*ACCREDITED INVESTORS ONLY* $7,790,000

Transcription

1 *ACCREDITED INVESTORS ONLY* $7,790,000 Black Hawk Funding, Inc. 7,790,000 Shares Series B 6% Cumulative Convertible Preferred Stock Price $1 Per Share OFFERING TYPE Regulation D 506(c) Private Placement *Available only to Accredited Investors who can prove their Accredited Investor status. BUSINESS Origination of High-Rate, Short-Term Commercial Bridge Loans & Business Financings SHARES Series B Cumulative Preferred B Shares paying 6% dividends in cash or Common Stock Convertible into Common Stock one-for-one FOUNDER Robert L. Newell, President rob@blackhawkfunding.com

2 SUMMARY OF BLACK HAWK FUNDING, INC. A Private Money Lending Company Black Hawk Funding, Inc., a Nevada Corporation (the Company ) is in the business of originating high-rate, short-term commercial bridge loans and secured business loans. Our borrowers are typically high net worth individuals who prefer to pay a premium to us in exchange for our ability to close a transaction quickly without a lengthy approval process. We have key banking relationships that give our borrowers the added bonus of a potential take-out loan once our financing with them matures. We receive loan opportunities from a referral database, and give other commercial lenders access to the database through a license whereby the other commercial lenders can review loan requests that are submitted to the database by its members. We use capital from our operating account to originate these loans charging a premium for the loan. A typical loan includes significant fees, high interest and participation interest(s) in a borrower s business. We conduct in depth due diligence reviews of each proposed loan. All loans are secured by valuable collateral typically in the form of real property and we often require additional security by requiring the borrower s principals to provide personal guarantees. If initial due diligence indicates there is a high likelihood that we will fund the loan, we negotiate the terms of the potential loan memorialized in a letter of intent, and begin an extensive due diligence process, which typically includes engaging an MAI certified appraiser to value the collateral. If the potential borrower and collateral meets the lending requirements, loan documents are sent to the borrower for execution. We have a referral database derived through Our referral database is one of the nation s largest private lending networks with over 15,000 members. This database provides significant deal-flow not only to us, but also to our licensees. We reserve the right to choose the loan deals prior to forwarding loan requests to our licensees. The licensees access potential loan deals on a first come, first serve basis. A summary of typical loan types and terms includes: COMMERCIAL LOAN TERMS: Flexible loan terms from 3 months to 18 months. LOAN SIZE FOR BRIDGE LOAN: From $100,000 to $5 Million LOAN TO VALUE ( LTV ): Not to exceed 75% LTV. COLLATERAL: 1 st position deed of trust on commercial real estate, personal guarantees, equity, and other mixed collateral. Although it is not our intent to invest the Company s assets into securities, some transactions are better structured by taking an equity possession in an entity. Equity can come in the form of acquiring a stock or membership interest in a company or LLC. It is common for us to own all the shares or membership interests in a company or LLC as a holding company for the assets that collateralize our loans. In these situations, the Company may obtain ownership of stock or equity units rather than mortgages secured by real property. The Company currently estimates that it has equity interests in other companies valued at $450,000. Robert L. Newell, CEO and Director--Robert Newell has extensive experience in the commercial lending and private lending business. In 2007, Mr. Newell founded Black Hawk Capital Managers, LLC, a private company that focuses on investments tied to commercial real estate loans and properties. Prior to 2007, Mr. Newell was Director of Operations for Black Mountain Capital, a joint venture company with Prudential Real Estate. Prior to that Mr. Newell was the COO of Bridge Capital USVI, a company that focused on hard money bridge loans. Mr. Newell also founded and served as the President of RTC Financial Advisors, a company focused on real estate loan acquisitions through the Resolutions Trust Corporation (RTC). In 1995, Mr. Newell co-founded the private real-estate lending network that the Company acquired in mid Mr. Newell operated the website on a personal basis for 17 years before transferring it to the Company. Mr. Newell started his career as a registered investment advisor with Shearson Lehman Brothers and EF Hutton. Other members of our team can be found by visiting

3 SUMMARY OF THE OFFERING This Summary of the Offering summarizes the principal terms of the private placement of Series B Preferred Shares in Black Hawk Funding, Inc. This Private Placement Memorandum ( PPM ) and its accompanying exhibits should be read in their entirety by the prospective investor prior to considering the investment. This summary is not intended to be complete, or to set forth binding obligations of the Company. The Offering: Purchase Price: Target Financing: Minimum Commitment: Up to 7,790,000 Shares of restricted Series B 6% Cumulative Convertible Preferred Stock of the Company paying 6% dividends per annum in cash or common stock on a cumulative basis, as the board may determine, out of cash and shares legally available therefore. $1.00 per Share of Series B Preferred. The Company is seeking to raise $7,790,000 in cash and/or assets from prospective investors, although commitments of greater or lesser amounts may be accepted at the Company s discretion. The Company may elect to issue Shares subject to this offering for non-cash assets at its discretion altering the amount of cash received. The minimum commitment for a prospective investor will be $10,000, although commitments of lesser amounts may be accepted at the discretion of the Company. Private Placement Period: The Shares are being offered for a period not to exceed 180 days or until June 30, The closing is anticipated to occur on a rolling basis up until the end of the 180 day period but may be held prior to such date or extended, as determined by the Company in its discretion. On a rolling basis, each investor whose subscription has been accepted by the Company will be admitted as a shareholder of the Company and will receive a certificate evidencing such Preferred B Shares. Investor Qualifications: Use of Proceeds: Capitalization: Only Accredited Investors under applicable law who can prove their accreditation may participate in this offering. The Company reserves the right to reject any subscription submitted by a prospective investor for any reason and without explanation. Federal Securities laws may require the Company to reject a prospective investor s subscription. If we sell all of the securities under this PPM, we estimate that our net proceeds will be approximately $7,740,000, after offering expenses. We intend to use the net proceeds from any sales of Series B Preferred Stock under this PPM to fund new commercial loans, fund compliance and due diligence costs, pay for office expenses, and as general working capital, including the payment of distributions, interest, operating expenses and offering expenses. We may also use net proceeds to retire all or a portion of any debt we may incur or have incurred. As of December 31, 2014, the combined capitalization of the Company was 10,281,450 shares outstanding (there are no outstanding warrants for Shares). There are 500,000 Series A Preferred Shares outstanding. If all the common shareholders exercise their right to convert to Series B Preferred Shares, there will be 1,710,000 Series B Preferred Shares outstanding and 8,121,450 Common Shares outstanding. The Series B Preferred Shares are convertible into common shares at a ratio of oneto-one. Assuming that the Company receives financing of $7,790,000 and issues 7,790,000 Series B Preferred Shares, the capitalization of the Company would then be a combined total of 18,121,450 of Preferred and Common Shares. 3

4 THE STATEMENTS CONTAINED IN THIS PPM WHICH ARE NOT HISTORICAL FACTS ARE FORWARD-LOOKING STATEMENTS (AS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995), WHICH CAN BE IDENTIFIED BY THE USE OF FORWARD- LOOKING WORDS SUCH AS BELIEVES, EXPECTS, MAY, WILL, SHOULD, OR ANTICIPATES, OR THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE WORDS, OR BY DISCUSSION OF STRATEGY THAT INVOLVE RISKS AND UNCERTAINTIES. MANAGEMENT CAUTIONS THE READER THAT THESE FORWARD- LOOKING STATEMENTS, INCLUDING, WITHOUT LIMITATION, STATEMENTS REGARDING THE DEVELOPMENT OF THE COMPANY'S BUSINESS, THE MARKETS FOR ITS SERVICES, THE COMPANY S ANTICIPATED SOURCES OF FINANCING AND CAPITAL EXPENDITURES, AND OTHER STATEMENTS CONTAINED HEREIN REGARDING MATTERS THAT ARE NOT HISTORICAL FACTS, ARE ONLY PREDICTIONS. NO ASSURANCE CAN BE GIVEN THAT SUCH PREDICTIONS WILL PROVE CORRECT OR THAT THE ANTICIPATED FUTURE RESULTS WILL BE ACHIEVED; ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY, EITHER BECAUSE ONE OR MORE OF SUCH PREDICTIONS PROVES TO BE ERRONEOUS, OR AS A RESULT OF RISKS FACING THE COMPANY. SEE THE RISK FACTORS SECTION. THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE 1933 ACT OR APPLICABLE STATE SECURITIES LAWS, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE REGULATORY AUTHORITY PASSED UPON THE ACCURACY, ADEQUACY, OR ENDORSED THE MERITS OF THIS PRIVATE PLACEMENT OR PPM. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. THE SECURITIES ARE OFFERED PURSUANT TO THE SAFEHARBOR EXEMPTION PROVIDED BY REGULATION 506(c) OF THE 1933 ACT, AND CERTAIN STATE SECURITIES LAWS AND CERTAIN RULES AND REGULATIONS PROMULGATED PURSUANT THERETO. THE SECURITIES MAY NOT BE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL ACCEPTABLE TO US AND OUR COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. FOR INFORMATION CONCERNING THE SPECULATIVE NATURE AND RISKS INVOLVED IN THIS OFFERING, SEE "RISK FACTORS." THIS PRIVATE PLACEMENT OF SPECULATIVE SECURITIES INVOLVES A HIGH DEGREE OF RISK AND SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. THERE IS CURRENTLY NO MARKET FOR OUR PREFERRED OR COMMON STOCK AND THERE IS NO ASSURANCE THAT A MARKET WILL EVER DEVELOP. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF US AND THE TERMS OF THE PRIVATE PLACEMENT, INCLUDING THE MERITS AND RISKS INVOLVED. 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 AN EXEMPTION THEREFROM. NO PERSON IS AUTHORIZED BY US TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THS PPM IN CONNECTION WITH THIS PRIVATE PLACEMENT. THE DELIVERY OF THIS PPM DOES NOT IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. THIS PPM DOES NOT CONSTITUTE AN OFFER WITHIN ANY STATE TO ANY PERSON TO WHOM SUCH OFFER WOULD BE UNLAWFUL. THIS PPM AND THE INFORMATION CONTAINED HEREIN MAY NOT BE REPRODUCED OR USED IN ANY OTHER MANNER WITHOUT OUR EXPRESS WRITTEN CONSENT. BY ACCEPTING DELIVERY OF THIS PPM, EACH OFFEREE 4

5 AGREES TO RETURN THE PPM IF HE/SHE DOES NOT PURCHASE THE SHARES OFFERED HEREBY. THIS PPM AND ITS ACCOMPANYING EXHIBITS SHOULD BE READ IN THEIR ENTIRETY BY ANY PROSPECTIVE INVESTOR PRIOR TO THE CONFIRMATION OF HIS INVESTMENT. THE INFORMATION CONTAINED IN THIS PPM IS PROVIDED SOLELY FOR THE PERSONS RECEIVING IT IN CONNECTION WITH OUR OFFERING OF THE SHARES AND MAY NOT BE USED FOR ANY OTHER PURPOSE. WE ARE NOT OBLIGATED TO REGISTER THE PREFERRED B SHARES UNDER THE 1933 ACT OR ANY STATE SECURITIES ACT. THE COMPANY DOES NOT INTEND TO FILE A REGISTRATION STATEMENT UNDER THE 1933 ACT WITH THE SEC TO REGISTER THE PREFERRED B SHARES. THE PREFERRED B SHARES OFFERED HEREUNDER ARE SUBJECT TO PRIOR SALE AND OUR RIGHT TO RETURN ALL OR ANY PORTION OF THE TENDERED SUBSCRIPTION AMOUNTS PRIOR TO OUR ACCEPTANCE. IT IS ANTICIPATED THAT THE OFFERING PERIOD WILL NOT BE EXTENDED BEYOND JUNE 30, HOWEVER, THE COMPANY HOLDS THE RIGHT TO REVOKE OR EXTEND THE OFFERING, WITH OR WITHOUT NOTICE, AT ANY TIME. THIS OFFERING IS MADE SUBJECT TO WITHDRAWAL, CANCELLATION OR MODIFICATION WITHOUT NOTICE. THIS PPM CONSTITUTES AN OFFER ONLY TO THE PERSON THAT RECEIVES THIS PPM FROM US. WE RESERVE THE RIGHT, AT OUR SOLE DISCRETION, TO ACCEPT OR REJECT EACH SUBSCRIPTION FOR PURCHASE OF PREFERRED B SHARES IN WHOLE OR IN PART OR TO ALLOT TO ANY PROSPECTIVE INVESTOR LESS THAN THE NUMBER OF PREFERRED B SHARES SUBSCRIBED FOR BY SUCH INVESTOR. PROSPECTIVE INVESTORS ARE NOT TO CONSTRUE THE CONTENTS OF THIS PPM OR ANY PRIOR OR SUBSEQUENT COMMUNICATIONS FROM US AND OUR OFFICERS AND DIRECTORS AS INVESTMENT, LEGAL OR TAX ADVICE OR AS INFORMATION NECESSARILY APPLICABLE TO EACH PROSPECTIVE INVESTOR'S PARTICULAR FINANCIAL SITUATION. EACH PROSPECTIVE INVESTOR SHOULD CONSULT WITH HIS OWN FINANCIAL ADVISOR, LEGAL COUNSEL AND ACCOUNTANT AS TO TAX AND RELATED MATTERS CONCERNING THIS INVESTMENT. EACH PROSPECTIVE INVESTOR WILL BE AFFORDED THE OPPORTUNITY TO OBTAIN ANY ADDITIONAL INFORMATION WHICH SUCH PROSPECTIVE INVESTOR MAY REASONABLY REQUEST, AND TO ASK QUESTIONS AND RECEIVE ANSWERS FROM US AND OUR OFFICERS AND DIRECTORS OR OTHER AUTHORIZED PERSONS CONCERNING THE TERMS AND CONDITIONS OF THIS OFFERING, THE TRANSACTIONS CONTEMPLATED HEREIN, THE INFORMATION SET FORTH HEREIN AND ANY ADDITIONAL INFORMATION WHICH IS REQUESTED AND SUPPLIED TO SUCH PROSPECTIVE INVESTOR. FOR CALIFORNIA RESIDENTS: THE SALE OF THE SECURITIES DESCRIBED IN THIS MEMORANDUM HAS NOT BEEN QUALIFIED UNDER THE CALIFORNIA CORPORATIONS CODE WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, NOR HAVE THE SECURITIES BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, BY THE REASON OF SPECIFIC EXEMPTION THEREUNDER RELATED TO THE LIMITED AVAILABILITY OF THE OFFERING. THE 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 ISSUANCE OF SECURITIES OR THE PAYMENT OR THE RECEIPT OF CONSIDERATION THEREFORE PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE THEREOF IS EXEMPT UNDER APPLICABLE LAW. THE COMPANY IS RELYING ON THE EXEMPTION PROVIDED BY REGULATION 506(C). 5

6 INVESTOR SUITABILITY REQUIREMENTS The Preferred B Shares are being offered to you and others meeting certain suitability standards. Investment in the Preferred B Shares is suitable only if you have adequate financial means and have no need for liquidity with respect to your investment in the Preferred B Shares and are able to withstand a total loss of your investment. There is currently no public market for the Preferred B Shares and a market may not develop. In connection with your purchase of the Preferred B Shares, you must represent that you, either alone or with your purchaser representative, have such knowledge and experience in financial and business matters that you are (or that we believe immediately prior to accepting your subscription for purchase of the Preferred B Shares that you are) capable of evaluating the merits and risks of an investment in the Preferred B Shares and that you have had the opportunity to ask the Company for the information necessary in making an informed investment decision. The Preferred B Shares will only be sold to you if you qualify as an Accredited Investor pursuant to Regulation D 501(a) and Securities Act Rule 215, as summarized below, and we can verify your Accredited Investor status. If you meet one or more of the following standards, you will qualify as an accredited investor: (a) You are an individual with a net worth, or joint net worth with your spouse, at the time of purchase of the Preferred B Shares, exceeding $1,000,000 [NOTE: Per Securities Act Rules 215 and 501(a)(5), the value of the person's primary residence must be excluded. Indebtedness secured by the primary residence up to its fair market value at the time of purchase of the Preferred B Shares shall not be included as a liability, except that if the amount of such indebtedness outstanding at the time of the sale of Preferred B Shares exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability. Indebtedness that is secured by the person's primary residence in excess of the estimated fair market value of the primary residence shall be included as a liability]; or (b) You are an individual who had annual adjusted gross income in 2013 and 2014 in excess of $200,000 in each of those years or joint income with your spouse in excess of $300,000 in each of those years and reasonably expect reaching the same level in 2015; or (c) If you are purchasing the Preferred B Shares in your capacity as a trustee of a trust (other than a trust in which you have the power to terminate or revoke the trust), the trust has total assets in excess of $5,000,000, was not formed for the specific purpose of acquiring the Preferred B Shares, (in your capacity as trustee) you either alone or with your purchaser representative(s) have such knowledge and experience in financial and business matters that you are (or we reasonably believe immediately prior to making the sale of the Preferred B Shares that you are) capable of evaluating the merits and risks of investment in the Preferred B Shares; or (d) If you are an officer or director of a corporation or the partner of a partnership, trustee of a trust or associate or member of another type of entity purchasing the Preferred B Shares, and (i) all of the equity owners of such corporation, partnership, trust or other entity meet the requirements set forth in (a) and or (b) above, or (ii) which such corporation, partnership, trust or other entity qualifies under one of the categories of institutional Accredited Investors (e.g., certain banks, insurance companies, investment companies, employee benefit plans, private business development companies, or an organization defined in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code") with total assets in excess of $5,000,000). 6

7 DESCRIPTION OF SECURITIES Our authorized capital stock consists of 10,000,000 shares of Preferred stock, par value of $.001 per share, and 100,000,000 shares of Common Stock, par value of $.001 per share. All shares of Preferred Stock now outstanding are fully paid for and non-assessable and all shares of Preferred Stock, which are the subject of this private placement, when issued, will be fully paid for and nonassessable. The Company is authorized to issue and has issued Five Hundred Thousand 500,000 Series A Preferred Shares with each preferred share having Sixty Six (66) votes per share at any meeting of the shareholders where votes are submitted. The Series A preferred shares are not convertible into common shares. The Preferred Stock will be entitled to preference over the Common Stock with respect to the distribution of assets of the corporation in the event of liquidation, dissolution, or winding-up of the corporation, whether voluntary or involuntary, or in the event of any other distribution of assets of the corporation among its stockholders for the purpose of winding-up its affairs. The Company has designated Series B 6.00% Cumulative Convertible Preferred Stock, par value $.001 per share. There are nine million five hundred thousand (9,500,000) Series B shares authorized. The holders of shares of the outstanding Series B Preferred Stock shall be entitled, when, and if declared by the Board of Directors out of funds of the Corporation legally available therefore, to receive cumulative cash dividends at the rate per annum of 6.00% per share on the liquidation preference, which is, with respect to each share of Preferred Stock, $1 (equivalent to $.06 per annum per share), payable quarterly in arrears (the Dividend Rate ). Dividends shall be payable at the option of the Corporation; (i) through the issuance of Common Shares of the Corporation; (ii) in cash; or (iii) in a combination thereof. If any portion of the dividends are paid in Common Stock, share dividends shall be paid using the estimated market value of the Corporation s Common Stock on the date the dividend is declared. If an estimated market value of the Common Stock cannot be obtained, then at a value of $1 per share. Conversion. Holders of shares of Series B Preferred Stock shall have the right to convert those shares into Common Stock at the rate of one (1) share of New Common Stock for each single one (1) share of Series B Preferred Stock upon no less than 75 days advance notice to the Company. Voting Rights. Each one share of the Series B Preferred Stock shall have voting rights equal to two (2) votes of Common Stock. With respect to all matters upon which stockholders are entitled to vote or to which stockholders are entitled to give consent, the holders of the outstanding shares of Series B Preferred Stock shall vote together with the holders of Common Stock without regard to class, except as to those matters on which separate class voting is required by applicable law or the Corporation s Articles of Incorporation or By-Laws. Upon the occurrence of a Liquidation Event, the holders of Series B Preferred Stock are entitled to receive net assets on a pro rata basis. Each holder of Series B Preferred Stock is entitled to receive ratably any dividends declared by the Board, if any, out of funds legally available for the payment of dividends. 7

8 USE OF PROCEEDS We intend to use the net proceeds of this offering primarily to make loans to individuals and entities secured by real property and improvements thereon, acquire equity interests in businesses seeking financings, pay salaries, commissions and other expenses that arise through the normal course of business. We also may use sale proceeds to retire all or a portion of any debt we incur, or for working capital purposes, including the payment of distributions, interest and operating expenses, although there is currently no intent to issue securities primarily for this purpose. Management anticipates strong future revenues with this influx of capital to help move into aggressive funding. The Company is seeking $7,790,000 in cash and/or other assets. The use of proceeds is estimated as follows, although the figures below may be altered depending on non-cash assets received by the Company and the total amount of funds raised in this offering: $7,152,000 New Loans or Investments $50,000 Compliance and Due Diligence $321,000 Office Expenses and Working Capital $140,000 Salaries, Wages, Benefits, Taxes and Insurance $127,000 Legal Expenses, Offering Expenses and Accounting Expenses The foregoing represents our best estimate of the allocation of the proceeds of the offering based upon the present state of our business, operations, plans and current business conditions. The Company may exchange shares for real property or other investments that may alter these estimates. We will have broad discretion to determine the use of a substantial portion of the proceeds of the offering. Conditions may develop which could cause us to reallocate proceeds from the categories listed above. We believe that the net proceeds of the offering, combined with the cash and cash equivalents, will be sufficient to fund our budgeted capital and operating requirements for the next twelve months. EXECUTIVE COMPENSATION The following table sets forth the proposed compensation to be paid by us to our officers. Robert L. Newell, President, CEO Mike Newell, COO Ralph Trigg, VP of Investor Relations Richard Oliphant, Board Member Charles Crites, Vice President, Business Development $1,000 per month $1,000 per month $1,000 per month $1,000 per month $1,000 per month 8

9 PREFERRED B SHARES ELIGIBLE FOR FUTURE SALE Assuming the sale of the 7,790,000 Preferred B Shares pursuant to this offering, we will have 10,331,450 shares outstanding, 1,214,500 of which were registered and sold as common stock pursuant to the Company s Regulation A offering in 2013 (these figures assume all eligible common stock shareholders exercise their right to convert to Series B Preferred). In October of 2014, the Company offered its common shareholders the opportunity to convert their common share holdings into Preferred Series B shares. To date, all but 500,000 shares of the common shares issued in the Regulation A offering have been converted. We anticipate the remaining shares will be converted pursuant to the Company s exchange offer, which has been left open for the duration of this offering (June 30, 2015). The converted shares maintain their registered status. All other shares issued and outstanding have been issued without prior registration under the Securities Act of 1933, as amended, or any state securities act, and all shares hereby will constitute "restricted securities" within the meaning of Rule 144 under the 1933 Act ("Rule 144"), and will be restricted from resale unless registered or sold pursuant to an applicable exemption from registration. Accordingly, purchasers of the Preferred B Shares pursuant to this offering will be required to bear the economic risk of their investment in the Preferred B Shares indefinitely (or at least during the minimum applicable holding period under Rule 144), and should consider their purchase of the Shares as an illiquid investment. The purchasers of Preferred B Shares will have limited rights or abilities to sell or transfer their Shares and then only in transactions exempt from registration under the 1933 Act and applicable state securities laws. For these reasons, among others, the Shares will not be readily marketable and may not be sold within the near term in the event of an emergency. In general, under Rule 144 as currently in effect, a person (or persons whose Shares are aggregated), including an affiliate, who has beneficially owned restricted securities for at least oneyear, is entitled to sell, within any three-month period, a number of such securities (Shares) that does not exceed the greater of (i) one percent of the then outstanding Shares of such securities or (ii) the average weekly trading volume in the securities in the over-the-counter market during the four calendar weeks preceding the date on which notice of such sale is filed, provided certain requirements concerning availability of public information, manner of sale, and notice of sale are satisfied, but only in the event we are then subject to and current under the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In addition, affiliates must comply with the restrictions and requirements of Rule 144, other than the one-year holding period requirement, in order to sell Shares that are not restricted securities. Under Rule 144, a person who is not an affiliate and has not been an affiliate for at least three months prior to the sale and who has beneficially owned the restricted securities for at least six months may resell such securities without compliance with the foregoing requirements of Rule 144. In meeting the six-month and one-year holding periods described above, a holder of restricted securities can include the holding period of a prior owner who was not an affiliate. The six-month and one-year holding periods described above do not begin to run until the full purchase price or other consideration is paid by the person acquiring the restricted securities from the issuer or an affiliate. In the event we do not become subject to the reporting requirements of the Exchange Act on a voluntary basis, which is likely to be the case, the subscribing purchaser of Shares pursuant to this offering generally will be obligated to hold the Shares for a minimum one-year from the date of purchase before the Shares will become eligible for transfer under Rule

10 You should carefully consider the risks described below before making an investment decision in our company. The risks and uncertainties described below are not the only ones facing our company and there may be additional risks that we do not presently know of or that we currently deem immaterial. All of these risks may impair our business operations. If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected. In such a case, you may lose all or part of your investment. RISK FACTORS Please note that the following risks are illustrative and not comprehensive. We invite you, together with your professional advisors, to conduct as much due diligence as you believe is appropriate to gain a full understanding of the investment and risks involved. Failure by the Company to successfully address the risks and uncertainties described below would have a material adverse effect on our business, financial condition and/or results of operations, and the price of our Series B Preferred Stock may decline and investors may lose all or part of their investment. We cannot assure you that we will successfully address these risks or other unknown risks that may affect our business. Do not purchase our shares unless you carefully review and consider all of the following risk factors and, following such review, you are confident that you understand these risks and that this investment is suitable for you. 1. We are dependent upon Black Hawk Funding's key management personnel for our future success. We depend on the diligence, skill, and network of the business contacts of our Executive Officer. We also depend, to a significant extent, on our Executive Officer's access to the real estate investment professionals and the information and deal-flow generated by these professionals in the course of their activities. The Executive Officer evaluates, negotiates, structures, closes, monitors, and services our business transactions. Our success depends to a significant extent on the continued service of Executive Officer, Robert L. Newell. The departure of our Executive Officer could have a materially adverse effect on our ability to achieve our business objectives. In addition, we can offer no assurance that the Company will continue to have access to real estate investment professionals or their information and deal flow. The Company is highly dependent upon Mr. Newell. The loss of Mr. Newell could have a material adverse effect on our business. 2. We operate in a highly competitive market for investment opportunities. A large number of entities compete with us to make the types of loans we do. We compete with other businesses, public and private funds, commercial and investment banks, and commercial financing companies. Additionally, because competition for investment opportunities generally has increased among alternative investment vehicles, such as hedge funds, those entities have begun to invest in areas they have not traditionally invested in. As a result of these new entrants, competition for investment opportunities has intensified in the commercial real-estate secured bridge loan, High Rate Bridge, Discounted REO and Receivership loan markets, a trend we expect to continue. The Company will be competing for commercial real estate secured loans with many other real estate finance investors, including individuals, limited liability companies, partnerships, corporations, insurance companies, real estate investment trusts and other entities engaged in real estate finance. These competing entities may include some of our own clients. While capital available for real estate financing has recently decreased as a result of the credit crisis of late 2008 and early 2009, prior to that time, competition among private and institutional financiers of real estate investments had increased substantially. The Company anticipates that as the real estate market improves competition for real estate financing will increase. There is no assurance that the Company will be successful in 10

11 obtaining suitable real estate finance opportunities to expand its business objectives. 3. Our Executive Officers have broad discretion and there is a potential lack of transactional diversification. There are no restrictions on the transactional business discretion of the Executive Officers, including diversification or concentration constraints. Accordingly, the Executive Officers are not restricted from allocating a large portion of the assets of the Company in any one sector, investment, or type of business deal. If the Company's portfolio becomes concentrated in any one sector, the value of an investment in the Company may be subject to greater volatility and may be more susceptible to any single economic, political, or regulatory occurrence or the fortunes of a single company or industry, than would be the case if the Company's business transactions were more diversified. Consequently, concentration of assets allocated in a single sector or deal may substantially increase the risk of loss to the Company. 4. Many of our existing and potential competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. Some competitors may have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of deals and investments and establish more or fuller relationships with borrowers and sponsors than us. We cannot assure you that the competitive pressures we face will not have a materially adverse effect on our business, financial condition, and results of operations. Also, as a result of existing and increasing competition we may not be able to take advantage of attractive investment opportunities or deal-flow from time to time, and we can offer no assurance that we will be able to identify and engage deals that are consistent with our investment objective. 5. There is significant risk of investment related to our lack of operating history. The Company commenced operations in 2012 and, accordingly, has very little operating history upon which potential investors may evaluate for its prospective performance. 6. We do not seek to compete primarily based on the interest rates that we offer, and we believe that some of our competitors make loans with interest rates that are comparable to or lower than the rates we offer. We may lose investment and deal opportunities if we do not match our competitors pricing, terms, and structure. If we match our competitors pricing, terms, and structure, we may experience decreased net interest income and increased risk of loss. 7. We need to raise additional capital to grow because we must distribute most of our income. We need additional capital to fund growth in our investments and overall business objectives. A reduction in the availability of new capital could limit our ability to grow. Investment income is often used to originate new loans and may be locked up in a property for years. As a result, such earnings may be limited and in some cases may not be available to fund additional investments. If we fail to obtain funds to fund our investments, we could be limited in our ability to grow. 8. The lack of liquidity in our investments may adversely affect our business. We generally make investments in commercial real-estate secured bridge loans, discounted REO, High Rate Bridge, and receivership loans. Substantially all of these investments could be subject to legal and other restrictions on resale or are otherwise less liquid than investments in publicly traded securities, for example. The illiquidity of our investments may make it difficult for us to sell such investments if the need arises. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we have previously recorded our investments. 11

12 9. Potential conflicts of interest could impact our investment returns. Our Executive Officers may serve as officers, directors, general partners or principals of entities that operate in the same or related lines of business as we do or in investment funds managed by the Executive Officers. Accordingly, they may have obligations to investors in those entities, the fulfillment of which might not be in our best interests or those of our unit holders. However, our Executive Officers and Directors owe us a fiduciary obligation to act in the best interests of the Company. Certain of our officers and directors may be or become associated with other businesses, including other lending companies and broker-dealers who raise capital for companies. Such associations may give rise to conflicts of interest from time to time. Our directors are required by General Corporation Law of the State of Nevada to act honestly and in good faith with a view to our best interests and to disclose any interest which they may have in any of our projects or opportunities. Currently, the Board of Directors is composed of Robert L. Newell. Mr. Newell, who functions both as a Director and the President of the issuer, is the General Partner of three companies that have each entered into database license agreements with the issuer and are thus clients of the issuer. The principal terms of the three licensee agreements are the same and they require the licensee to pay one percentage point (1%) on the origination of a commercial loan derived from the Company s database. 10. Changes in laws or regulations governing our operations may adversely affect our business. There is currently broad discretion given to parties engaging in the origination of commercial loans. Local, state and federal governments give deference to the supposed sophistication of the parties entering into loan agreements. This broad discretion allows the Company to charge higher fees and interest than could normally be charged in a non-commercial transaction. Accordingly, changes in these laws or regulations that give deference to commercial parties could have a material adverse effect on our business. 11. Our investments in real estate are subject to real estate market risk. One of the major risks of investing in real estate debt is the possibility that the properties will not generate income sufficient to meet operating expenses and debt service payments, and will generate income of capital appreciation at a rate less than that anticipated or available through investments in comparable real estate partnerships or other investments. The income from the properties may be affected by many factors, including changes in national economic conditions; changes in local market conditions; changes in interest rates and the availability of credit; the impact of present or future legislation and compliance with environmental laws; the ongoing need for capital improvements; changes in real estate tax rates and other operating expenses; adverse changes in governmental rules and fiscal policies; civil unrest; terrorism and threats of terrorism; natural disasters including earthquakes, fires, floods, mudslides, hurricanes, volcanic eruption and other natural disasters (which may result in uninsured losses); acts of war; acts of God; adverse changes in zoning laws; and other factors which are beyond the control of the Company. Real estate market risk appears as direct real estate market risk (if the value of an asset corresponds directly with the real estate market -without anyone being able to influence the effect), and as indirect real estate market risk (if the value of an asset corresponds only indirectly with the real estate market since there are other factors that also exert influence). At least four types of indirect real estate risk can be found, namely credit risk (where real estate fluctuations reduce the creditworthiness of a borrower), collateral risk (where the value of a secured property can be reduced by an adverse market trend), profitability risk (where real estate market variations endanger the profitability of an investment), and price risk (where the real estate market has a negative influence on other market 12

13 prices, such as stock prices, and vice versa). There can be no assurance that the Company will be unaffected by direct and indirect real estate market risks, or that the Company will be successful in mitigating direct or indirect real estate market risks. 12. There are significant risks associated with real estate financing investments. Identifying and participating in attractive investment opportunities is difficult. There is no assurance that the Company s investments will be profitable and there is a substantial risk that borrowers may default on their loans and the Company s losses and expenses will exceed its income and gains. 13. The company may incur substantial expenses and interruptions of current returns should an investment fail to perform, i.e. should a loan default or a project not operate as planned. From time to time borrowers fail to perform on their obligations, when that occurs the Company must foreclose on the security interests that it has tied to non-performing loans. The process involved for foreclosure sometimes involves the court systems and associated attorneys fees. In other instances borrowers face unforeseen complications, which limit their ability to repay their obligations on time. When a borrower fails to pay on time the Company does not have fresh capital with which it can originate new commercial loans, which delays our ability to follow our business plan. 14. The two commercial lending companies that account for a majority of our sales are comanaged by Black Hawk Funding s President Robert L. Newell. If Mr. Newell were to terminate his involvement with the Company it could adversely affect our business relationship with Opportunity Income Fund I, LP and Trustee Opportunity Partners, LP. Additionally, given his relationship with those two companies there is potential for conflicts of interest. 15. There is a risk that the Company is not in compliance with state and federal laws. The Company may be deemed to be subject to unforeseen rules and regulations which may require registration within the states in which it operates or at the federal level. Such registration may expose the Company to additional regulatory requirements not previously considered. Failure to register, or properly obtain licensure, may preclude the Company from conducting business until a license is obtained, or preclude the business from continuing as a going concern if a license cannot be obtained. Note: In addition to the above risks, businesses are often subject to risks not foreseen or fully appreciated by management. In reviewing this PPM potential investors should keep in mind other possible risks that could be important. Risks Related to This Offering 16. Because there is no public trading market for our Series B Preferred stock, you may not be able to resell your stock, and as a result, your investment is illiquid. There is currently no public trading market for our Preferred stock. Therefore there is no central place, such as a stock exchange or electronic trading system, to resell your shares. If you want to resell your shares, you will have to locate a buyer and negotiate your own sale. Your investment is illiquid and there is no assurance that you will ever be able to resell your shares. 17. Determination of offering price for the Preferred Share. The offering price for the Preferred B Shares was determined by the Company. The offering price does not necessarily bear any relationship to prior operations or to the net worth of the Company or to any other recognized criteria of value other than the expectation of future growth in revenues and earnings. 13

14 18. No minimum amount of Preferred B Shares needs to be subscribed for in order to accept and close any particular subscription. No minimum threshold amount of Preferred B Shares need to be subscribed for in order for the Company to accept any subscription and utilize the proceeds therefrom and as a result it is possible that invested proceeds may be inadequate for the purposes and indicated uses of proceeds identified herein. 19. The chairman of the board of directors and President of the Company controls a large percentage of its voting stock and may use this control to compel corporate actions that may not be in the best interests of its shareholders as a whole. The Company's chairman of the board of directors and President beneficially owns 100% of its aggregate outstanding Preferred Series A Stock which consists of 500,000 shares with the equivalent of 66 votes per share. On completion of the Offering, assuming the Offering is fully subscribed, Mr. Newell will beneficially own approximately 5% of the outstanding Preferred Series B and 98.5% of the currently outstanding common stock. His percent interest in Preferred Series A and B stock and his ownership of common stock will constitute 68% of the voting power of the Company since each share of Series A Preferred Shares has the equivalent of 66 votes. This shareholder will be able to exercise significant control over our business and affairs and all matters requiring stockholder approval, including the election of directors and the approval of significant corporate transactions, such as mergers or other business combination transactions. This concentration of voting power could discourage or prevent a change in control that otherwise could result in a premium in the price of the Preferred Stock. 20. Although we intend to pay dividends on shares of our Preferred stock in the near future, there is no guarantee that the Company will be able to do so. If we cannot, your only opportunity currently to achieve a return on your investment will be if the price of our shares of Preferred stock appreciates above the price that you pay for our shares of Preferred stock. We intend to declare and pay dividends to our Series B Preferred shareholders in an amount of six percent per annum in cash or common stock. However, we are limited by Nevada corporation law and subject to other market risks previously described and may not be allowed to lawfully pay dividends. Any future decision as to the payment of dividends will be at the discretion of our board of directors and will depend upon our earnings, financial position, capital requirements and such other factors as our board of directors deems relevant. In order to issue dividends the Company would have to successfully generate revenues in an amount that would exceed costs without incurring additional liabilities in excess of the value of the Company s assets. It is entirely possible that the Company could generate significant revenues but be precluded from issuing dividends under Nevada Law. 21. Management will have broad discretion as to the use of the proceeds from any offering under this PPM, and we may not use the proceeds effectively or in a manner that increases the value of your investment. We have given our best guess estimate of the use of proceeds received from this offering (See the Use of Proceeds Section). Proceeds designated for New Loans or Investments are not earmarked for any particular loan, rather management will have broad discretion as to which opportunities to provide financing. Accordingly, our management will have broad discretion as to the application of the net proceeds from this offering and could use them for purposes other than those contemplated at this time. Our stockholders may not agree with the manner in which our management chooses to allocate and spend the net proceeds. Moreover, our management may use the net proceeds for corporate purposes that may not increase our profitability or market value. 22. Investors interests in us will be diluted and investors may suffer dilution in their net book value per share if we issue additional shares to finance our operations. In order to further 14

15 expand our Company and meet our objectives, any additional growth or expanded activity may need to be financed through sale of and issuance of additional shares, including, but not limited to, raising finances to lend on real estate and other equity investments. We may also in the future grant to some or all of our directors, officers, insiders, and key employees options to purchase our Common Stock as non-cash incentives. The issuance of any equity securities could, and the issuance of any additional shares will, cause our existing shareholders to experience dilution of their ownership interests. 23. The laws of the State of Nevada and our Articles of Incorporation may protect our directors from certain types of lawsuits. The laws of the State of Nevada provide that our directors will not be liable to us or our shareholders for monetary damages for all but certain types of conduct as directors of the Company. Our Articles of Incorporation permit us to indemnify our directors and officers against all damages incurred in connection with our business to the fullest extent provided or allowed by law. The exculpation provisions may have the effect of preventing shareholders from recovering damages against our directors caused by their negligence, poor judgment or other circumstances. The indemnification provisions may require us to use our limited assets to defend our directors and officers against claims, including claims arising out of their negligence, poor judgment, or other circumstances. 24. The Company has made and may make investments in seed and early stage startups, many of which will have unproven and early stage technologies and products or services. Often, companies and ventures in their development stages have little or no operating history, unproven technology, untested management, and unknown future capital requirements. Many of the technologies will be difficult to assess through due diligence. These startups may be dependent upon the success of one product or service, a unique distribution channel, or the effectiveness of its manager or management team. The failure of this one product, service or distribution channel, or the loss or ineffectiveness of a key executive or executives within the management team may have a materially adverse impact on such startups. Furthermore, these startups may be more vulnerable to competition and to overall economic conditions than larger, more established entities. There can be no assurance that the development or marketing efforts of any particular Portfolio Company will be successful or that its business will be profitable. 15