

24 USE OF PROCEEDS The Company anticipates using the proceeds to increase origination of Loans, volume, market share, and profitability. Specifically, proceeds will be used to fund Loans for investment as determined by the Company s management and its advisors in their sole and absolute business discretion and judgment. The Company plans to use any proceeds as and when received from Investors. Accordingly, the Company does not plan to close this Offering or raise any set amount of proceeds before accepting subscriptions (in the sole and absolute discretion of the Company) and utilizing funds advanced to the Company by Investors. BUSINESS STRATEGY SIG s business strategy is designed to generate income through the origination and servicing of Loans secured by real property located throughout the United States with a primary focus in Southern California. There is a significant market opportunity to make loans to real estate investors whose financing needs are not met by traditional banks. SIG lends to such borrowers provided that they have sufficient equity in the stabilized value of the subject property, and otherwise meet SIG s lending criteria. In return, we receive a higher total interest yield on the Loans originated. In addition, the Company takes steps intended to mitigate the risks, such as imposing a lower loan-to-value ratio. By focusing on the value of the underlying real estate, which serves as collateral on our loans, SIG can approve loans on properties quickly in a lending niche not offered by mainstream lenders. SIG has three primary investment objectives: Preserve and return Investor capital contributions; Produce revenues from interest and fee income on Loans originated, funded, made, acquired, and/or serviced by the Company Provide quarterly cash distributions to our Secured Debenture holders; The Company s lending parameters are an extension of our commitment to our first investment objective - the preservation of capital. The Company and its principals believe that lending almost exclusively on single-family residences and 2-4 unit properties substantially reduces both our short-term and long-term portfolio risks. Entry-level single-family homes & 2-4 unit properties represent the most basic form of improved real estate & appeal to the largest pool of buyers and are the least affected by an economic downturn or recession. In addition, the short-term nature of the Company s financing reduces exposure to market fluctuations. Conventional & FHA financing, with as little as 3-5% down, is also a consistent and effective force driving the Company s loan payoffs. For prospective buyers of our client s properties, entry-level singlefamily residences & 2-4 unit properties are among the easiest class of properties to obtain mortgage financing. The expanding minority demographics in California continue to drive the purchase of entry-level singlefamily residences & 2-4 unit properties. The Company s average loan amount of approximately one hundred and eighty thousand dollars ($180,000) allows for the risk variable to be spread over a larger number of loans within the Company s portfolio. 7

25 INVESTMENT STANDARDS AND POLICIES SIG will engage in originating, acquiring, managing or selling Loans secured by either mortgages or deeds of trusts secured by real property (single family residential real estate) located around the United States with a primary focus in Southern California. The value and balance of the Loans will not be guaranteed by any governmental agency or private entity, but may be guaranteed by affiliates and associates of the underlying borrowers. The Company (or its designated third party agent or representative) will originate its own investment opportunities for Loans and service and manage any Loans in which it may invest or otherwise participate. Subject to the sole and absolute discretion of the Company to amend, modify, cancel, or revise any of the following at any time, SIG generally intends to make Loans according to the following lending standards and policies: General Lending Guidelines 1. Lien Priority. The deeds of trusts and mortgages securing the Loans will be first, junior, or subordinated lien positions. However, the Company intends to focus on Loans secured by a first position deed of trust, mortgage or lien position. 2. Location of Real Property Securing Loans. Deeds of trusts and mortgages will be secured by real property located around the United States with a primary focus in Southern California. 3. Type of Property. Investment in Loans may involve underlying assets of real property that will generally consist of single family residences and 2-4 unit properties. The Loans will involve both nonowner occupied investment properties as well as owner occupied properties. 4. Loan-to-Value Ratio. A Loan investment by the Company will generally not exceed the Loanto-Value percentage ratios set forth below. The Loan-to-Value ratio is calculated by taking the amount of the Loan combined with the amount of outstanding debt secured by other liens on the property, dividing that by the value of the real property securing the deed of trust or mortgage and multiplying that figure by 100 to come to a percentage. Value shall be determined by an independent certified appraiser or noncertified appraiser doing an appraisal on the real property or commercial or residential real estate broker giving his, her, or its opinion of value of the real property. Notwithstanding the foregoing, the Company may, in its sole and absolute discretion, exceed the below stated Loan-to-Value ratios at any time and for any reason, including (without limitation) if SIG determines in its sole business judgment that a higher loan amount is warranted by the circumstances of that particular loan, such as being able to secure multiple properties, called cross-collateralization, personal guaranties, prior loan history with the borrower, market conditions, if mortgage insurance is obtained, or other factors. The Company plans to routinely re-evaluate the portfolio and Loan-to-Value ratio maximums set forth herein and may revise the Loan-to-Value ratio maximums at any time if it considers it to be in its best interests. Subject to the specific ratios set forth below, SIG will maintain a weighted Loan-to-Value ratio of no more than seventy percent (70%). The value of the property will be calculated on an after completion or post-rehabilitation basis. Prospective investors should carefully evaluate and understand that calculation of the ratio using such after completion values exposes the Loans to additional risks in the event that the rehabilitation is not completed or the value of the rehabilitation is not timely or ultimately achieved. 8

26 5. Terms of Loans. The terms of the Loans will vary, but will generally have a term between six (6) months and twelve (12) months, but may have loan terms exceeding twelve (12) months. Most Loans originated or acquired by SIG will generally provide for monthly payments of principal and/or interest and a balloon payment payable in full at the end of the term. At the end of the term, SIG will require the borrower to pay the loan in full, to refinance the loan, or to sell the real property to pay back the loan. 6. Interest Rates on Loans. The interest rates paid by borrowers on Loans will vary, but will generally be around nine percent to fifteen percent (9% to 15%) per annum. 7. Title Insurance. Satisfactory title insurance coverage will be obtained for all Loans and will usually be paid by the borrower. The title insurance policy will name the Company as the insured and provide title insurance in an amount not less than the principal amount of the loan unless there is multiple forms of security for the loan, in which case SIG shall use its business judgment in determining whether and to what extent title insurance shall be required. Title insurance insures only the validity and priority of the deed of trust or mortgage, and does not insure SIG against any loss from other causes, such as (without limitation) diminution in the value of the secured property, loan defaults, and other such losses. 8. Fire and Casualty Insurance. Satisfactory fire and casualty insurance will be obtained for all improved real property loans which insurance will name SIG as its loss payee in the amount equal to the improvements on the real property. (See Business Risks Uninsured Losses below.) 9. Mortgage Insurance. SIG does not intend to, but may if the property otherwise qualifies, arrange for mortgage insurance, which would afford some protection against loss if the Company foreclosed on a loan and there existed insufficient equity in the security property to repay all sums owed. 10. Acquiring Loans from Other Lenders. SIG may also participate in loans with other lenders (including other businesses organized by business partners or affiliates of the Company, by providing funds for or purchasing a fractional undivided interest in a loan meeting the requirements set forth above. In the event the Company acquires loans from other lenders, SIG will receive assignments of all beneficial interest in any loans purchased. 11. Purchase of Loans from Affiliates. SIG may purchase Loans from its Affiliates, so long as the Loans meet the lending requirements set forth above. For the purposes hereof, the term Affiliates with respect to any entity shall mean any of the following: (1) a Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the entity, (2) a Person who, directly or indirectly, owns or controls at least ten percent (10%) of the outstanding voting interests of the entity, (3) a Person who is an officer, director, manager or member of the entity, or (4) a Person who is an officer, director, manager, member, general partner, trustee or owns at least ten percent (10%) of the outstanding voting interests of a Person described in clauses (1) through (3) of this sentence. The term Person shall mean a natural person or Entity. The term Entity shall mean an association, relationship or artificial person through or by means of which an enterprise or activity may be lawfully conducted, including, without limitation, a partnership, trust, limited liability company, corporation, joint venture, cooperative or association. 9

27 12. Credit Evaluations. SIG may consider the income level and general creditworthiness of a borrower to determine his, her or its ability to repay any loan according to its terms in addition to considering the loan-to-value ratios and sources of security for repayment. Loans may be made to borrowers who are in default under other obligations or in bankruptcy or who do not have sources of income that would be sufficient to qualify for loans from other lenders such as banks or savings and loan associations. 13. Loan Packaging and Servicing. SIG or its affiliates will assemble and/or obtain all necessary information required to make a funding decision on any loan request. It is presently anticipated that all Loans will be serviced (i.e., loan payments collected and other services relating to the loan) by the Company (although the Company may, at any time, retain a third-party loan servicing company) (the Servicer ). If the Servicer is a third party, the Company will oversee the Servicer. The Company may, in its sole and absolute discretion, decide to service Loans in-house at such time as conditions warrant. SIG may change or replace its Servicer at any time and for any reason in its sole and absolute discretion. 14. Diversification. No loan originated, acquired, made, funded or held by the Company shall exceed five percent (5%) of the Company s loan portfolio Specific Loan Terms The Company intends to focus on two types of Loans: Bridge Loans and Construction Loans. Each will be secured by a Property located in the United States with a primary focus in Southern California. 1. Bridge Financing. The Company s borrowers will identify and bid on distressed properties that can be purchased from local banks, S & L s, government agencies, probate sales, and private parties at significant discounts from their stabilized values. Many of the properties are bank repossessions obtained through foreclosure. The borrower has made a below market purchase of a property that is in fair to poor condition but needs cosmetic repairs and improvements. Typical improvements might involve upgrades or replacement of any one of the following; roof, kitchen, bathroom(s), plumbing and fixtures, paint exterior & interior, stucco, drywall, carpeting & tile, and minor landscaping. On many occasions a borrower will have his own crew to perform the work for a significant cost reduction. Bridge Loans are designed to allow borrowers to buy and stabilize distressed properties so they may be sold or refinanced. It is a lending niche that is traditionally prohibited by local and mainstream mortgage sources because of their own underwriting restrictions. The Company will review the appraisal of the value of the property and the proposed improvements, and will arrange Loans to borrowers that seldom exceed seventy percent (70%) of the future value of the property. The general guidelines for bridge loans are as follows: Loan Range: $30,000-$500,000. Maximum Loan Amount: 70% of improved Loan-to-Value. Loan Type: Fixed, interest-only. Interest Rate: 9.0%-15.0%, based primarily on credit scores Loan Term: 12 months; 3-month extension periods available. Prepayment: N/A Security: First trust deed on subject property. Borrowing entity: Individual(s) with approved credit/corp/llc/non-profit. Fees/Costs: Generally 3 points at origination & $750 in fees. Extension fee is 1½ points per 3-month period. 10

28 2. Construction Financing. A construction loan provides funds for the construction of one or more structures on developed land. SIG s construction program is limited to single-family residences and two (2) four (4) unit residential properties. Funds under this type of Loan are generally not forwarded to the borrower until work in the previous phase of the project has been completed and SIG has verified certain aspects of the construction and its costs. SIG will review the appraisal of the value of the property and proposed construction, and will arrange loans for up to seventy percent (70%) of the as completed or after repair value. If a borrower and project qualify, the Company also considers financing both the acquisition & development and the construction up to seventy percent (70%) of the appraised project value in return for a higher Loan fee. The general guidelines for construction Loans are as follows: Sale of Loans Loan Range: $50,000-$750,000. Maximum Loan Amount: 70% of completed value. Loan Type: Fixed, interest-only. Interest Rate: 9.0%-15.0%, based primarily on credit scores. Loan Term: 12 months; 3-month extension periods available. Prepayment: N/A Security: First trust deed on subject property. Borrowing entity: Individual(s) with approved credit/corp/llc/non-profit. Fees/Costs: Generally 4-5 points at origination & $750 in fees. Extension fee is 1 ½ points per 3-month period. The Company does not plan on investing in Loans for the primary purpose of reselling such Loans in the course of business. However, the Company may sell Loans, or fractional interests in such Loans, when the Company determines, in its sole and absolute discretion, that it appears to be advantageous for the Company to do so, based upon then current interest rates, the length of time that the Loan has been held by the Company and the overall investment objectives of the Company. Borrowing/Hypothecation The Company intends to obtain or maintain a credit facility for the purpose of making Loans and investing in Loans and may assign all or a portion of its loan portfolio as security for such loan(s). The Company anticipates engaging in this type of transaction when the interest rate at which the Company can borrow funds is significantly less than the rate that can be earned by SIG on its loans, giving the Company the opportunity to earn a profit as a spread. The Company may also in its sole and absolute discretion elect to finance its investments with borrowed funds. COLLATERAL ASSIGNMENT OF SECURED LOAN PORTFOLIO As security for the Secured Debentures issued pursuant to this Offering, the Company shall assign to its Debenture Holders 100% of its beneficial interest in each and every one of its secured real estate Loans concurrently with their making, until all of the Secured Debentures so issued have been fully repaid. Such assignments shall be evidenced by the Company executing a Security Agreement in favor of Debenture holders in the form as shown in Exhibit D. 11

29 COMPENSATION Aside from interest income from Loans, the principal sources of the Company s revenues are listed below. The Company will explore other sources of revenues as operations continue. Form of Compensation LOAN ORIGINATION FEES LOAN EXTENSION AND MODIFICATION FEES LOAN PROCESSING, LOAN DOCUMENTATION AND SIMILAR FEES Estimated Amount or Method of Compensation Loan origination fees are collected from borrowers. Such fees generally average between two to six percent (2-6%) depending on market conditions and different types of loans. Most commonly, such fees represent three to four percent (3%-4%) of the value of the Loan. Loan origination fees collected by the Company are part of the Company s compensation from Loans. Loan extension and modification fees are collected from borrowers and payable to the Company. Such fees are typically between one and three percent (1-3%) of the original loan amount, but could be higher depending on market rates and conditions. Loan processing and loan documentation and other similar fees are collected from the borrower and payable to SIG at prevailing industry rates. SIG will earn other loan fees as follows: One Hundred Percent (100%) of each of the following: OTHER LOAN FEES (1) All late payment fees incurred by borrowers on loans; (2) All default interest incurred by borrowers on defaulted loans; (3) All prepayment penalties incurred by borrowers; and (4) All forbearance fees, extension fees and all other fees incurred by borrowers. SIG will also earn interest income from loans originated by SIG. Borrowers pay interest to SIG on a monthly basis on the full amount of their indebtedness. The Company will generally attempt to charge borrowers a higher interest rate ( spread ) than the rates paid to Investors in this Offering. 12

30 OFFICERS AND DIRECTORS Under applicable law, the officers and directors are generally accountable to the Company as a fiduciary, which means that they are required to exercise good faith and integrity with respect to corporate affairs and sound business judgment. This is a rapidly developing and changing area of the law, and Members should consult with their own independent legal counsel in this regard. The Company has not been separately represented by independent legal counsel in its formation or in the dealings with its officers, directors or affiliates. As such, Investors must rely on the good faith and integrity of the Company s officers, directors and affiliates to act in accordance with the terms and conditions of this Offering. The Bylaws provide that the officers and directors will not have any liability to the Company for losses resulting from errors in judgment or other acts or omissions unless they are guilty of fraud, bad faith, or willful misconduct. The Bylaws also provide that the Company will indemnify the officers and directors against liability and related expenses (including, without limitation, legal fees and costs) incurred in dealing with the Company, Investors, or third parties as long as no fraud, bad faith, or willful misconduct on the part of the officers and directors is involved. Therefore, Investors may have a more limited right of action than they would have absent these provisions in the Bylaws. A successful indemnification of the officers and directors or any litigation that may arise in connection with the Company s indemnification thereof could deplete the assets of the Company. Investors who believe that a breach of the officers and directors fiduciary duties has occurred should consult with their own legal counsel in the event of fraud, willful misconduct, or bad faith. Investors are urged to carefully read the articles and bylaws in their entirety. Any summary of the articles or bylaws is qualified in its entirety by the actual underlying documents which shall govern in the event of any conflict between the actual documents and any summary or reference thereof included herein. It is the position of the U.S. Securities and Exchange Commission that indemnification for liabilities arising from, or out of, a violation of federal securities law is void as contrary to public policy. However, indemnification will be available for settlements and related expenses of lawsuits alleging securities law violations if a court approves the settlement and indemnification, and also for expenses incurred in successfully defending such lawsuits if a court approves such indemnification. Officers and directors of the Company will be entitled to receive compensation based on the profitability of the Company. RISK FACTORS The Company may attempt (in its sole and absolute discretion) to comply with requests for the early payment of the Secured Debentures if the financial position of the Company can accommodate it and the Company elects to do so (provided, that the Company is not under any obligation to permit an early redemption or withdrawal of the Secured Debentures requested by any Investor). Investors should consider each of the following risks. No Registration: Limited Governmental Review INVESTMENT RISKS This Offering has not been registered with, or reviewed by, the U.S. Securities and Exchange Commission, or any State securities regulator or authority, nor is registration or review contemplated. 13

31 Limited Transferability of Interests Although the Company may attempt to redeem Secured Debentures (when possible, in the Company s sole and absolute discretion), there is no public market for the Secured Debentures and none is expected to develop in the future. Even if a potential buyer could be found, the transferability of these Secured Debentures is also restricted by the provisions of the Securities Act of 1933 (as amended) and Rule 144 promulgated thereunder. Unless an exemption is available, these Secured Debentures may not be sold or transferred without registration under the Securities Act of 1933 (as amended) and the prior written consent of applicable State securities regulator(s). Any sale or transfer of these Secured Debentures also requires the prior written consent of the Company. Investors must be capable of bearing the economic risks of this investment with the understanding that these Secured Debentures may not be liquidated by resale or redemption and should expect to hold their Secured Debentures as a long-term investment. Size of the Offering There is no assurance that the Company will obtain capital investments equal to the amount required to close the Offering. In addition, receipt of capital investments of less than the Maximum Offering Amount will reduce the ability of SIG to spread investment risks through diversification of its loan portfolio. Investors Not Independently Represented The Investors in the Company have not been represented by independent counsel with respect to this Offering. Attorneys assisting in the formation of the Company and the preparation of this Memorandum have represented only the Company and its principals and affiliates. Provisions in the Secured Debenture The Company has set the terms of the Secured Debenture in a manner which is favorable to the Company and has not made an attempt to consider the favorability or suitability of such terms for any prospective investors. Lack of Regulation The Company is not supervised or regulated by any federal or state authority, except to the extent that the Company s lending and brokerage activities are regulated and supervised by applicable authorities in at least the State of California. Reliance on Key Personnel BUSINESS RISKS The directors and officers of the Company will make virtually all decisions with respect to the management of the Company including, without limitation, the determination as to which loans to make and the terms thereof. The Investors will not have a voice in the management decisions of the Company and can exercise only a limited (if any) amount of control over the Company. The Company gives no assurance that the Company will operate at a profit or positive cash flow. The Company is dependent to a substantial degree on the continued services of its key personnel. In the event of the death, incapacity or other termination of key personnel, the business and operations of the Company may be adversely affected. Furthermore, all investments related to specific Loans will be undertaken by the Company without the Investors having any ability to directly affect such transactions. 14

32 Lack of Regulation The management and investment practices of the Company are not supervised or regulated by any Federal or State legal or regulatory authority. Tax and ERISA Risks An investment in the Company involves certain tax risks of general application to all investors and certain other risks specifically applicable to Keogh accounts, Individual Retirement Accounts and other taxexempt investors. (See Income Tax Considerations and ERISA Considerations below). Possible Repeal of Usury Exemption To the extent that any Loans are arranged by or through a mortgage lending license and are therefore generally exempt from the otherwise applicable state s usury limitation, should this exemption be repealed, the Company may no longer be able to originate loans in excess of the usury limit, potentially reducing its return on investment or forcing it to limit its lending activities or otherwise burdening its profitability and cash flow. Uninsured and Underinsured Losses SIG intends to maintain comprehensive insurance coverage of the type and amount it believes is customarily obtained by any lender of real estate. There are, however, certain types of losses, generally of a catastrophic nature, such as earthquakes, war and floods, that may be uninsurable or not economically insurable from which the real estate properties may be at risk. In addition, because of coverage limits and deductibles, insurance coverage in the event of a substantial loss may not be sufficient to pay the full current market value or current replacement cost of the underlying investment. Inflation, changes in building codes and ordinances, environmental considerations and other factors also might make it unfeasible to use insurance proceeds to replace a property after it has been damaged or destroyed. Under such circumstances, the insurance proceeds received by SIG might not be adequate to restore its economic position with respect to its real estate properties. Additionally, SIG does not intend to require mortgage insurance on Loans, which would protect the Company from losses due to defaults by borrowers. Fluctuations in Interest Rates Mortgage interest rates are subject to abrupt and substantial fluctuations and the purchase of Secured Debentures are a relatively illiquid investment. If prevailing interest rates rise above the average interest rate being earned by Secured Debentures, the Investors may wish to liquidate their investment to take advantage of higher available returns but may be unable to do so due to restrictions on transfer and withdrawal. 15

33 Litigation Risks SIG will act in good faith and use reasonable judgment in selecting borrowers and making, purchasing, and managing the Loans. However, as a lender the Company is exposed to the risk of litigation by a borrower, tenant, or other counter-party for any warranted or unwarranted allegations regarding the terms of any transaction or the actions or representations of SIG in making, managing or foreclosing on Loans. It is impossible to foresee the allegations that a party will bring against the Company, but the Company will use its best efforts to avoid litigation if, in its sole and absolute discretion, it is in the best interests of the Company. If the Company is required to incur legal fees and costs to respond to any lawsuit, the costs and fees could have an adverse impact on the Company s cash flow and profitability. Participation with Other Parties While SIG does not expect to participate in transactions with other parties, there is a possibility that it may do so. When participating in Loans with other lenders the Company may not have control over the determination of when and how to enforce a default, depending on the terms of any participation agreement with the other lenders or owners, other lenders or owners may have varied amounts of input into such decision-making process, including (without limitation) the ultimate decision-making power on if and when to enforce a default. There is no certainty as to who will be a lead lender or lead investor (as applicable) in a situation where SIG participates in ownership of a Loan with another entity. Risks of Government Action While the Company will use its best efforts to comply with all laws, including federal, state and local laws and regulations, there is a possibility of governmental action to enforce any alleged violations of (without limitation) mortgage lending laws which may result in legal fees and damage awards that would adversely affect the applicable entity. Unforeseen Changes While the Company has enumerated certain material risk factors herein, it is impossible to know all risks which may arise in the future. In particular, Members may be negatively affected by changes in any of the following: (i) laws, rules and regulations; (ii) regional, national and/or global economic factors and/or real estate trends; (iii) the capacity, circumstances and relationships of partners of Affiliates, the Company or the Manager; (iv) general changes in financial or capital markets, including (without limitations) changes in interest rates, investment demand, valuations or prevailing equity or bond market conditions; or (v) the presence, availability or discontinuation of real estate and/or housing incentives. The Company continuously encounters changes in its operating environment, and the Company may have fewer resources than many of its competitors to continue to adjust to those changes. The operating environment of the Company is undergoing rapid changes, with frequent introductions of laws, regulations, competitors, market approaches, and economic impacts. Future success will depend, in part, upon the ability of the Company to address the needs of its borrowers, sponsors and clients by adapting to those changes and providing products and services that will satisfy the demands of their respective businesses and projects. Many of the competitors have substantially greater resources to adapt to those changes. The Company may not be able to effectively react to all of the changes in its operating environment or be successful in adapting its products, services and approach. 16

34 KEY PERSONNEL The Company is currently managed by officers, listed below. The Company may hire additional officers and employees once sufficient resources have been acquired to support the costs for such positions. Loan Officers will be critical to support the anticipated rapid growth of the Company and to provide a level of management depth. The role of the Loan Officer will be to help manage the daily flow of activities between prospects, wholesalers/brokers and existing borrowers and to provide a second level of oversight as well as generate additional business for SIG. The following individuals comprise the officers of the Company as of the date of this Private Placement Memorandum: Max E. McDermott, 48, President of SIG. Mr. McDermott has served in the mortgage industry for over 25 years. Mr. McDermott serves as founder and President of SIG, and serves as a board member. In 1991 and 1992, he served as a loan officer for VMC Mortgage Co., a residential mortgage company based in Marina Del Rey, California. In 1992, Mr. McDermott left VMC and co-founded Barrington Capital Corporation, which focused on the origination and underwriting of residential mortgage loans. Mr. McDermott served as President until he sold his interest in Barrington in From July 1995 to July 2005, Mr. McDermott served as founder and President of Capital Quick, Inc., which raised private capital to provide loans to real estate investors who bought and sold distressed properties. Capital Quick grew to over $20 million in assets during Mr. McDermott s involvement. Amy Sutton, 40, Chief Operating Officer of SIG, has served in the mortgage and realty industry for over 10 years. From , she worked for New York and Company was promoted to District Sales Manager for the Western United States. From 2006 to 2009, she worked for City Funding Group as Branch Manager of their Los Angeles Office. From 2009 to 2012, Ms. Sutton worked for Prudential California Realty as Branch Manager for their Rancho Cucamonga Office. From 2013 to 2014, she served as COO of Realty One Group Trilogy. Ms. Sutton has been with the Company since 2014 as COO of Secured Income Group, Arbor One Escrow, and Realty Masters. Sabrina Rossetti, 32, Controller of SIG, has served in the finance industry for over 3 years. Mrs. Rossetti earned a BA in Qualitative Analysis / Accounting from Arizona State in 2005, and her Masters in Statistics from Claremont Graduate University in From 2013 to 2015, she worked for the County of San Bernardino as Head of Statistical Analysis. Mrs. Rossetti joined the Company in 2015, and serves as Controller for Secured Income Group, Arbor One Escrow, and Realty Masters. LEGAL PROCEEDINGS Neither the Company nor any of its directors or officers, are now, or within the past five (5) years have been, involved in any material litigation or arbitration. 17

35 Federal Income Tax Aspects INCOME TAX CONSIDERATIONS The following discussion generally summarizes the material federal income tax consequences of an investment in the Company based upon the existing provisions of the Internal Revenue Code of 1986, as amended (the Code ), and applicable Treasury regulations thereunder, current administrative rulings and procedures and applicable judicial decisions. However, it is not intended to be a complete description of all tax consequences to prospective Investors with respect to their investment in the Company. No assurance can be given that the Internal Revenue Service (the IRS ) will agree with the interpretation of the current federal income tax laws and regulations summarized below. In addition, the Company or the Investors may be subject to state and local taxes in jurisdictions in which the Company may be deemed to be doing business. ACCORDINGLY, ALL PROSPECTIVE INVESTORS SHOULD INDEPENDENTLY SATISFY THEMSELVES REGARDING THE POTENTIAL FEDERAL AND STATE TAX CONSEQUENCES OF PARTICIPATION IN THE COMPANY AND ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS, ATTORNEYS OR ACCOUNTANTS IN CONNECTION WITH ANY INTEREST IN THE COMPANY. EACH PROSPECTIVE INVESTOR/SHAREHOLDER SHOULD SEEK, AND RELY UPON, THE ADVICE OF THEIR OWN TAX ADVISORS IN EVALUATING THE SUITABILITY OF AN INVESTMENT IN THE COMPANY IN LIGHT OF THEIR PARTICULAR INVESTMENT AND TAX SITUATION. Tax Law Subject to Change Frequent and substantial changes have been made, and will likely continue to be made, to the federal and state income tax laws. The changes made to the tax laws by legislation are pervasive, and in many cases, have yet to be interpreted by the IRS or the courts. State and Local Taxes A description or analysis of the state and local tax consequences of an investment in the Company is beyond the scope of this discussion. Prospective Investors are advised to consult their own tax counsel and advisors regarding these consequences and the preparation of any state or local tax returns that an Investor may be required to file. IRS Audits Returns filed by the Company are subject to audit by the IRS. The IRS devotes considerable attention to the proper application of the tax laws to corporations. An audit of the Company s return may lead to adjustments which adversely affect the federal income tax treatment of Secured Debentures and cause Investors to be liable for tax deficiencies, interest thereon and penalties for underpayment. An audit of the Company s tax return could also lead to an audit of their individual tax return that may not otherwise have occurred, and to the adjustment of items unrelated to the Company. Prospective investors should make their determination to invest based on the economic considerations of the Company rather than any anticipated tax benefits. Furthermore, the IRS has taken the position in Temp. Reg T that any interest on income taxes owed by an individual is personal interest, subject to limitations on deduction, regardless of the nature of the activity that produced the income that was the source of the tax. 18

36 Understatement Penalties The Company will be subject to a substantial understatement penalty in the event that it understates its income tax. The IRS imposes a penalty of 20% on any substantial understatement of income tax. Furthermore, the IRS can charge interest on underpayments of income tax exceeding One Hundred Thousand ($100,000) for any tax year owing by certain corporations at a rate that is higher than the normal interest rate. The Company strongly advises prospective investors to consult with their own tax advisor to be sure that they fully evaluate the proposed tax treatment of Company as described herein. ERISA CONSIDERATIONS The following is a discussion of how certain requirements of the Employee Retirement Income Security Act of 1974, as amended ( ERISA ) and the Code relating to Employee Benefit Plans and certain Other Benefit Arrangements (each as defined below) may affect an investment in the Secured Debentures. It is not, however, a complete or comprehensive discussion of all employee benefits aspects of such an investment. If the prospective investors are trustees or other fiduciaries of an Employee Benefit Plan or Other Benefit Arrangement, before purchasing Units, they should consult with their own independent legal counsel to assure that the investment does not violate any of the applicable requirements of ERISA or the Code, including, without limitation, the ERISA fiduciary rules and the prohibited transaction requirements of ERISA and the Code. ERISA Fiduciary Duties Under ERISA, persons who serve as trustees or other fiduciaries of an Employee Benefit Plan have certain duties, obligations and responsibilities with respect to the participants and beneficiaries of such plans. Among the ERISA fiduciary duties are the duty to invest the assets of the plan prudently, and the duty to diversify the investment of plan assets so as to minimize the risk of large losses. An Employee Benefit Plan is a plan subject to ERISA that is an employee pension benefit plan (such as a defined benefit pension plan or a section 401(k) or 403(b) plan) or any employee welfare benefit plan (such as an employee group health plan). Prohibited Transaction Requirements Section 406 of ERISA and Section 4975 of the Code proscribe certain dealings between Employee Benefit Plans or Other Benefit Arrangements, on the one hand, and parties-in interest or disqualified persons with respect to those plans or arrangements on the other. An Other Benefit Arrangement is a benefit arrangement described in Section 4975(e)(1) of the Code (such as a self-directed individual retirement account ( IRA ), other than an Employee Benefit Plan. Prohibited transactions include, directly or indirectly, any of the following transactions between an Employee Benefit Plan or Other Benefit Arrangement and a party in interest or disqualified person: (a) (b) (c) sales or exchanges of property; lending of money or other extension of credit; furnishing of goods, services or facilities; and (d) transfers to, or use by or for the benefit of, a party in interest or disqualified person of any assets of the Employee Benefit Plan or Other Benefit Arrangement. 19

37 In addition, prohibited transactions include any transaction where a trustee or other fiduciary of an Employee Benefit Plan or Other Benefit Arrangement: (a) (b) deals with plan assets for his own account, acts on the behalf of parties whose interests are adverse to the interest of the plan, or (c) receives consideration for his own personal account from any party dealing with the plan with respect to plan assets. The terms party in interest under ERISA and disqualified person under the Code have similar definitions. The terms include persons who have particular relationships with respect to an Employee Benefit Plan or Other Benefit Arrangement, such as: (a) (b) fiduciaries; persons rendering services of any nature to the plan; (c) employers any of whose employees are participants in the plan, as well as owners of 50% or more of the equity interests of such employers; (d) spouses, lineal ascendants, lineal descendants, and spouses of such ascendants or descendents of any of the above persons; (e) employees, officers, directors and 10% or more owners of such fiduciaries, service providers, employers or owners; (f) (g) entities in which any of the above-described parties hold interests of 50% or more; and 10% or more joint venturers or partners of certain of the parties described above. Certain transactions between Employee Benefit Plans or Other Benefit Arrangements and parties in interest or disqualified persons that would otherwise be prohibited transactions are exempt from the prohibited transaction rules due to the application of certain statutory or regulatory exemptions. In addition, the United States Department of Labor (the DOL ) has issued class exemptions and individual exemptions for certain types of transactions. Violations of the prohibited transaction rules may require the prohibited transactions to be rescinded and will cause the parties in interest or disqualified persons to be subject to excise taxes under Section 4975 of the Code. Investments in the Company If a prospective investor is a fiduciary of an Employee Benefit Plan, the investor must act prudently and ensure that the plan s assets are adequately diversified to satisfy the ERISA fiduciary duty requirements. Whether an investment in the Company is prudent and whether an Employee Benefit Plan s investments are adequately diversified must be determined by the plan s fiduciaries in light of all of the relevant facts and circumstances. A fiduciary should consider, among other factors, the limited marketability of the Secured Debentures. 20

38 Prospective investors also should be aware that under certain circumstances the DOL may view the underlying assets of the Company as plan assets for purposes of the ERISA fiduciary rules and the ERISA and Internal Revenue Code prohibited transaction rules. DOL regulations indicate that Company assets will not be considered plan assets if less than 25% of the value of the Secured Debentures is held by Employee Benefit Plans and Other Benefit Arrangements. The Company anticipates that if any investor is an Employee Benefit Plan subject to ERISA, the Company will limit the investments by all Employee Benefit Plans and Other Benefit Arrangements to ensure that the 25% limit is not exceeded. Because the 25% limit is determined after every subscription or redemption, the Company has the authority to require the redemption of all or some of the Secured Debentures held by any Investor that is an Employee Benefit Plan or Other Benefit Arrangement if the continued holding of such Secured Debentures, in the sole opinion of the Company, could result in the Company being subject to the ERISA fiduciary rules. If there are no Employee Benefit Plan investors in the Company, the Company anticipates that investments by Other Benefit Arrangements (such as self-directed IRAs) may exceed the 25% limit. This may cause the underlying assets of the Company to be considered plan assets for purposes of the Code prohibited transaction rules. In such a case, the Other Benefit Arrangement investors must ensure that their investments do not constitute prohibited transactions under Section 4975 of the Code. Such investors should consult with independent legal counsel on these issues. Special Limitations The discussion of the ERISA fiduciary aspects and the ERISA and Code prohibited transaction rules contained in this Memorandum is not intended as a substitute for careful planning. The applicability of ERISA fiduciary rules and the ERISA or Code prohibited transaction rules to Investors may vary from one Investor to another, depending upon that Investor s situation. Accordingly, prospective investors should consult with their own attorneys, accountants and other personal advisors as to the effect of ERISA and the Code on their situation of a purchase and ownership of the Secured Debentures and as to potential changes in the applicable law. LEGAL MATTERS The Company has retained Geraci Law Firm, APC of Irvine, California to advise it in connection with the preparation of this Offering, the Secured Debenture, the Subscription Agreement and any other documents related thereto. Geraci Law Firm, APC has not been retained to represent the interests of any Investors or Investors in connection with this Offering. All investors that are evaluating or purchasing Promissory Secured Debentures should retain their own independent legal counsel to review this Offering, the Memorandum, the Promissory Note, the Subscription Agreement and any other documents and matters related whatsoever to this Offering, and to advise them accordingly. FINANCIAL INFORMATION The following financial statements attached hereto in Exhibit D have been prepared from the Company s books and records by the Company s accountant and management. They are unaudited. Management believes that the statements fairly reflect the financial condition and operating results of the Company. The Company has been taxed as a subchapter S corporation. By following certain guidelines, income of a subchapter S corporation can be passed through to stockholders without the corporation being subject to the federal corporate income tax. Subchapter S corporations must divest most of their income to their stockholders in order to retain their subchapter S status. 21

39 ADDITIONAL INFORMATION AND UNDERTAKINGS The Company undertakes to make available to each prospective investor every opportunity to obtain any additional information from the Company necessary to verify the accuracy of the information contained in this Memorandum, to the extent that the Company possesses such information or can acquire it without unreasonable effort or expense. This additional information includes, without limitation, all the organizational documents of the Company, recent financial statements for the Company and all other documents or instruments relating to the operation and business of the Company and material to this offering and the transactions contemplated and described in this Memorandum so long as such additional information does not violate any Investor s privacy or confidentiality rights. 22

40 EXHIBIT A HOW TO SUBSCRIBE FOR A SECURED DEBENTURE Any subscriber who wishes to open an account and purchase a Secured Debenture should deliver the following documents to the Company's Corporate Headquarters, at E. 17th Street, STE 100, Tustin, CA 92780; One dated and signed Subscription Agreement (Exhibit B); and A wire transfer* or check payable to the Company in the amount of the face value of the Secured Debenture the subscriber wishes to purchase. Upon acceptance by the Company, an executed original Secured Debenture with the selected term and rate will be returned to the subscriber along with a copy of the executed Subscription Agreement. Please keep them in a safe place with your other important papers. *WIRE INSTRUCTIONS: BANK: Farmer s & Merchants Bank of Long Beach 4827 E. 2nd Street Long Beach, CA (562) ROUTING #: ACCOUNT #: FOR CREDIT TO: Secured Income Group, Inc E. 17th Street #100 Tustin, CA Please contact Sabrina Rossetti, Chief Financial Officer, for any questions regarding your investment. (714) srossetti@securedincomegroup.com 23

41 EXHIBIT B (SEE ATTACHED) 24

42 EXHIBIT C SECURED DEBENTURE THE SALE OF THESE SECURED DEBENTURES HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON THE EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS SET FORTH IN SECTION 4(2) OF THE ACT AND REGULATION A PROMULGATED THEREUNDER. THESE SECURED DEBENTURES HAVE NOT BEEN QUALIFIED OR REGISTERED IN ANY STATE IN RELIANCE UPON THE EXEMPTIONS FROM SUCH QUALIFICATION OR REGISTRATION UNDER STATE LAW. THESE SECURED DEBENTURES ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANFER OR DISPOSITION PURSUANT TO THE OFFERING CIRCULAR OF THE UNDERSIGNED BORROWER THROUGH WHICH THESE SECURED DEBENTURES ARE TO BE ISSUED. ANY PURCHASER OF THESE SECURED DEBENTURES SHOULD READ AND UNDERSTAND THE OFFERING CIRCULAR OF THE UNDERSIGNED BORROWER THROUGH WHICH THESE SECURED DEBENTURES ARE TO BE ISSUED. $.00 Date:, 20 Tustin, California FOR VALUE RECEIVED, the undersigned, SECURED INCOME GROUP, INC., a California corporation ( Borrower ), hereby promises to pay to ( Lender ), the principal sum of Dollars ($.00), together with interest on the unpaid principal balance of this Secured Debenture (the Secured Debenture ), as follows: 1. Interest. Interest on the unpaid principal balance will accrue from the date the proceeds have been distributed to or on behalf of the Borrower (the Date of Advance ) at a fixed Interest Rate per annum in each year through the Maturity Date. Interest shall be computed based on a 360-day year and the actual number of days elapsed. Interest computed based on a 360-day year is greater than interest computed based on a 365-day year. Interest payments will continue until the Secured Debenture is fully paid, with any and all unpaid principal and interest due and payable on the date that is exactly the Secured Debenture Term from the date of the Secured Debenture (the Maturity Date ), unless such Maturity Date is extended or renewed as provided in the Secured Debenture or as otherwise agreed to in writing by Lender and Borrower. For the purposes hereof, as of the date hereof, the Lender shall select the Interest Rate and Term. Such election is irrevocable and shall apply through the Maturity Date of the Secured Debenture. Please check below and initial to the left of your selection: For a Secured Debenture Term of six (6) months, the applicable Interest Rate Will be defined as Six and 50/100 Percent (6.50%) annually (hereinafter, 25

43 Six Month Secured Debenture ). For a Secured Debenture Term of twelve (12) months, the applicable Interest Rate will be defined as Seven and 00/100 Percent (7.00%) annually (hereinafter, Twelve Month Secured Debenture ). For a Secured Debenture Term of twenty-four (24) months, the applicable Interest Rate will be defined as Eight and 00/100 Percent (8.00%) annually (hereinafter, Twenty-Four Month Secured Debenture ). For a Secured Debenture Term of thirty-six (36) months, the applicable Interest Rate will be defined as Nine and 00/100 Percent (9.00%) annually (hereinafter, Thirty-Six Month Secured Debenture ). At Lender s reasonable discretion, upon the Maturity Date of Secured Debenture, the term of the Secured Debenture will rollover automatically into a new term with the same Interest Rate, Payment Schedule, Term, and any other material provision. If Lender elects not to rollover the term of the Secured Debenture automatically, Lender shall provide Borrower with 60 days written notice of such election prior to the maturity date of (insert maturity date). If Lender elects to change the terms of the Secured Debenture upon rollover, Lender shall provide Borrower with 60 days written notice of such election prior to the maturity date of (insert maturity date). Interest on the unpaid principal balance will accrue interest starting on the date (the Interest Date ) on which the investment proceeds have been distributed by the Lender to, or on behalf of, the Borrower following acceptance of the Borrower s subscription agreement by the Borrower, payment of such interest will be made at the end of each yearly quarter (March 31, June 30, September 30, and December 31) (each a Quarter ) from Interest Date. 2. Payment of Interest. 2.1 Payments Quarterly Payments. Lender will receive quarterly payments from Borrower on the following schedule: Please check below and initial to the left of your selection: For a Six Month Secured Debenture, each quarterly installment payment shall be in the amount of Dollars ($. ). For a Twelve Month Secured Debenture, each quarterly installment payment shall be in the amount of Dollars ($. ). For a Twenty-Four Month Secured Debenture, each quarterly installment payment shall be in the amount of Dollars ($. ). For a Thirty-Six Month Secured Debenture, each quarterly installment payment shall be in the amount of Dollars ($. ). 26

44 Borrower shall make these payments as interest-only. Payments shall be made on the last day of each Quarter until the Maturity Date Daily Payments. In the event that a full Quarter has not passed before a quarterly payment is due or the Maturity Date occurs, interest payments will be calculated on a daily basis based on a 360-day year, and due at the end of the Quarter or on the Maturity Date. Lender will receive payments based on the daily interest rate. 2.2 Order of Application of Payments. Unless otherwise agreed to in writing by the parties or required by applicable law, each payment under this Secured Debenture shall be credited in the following order: (a) Late Charges due to Lender; (b) interest payable under the Secured Debenture, including accrued but unpaid interest, and (c) principal amount outstanding under the Secured Debenture. 2.3 Delivery of Payments. Payments shall be made to Lender at his, her or its address, which is provided in Section 10 below, or to another address if so designated in writing by Lender. 3. Late Charge. Borrower acknowledges and agrees that default in the payment of any sum due under this Secured Debenture will result in losses and additional expenses to Lender in servicing the indebtedness evidenced by this Secured Debenture, handling such delinquent payments, and meeting its other financial obligations. 4. Default. 4.1 Events of Default. On (a) Borrower's failure to make any three (3) consecutive payments due under this Secured Debenture when due and payable, upon receipt of written notice from Lender of such failure, (b) any breach of any other material covenant or obligation in this Secured Debenture, or (c) the occurrence of events specified in Section 8 below, an event of default ( Event of Default ) shall have occurred. If an Event of Default occurs that remains uncured after written notice of such Event of Default from Lender to Borrower, then Lender may, at its option, declare this Secured Debenture (including, without limitation, all accrued interest) due and payable immediately regardless of the Maturity Date. If an Event of Default occurs that remains uncured, in lieu of payment in full to Lender, Borrower may, at its sole option, assign the income stream secured by certain assets that it holds directly to Lender. 4.2 Cure. Upon the occurrence of any Event of Default, the Borrower shall have thirty (30) days from the date of written notice from Lender of such Event of Default to cure such Event of Default; provided, that if the cure is of a nature that reasonably requires under the circumstances greater than thirty (30) days to cure such Event of Default, then Borrower shall only have the obligation to have initiated within thirty (30) days of Lender s notice of the Event of Default reasonable steps to produce a cure. 5. Prepayment Option. 5.1 No Prepayment Premium or Penalty. If Borrower prepays this Secured Debenture in whole or in part at any time from the date of this Secured Debenture, no prepayment premium or penalty shall be due to Lender. All prepayments of principal on this Secured Debenture shall be applied to the most remote principal installment or installments then unpaid. 27

45 5.2 Ability to Pay Prepayment. Borrower may, at its sole option, elect to prepay all or any portion of the Secured Debenture, including any unpaid principal balance, at any time and shall give Lender five (5) days prior written notice of its intention to prepay all or any portion of this Secured Debenture. Said notice shall include the amount Borrower intends to prepay. 5.3 Prepayment Waivers. BORROWER AND LENDER EXPRESSLY ACKNOWLEDGE AND AGREE THAT BORROWER HAS THE RIGHT TO PREPAY THIS SECURED DEBENTURE AT ANY TIME AS PROVIDED IN THIS SECTION 5 HEREOF. BORROWER AND LENDER FURTHER ACKNOWLEDGE AND AGREE THAT THERE SHALL BE NO PREPAYMENT PREMIUM OR PENALTY DUE TO THE LENDER IN CONNECTION WITH ANY PREPAYMENT OF THE SECURED DEBENTURE, INCLUDING ANY UNPAID PRINCIPAL BALANCE, BY BORROWER. 6. Early Withdrawal. 6.1 Early Withdrawal. A Lender may request an early withdrawal of the original principal balance of his, her or its Secured Debenture. The Borrower may fulfill an early withdrawal request at its sole and absolute discretion and has no commitment (implied or express) to complete a request for early withdrawal. The Borrower may charge Lender fees, penalties and/or additional interest if the Borrower elects to process any early withdrawal (in whole or in part). 6.2 Ability to Request Early Withdrawal. Lender may request an early withdrawal of any portion of the original principal balance of this Secured Debenture by giving Borrower ten (10) days prior written notice of its intention to request an early withdrawal of its original principal balance, in whole or in part, under this Secured Debenture. Said notice shall include the amount Lender requests to withdraw. Notwithstanding the foregoing, the Borrower may fulfill the early withdrawal request at its sole and absolute discretion and has no commitment (implied, express or otherwise) to complete a request for early withdrawal. Lender understands and agrees that Borrower has no obligation to complete a request for early withdrawal and may not fulfill the Lender s request for any reason or no reason at all. Lender acknowledges and agrees that the Secured Debenture is not a liquid investment and may in fact be highly illiquid, resulting in a partial or total inability for Lender to receive a withdrawal of any portion of its original principal balance prior to the Maturity Date. 6.3 Early Withdrawal Waivers. BORROWER AND LENDER ACKNOWLEDGE AND AGREE THAT LENDER MAY REQUEST AN EARLY WITHDRAWAL OF ITS ORIGINAL PRINCIPAL BALANCE UNDER THIS SECURED DEBENTURE. LENDER FURTHER ACKNOWLEDGES AND AGREES THAT BORROWER HAS NO DUTY TO HONOR LENDER S REQUEST FOR AN EARLY WITHDRAWAL OF FUNDS AND THERE IS ABSOLUTELY NO GUARANTEE THAT ANY EARLY WITHDRAWAL REQUEST WILL BE FULFILLED OR COMPLETED BY BORROWER AT ANY TIME. LENDER UNDERSTANDS AND AGREES THAT ANY FUNDS LOANED TO THE BORROWER ARE NOT READILY AVAILABLE OR FREELY LIQUID. LENDER MAY REQUEST, BUT SHOULD NOT EXPECT TO AND HAS NO RIGHT TO DEMAND, THE RETURN OF ANY PORTION OF ITS ORIGINAL PRINCIPAL BALANCE UNDER THIS SECURED DEBENTURE PRIOR TO THE MATURITY DATE. 28

46 7. Interest on Interest. If any interest payment under this Secured Debenture is not paid when due, the unpaid interest shall be added to the principal of this Secured Debenture, shall become and be treated as principal, and shall thereafter bear like interest. For the avoidance of doubt, such additions to the principal of this Secured Debenture shall not be deemed to constitute the original principal balance of this Secured Debenture as such term is referenced in Section 6 hereof. 8. Due-on-Sale, Transfer, or Insolvency. 8.1 Borrower s Action. If Borrower sells, conveys, assigns or otherwise transfers all or substantially all of the beneficial interest of Borrower (which shall not include a sale or other transfer to any affiliate of Borrower) or commences any proceeding under bankruptcy or insolvency laws, without the prior written consent of Lender, then an Event of Default shall have occurred and Lender may elect to accelerate the Maturity Date and declare the entire unpaid principal, accrued interest, and other sums due hereunder to be immediately due and payable pursuant to the provisions of Section 4 hereof. 8.2 Lender s Action. If Lender sells, conveys, assigns or otherwise transfers all or substantially all of the beneficial interest of Lender (which shall include a sale or other transfer to any affiliate of Borrower) or commences any proceeding under bankruptcy or insolvency laws, without the prior written consent of Borrower, then Borrower may elect to accelerate the Maturity Date and declare the entire unpaid principal, accrued interest, and other sums due hereunder to be immediately due and payable without penalty to Borrower. 9. Attorneys Fees. In any dispute or litigation arising hereunder or related to this Secured Debenture, the losing party shall pay the reasonable costs, expenses, and attorneys fees paid or incurred by the prevailing party. 10. Notice. Any notice required to be provided in this Secured Debenture shall be given in writing and shall be sent (a) for personal delivery by a delivery service that provides a record of the date of delivery, the individual to whom delivery was made, and the address where delivery was made; (b) by first-class certified United States mail, postage prepaid, return receipt requested; or (c) by a nationally recognized overnight courier service, marked for next day business delivery. All notices shall be addressed to the party to whom such notice is to be given at the following addresses Lender: Borrower: Secured Income Group, Inc East 17th Street, Suite 100 Tustin, California or to such other address as a party may designate by written notice to the other party. All notices shall be deemed effective on the earliest of (a) actual receipt; (b) rejection of delivery by the receiving party; (c) if sent by certified mail, the third day on which regular United States mail delivery service is provided after the day of mailing or, if sent by overnight delivery service, on the next day on which such service makes next-business-day deliveries after the day of sending. 29

47 11. Assignment. This Secured Debenture inures to and binds the heirs, legal representatives, successors, and permitted assigns of Borrower and Lender; provided, however, that Borrower may not assign this Secured Debenture, or assign or delegate any of its rights or obligations (except to any affiliate of Borrower), without Lender's prior written consent in each instance. Lender may, upon at least ten (10) business days prior written notice to Borrower, transfer this Secured Debenture or sell or assign participations or other interests in all or any part of this Secured Debenture. Whenever used herein, the terms Lender and Borrower shall be deemed to include their respective permitted heirs, legal representatives, successors and permitted assigns. 12. Governing Law and Venue. This Secured Debenture shall be construed and enforced for all purposes according to the laws of the State of California, excluding its conflicts of law provisions. In any dispute, controversy, claim or cause of action arising from or in connection with this Secured Debenture, both parties agree to submit to the jurisdiction in Tustin, California or otherwise as required by Section 14 below. 13. Made or Arranged by a Broker. Borrower and Lender acknowledge that this Secured Debenture may have been made or arranged by a licensed real estate broker or a securities brokerdealer licensed under the Financial Industry Regulatory Authority ( FINRA ) and that the broker s participation may have been a material factor in consummating this loan. 14. Arbitration. The parties expressly agree that all disputes, claims, controversies and other matters of contention arising out of or relating to this Secured Debenture, or the performance or breach thereof, shall be submitted to confidential and binding arbitration as specified herein. The arbitration shall take place in Tustin, California (or as close thereto as possible, in the event that such venue is not available for the arbitration) and be held before and decided by a single neutral arbitrator, who shall be mutually selected by the parties and shall have experience in evaluating matters similar to the subject matter hereof. If the parties cannot agree as to an arbitrator, each party shall nominate one temporary arbitrator (who shall have experience in evaluating matters similar to the subject matter hereof) and together these two temporary arbitrators shall select the single neutral arbitrator to hold and decide the arbitration between the parties. The parties shall be entitled to undertake reasonable discovery (which shall be kept to a minimum without first securing the approval of the arbitrator) as a part of the arbitration. The final award decision of the arbitrator on all matters of contention between the parties shall be considered final and the arbitrator shall have the power to award to the prevailing party all costs and expenses of the arbitration, including, without limitation, attorneys fees. 15. Usury. All agreements between Borrower and Lender are expressly limited, so that in no event or contingency, whether because of the advancement of the proceeds of this Secured Debenture, acceleration of maturity of the unpaid principal balance, or otherwise, shall the amount paid or agreed to be paid to Lender for the use, forbearance, or retention of the money to be advanced under this Secured Debenture exceed the highest lawful rate permissible under applicable usury laws. If, under any circumstances, fulfillment of any provision of this Secured Debenture, after timely performance of such provision is due, shall involve exceeding the limit of validity prescribed by law that a court of competent jurisdiction deems applicable, then, ipso facto, the obligations to be fulfilled shall be reduced to the limit of such validity. If, under any circumstances, Lender shall ever receive as interest an amount that exceeds the highest lawful rate, the amount that would be excessive interest shall be applied to reduce the unpaid principal balance under this Secured Debenture and not to pay interest, or, if such excessive interest exceeds the unpaid principal balance under this Secured 30

48 Debenture, such excess shall be refunded to Borrower. This provision shall control every other provision of all agreements between Borrower and Lender. 16. Representation on Use of Proceeds. Borrower represents and warrants to Lender that the proceeds of this Secured Debenture will be used solely for business, commercial investment or lending, or similar purposes, and that no portion of it will be used for personal, family, or household purposes. 17. No Modifications or Amendments; No Waiver. Except as specified herein, this Secured Debenture may not be amended, modified or changed, nor shall any waiver of the provisions hereof be effective, except only by an instrument in writing signed by the party against whom enforcement of any waiver, amendment, change, modification or discharge is sought. The lack of enforcement by either party of any of its rights, privileges or benefits under this Secured Debenture shall not constitute a waiver, whether express or implied, of such rights, privileges or benefits. Additionally, a waiver of any provision in one event shall not be construed as a waiver of any other provision at any time, as a continuing waiver, or as a waiver of such provision on a subsequent event. 18. Severability. Any provision of this Secured Debenture which shall be held by a court of competent jurisdiction to be invalid, void or illegal shall in no way affect, impair or invalidate any other provision or term hereof, and such other provisions or terms shall remain in full force and effect. In addition, such invalid, void or illegal provision shall be interpreted by the court so that both the intent and objective of the parties with respect to such provision are effectuated to the maximum extent permitted by applicable law. 19. Financial Information. At the Lender s specific written request, within one hundred and twenty (120) days following the end of each fiscal year of Company, subsequent to the date of the Secured Debenture and prior to the Maturity Date, Borrower will deliver a copy of its annual financial statements to the Lender; provided, that Borrower shall only have a duty to deliver said financial statements if Lender expressly requested the same in writing. 20. Counterparts; Facsimile. This Secured Debenture may be executed via facsimile and in separate counterparts, each of which, when so executed shall be deemed an original and all such counterparts shall constitute one and the same original agreement. 21. Headings. Section and paragraph headings are for reference only and shall not affect the interpretation or meaning of any provisions of this Secured Debenture. 22. Lender Representations. If Lender is a foreign person as defined by the Internal Revenue Code 871(h) and 881(c), et seq., as amended (the Code ), Lender shall deliver to Borrower evidence proving Lender s status as a foreign person prior to the execution of this Secured Debenture. Subject and pursuant to the Code, Lender makes the following representations to Borrower: (i) Lender is not a bank extending credit in the course of its ordinary trade or business, as defined by the Code; (ii) Lender is not a ten percent shareholder of Borrower as defined by the Code; and, (iii) Lender, and/or its principals, members, officers, shareholders, or directors share no familial relation with any principal, member, officer, director, or shareholder of Borrower. [Signature Page Follows] 31

49 IN WITNESS WHEREOF, each of Borrower and Lender has executed this Secured Debenture as of the date first set forth above. BORROWER: SECURED INCOME GROUP, INC., A CALIFORNIA CORPORATION By: Name: Max E. McDermott Title: President LENDER: By: Name: By: Name: 32

50 EXHIBIT D Security Agreement This AGREEMENT is made on this day of, 20 between Secured Income Group, Inc. of East 17th Street, Suite 100, Tustin, California, 92780, hereinafter Debtor and residing at California, hereinafter Secured Debenture Holder. The Parties to this Agreement agree to the following: 1. Creation of Security Interest The Secured Debenture Holder shall secure the payment and performance of Debtor's Secured Debenture in the principal amount of $ and the payment and performance of all other liabilities and obligations of Debtor to Secured Debenture Holder of every kind and description, direct or indirect, absolute or contingent, due or to become due now existing or hereafter arising, hereinafter Obligations. In addition, Debtor hereby grants to Secured Debenture Holder a security interest in the Collateral described in Paragraph 2 to secure the performance or payment of the Obligations of Debtor to Secured Debenture Holder under Paragraph Collateral The Collateral of this Security Agreement is as follows: All promissory notes receivable by Debtor that are secured by deeds of trust encumbering real property, whether said notes are currently existing or hereafter received. 3. Security Interest Debtor grants to Secured Debenture Holder a security interest in the Collateral as described in Paragraph 2 now or hereafter placed upon the premises located at East 17th Street, Suite 100, Tustin, California 92780, or used in connection therewith and in which Debtor now has or hereafter acquires any right and the proceeds wherefrom. Debtor also assigns to Secured Debenture Holder a security interest in any other rights or interests which Debtor now has or hereafter acquires. 33

51 4. Warrants and Covenants Debtor hereby warrants and covenants that Debtor shall pay to Secured Debenture Holder the sum or sums evidenced by the Secured Debenture or Secured Debentures executed pursuant to this Security Agreement in accordance with the terms of the Secured Debenture or Secured Debentures. The collateral will not be removed from the Premises other than in the ordinary course of business. Debtor will immediately notify Secured Debenture Holder in writing of any change in Debtor's address. The Debtor will not hypothecate, sell, dispose, or otherwise transfer the collateral or any interest therein without the prior written consent of Secured Debenture Holder, and the Debtor shall keep the collateral free from unpaid charges, taxes, and liens. Debtor shall maintain insurance at all times with respect to all collateral against risks of fire, theft, and other such risks and in such amounts as Secured Debenture Holder may require. The Debtor shall make all repairs, replacements, additions, and improvements necessary to maintain any Collateral in good working order and condition. 5. Default The Debtor shall be in default under this Agreement upon any non-compliance with or nonperformance of the Debtor's obligations under this Agreement. Upon default and at any time thereafter, Secured Debenture Holder may declare all obligations secured hereby immediately due and payable and shall have the remedies of a Secured Debenture Holder under the law. 6. Waiver No waiver by Secured Debenture Holder of any default shall operate as a waiver of any other default or of the same default on a future occasion. 7. Notices Any notices required to be given under this Agreement by either party to the other may be effected by personal delivery in writing or by registered or certified mail, postage prepaid, return receipt requested. A notice shall be deemed communicated as of the time of delivery if personally delivered, or as of the time of mailing. The address of the Debtor for the purpose of receiving notice shall be East 17th Street, Suite 100, Tustin, California The address of the Secured Party for this purpose shall be,, California. Either party may change its address for the purpose of receiving notice by giving the other party written notice of the change. 8. Governing Law This Agreement shall be construed under and in accordance with the laws of California and all obligations of the parties created under this Agreement are performable in California. 9. Parties Bound This Agreement shall be binding on and inure to the benefit of the parties to this Agreement and their respective heirs, executors, administrators, legal representatives, successors and assigns as permitted by this Agreement. 34

52 10. Legal Construction In the event, any one or more of the provisions contained in this Agreement shall for any reason be held invalid, illegal, or unenforceable in any respect, that invalidity, illegality, or unenforceability shall not affect any other provision. This Agreement shall be construed as if the invalid, illegal, or unenforceable provision had never been contained in it. 11. Prior Agreements Superseded This Agreement constitutes the sole and only agreement of the parties and supersedes any prior understandings or written or oral agreements between the parties respecting the subject matter of this Agreement. 12. Amendments This Agreement may be amended by the parties only by a written agreement. 13. Attorney's Fees If any action at law or in equity is brought to enforce or interpret the provisions of this Agreement, the prevailing party will be entitled to reasonable attorneys' fees in addition to any other relief to which that party may be entitled. 14. Signatories This Agreement shall be signed on behalf of Secured Income Group, Inc. by Max McDermott, its President, and on behalf of Secured Debenture Holder by, and shall be effective as of the date first written above. Secured Income Group, Inc. By: Max McDermott, its President Secured Debenture Holder By: Name: 35

53 EXHIBIT E SECURED INCOME GROUP, INC Income Statement For the Twelve Months Ending December 31, 2016 Current Month Year to Date Revenues REVENUE $92, % $1,149, % OTHER REVENUE $ % $7, % OTHER FEES $12, % $154, % LATE FEES $ % $4, % Misc Income $ % $2, % EXTENSION FEES $ % $11, % Total Revenues $105, % $1,330, % Gross Profit $105, % $1,330, % Expenses DUES & SUBSCRIPTIONS $ % $1, % ADVERTISING 0.00% $2, % FORCED PLACED PROP. INSURANCE $1, % $23, % DOCUMENT PREPARATION $ % $5, % OFFICE RENT $3, % $30, % OFFICE SUPPLIES $ % $18, % ADP PROCESSING FEES $ % $2, % ACCOUNTING SERVICES $1, % $29, % LICENSES $ % $3, % COMPUTER EXPENSE $ % $1, % APPRAISAL FEES $ % $18, % F & M MISC. LOAN COSTS $ % $2, % SALARIES $25, % $294, % PAYROLL TAXES $1, % $21, % HEALTH INSURANCE $ % $6, % TELEPHONE $ % $12, % UTILITIES $ % $3, % MISCELLANEOUS $ % $10, % COURIER EXPENSE $ % $5, % TRAVEL $ % $1, % 36

54 STATE INCOME TAX EXPENSE $ % $ % INTEREST EXPENSE-SECURED DEBENTURES $58, % $671, % CHARITABLE CONTRIBUTIONS $ % $ % Total Expenses $97, % $1,169, % Net Income $ $7, % $160, % [Balance Sheet Follows] 37

55 SECURED INCOME GROUP, INC. Balance Sheet December 31, 2016 ASSETS Current Assets CASH-F & M-SIG CHECKING $91, CASH-F & M-SIG SAVINGS $808, CASH-F&M SIG TRUST $16, NOTES RECEIVABLE-CURRENT $7,231, INTEREST RECEIVABLE $63, Total Current Assets $8,210, Property and Equipment SOFTWARE $11, FURNITURE & FIXTURES $18, ACC. DEPRECIATION ($7,984.20) Total Property and Equipment $21, Other Assets DEPOSITS $3, Total Other Assets $3, Total Assets $8,235, LIABILITIES AND CAPITAL Current Liabilities ACCRUED INTEREST-SECURED DEBENTURES $0.00 Total Current Liabilities $0.00 Long-Term Liabilities Total Long-Term Liabilities $0.00 Total Liabilities $

56 Capital COMMON STOCK $5, CONV. SECURED DEBENTURES-Series "A" $1,450, CONV. SECURED DEBENTURES-Series "B" $6,550, RETAINED EARNINGS $69, Net Income $160, Total Capital $8,235, Total Liabilities & Capital $8,235,

57 EXHIBIT F 40

58 41

59 42

60 43

61 44

62 45

63 46