Joseph Cole Barleta Mail - Capital Source Noteholder Settlement 5/26/23, 3:31 PM

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Legal Department <legal@capitalsourcefunding.com>

Capital Source Noteholder Settlement

1 message

Joe Cole Barleta <joecole@capitalsourcefunding.com> Wed, Mar 22, 2023 at 3:15 PM

Cc: Legal Department <legal@capitalsourcefunding.com>, Bill Bromley <bill@capitalsourcefunding.com>

Dear ,

First of all, thank you for your continued patience while waiting for resolution to the ongoing SEC lawsuit against Par

Funding and its related parties. I'm writing to update you on the status of our company, Capital Source 2000, and to

hopefully provide some relief by repaying some of the principal from the promissory note agreement you have with us.

As you may have heard from following the case, the court has approved the return of Capital Source 2000 to Bill and I

as of February 28th, 2023. We have since been working closely with the receiver to transfer all documents, records,

Accounts Receivable and the remaining funds back to us.

Prior to the receivership, Capital Source had approximately $19.1 million in Accounts Receivables and collected

approximately $500,000.00 each week in payments from our clients. The receiver has since written off the majority of

these receivables leaving only $139,290.34 in our active collections portfolio and approximately $2.3 million in cash

and ACH reserves for us to work with. They have done very little with the portfolio and collections have been stagnant

since Q3 2022. So to call this anything less than a catastrophic dismantling of our business would be an

understatement. 

As bleak as this situation has become, the return of Capital Source does present an opportunity for the company to do

the right thing and work to return some of the principal withheld from you from the past 32 months. Our current game

plan is to simultaneously restart operations while resuming monthly payments to our noteholders as soon as the

coming month.

We have established new bank accounts and a legal domicile in Delaware. I'm currently in the process of hiring new

employees and working with counsel to recover as much of the value our company has lost. We expect to have our

website and funding operations restored next month.

Apart from funding and servicing its own MCA deals, Capital Source also syndicated with Par Funding on hundreds of

deals that Capital Source has the right to receive a portion of the cash flow and revenues from. We filed a claim for the

unpaid syndication payments collected by the receiver through Par Funding that we believe is rightfully due to our

company.

These collections will occur in tandem with collecting payments from the remainder of the AR portfolio, pursuing

payments from merchants we had in collections and from servicing new MCA deals. We intend to keep our

underwriting extremely tight and short term to maximize cash flows from these new MCA deals.

I will personally be supervising and working with a new team that's entirely independent from Par Funding or any of its

affiliates. Bill will continue communicating with note holders and answering questions as they come up. We will not be

taking any profits from the business for the foreseeable future and apart from covering operational expenses, legal

costs and funding merchants, the cash flows of the business will go entirely towards the repayment of our noteholder's

principal.

Unlike the claims process described by the SEC and court Receiver, our repayment will not require you to submit due

diligence documentation to qualify for repayment nor will we deduct any previously paid interest from the principal

balance owed back to you. We already have our company records and have previously established lines of

Case 9:20-cv-81205-RAR Document 1572-2 Entered on FLSD Docket 05/26/2023 Page 1 of 2
Joseph Cole Barleta Mail - Capital Source Noteholder Settlement 5/26/23, 3:31 PM

https://mail.google.com/mail/u/2/?ik=46a37a1549&view=pt&search=al...hid=thread-f:1761096618478507622&simpl=msg-f:1761096618478507622 Page 2 of 2

communications with you and all of our note holders.

We are offering a straight forward settlement with regular monthly distributions to repay an agreed upon percentage of

principal repayment. This settlement will also be completely separate from any claims you may have submitted for the

Par Funding Receiver claims. So we hope you can simultaneously recover funds through the claims process along

with the funds you receive directly from us as part of this settlement.

Given the destruction of our AR portfolio and current state of the company, we forecast two paths for repayment,

assuming there are no further adverse actions from the Receiver. We can either repay 15% of your

outstanding principal over 2 years with flat, recurring monthly payments or we can repay 30% of your outstanding

principal over 5 years. This will also have monthly distributions but it will start with a repayment of 10% of your

settlement amount in the initial year, increasing to 15% in the second year, and continuing to increase by 5% each

year until fully paid off by the end of the 5th year.

We feel that these repayment schedules will allow for the optimal repayment of principal to all note holders while

simultaneously allowing for the company to conserve and improve cash flows. During this process, Capital Source will

only be working with the cash we have on hand and its retained earnings from servicing new MCA deals. We will not

seek to raise any new capital from any non-institutional parties.

If this sounds agreeable, please reply with your current contact information (name, address, phone and email) and our

legal team copied on this email will follow up accordingly.

Bill and I thank you for your continued cooperation and support as we endeavour to correct this injustice done to our

company. We look forward to following up soon.

-- 

Joe Cole Barleta

President

Capital Source

8 The Green Suite #14196

Dover, DE 19901

(215) 650-0120

joecole@capitalsourcefunding.com

Case 9:20-cv-81205-RAR Document 1572-2 Entered on FLSD Docket 05/26/2023 Page 2 of 2