DTS Logo

Design Trade Service, Inc.

An Ecommerce-driven buying group exclusively for interior designers

Min. of $1,000,000 and up to $5,000,000

Minimum Direct Investment - $100,000

Minimum Investment in SPV - $10,000

6.0% Convertible Preferred Stock

Pre-Money Valuation $9,000,000

  • The U.S. interior design market consists of 75,000 interior designers producing $17 billion in annual sales of furniture. The COVID pandemic has caused homeowners to prioritize their home’s décor and the use of interior designers.

  • Founded in 2015, DTS is the only eCommerce-driven purchasing group that represents interior designers exclusively, enabling them to more economically and more easily purchase products made by major furniture manufacturers.

  • In 2020 DTS generated $2.5 million in written sales and $78,000 of cash flow. The company has grown 73%/year since 2015. Proceeds from this financing will be invested in marketing, technology & infrastructure to rapidly grow DTS further.

  • DTS consolidates their purchasing power into a powerful buying consortium wherein interior designers and the manufacturers of furniture each benefit.

  • DTS solves for high order minimums, staffing requirements and follow-on order tracking associated with purchasing directly from furniture manufacturers. These barriers otherwise resign many designers to find alternative, less-efficient, higher-priced sources.

  • With over 100 years of industry experience, DTS has attracted over 2,400 registered interior designers on its platform, providing efficient access to the inventory of 50 furniture manufacturers.

Design Trade Services, Inc., (the “Issuer”, “The Company”, or “DTS”) is issuing a min of $1,000,000 and up to $5,000,000 in convertible preferred stock (the “Preferred Stock” or “Securities”) to (i) scale marketing, (ii) hire sales and customer service staff, and (iii) enhance the existing eCommerce infrastructure.

By registering with Carofin, Members have access to more extensive due diligence materials, additional private investment opportunities, and can proceed with making an investment.

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BUSINESS OPPORTUNITY / DTS SOLUTION

Business Opportunity

Providing Interior Designers with Immediate Access to Furniture Manufacturer’s Inventory

  • Designers prefer to buy directly from manufacturers, but they lack the purchasing power, time, staff, and typically cannot meet the manufacturer’s minimum purchase order or other account requirements.

  • Large manufacturers cannot work efficiently with designers individually and are often cautious in risking the business relationships developed with large brick and mortar retailers.

  • As a result, interior designers source furniture and accessories for their clients independently through brick-and-mortar retail stores, small boutique manufacturers, design marts showcasing manufacturers and online retailers who also sell to consumers, the designer’s clients.

DTS Solution

An Ecommerce-Driven Buying Group Exclusively for Interior Designers

  • DTS’s creative technology & private e-commerce solution now provides designers the opportunity to immediately access products made by major manufacturers in a manner that circumvents distribution conflicts with brick-and-mortar retailers.

  • DTS has created an exclusive eCommerce-based purchasing group for interior designers to instantly access products from the nation’s top furniture manufacturers without having to meet any manufacturer’s requirements to qualify for an account.

  • Designers place their order on the DTS website and remit full payment at that time, eliminating any ongoing accounts receivable. DTS vets the designer’s status as an interior designer and verifies their sales tax number prior to placing orders with the manufacturer.

  • Margin is generated by DTS purchasing the products from manufacturers at wholesale stocking dealer prices, without stocking anything, and selling to the Designer at the lowest net prices manufacturers would charge a designer if the designer were large enough to qualify for an account.

  • DTS pays the manufacturer for the products before or at the time of shipment eliminating any need for credit terms and ongoing payables on the company’s books.

  • DTS arranges shipping to the Designer, keeping all parties electronically updated. DTS does not take returns unless authorized and paid for by the manufacturer.

RETURNS CANNOT BE GUARANTEED

Platform Pictures

DTS Platform

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INVESTMENT OVERVIEW

1) Purpose of the financing

  • Provide DTS with growth capital to implement a marketing plan, expand company infrastructure and further develop supporting technology.

  • Planned growth coincides with industry-wide demand for online alternatives to the inefficient status quo as well as solidifies The Company’s first-to-market advantage and control of the specific channel of distribution between interior designers and major furniture manufacturers.

2) Issuer – Design Trade Service, Inc. (DTS)

  • Founded in 2015, an eCommerce marketplace allowing interior designers to access inventory made by major furniture manufacturers that are otherwise difficult or impossible for designers to access directly.

  • DTS management has over 100 years of experience in the interior design and furniture industries.

  • Average annual revenue growth of 73%, generating positive cashflow, and organically growing membership to over 2,400 designers.

3) Security Description - Convertible Preferred Stock

  • 6.0% Series A convertible preferred stock. Investors are entitled to either (1) the original purchase price plus accrued dividends plus declared and unpaid dividends on each of the Series A Preferred OR (2) if greater, the amount that the holders of the Series A Preferred would receive on an as-converted basis.

  • Minimum of $1,000,000 and up to $5,000,000 - The effective pre-money valuation for this offering is $9,000,000. The implied post-money valuation is a minimum of $10,000,000 and up to $14,000,000. Representing a minimum of 10.0% and up to 35.7% of the Company’s fully diluted, as converted ownership.

4) Repayment

  • Potential capital gain following the sale of the Company, IPO, or recapitalization. These returns cannot be guaranteed.

  • Investor distributions, if made, will be made first in the following order: 1) to satisfy the preferences of the Preferred Stock and, thereafter on an ongoing basis, pro-rata to common stock ownership.

5) Investment Risks

  • Design Trade Service is the first mover in this space, but the attractive market opportunity could attract new entrants to compete for market share if DTS does not rapidly expand in accordance with the growth plan.

  • Without capital to expand infrastructure, projected demand could outpace DTS’s ability to adequately service designers’ orders.

AN INVESTMENT IN THESE PREFFERED INTERESTS IS SPECULATIVE AND IS SUITABLE ONLY FOR PERSONS OF SUBSTANTIAL FINANCIAL MEANS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT AND HAVE NO NEED FOR LIQUIDITY IN THIS INVESTMENT. RETURNS CANNOT BE GUARANTEED.

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COMPANY INFORMATION

Background

DTS was founded in August of 2015 by a team who collectively had over 100 years of experience working with major furniture manufacturers and interior designers in a brick-and-mortar environment. The team was intimately familiar with the inefficiencies in the channel of distribution between interior designer and major furniture manufacturers. Roughly 4 years ago, DTS shifted focus and laid the foundation for a technological eCommerce platform that addresses all those inefficiencies and allows interior designers to instantly access products made by major furniture manufacturers.

The online platform that DTS has created is private, password protected, and exclusively for qualified interior designers. Designers can log on to the proprietary portal 24/7 and view “designer net price” with shipping, which is almost always the lowest price available to them from any other source. They can then place an order for multiple products from multiple manufacturers, pay for them up front and let DTS manage all subsequent details.

In the model they have created, DTS orders products from manufacturers and pays for the products either before or at the time of shipment, eliminating any ongoing payable/receivable on the company’s books. DTS arranges shipping to the Designer, keeping all parties electronically updated. DTS does not take returns unless authorized and paid for by the manufacturer.

Interior Design Industry

About

DTS Logo Long Interior designers craft spaces that are functional and appeal to emotion. Designers use a variety of tools and resources to create this vision for a given space and are ultimately responsible for sourcing materials for their projects. This responsibility affects how designers manage their time, handle their books, and manage costs. Time management, accounting, and managing margin are some of the top challenges faced by interior designers today. In the industry status quo, interior designers commonly use brick and mortar furniture retailers to source their furniture and material as well as a myriad of other sources to procure product for their clients. Brick and mortar retailers buy directly from furniture manufacturers at low cost because they meet the minimum purchase order set by the manufacturers. Retailers then mark-up furniture prices when selling to their customers including interior designers. However, brick and mortar retailers are also accessible by the interior designer’s client, and it is not uncommon for clients to go straight to the retailer as a way to undercut interior designers after initial consulting sessions. Only large or established Interior Design firms can source furniture directly from manufacturers at the lowest price available, known in the industry as “Designer Net Price.” This industry wide reality has given interior designer’s very little purchasing power. There is not and never has been any organization to collectively represent the thousands of interior designers. Ecommerce has now made it possible to do so and both manufacturers and designers are now recognizing the efficiency inherent in doing business in this manner.

DTS Disruption

The Status Quo

According to the American Society for Interior Design, Design firms should maintain a gross margin percentage around 35-40% to keep their finances “solvent.” Firms struggle to meet this number year over year due to the challenges discussed above. Design firms implement a combination of pricing methods when implementing their services, including flat fees, cost-plus markups, and hourly charges. But firms are best positioned for success when they can buy at the lowest available prices which gives them more control over their margins. The DTS business model was created to give interior designers this advantage and disrupt the status quo.

Design Trade Service Website

DTS accomplishes this disruption through their online eCommerce marketplace which instantly provides interior designers access to a large selection of products made by small and large major furniture manufacturers. HFHG DTS has established relationships with top furniture manufacturers such as Hooker Furniture, Gabby Home and Four Hands, and lists their products online at “Designer Net Price”. However, prices are not available to interior designers until after they register on the DTS platform. By not posting prices publicly, DTS does not risk the relationship manufacturers have established with retailers and does not disadvantage interior designers by giving their clients the ability to see pricing. To register, interior designers sign up on the DTS website and are subjected to a qualification procedure.

Advantage Over Brick and Mortar

Once registered, interior designers are considered “Members” and can view and purchase from 50 different furniture manufacturers simultaneously. By purchasing on the DTS platform, designers do not have to worry about establishing accounts with manufacturers, invoicing, managing shipment/delivery processes, or minimum purchase orders. They are also not subject to the mark-ups used by retailers. On the DTS website, interior designers can purchase from multiple manufacturers simultaneously at Designer Net Prices and thereafter have only one point of contact to track all of their orders.

Customers and Clients

The Client - Manufacturers

DTS currently offers furniture from 50 furniture manufacturers with plans to add hundreds more after funding. DTS’s manufacturers include Caracole, Hooker, Universal, Bernhardt, and John Richard. These manufacturers benefit from the DTS business model in a number of ways. DTS does not require catalogs, swatches, finish samples or credit terms or cooperative advertising. And because DTS is an entirely online platform, there is no need for manufacturers to provide floor samples or balance their inventory as often. Furthermore, manufacturers will not have cooperative advertising campaigns on the DTS platform.

ExamplesFurn

The Customer – Interior Designers

There are estimated to be over 74,000 interior designers currently operating in the United States. They are distributed throughout the country, but in general are more populous in larger metropolitan areas. California, New York, Texas, Florida, and Colorado combined host nearly half of the entire population of Designers. Since their inception in 2015, DTS has grown their interior designer membership base to 2,400 Designers.

TotalInteriorDesigners The growth they have experienced so far is largely because of the benefits the platform offers, and the problems their business solves for designers ubiquitously. The benefits Designers experience on the DTS platform include:

1. Instant access to manufacturers without time spent setting up individual accounts

2. Ability to order from multiple manufacturers simultaneously

3. Order updates provided through one point of contact

4. Assistance with shipment and damage issues

5. No competition with terminal consumer

DesignerDistribution

Current Members

ExampleDesigners

Customer Testimonials

“The process with DTS was easy, seamless, and an absolute pleasure. Every time I had either a question, concern, or just an update inquiry, [they] answered my phone calls and emails within minutes. I couldn’t ask for better customer service. Thank you for taking the stress out of my project”

  • Sonya Capasso from Capasso Capasso Interior Design

“I am overwhelmed! This has totally caught me by surprise. Thanks so much for going to bat for me with Caracole and negotiating a credit. You are one in a million. This blows me away. Thank you.”

  • Lisa Ellis, from LED Lisa Ellis Designs

“You helped me with the order for the semi-custom Caracole chair. Oh, my word. It looks fantastic. Thank you so much for your help.”

  • Lin Moty, from LMI Lin Moty Interiors

“Thanks again for the quick service today. You guys are great to work with.”

  • Amy Muetterties, from PD Petra Designs

“Thank you. Very impressed with the turnaround. I look forward to doing business with you on future endeavors.”

  • April Cosby, from AC Design Company

Sales and Marketing

To Date

Historically, DTS has relied on organic growth and word-of-mouth referrals for marketing their business. Through that, they have experienced rapid growth, made successful conversions, grown their membership base, and have grown their average monthly order size by nearly 50% in 5 years, and averaged yearly revenue growth of 73%. The graph below depicts the monthly membership growth over the last 6 months, and revenue trends for the last 12 months. Sales to Date

COVID-19 Impact

The COVID-19 pandemic has had very little financial impact on DTS. In fact, when compared to the same period in years prior, the company has performed higher in 2020. The graph below compares March through September of 2016 through 2020 to highlight this trend. DTS improved their average monthly purchase during this period by 12% from 2019 to 2020. COVID

Marketing Plan

The Company has teamed up with A Design Partnership, LLC (ADP) to create 12-month marketing plan that aims to introduce DTS to the bulk of the interior design firms in the US. ADP has numerous marketing channels that it works through, including magazines, social media, and news outlets. Below is a list of channels they have used in the past: ADPEx1

ADP is expected to be a strong partner of DTS because they only market for companies within the interior design industry. The marketing plan can be found in Carofin Diligence Folder (C) Market Overview and describes both early and long-term strategies for marketing DTS.

ADPEx2

Vendor Development

While the ADP marketing campaign is targeted at interior designers, DTS anticipates that it will yield increased interest from major furniture manufacturers who share the same advertising and marketing space. However, a portion of the proceeds in this offering will go towards many new key personnel including a Vice President of Vendor Development. As DTS grows, so will the number of manufacturers being offered on the platform. The Company has already begun scouting for individuals for this position.

Market

Furniture Manufacturers

About the Furniture Manufacturer Industry

Furniture manufacturers craft furnishings for homes, offices, and institutions. The furniture manufacturing industry is vast and highly fragmented. Typical products include beds, chairs, desks, wardrobes, etc. In the US, there are an estimated 14,500 establishments selling furniture and furnishings in some capacity. It is also estimated that the largest 50 companies in the space only account for 40% of the total revenue. In general, the state of the furniture manufacturing market is highly dependent on the state of the housing market and the health of the US economy. Furniture manufacturers generate revenue through wholesale to brick-and-mortar retailers, or through online sales. In an article on trends and challenges facing furniture manufacturers, researchers wrote: “For manufacturers, the increase in online shopping means an opportunity to sell to online retailers that are not limited to a physical geographic area.” This increased reach that manufacturers can obtain is helping to increase the overall size and success of the industry. Though, it is projected that manufacturers unable or unwilling to adopt eCommerce practice will not survive.

Major Players

  • Hooker Furniture Corporation
  • Caracole
  • Butler Specialty Company
  • A.R.T. Furniture
  • Zuo

Primary Activities, Products, and Services

Furniture is produced for indoor and outdoor spaces, for a variety of sectors. The most common sectors that utilize furniture are residential, commercial, and hospitality sectors.

Supply Chain

The furniture manufacturing supply chain can be generally thought of in three pieces: Provider, Producer, and Customer. The Provider is responsible for the creation of raw materials that will ultimately be used to make furniture. Materials include wood, leather, upholstery, metal, foam, and more. The Producer is the furniture manufacturer. They use the materials procured to create a finished piece of furniture. The customer is any purchaser of the furniture, consumers, or for DTS, interior designers. The furniture supply chain comes with its own unique set of challenges. Because of the high quality-craftsmanship of the pieces, there is a heavy emphasis on de-risking the transportation of pieces from their point of manufacturing to their destination. To de-risk transportation, furniture manufacturers employ specific furniture transportation specialists to manually move pieces and protect them as they are transported domestically or otherwise.

Industry Size and Growth Projections

The global furniture manufacturing market is expected to exceed $650 billion by 2027. In the US, the total revenue generated in the furniture manufacturing market was estimated to be just under $75 billion. The US furniture manufacturing market is projected to grow by 4% CAGR each year to reach $80 billion. 2020FurnitureRevenue

Designer Market

State of the Interior Design Industry

The Interior Design industry is experiencing growth in a variety of different ways. In the past decade, the total number of interior designers has increased by 18,000, the salary and wages of interior designers has grown 13.5%, and the number of industries employing interior designers has expanded. These trends are expected to continue and are being propelled by external advancements in technology, textiles, and psychology.

Major Players

Only very large firms (>500 employees) are considered “Major Players” in this industry. Because these firms represent only 0.1% of the total number of firms in the interior design space, they are not initial targets for DTS’s business. These firms are more likely to have distribution channels established with furniture manufacturers. However, they are still unable to establish nearly as many as DTS offers. DTS has built a successful business by providing their services and collating design firms in the other 99.9% of the industry and plans to add the largest firms as the size of their buying group increases. Percentage Of Firms by Size

Primary Activities, Products, and Services

Interior designers craft indoor and outdoor spaces across a variety of industries in the commercial and residential sectors. Their designs appeal to emotion, base senses, the conscious, and the subconscious, while also being functional.

Supply Chain

Individuals and families hire designers to furnish their rooms and homes in the residential sector, and interior designers are either hired by firms or are a makeup a division within a firm in the commercial sector. In 2015, a survey found that 17% of homeowners employed interior designers to furnish their homes. In the commercial sector, “the number of industries employing interior designers continues to be vast.” Interior designers source furniture from a variety of furniture manufacturers, retail superstores, design marts and boutique manufacturers.

Industry Size and Growth Projections

Between 2012 and 2018, the US Interior Design Market grew an average of 10% yearly. In 2019, the market was estimated to be $14.7 Billion, with projected growth to $16.0 Billion by the end of 2020, and $17 Billion in 2021. Because DTS is accessible to the entirety of the interior design industry, the true market size of the opportunity is assumed to be $17 Billion as well. MarketMetrics

Implications for DTS

The short and long-term goal of DTS is to collate the collective purchasing power of interior designers to form the most powerful buying group in the furniture industry. Establishing this buying group will benefit both designers and furniture manufacturers because it will address the historical “pain points” and inefficiencies in that channel of distribution. Such a group is now possible because of the growth of eCommerce. DTS’s success in achieving their goal of increasing the purchasing power of interior designers is directly related to the success and growth of both the Interior Design Industry, the Furniture Manufacturing Industry, and the adoption of eCommerce. The nature and timing of the service DTS is providing coincides with the growth in both industries. The number of Interior Design firms in the US continues to grow, which implies that the total customer base of DTS is growing as well. TotalNumberofFirms

COVID-19 Impact

With the onset of COVID-19, people across the country and globe have been encouraged to spend more time at home. Furthermore, because of the increasingly virtual nature of business practices, more and more people have adopted a “work from home” lifestyle. The increased time spent in the home and the shift in the use of individual interiors has given interior design a new focus in the US. Interior designers are finding that they have increased demand and more projects than ever before. With “in-person shopping” becoming less desirable than online alternatives, interior designers have voiced their need for strong online shopping platforms for purchasing furniture and accessories to meet their growing number of projects. Interestingly, the COVID-19 pandemic has heightened the desire for the DTS business solution.

Competition

Advantage over Competition

After years of struggling with technical challenges and with the advantage of great relationships with manufacturers, DTS has developed the process for converting highly dissimilar digital assets from manufacturers to an effective eCommerce platform exclusively for interior designers. Furthermore, interior designers and furniture manufacturers have specific needs and processes understood by the DTS team who have over 100 years of experience working with these groups on a national level. They also have decades of relationships with the leaders of the largest manufacturers and an acute understanding of their needs and business model. Such experience and relationships are not easily duplicated by most potential competitors; particularly those whose background is primarily retail and/or technical expertise.

First to Market

The essence of the DTS business model is to rapidly scale the company and sign up the great majority of designers as members to effectively preclude potential competitors from trying to duplicate the DTS program.

Competitor Barriers to Entry

Experience, knowledge and relationships

The DTS niche is highly specialized consisting of interior designers and their unique challenges and needs. Typical ecommerce companies have limited understanding of the niche or the ability to serve it. Companies in the furniture industry which may understand the niche do not have the technical ability to work with the highly fragmented and dissimilar data utilized by the various manufacturers. DTS has been working on that single challenge for several years. Furniture manufacturers are very guarded with how they distribute their products and who they trust with that. DTS has extensive personal relationships with the leaders of the largest furniture manufacturers. DTS provides designers one point of contact for sourcing, delivery tracking and troubleshooting delivery issues. DTS has no selling expense, and no obligation to take returns or pay for service-related issues. DTS does assist the designer with delivery and product issues and because DTS has extensive relationships with the delivery carriers and the manufacturers, DTS has far more influence and ability to quickly resolve issues in the designer’s favor. This service also directly benefits the manufactures as who can reach virtually all designers with no marketing, sales or service expense. Once thoroughly established, there is no advantage to manufacturers or designers to have another such group.

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PRO-FORMA CAPITALIZATION

ProForma5MM ProForma1MM Note: The company’s capitalization is subject to change, specifically share price and Series A fully diluted ownership. Given $5MM is raised, Series A Investors will own 35.71% of DTS’ fully diluted ownership.

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COMPANY FINANCIAL INFORMATION

ISandBS

Model Assumptions

Revenue is based on acquisition of new designers on the platform and a percentage of those designers placing orders.

Associated risks:

Demand-generation growth is highly dependent on converting new members into orders.

Ongoing receptivity to manufacturers to place their lines on DTS’s platform.

The interior design market is dependent on clients’ discretionary income. An economic contraction can dampen demand for the market and DTS.

Product fulfillment could be materially disrupted if customer service and order processing cannot keep up with customer demand.

The preceding financial projections reflect the Company’s best estimated forecasts and are not guaranteed to be accurate. The timing of performance is estimated post-funding. These figures are forward-looking statements and reflect the Company’s views about various future events or expectations. These figures take into account known and unknown risks, uncertainties and other factors and assumptions which may cause the Company’s actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by this forward-looking financial projection. Please see the note regarding forward-looking statements. A full version of this pro-forma financial model is available through carofin.com

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MANAGEMENT TEAM

GW

Greg Wyers - CEO & Co Founder

Greg began his career in the furniture industry in 1963 working as a salesman for Beiderman Furniture, then the largest furniture chain in the US. In 1967, Greg was drafted for the Vietnam War where he flew missions and instructed new pilots. His entrepreneurial career began in 1974 when he started the photo business, Camera America. He later founded Camera America Franchising, which grew to 82 stores before he sold the company in 1990. His career in the furniture industry resumed when he worked for Expressions Custom Furniture as an Executive VP and COO. Between 1994-and 1999, Greg owned and operated 8 Norwalk Furniture and Design franchises, which provided custom furniture and interior design services to consumers. In 1997, he became the President of the Norwalk franchise owner’s association and formed a partnership with the owners of Norwalk Furniture to establish Norwalk Franchise Services, which he managed until Norwalk Manufacturing unexpectedly declared bankruptcy in 2012. Following the bankruptcy, Greg founded Luxe Home Interiors with his business partner Robert Korba, the former CEO of Sammons Enterprises. Luxe was closed following Korba’s death in 2015. Greg started DTS toward the end of 2015 to continue his vision of creating an eCommerce-driven purchasing group connecting interior designers to manufacturers.


FG

Frank Goldoni - COO & Co Founder

Frank entered the furniture industry in 1976. He owned and operated a family-owned furniture store for 14 years. Beginning in 1990, he owned and operated 6 Norwalk The Furniture Idea stores specializing in providing interior designs services and upholstered furniture produced by Norwalk Furniture. Frank was VP of DOTI Franchising from 2003 -2009. DOTI was a 25-store chain of franchisees providing interior design services. From 2009-2015, Frank was VP of Luxe Home Interiors. In 2012, Frank was simultaneously VP of TUI Lifestyle and provided interior design services to upscale condos and high-rises. Since 2015, Frank has been COO and Vice President of Design Trade Service.


CO

Cliff Oxford - Director of Merchandising & Vendor Development

Cliff Oxford has been in upper management of national companies for most of his professional career. He served as VP Merchandising, Advertising, Business Development, & Corp Relations for Maitland-Smith/Lifestyle Furnishings, Int., 1999 to 2003. He was Senior Vice President of Human Resources, Training, and Corporate Relations at Lowe’s Companies. Before joining DTS, Cliff was Vice President at TUI Lifestyle.

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COMPANY DISCLOSURES

GW Ventures, LTD, and Dallas Texas Furniture Ventures, LLC, two companies for which Mr. Greg Wyers acted as director and/or president have outstanding tax liens in Travis County, Texas. GW Ventures is subject to a $31,960.29 State Tax Lien, while Dallas Texas Furniture Ventures is subject to a $21,236.08 State Tax Lien. Both liens are for obligations incurred between 2002 and 2005. Mr. Wyers has stipulated that he has no knowledge of these liens and has never been contacted by the State of Texas in connection with these liens or any outstanding tax issues. GW Ventures and Dallas Texas Furniture Ventures ceased operations over 10 years ago. These liens are not an obligation of Design Trade Service, Inc.

In the State of Texas, an action to collect delinquent taxes must be initiated by the State within three years of the lien being filed. As the liens against GW Ventures and Dallas Texas Furniture Ventures were filed in 2006, they are uncollectible.

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DUE DILIGENCE

From the Carofin Knowledge Base:

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SECURITY TERMS

Design Trade Service, Inc.

MIN. OF $1,000,000 AND UP TO $5,000,000

6.0% CONVERTIBLE PREFERRED STOCK

Proceeds from this Offering will be used, to (i) scale marketing, (ii) hire sales and customer service staff, and (iii) enhance the existing eCommerce infrastructure.

The Offering

Issuer

Design Trade Services Corporation (“DTS” the “Company” or the “Issuer”), a B2B eCommerce marketplace connecting interior designers with major furniture manufacturers and providing 24/7 sales and logistical support to both parties.

Securities Offered

Series A Convertible Preferred Shares (the “Offering”, “Securities” or the “Series A Preferred”) of the Issuer, offered privately in accordance with S.E.C. Regulation D, Rule 506(c).
Individuals seeking investment below $100,000 will purchase common shares of DTS Funding, LLC, a Special Purpose Vehicle (“SPV”) managed by Carolina Financial Group, LLC, whose sole assets will be the Series A Preferred of the Company. See “SPV Investment” for more details.

Offering Amount

A minimum of $1,000,000 and up to $5,000,000

Pre-Money Valuation

The effective pre-money valuation for this offering is $9,000,000. The implied post-money valuation is between $10,000,000 and $14,000,000. Representing between 10.0% and 35.7% of the Company’s fully diluted, as converted ownership. Please see the Pro-Forma Capitalization Table enclosed herewith.

Share Price & Number of Shares Offered

The Company has authorized the sale of up to 35.7% of the fully diluted ownership. Series A Preferred share price and shares will be calculated upon closing. Share Price will be equal to the Pre-Money Valuation divided by pre money current fully diluted shares, inclusive of CFS awarded Warrants.

Investor Qualification

All Investors in the Series A Preferred (the “Series A Investors”) must qualify as an “Accredited Investor” as defined within Regulation D, Rule 501 as promulgated by the U.S. Securities Exchange Commission.

Investment Objective

To generate capital gains for Investors.

Minimum Subscription Amount

The minimum subscription amount for an investor to directly invest in the Offering will be $10,000, subject to exception by the Company.

Offering Period

The Offering will expire on 6/30/2021 subject to a 60-day extension by the Company at its sole discretion.

Terms of the Security

Dividends

The Series A Preferred will carry an annual 6.0% cumulative dividend which shall accrue until paid in connection with a liquidation event as defined below:

Liquidation Preference

In the event of any liquidation, dissolution or winding up of the Company, the holders of the Series A Preferred shall first be paid as follows:

First, to pay one times the original purchase price plus accrued dividends plus declared and unpaid dividends on each of the Series A Preferred. The balance of any proceeds shall be distributed pro rata to holders of Common Stock.

A merger or consolidation (other than one in which stockholders of the Company own a majority by voting power of the outstanding stock of the surviving or acquiring corporation) and a sale, lease, transfer, exclusive license or other disposition of all or substantially all of the assets of the Company will be treated as a liquidation event (a “Deemed Liquidation Event”), thereby triggering payment of the liquidation preferences described above unless the holders of a majority of the Series A Preferred to convert into Common Stock as defined below under Optional Conversion. The Investors' entitlement to their liquidation preference shall not be abrogated or diminished in the event part of the consideration is subject to escrow in connection with a Deemed Liquidation Event.

Optional Conversion

The Series A Preferred initially convert at a 1:1 ratio to Common Stock at any time at option of holder, subject to adjustments for stock dividends, splits, combinations and similar events and as described below under “Anti-dilution Provisions.”

Mandatory Conversion

Each share of Series A Preferred will automatically be converted into Common Stock at the then applicable conversion rate (i) in the event of the closing of an underwritten public offering with a price of 3 times the original purchase price (subject to adjustments for stock dividends, splits, combinations and similar events) and net/gross proceeds to the Company of not less than $25,000,000 (a “Qualified Public Offering”), or (ii) upon the written consent of the holders of 66 2/3% of the Series A Preferred.

Anti-Dilution Provisions

Broad based weighted average anti-dilution protection against additional equity being issued or options granted at a value lower than that implied at the time of the Series A Preferred closing. Options or Warrants approved by the Board of Directors for issuance to management, consultants and/or key employees shall not trigger anti-dilution adjustment. This anti-dilution protection does not apply to anticipated subsequent rounds of financing needed to grow the Company that are sold at a higher valuation than that implied at the time of the Series A Preferred closing.

Investor Rights

Voting Rights

Shareholders owning Series A Preferred will not have pro-rata voting rights with the common shareholders on an “as if converted” basis.

Approval Rights/ Negative Covenants

So long as Series A Preferred shares are outstanding, the Company will obtain the consent of a majority of the Series A Preferred for any merger or sale of all or part of the Company at a price resulting in a return to the Series A Preferred shareholders (inclusive of all prior distributions received by the Series A Preferred shareholders) of less than two times their Investment Principal.

Board of Directors

The Board of Directors shall initially consist of three members (the “Directors”) as follows: (i) holders of the Series A Preferred shall be entitled to designate one voting Director (the “Series A Director”); (ii) holders of the Common shall be entitled to designate one voting Director; (iii) the remaining voting Director shall not otherwise be associated with the Company and shall be elected by all of the outstanding preferred and common stock, voting together as a single voting group. The Board will elect an Audit Committee and a Compensation Committee, each of which will have two members consisting of outside Board members. The Series A Director will have the right, but not the obligation to sit on either or both of these committees. The Company shall pay for or reimburse reasonable out-of-pocket expenses for all Directors.

Information Rights

The Company will provide financial reporting, including quarterly, year-to-date and annual income, balance sheet and cash flow statements as compared to the current budget and compared to results for the comparable period for the prior year to Series A Investors and the Administrative Agent. An annual review will be performed within 120 days of year-end by the Company’s outside auditor selected by the Audit Committee. The coming year’s annual budget will be provided to each Investor within 30 days of each fiscal year-end for as long as they continue to be a shareholder of the Company.

Inspection Rights:

All Series A Preferred shareholders hall have the right to inspect the Issuer’s books and records, in accordance with Title 8, Section 220 of the Delaware General Corporate Law.

Preemptive Rights

All Series A Preferred shareholders shall have preemptive rights to purchase additional shares, up to the amount of their ownership percentage of the Company on an as-converted basis, in bona fide offerings for capital raising purposes until such time as the Series A Preferred shares convert to common shares, and/or sale or merger of the Company occurs, subject to customary exclusions, including without limitation: (i) issuances of management/employee/director/consultant incentive equity, (ii) equity issued at any time pursuant to any currently outstanding debt instruments, options or warrant agreements (ii) equity securities issuable upon exercise of any options or other equity security equivalents, (iv) equity securities issued in connection with bona fide third party financing transactions and (v) equity securities issued in connection with acquisitions and other strategic transactions.

Co-Sale/ Tag-Along

Should any single Series A Preferred shareholders or shareholder of any class owning five percent (5%) or more of the Company’s total equity make a private sale of its shares (to someone other than another employee, officer or Director or then current shareholder of the Company, or a transfer pursuant to estate planning), then the holders of Series A Preferred shares would be entitled to participate, pro rata, in the sale (i.e., a Tag-Along Right).

Drag-Along Rights

If a Series A Preferred shareholder, Series A Preferred shareholder, or a common shareholder, or a group of shareholders owning more than sixty six and two thirds percent (66 2/3%) of the total shares of all classes (“Selling Shareholders”) decide to (i) sell their shares to an unrelated third party, (ii) sell or license all or substantially all of the Company’s assets to an unrelated third party or (iii) consummate a similar “sale of the company” transaction, and such transaction is unanimously approved by the Company’s Board, then they shall have the right (i.e., a Drag-Along Right) to require the remaining shareholders of all classes to sell their shares at the same price and on the same terms as offered by the third party for the Selling Shareholders’ shares; subject to standard exceptions and requirements.

Sale of Preferred Shares

The Series A Preferred are subject to resale restrictions under applicable securities laws and are not registered for sale with the Securities and Exchange Commission.

Registration Rights

Investors in the Series A Preferred, together as one class, will be granted the following registration rights after the Company’s IPO: (i) one demand registration for underwritten offerings, (ii) unlimited piggyback rights (including participation in the Company’s IPO, subject to underwriter approval) and (iii) rights to register shares in unlimited S-3 "shelf" offerings provided that the aggregate amount of the proceeds of any such S-3 offering is at least $5,000,000. All of the related expenses (except underwriters' discounts and commissions) incurred by the holders shall be paid by the Company. The registration rights shall be subject to standard black out rights.

Other Matters

SPV Investment

Individuals seeking investment below $100,000 will purchase common shares of DTS Funding, LLC, a Special Purpose Vehicle (“SPV”) managed by Carolina Financial Group, LLC, whose sole assets will be the Series A Preferred of the Company. If/when the SPV has the ability to vote or exercise investor rights pertaining to the Series A Preferred, the SPV will vote its shares/exercise its options as one sole investor, based on the choice of those SPV investors holding at least 66.67% of the SPV’s shares. DTS shall reimburse CFG for its reasonable out of pocket expenses incurred in the management of the SPV. Audited financial statements of the SPV shall be prepared at the request of SPV investors holding at least 66.67% of the SPV’s shares.

Escrow Account

The Company will establish an escrow account at an FDIC-insured banking institution (the “Custodian”). Under escrow instructions with the Custodian, all subscription amounts will be deposited into the escrow account until DTS has received, and is prepared to accept, subscriptions for the entire minimum amount of $1,000,000 of the Series A Preferred offered hereby, and/or a combination of such subscriptions and other alternative methods of financing, such as short-term bridge notes (each an “Alternative Financing”). When this subscription amount, which may include Alternative Financing, has been reached, the amounts previously deposited in escrow will be released to the Company (the “Initial Closing”). Amounts received following this distribution will fund the Issuer directly. If the Company does not receive subscriptions, which may include Alternative Financing, equal to at least $1,000,000 prior to 2/28/2021, then at the termination date all funds on deposit in the escrow account will be returned to the corresponding subscribers, without interest.

Representation and Warranties

Standard representations and warranties as to due organization, existence in good standing and power to conduct its business will be provided by the Company in the purchase agreement. Standard representations and warranties typical of a private offering of equity units will be provided by each Investor, including as to status as an “accredited investor”, receipt of Private Placement Memorandum, Company’s shareholder agreement, and other offering documents and other materials as requested, and acknowledgement that the Offering is being made under exemption from registration requirements (Details to be found in the purchase agreement). In order to comply with the requirements of Rule 506(c), Each Investor shall be obligated to provide the Company with either: (i) third party confirmation of such Investor’s status as an “accredited investor”, or (ii) such information as reasonably requested by the Company to confirm such Investor’s status as an “accredited investor.

Conditions to Closing

The closing of the Offering (when funds are released from the Escrow Account and are transferred to the Issuer) is subject to customary pre-conditions, including but not limited to:

  • Receipt of all required authorizations, approvals and consents.
  • Delivery of customary closing certificates: and
  • The absence of material adverse changes with respect to the Company.
Fees and Expenses

Carolina Financial Securities, LLC shall receive a 7.0% fee for all equity capital raised up to $3,500,000, a 5.0% fee for all equity capital raised thereafter, and warrants equal to the respective cash fee percentages above, times the number of shares sold in the Offering. CFS may share up to 50% of its fees and warrants with

Carofin, LLC, an affiliated Broker-Dealer, for its assistance in the placement of the Offering. All legal fees and out of pocket expenses relating to closing the Offering will be paid by DTS with CFS expenses subject to the Engagement Agreement between DTS and CFS.

Administrative Agent

CFG Financial Services, LLC (“CFG FS”), an affiliate of Carofin and Carolina Financial Securities will act as administrative agent for the Series A Preferred shareholders, often coordinating reporting and other obligations between the Company and the Series A Preferred shareholders. The Company will reimburse CFG FS for its reasonable out of pocket expenses.

Governing Law

Delaware

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SECURITY VISUALIZATION

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FREQUENTLY ASKED QUESTIONS

What is Carofin?

Carofin is a FINRA broker dealer, an investment bank headquartered in Brevard, North Carolina, that specializes in financing smaller businesses. Carofin’s parent company Carolina Financial Group, LLC, was established in 1995 and its affiliates have privately placed over $1 billion of debt and equity securities.

Is this security registered with the Securities Exchange Commission (S.E.C.)?

No. It is being privately placed under Rule 506c of Regulation D of the S.E.C.

Must Investors in the DTS Stock be Accredited Investors?

Yes. They must have household income of $300,000 (for married couples) OR a net worth of $1,000,000, excluding the value of their primary residence, OR qualify for an institutional category of investor.

How is this security Repaid?

This security can be repaid through potential capital gain following the sale of the Company, IPO, or recapitalization. Returns cannot be guaranteed. Investor distributions, if made, will be made first in the following order: 1) to satisfy the preferences of the Preferred Stock and, thereafter on an ongoing basis, pro-rata to common stock ownership.

Will Investors Continue to Receive Information About the Security After Issuance?

Given its role as the administrative agent, CFG Financial Services is able to keep Investors informed about any unexpected changes in the Issuer's business and general operational updates.

What if I have questions in the future about the Business’s performance?

Carofin will distribute updates to investors at least quarterly, including account statements. You should feel free to also email Carofin at [email protected] or telephone us at 828.393.0088

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RISK FACTORS

AN INVESTMENT IN THE NOTES IS SPECULATIVE AND IS SUITABLE ONLY FOR PERSONS OF SUBSTANTIAL FINANCIAL MEANS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT AND HAVE NO NEED FOR LIQUIDITY IN THIS INVESTMENT. AN INVESTMENT IN THE SECURITIES OFFERED HEREIN SHOULD NOT BE A MAJOR PART OF YOUR INVESTMENT PORTFOLIO. YOU SHOULD REVIEW THE RISKS OF THIS INVESTMENT WITH YOUR LEGAL OR FINANCIAL ADVISORS.

THIS OFFERING INVOLVES SUBSTANTIAL RISKS. THESE RISKS INCLUDE, BY WAY OF ILLUSTRATION AND NOT LIMITATION, THE FOLLOWING: RISKS ASSOCIATED WITH THE FACT THAT THE MEMBERS WILL NOT HAVE THE RIGHT TO VOTE ON OR APPROVE MOST DECISIONS REGARDING THE BUSINESS AND, AS SUCH, WILL NOT BE IN CONTROL OF THEIR INVESTMENTS IN NOTES OF THE COMPANY AND THE BUSINESS; AND THE OPERATION OF THE COMPANY INVOLVES TRANSACTIONS BETWEEN THE COMPANY, THE MANAGER, AND THE OWNER WHICH MAY INVOLVE CONFLICTS OF INTEREST.

THE NOTES 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, AND WITH THE PRIOR CONSENT OF THE MANAGER, WHICH CONSENT MAY BE WITHHELD IN THE MANAGER’S SOLE DISCRETION. PROSPECTIVE INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

SOME OF THE INFORMATION IN THIS PRESENTATION MAY CONTAIN “FORWARD-LOOKING” STATEMENTS. YOU CAN IDENTIFY SUCH STATEMENTS BY THE USE OF FORWARD-LOOKING WORDS SUCH AS “MAY,” “ANTICIPATE,” “ESTIMATE,” “COULD,” “SHOULD,” “WOULD,” “EXPECT,” “BELIEVE,” “WILL,” “PLAN,” “INTEND,” “PROJECT,” “PREDICT,” “POTENTIAL” OR OTHER SIMILAR WORDS. THESE TYPES OF STATEMENTS DISCUSS FUTURE EXPECTATIONS OR CONTAIN PROJECTIONS OR ESTIMATES WHICH MAY OR MAY NOT HAPPEN AS PROJECTED HEREIN. WHEN CONSIDERING SUCH FORWARD-LOOKING STATEMENTS, YOU SHOULD KEEP IN MIND THE RISK FACTORS LISTED BELOW, WHICH COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN ANY FORWARD-LOOKING STATEMENT.
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN CONJUNCTION WITH THE OTHER INFORMATION ABOUT THE NOTES BEFORE PARTICIPATING IN THIS OFFERING. THE RISKS DISCUSSED IN THIS PRESENTATION CAN ADVERSELY AFFECT THE COMPANY’S OPERATION, OPERATING RESULTS, FINANCIAL CONDITION AND PROSPECTS FOR SUCCESS. THIS COULD CAUSE THE VALUE OF THE SECURITIES OFFERED HEREIN TO DECLINE AND COULD CAUSE YOU TO LOSE PART OR ALL OF YOU INVESTMENT. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES THE COMPANY FACES BUT DO REPRESENT THOSE RISKS AND UNCERTAINTIES KNOWN TO THE COMPANY AND THAT THE COMPANY BELIEVES ARE MATERIAL TO THE COMPANY’S FUTURE OPERATING PERFORMANCE.

A. Investment Related Risks

Speculative Investment

The Securities being offered should be considered a speculative investment. The ability of the Company to achieve its objectives may be determined by factors beyond its control that cannot be predicted at this time. Consequently, there can be no assurance that the Company’s efforts to continue its business operations will prove to be sufficient to enable the Company to generate the funds required to make distributions. Anyone investing in the Securities should do so only if they are financially able to sustain the loss of their entire investment and should recognize that such a possibility exists.

No Secondary Market for the Securities

As this security is a private transaction, there is currently no public market for the securities being offered herein. These Securities are not a publicly registered securities and will have no secondary sale liquidity.

Limited Operating History

The Company has a limited history of operations upon which an evaluation of the Company’s business and prospects can be based. No assurances can be given that the Company will ever be profitable or generate revenues sufficient to make distributions. This makes evaluating the Company’s business operations and validating its financial projections difficult. In assessing the Company’s prospects, a potential investor must consider the risks and difficulties frequently encountered by early-stage companies. These risks include the Company’s ability to: raise sufficient capital to fund operations, and other general corporate purposes; manage changing and expanding operations; establish and increase awareness of the Company’s brand and strengthen loyalty among prospective customers; implement and successfully execute the Company’s business and marketing strategies; respond effectively to competitive pressures and developments; continue to enhance the Company’s products and services; and attract, retain and motivate qualified personnel. The Company’s failure in any of these areas could adversely affect the Company’s financial condition and results of operation.

Existing Debt

The Company currently has no existing long-term debt, and short-term debt in the amount of $102,997, governed by a Loan and Security Agreement. Should the Company default on any of the payments owed to the senior secured lenders, they may take actions which could affect the Company’s ability to make distributions.

B. Industry-Related Risks

Recent Growth may not be Sustainable

Customer base may not continue to grow or may decline as a result of increased competition and the maturation of DTS. Failure to continue revenue growth rates could have a material adverse effect on the financial condition and results of operations. Past performance is not indicative of future growth.

Failure to Acquire New Members

In order to expand the customer base, DTS must appeal to and acquire customers who have historically used other means of commerce to purchase goods and may prefer alternatives to our offerings, such as traditional brick and mortar retailers, the websites of competitors or go directly to suppliers.

Dependence on Secondary Markets

The success of The Company is dependent on the success of the interior design industry. A decline in the interior design market or a decrease in the level of disposable income of tertiary consumers could adversely affect the performance of The Company.

Ability to Increase Net Revenue per Active Customer

The Company’s ability to grow depends on their ability to retain their existing customer base and generate increased revenue and repeat purchases from this customer base and maintain high levels of customer engagement.

Ability to Add New Brands

The Company’s business success depends to some extent on their ability to expand their customer offerings by launching new brands and expanding the existing brand portfolio into new geographies.

Dependence on the Supplier

The Company depends on their ability to provide customers with a wide range of products from qualified suppliers in a timely and efficient manner. The financial stability of suppliers, suppliers' ability to meet standards, labor problems experienced by suppliers, the availability of raw materials, merchandise quality issues, currency exchange rates, transport availability and cost, transport security, inflation, and other factors relating to the suppliers are beyond The Company’s control, but could adversely affect them.

System Access Failures

Server failure or a loss of access to the DTS website could harm their business. Server or facility failure could result in the loss of customer data or lost orders.

C. Management-Related Risks

Reliance on Key Personnel

Due to the size of the organization, the Issuer has a significant reliance on certain key employees, particularly Greg Wyers and Frank Goldoni. If the Issuer is unable to retain key employees it could jeopardize the Issuer’s ability to implement its business plan, its relationships with its customers, and its financial stability.

Ability to Manage Growth

The Company expects to continue to grow its overall operations and this may strain the Issuer’s resources. Any inability to manage growth effectively would have a material adverse effect on the Issuer’s business.

D. Offering-Related Risks

Acceptance of Investors on a First-Come, First-Serve Basis

The Issuer reserves the right to accept or reject any proposed investment in its sole discretion. Subject to this discretion, it intends to accept investments on a “first-come, first-served” basis, with the consequence that Investors will be allocated a portion of the total Offering, based upon the amounts they have committed, in the order in which such commitments have been accepted. The Borrower is not required to accept all commitments tendered to it. There is no assurance, therefore, that your commitment will necessarily be accepted in whole or in part by it should it raise more or less funds than are needed to make its investments.

Possibility of Material Differences Between Projected and Actual Results

The financial projections contained in this Offering Summary and any supplements represent the Issuer’s estimated results of operations. The financial projections have been prepared upon the basis of assumptions and estimates which may differ from actual events and/or circumstances.

E. Federal Income Tax Risks

Lack of Rulings and Opinions; Possibility of IRS Challenge of the Issuer’s Tax Position

The Company has not requested and will not request any tax ruling from the IRS regarding the tax consequences of the Company’s activities. Accordingly, there is no certainty as to the tax consequences of participating in the Security. The Company has not sought or obtained a legal opinion with respect to the tax treatment of the offering proceeds or issuance of the Security. Accordingly, Investors are urged to consult your own tax advisor with respect to the federal and state tax consequences arising from participation in this Offering.

Risk of Audit to Investors

There is a possibility that the IRS will audit the Company’s income tax returns. If the Company’s income tax returns are audited, your return might also be audited.

Future Federal Income Tax Legislation and Regulations

No assurance can be given that the current Congress or any future Congress will not enact federal income tax legislation that could adversely affect the tax consequences of participating in the Offering.

F. Other Risks

Reliance on Certain Aspects of the Offering

Potential investors should not rely exclusively on one aspect of the security structure when making an investment decision on whether or not to participate in this Offering.

Unforeseen Risks

In addition to the above risks, businesses are often subject to risks not foreseen or fully appreciated by management. Prospective investors reviewing this Offering Summary should keep in mind other possible risks that could be important to the success of their investment in the Notes.

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BEST INTEREST & OTHER DISCLOSURES

Important Disclosures

These securities have not been registered with the Securities and Exchange Commission (the “SEC” or the “Commission”), or with any state securities commission or any other regulatory authority. The securities are being offered in reliance upon an exemption from the registration requirement of federal and state securities laws and cannot be resold unless the securities are subsequently registered under such laws or unless an exemption from registration is available. Neither the SEC nor any other agency has passed on, recommended or endorsed the merits of this offering (this “Offering”) or the accuracy or adequacy of these confidential offering documents (the “Offering Package”). Any representation to the contrary is unlawful.

These securities are offered through Carofin, LLC, Member of FINRA/SIPC. Carolina Financial Securities is an affiliate of Carofin and both Broker-Dealers are affiliates of Carolina Financial Group, LLC. Documents have been prepared by Carolina Financial Securities and have been reviewed and approved by the management of the Company. The information contained herein has not been independently verified and is dependent on information provided by the Company to Carolina Financial Securities, LLC.

The information contained herein is for informational purposes only and is not intended for further distribution. The information does not constitute a complete description of any investment or investment performance. This document is in no way a solicitation nor is it an offer to sell securities nor is it advice or recommendation regarding any investment. The information is not directed to any person who is not believed to qualify under the definition of an Accredited Investor under the rules of Regulation D of the 1933 Securities and Exchange Act. No security listed in this document or otherwise offered through Carolina Financial Securities, LLC or Carofin, LLC may be purchased without prior receipt of a complete Private Placement Memorandum or other official offer to sell.

Due diligence materials related to this Borrower and the Offering are available to you through Carolina Financial Securities’ affiliated marketplace, Carofin. If you have not received your login information to access Carofin.com, please contact your company representative to have access granted..

The Company will not offer, sell or issue any Securities in any jurisdiction where it is unlawful to do so or where laws, rules, regulations or orders would require the Company, in its sole discretion, to incur costs, obligations or time delays disproportionate to the net proceeds the Company will realize from such offers, sales or issuances. Neither this Offering Package nor any subscription agreement shall constitute an offer to sell or a solicitation of an offer to purchase any Securities in any jurisdiction in which such transactions would be unlawful.

Private placements are high risk and illiquid investments. As with other investments, you can lose some or all of your investment. Nothing in this document should be interpreted to state or imply that past results indicate future performance, nor should it be interpreted that FINRA, the SEC or any other securities regulator approves of any of these securities. Additionally, there are no warranties expressed or implied as to accuracy, completeness, or results obtained from any information provided in this document. Investing in private securities transactions bears risk, in part due to the following factors: there is no secondary market for the securities; there is credit risk; where there is collateral as security for the investment, its value may be imped if it is sold. Please see the Private Placement Memorandum (PPM), and the complete list of contents of this Offering Package for a more detailed explanation of the securities Summary of Terms, Investor Suitability Standards, Confidentiality, Securities Matters and Risk Factors.

Caution Regarding Forward-Looking Statements

Certain statements in this Summary Offering Material may be “Forward-looking” in that they do not discuss historical facts but instead note future expectations, projections, intentions, or other items relating to the future. We caution you to be aware of the speculative nature of forward-looking statements as these statements are not guarantees of performance or results.

Forward-looking statements, which are generally prefaced by the words “may,” “anticipate,” “estimate,” “could,” “should,” “would,” “expect,” “believe,” “will,” “plan,” “project,” “intend,” and similar terms, are subject to known and unknown risks, uncertainties and other facts that may cause our actual results or performance to differ materially from those contemplated by the forward-looking statements.

Although these forward-looking statements reflect our good faith belief based on current expectations, estimates and projections about, among other things, the industry and the markets in which we operate, they are not guarantees of future performance. Whether actual results will conform to our expectations and predictions is subject to several known and unknown risks and uncertainties, including risks and uncertainties discussed in this Summary Offering Material.

Consequently, all the forward-looking statements made in this Summary Offering Material are qualified by these cautionary statements and there can be no assurance that the actual results anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us or our business or operations. Risks, uncertainties, and factors that could cause actual results to differ materially from those projected are discussed in the “Risk Factors” section of this Summary Offering Material. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Considering these risks, uncertainties, and assumptions, the forward-looking events discussed in the Summary Offering Material might not occur.

SECURITIES MATTERS

State Securities Matters

The Company will not offer, sell or issue any securities in any jurisdiction where it is unlawful to do so or where laws, rules, regulations or orders would require the Company, in its sole discretion, to incur costs, obligations or time delays disproportionate to the net proceeds the Company will realize from such offers, sales or issuances. Neither this Offering Package nor any subscription agreement shall constitute an offer to sell or a solicitation of an offer to purchase any securities in any jurisdiction in which such transactions would be unlawful.