Straight Creek MetCoal, LLC*

Mining & Selling Metallurgical Coal

Up to $5,000,000

Min. investment - $20,000

14.0% Senior Secured Promissory Notes

due 07/31/2023

  • Straight Creek MetCoal, LLC ("SCM") is a metallurgical coal company, located in Bell County, Kentucky, that mines, processes, and sells a very high quality “High-Vol B” coal used in steel, ferro-silicon & silicon metals manufacturing. End users of these metals include computer chip and solar panel manufacturers, among many others.

  • Coal from SCM’s “Straight Creek” seam is currently in high demand, and at historically high pricing, by industrial customers because of broad-based supply constraints, in particular worldwide efforts to restrict on new coal mine development (e.g. COP26, G-7 Agreements, environmental activists, etc.).

  • SCM’s current monthly sales suggest over $50,000,000 of 2022 revenues resulting in over $10,000,000 of cash flow from operations.

  • Gary Smith, a 40-year coal mining veteran, is SCM’s CEO, overseeing day-to-day operations.

  • SCM is seeking to issue up to $5,000,000 of these Senior Secured Notes (the “Notes”) which are collateralized by all short-term assets and certain unencumbered equipment. Proceeds will be used for working capital purposes and to refinance existing short-term debt.

Straight Creek MetCoal, LLC, (the “Issuer”, “The Company”, or “Borrower”) is issuing up to $5,000,000 in promissory notes (the “Notes” or “Securities”) to retire other short-term liabilities, pursue new accretive opportunities and support operations.

*The Company is currently pursuing a name change to Straight Creek MetCoal, LLC. The Company currently operates as Catalyst Resources, LLC.

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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Investment Overview

1) Purpose of the Financing

  • Straight Creek MetCoal (“SCM”) is seeking to leverage its short-term assets (inventory of coal, accounts receivable, cash) and certain unencumbered equipment to raise additional working capital reserves as a buffer against potential logistical delays and to support business growth opportunities in the coal mining industry sector.

2) Issuer – Straight Creek Met Coal, LLC * (“SCM”)

  • SCM mines, processes, and sells a type of metallurgical coal with unique properties (“High Vol-B”) that makes it uniquely suitable for the smelting of steel and silicon metal.

  • SCM was founded in 2011 to mine 9.2MM tons of coal (third-party reserve evaluation to an SEC standard) from the Straight Creek seam on the Dean-Viall property in Bell County, Kentucky and to purchase a 2008 vintage, lightly used processing plant, the Crockett Processing Plant. Current reserves are estimated to exceed 15 million tons, a 20+ year reserve for SCM operations.

  • Under the leadership of CEO, Gary Smith, the mine is now producing 20,000+ tons of coal per month that is sold to numerous domestic and international customers.

  • *The Company is currently pursuing a legal name change to Straight Creek MetCoal, LLC in order to emphasize the specific coal seam that it mines. The Company still operates as Catalyst Resources, LLC.

3) Security Description – Senior Secured Note (the “Notes”)

  • Interest Rate: 14.0% interest, payable monthly.

  • Maturity & Amortization: The Notes will fully amortize on a mortgage style basis with interest and principal calculated to be fully paid on July 31, 2023.

  • Collateral: Secured by a first perfected security interest in all cash, inventory, receivables, and certain currently unencumbered equipment (125% collateralization).

4) Repayment

  • Interest and principal will be paid monthly from operating cash flow generated from sales of coal.

5) Investment Risks

  • Logistical & Operational Difficulties: Since the onset of the COVID-19 pandemic, logistics have posed a significant hurdle for the coal industry, delaying trains and sales.

  • Regulatory oversight: Environmental protection and mining regulatory agencies, both Federal and Kentucky state, continually monitor the Company’s operations, both underground and above ground. A serious regulatory violation could force the Company to cease operations until these violations were satisfactorily addressed.

  • Exogeneous Shocks: Geopolitical factors and increased legislation regarding the coal industry may decrease demand and thus revenue.

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. RETURNS CANNOT BE GUARANTEED.

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SCM Business Opportunity

Business Opportunity

  • Environmentalists’ efforts to reduce coal consumption worldwide have been highly successful over the past 30 years, but they have also been indiscriminate regarding power generation usage (“thermal coal”, 92 % of all coal mined) and metallurgical uses (“met coal”, 8% of coal mined).

  • As a result coal production has declined and it is now very difficult to start a new mine because of 1) banking prohibitions on financing coal projects, 2) far fewer available miners and 3) equipment and spare part shortages

  • Never-the-less, the smelting of new steel (i,e. not including recycled steels, which is about 25% of all U.S. steel production) still requires met coal. Substantial production volumes using new hydrogen-based production technologies, which don’t use met coal, are not expected to evolve before 2035.

  • Met coal supply is therefore constrained and met coal prices are at historically high prices, having risen approximately 100% since summer 2021.

  • Since most coal is delivered via trains, which are also capacity constrained and vulnerable to regular service disruption, coal operators are compelled maintain working capital reserves.

Company Solution

  • SCM is leveraging its short-term assets (inventory, accounts receivable) and a recently purchased Komatsu Joy continuous miner to raise this additional working capital.

AN INVESTMENT IN THE SECURITIES 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.

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Company Information

Background

Straight Creek MetCoal, LLC (currently operating as Catalyst Resources, LLC) was founded in 2011 to mine, process and sell a rare ultra-high quality specialty grade of coal from a seam of 9.2MM tons on the Dean-Viall property located in Bell County, Kentucky.

SCM operates and owns an underground mine as well as a coal preparation plant with rail loadout, which is fully permitted.

The mine, which has successfully navigated a difficult business environment and a litany of external shocks to the market, is now consistently producing and selling over 20,000 tons per month under the management of Straight Creek Holding Corporation, an affiliate of Carolina Financial Securities, LLC (ownership and management change occurred in 07/2021).

SCM’s primary product is High-Vol B Coal, a premium metallurgical coal which is specifically suited to the production ferrous alloy and silicon metals.

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Property

Catalyst Resources holds two leases of mineral properties located in Bell County, Kentucky within the Southern Coal District, the Dean-Viall lease, which covers the Straight Creek Mine, and the Asher Lease, on which the Crockett Preparation Plant is located.

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Straight Creek Mine

The fully permitted Straight Creek seam mine is located on a 7,162-acre property (the “Dean Viall Property”) approximately ten miles to the northeast of Pineville, Kentucky.

The Dean Viall Property is highly accessible by road and rail (via US Route 25E, Kentucky Route 66 and Route 221).

A third-party reserve report, performed by Marshall Miller, indicates 9.2MM tons of recoverable coal on the Dean-Viall Property, though reserves are estimated to exceed 15 mm tons.

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Crockett Preparation Plant

SCM also owns a 2008 vintage, state-of-the-art coal onsite preparation plant (the “Crockett Preparation Plant” or the “Plant”), which is located on a 7,690-acre property (the “Asher Property”), approximately 18 miles to the northeast of Pineville, Kentucky.

  • Monthly Capacity: 75,000+ tons
  • Capable of directly loading coal onto a full train railing side (110 cars)
  • Adjoining, fully permitted impoundment has 15+ years of capacity.

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From Underground Mine to Revenues

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Operations

  • SCM is currently producing and selling ~20,000 tons per month resulting in ~$50MM of annual revenues. The Company has sustained this level of production and sales since September 2021.

  • Between the mine and the preparation plant, the Company employs 98 individuals.

Short Term Assets of the Company

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Historical Customers

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javelin

trafigura

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Projects for 2022

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Market Information

Metallurgical Coal

Metallurgical coal, also known as coking coal, is used to produce coke, the primary source of carbon used in steelmaking as well as in the production of silicon metal. It differs from thermal coal, used for energy and heating, by its carbon content and its caking ability. Caking refers to the coal’s ability to be converted into coke, a pure form of carbon that can be used in basic oxygen furnaces. Bituminous coal – generally classified as a metallurgical grade – is harder and blacker. It contains more carbon, less moisture, and less ash than low-rank coals.

The grade of coal and its caking ability is determined by the coal’s rank – a measure of volatile matter and degree of metamorphism – as well as mineral impurities and the ability of the coal to melt, swell, and resolidify when heated. The three main categories of metallurgical coal are (1) hard coking coals (HCC), (2) semi-soft coking coal (SSCC), and (3) pulverized coal injection (PCI) coal.

Straight Creek MetCoal focuses on a hard coking coal, specifically high volatile B bituminous coal (High-Vol B). High-Vol B coal has a relatively higher calorific content and lower volatile matter content that other types of coal. As a result, it is mainly used to make ferrous alloy and silicon metals.

End Uses of High-Vol B Coal

As a primary component in the production of both steel and silicon, high-vol B coal is used in the production of many items essential to everyday life. Notably, steel is used in national defense, bridges, automobiles, utility grids, telecommunications, medical equipment, and kitchen appliances, while silicon is used in cutting edge photovoltaic solar cells and electronic semiconductors.

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Pricing

The international market for coking coal is highly dependent on the steel industry, which has been volatile over the last several years due to tariffs, supply chain issues, and the COVID-19 pandemic. In the past two years, metallurgical coal prices were driven to record highs by the increased steel demand from the economic recovery after world supply was cut in 2020.

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Supply always takes time to add in response to high prices, while demand can change much faster. Looking forward, world supply growth is limited – Canada will see no growth after 2021 and Australia will have a few large mines restart after fixing problems – meaning the US will be the major source of increased metallurgical coal supply for world markets in 2022.

As a result, U.S. met coal production will grow to the highest level since 2014. Several large mines will be completed in 2022, while idle mines will be returned to full operations. Simultaneously, producers are trying to add supply across many smaller properties in Central Appalachia. Given this increase in supply, it is estimated that world coal prices have hit their peak and should fall throughout 2022.

forecast

Despite this decrease in pricing, in 2022, North American met coal contract settlements are expected to be higher than in years past. For High Vol-B met coal, contract settlements in 2022 are forecasted at $150/ton up from $78 in 2021.

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Company Financial Information

Historical Financials

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Projected Financials

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Model Assumptions

  • Assumes forecasted mining volumes for 2022 at: 15,000 tons in January, 19,000 tons in February, 22,000 tons in March, 23,000 tons/month for Q2, 24,000 tons/month in Q3, and 28,000 tons/month in Q4. Increases based on the deployment of new Joy miner in Q2, and a addition of a third section in Q4. Volumes for 2023, and 2024 are steady at 28,000 tons/month.

  • Price is assumed to stay flat at $200/ton through the end of 2024.

Associated Risks:

  • There may be difficulties in staffing, required ventilation or other unforeseen delays in implementing the third section.

  • Coal prices are volatile and subject to exogenous shocks.

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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Debt Structure and Credit Analysis

The Note contains a covenant that the issuer maintains collateral at a level of 125% of the Note’s principal. This is projected to be maintained throughout the forecast period to the end of Q1 2022 below.

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Model Assumptions:

  • Price and volumes of sales in the near term are forecasted based on management best estimates, and inventory is costed at production ($150/ton).

  • SCM has POs in hand for many of the forecasted sales.

Associated Risks:

  • Volume is dependent on the composition of the surface being mined and may be lower than expected based on conditions.

  • Timing of train sales are largely dependent on CSX and exogenous shocks (such as the explosion at the silo in Baltimore) are possible.  

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Management Team

Gary Smith – Chief Executive Officer

Gary Smith has 40+ years of experience in mining, including mine management, preparation plant operations, maintenance, engineering, safety, and regulatory compliance.

His career began at Bethlehem Steel Corporation, where he held numerous management positions including Mining Engineer, Section Foreman, and Head Planning Engineer. In his career, he has operated as the President/CEO at Kentucky Criterion Coal Company, Opes Resources Inc., and Fortress Resources, LLC. Since 2004, has owned Phoenix Management Group, LLC, a consulting company providing evaluations, due diligence, marketing and coal sales, and restructuring/bankruptcy support to mining operations.

Mr. Smith graduated from Virginia Polytechnic Institute and State University (Virginia Tech) with a Bachelor of Science in Mining Engineering before graduating from King University in Bristol, TN, with a Master of Business Administration. Mr. Smith has also completed the Duke University Leadership Development Program as well as an Executive Education course at the University of Virginia Darden School of Business.

Bruce Roberts – Chairman & Authorized Person

Bruce Roberts has over 35 years’ experience as an investment banker and entrepreneur. In 1995, Mr. Roberts founded Carolina Financial Group (CFG), which includes Carolina Financial Securities (1997, SMB-focused corporate finance) and Carofin, LLC (2018, technology-supported private securities distribution) – each is a registered broker/dealer with FINRA.

CFG specializes in private capital raising, having completed over $1.1 billion of equity and debt private placements for venture and growth companies across the US. Industries financed include traditional industries (manufacturing, distribution, consumer products agriculture, etc.) as well as technology (IT, life sciences, biometrics,). In additional to raising capital, CFG provides ongoing investment supervision and investor support throughout each investment’s life-cycle.

Mr. Roberts graduated in 1979 from Duke University with a B.S.E, completing a double major in Civil Engineering and Public Policy Studies. He and his wife have four children and live in Brevard, North Carolina.

Mr. Roberts is the Executive Director of Straight Creek Holding Corporation, an affiliate of Carolina Financial Securities, LLC which owns all the common equity of Catalyst Resources, LLC/SCM and has authorized Mr. Roberts to act on its behalf as manager of Catalyst Resources/SCM. This may present certain conflicts of interest, which are discussed in further detail under “Potential Conflicts of Interest” in the “Company Disclosures”

Craig Gilmore – Chief Financial Officer

CFS brought Craig Gilmore aboard in June of 2006 to fill the joint roles of Compliance Officer and Controller. In 2002, Craig earned a degree in Finance from Bentley College in Waltham, MA, where he performed among the top of his class.

In the four years between college and joining CFS, Craig worked as Survey Center Manager and Database Specialist for REDA International, Inc. of Wheaton, MD. In the spring of 2005, Craig opened a new, remote survey center for REDA in Brevard, NC. After developing, staffing, and managing the office, Craig left REDA to join CFS. He brings to CFS a diverse background with established skill sets that meet the firm’s FINRA and SEC compliance, data management, office management, and accounting needs.

At CFS Craig developed and implemented standard operating procedures for administration, finance and compliance both for CFS and for certain clients. Craig has been asked to perform similar responsibilities for SCM.

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Company Disclosures

PREVIOUS DEFAULT

On August 7, 2013, Catalyst Resources, LLC and its wholly owned subsidiary Covol Fuels No. 3, LLC entered into a loan and security agreement with multiple parties governing a loan of up to $29, 139,071.99 which called for quarterly interest and amortization payments, with final maturity and repaid originally scheduled for April 30, 2018.

After numerous events of default and related forbearance agreements and other modifications, the Lenders and the Company entered into that certain Debt Consolidation and Seniority Agreement dated December 8, 2020, which evidenced the Lenders secured interests and established repayment through either (1) a redemption on or after January, 31, 2023, or (ii) the semi-annual payments of interest after January 31, 2023, and full repayment of the notes at or before maturity on January 31, 2025. The loans restructured by the Debt Consolidation and Seniority Agreement are referred to herein as the “Legacy Notes”.

The loans restructured by the Debt Consolidation and Seniority Agreement hold a lien on all assets of the Company, except for the cash, accounts receivable, inventory, and equipment specifically subordinated to the Notes offered herein.

POTENTIAL CONFLICTS OF INTEREST

Management and Affiliation with Carolina Financial Securities, LLC – Bruce V. Roberts, the President of Carolina Financial Securities, LLC and Principal Manager of Carofin, LLC acts as Executive Director of Straight Creek Holding Corporation, an entity which owns all the common equity of Catalyst Resources, LLC. Due to his relationship CFS, its affiliates, and Catalyst Resources, LLC, Mr. Roberts may have a conflict of interest when selecting CFS and its affiliates to offer Broker-Dealer services to Catalyst Resources. Such conflicts of interest are addressed by CFS’ Investment banking committee process, which reviews any financing opportunities CFS and its affiliates take on. Such opportunities are reviewed by multiple staff members of CFS which receive no compensation tied to the sale of securities. Mr. Roberts and other members of CFS’ staff do not receive additional or specific compensation for the sales of the Notes offered herein.

Administrative Agent Services and Company’s loans – Affiliates of Carolina Financial Securities, such as CFG Financial Services, LLC and Catalyst Funding, LLC, often serve as administrative agent for debt securities offered by CFS and its affiliates. Given its role as administrative agent for the Notes offered herein and the Legacy Notes, CFG Financial Services, LLC might have certain conflicts of interest when acting on behalf of the lenders for such notes. Such conflicts of interest are addressed by, when appropriate, assigning separate and independent legal counsel to each relevant group of lenders, along with separate members of CFS qualified to act on their behalf.

Retirement of Certain Current Liabilities – Certain proceeds from this Offering will be utilized to retire certain current liabilities of the Company payable to a debtholder who is an equity member of Carofin, LLC. While Carofin, LLC may receive certain placement agent compensation for its efforts in the Offering, the individual member of Carofin, LLC whose debt is being repaid by certain proceeds from this Offering is precluded from participating in any securities based business of Carofin, LLC and holds his/her equity in Carofin solely as an investment. Furthermore, this individual will receive no compensation or any payments from Carofin as a result of its participation in this Offering.

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Due Diligence Room

From the Carofin Knowledge Base:

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Security Terms

Up to $5,000,000 of senior secured notes (the “Offering”, “Loan” or “Notes”) is being issued by Catalyst Resources, LLC and Covol Fuels No. 3, LLC (collectively, “Catalyst”, the “Borrower”, “Issuer” or the “Company”) to refinance current liabilities and provide working capital to the Company.

Terms of the Loan

Borrower

Initially Catalyst Resources, LLC and after a legal name change, Straight Creek MetCoal, LLC

Investors

Individuals and institutional investors who qualify as accredited investors as defined by Rule 501 of Regulation D of the US securities laws.

Loan Description

Senior Secured Notes of the Borrower (the “Offering”, “Loan” or “Notes”), which represent the senior indebtedness of the Borrower with respect to inventory, accounts receivable, cash and a Komatsu Joy continuous miner (recently purchased for $875,000).

Loan Amount

Up to $5,000,000.

Use of Proceeds

The proceeds for any Note issuance will be used as follows: (i) provide working capital to the Company, and as sufficient funds are raised to incrementally (ii) redeem $2.25MM of currently outstanding short-term indebtedness.

Minimum Investment Amount

The minimum investment amount for an investment in the Notes will be $20,000, subject to exception by the Issuer.

Interest

The Notes will pay Investors an annual interest rate equaling 14.0%, payable monthly on the last day of each month on an actual/365-day basis.

Final Maturity

July 31, 2023 (the “Maturity Date”), upon which time all outstanding Note principal and interest is due and payable.

Amortization

The Loan will fully amortize monthly, on a mortgage-style basis calculated such that all principal will be paid back by the Final Maturity (18 months).

Optional Prepayment

The Notes may be prepaid at any time, in whole or in part, but only if investors have been paid, through a combination of previous interest payments and, if necessary, additional amounts at the time of the prepayment, an amount totaling at least one full year of 14.00% interest, based upon their original principal investment.

Offering Period

An initial closing is targeted to occur by January 31, 2022, with additional investment to be accepted at the discretion of the Company through March 31, 2022. The Offering Period may be extended at the sole discretion of the Company.

Seniority

Collateral Interests

The Loan will have a first perfected security interest in all inventory, accounts receivable, and cash, now existing or hereafter acquired as well as by a Komatsu Joy continuous miner (recently purchased for $875,000). This security interest will initially be shared pro-rata with $3,000,000 of currently outstanding short-term debt of the Company. A revised UCC will be filed in the appropriate states to perfect the Notes security interest in this collateral.

Representations & Conditions to the Loan

Reps and Warranties

Usual for Loans of this type for the Borrower, including but not limited to: accuracy of financial statements; no material adverse change; absence of litigation; no violation of agreements; compliance with laws; payment of taxes; solvency; compliance with environmental matters; accuracy of information; and validity, and priority and perfection of security interest in the collateral.

Conditions Precedent to Initial Funding

Including but not limited to satisfaction of all legal and financial due diligence relating to the Borrower.

Financial Covenants

Collateral Coverage – The company’s cash, accounts receivable and inventories (valued against a Purchase Order, or the most recent Purchases Order for similar inventory), will always be in excess of one hundred and twenty-five percent (125%) of the outstanding Loan principal balances. The Borrower will provide Lenders with a Borrowing Base Certificate which will perform this calculation and certify whether the Borrower is in compliance.

Limitation on Additional Indebtedness – Any Additional Indebtedness, will not be allowed to place secondary liens or other lien on the Collateral.

Affirmative Covenants

As is usual for Loans of this type, including but not limited to performance of obligations; delivery of agreed financial information and compliance certificates; notices of default and litigation; maintenance of satisfactory insurance; compliance with laws; and payment of taxes.

Prior to closing management, director and owner compensation will be agreed and not changed without Lender consent. All Owner injections shall be subordinated to Lenders.

Negative Covenants

As is usual for Loans of this type, including but not limited to transfer of assets, incurrence of additional debt above the allowable amount, mergers changes in primary business, etc.

Loan Governance

Events of Default

An “Event of Default” under this Loan shall include: (a) Borrower shall fail to pay when due any required interest or principal; or (b) any warranty, representation, statement, report or certificate made or delivered to the Administrative Agent or the Lenders by Borrowers or any of Borrowers’ officers, directors, employees or agents, now or in the future, shall be untrue or misleading in any material respect; or (c) Borrowers shall fail or neglect to perform or shall violate any Financial Covenant, Affirmative Covenant or Negative Covenant as specified in the Loan and Security Agreement supporting the Loan, subject to a 10 business day grace period.

Default Interest Rate

If the Loan and any interest due to the Lender is not paid when due or the Borrower is otherwise in default, the Borrower will begin incurring an incremental 5% (annualized) Penalty Fee per month for so long as such default is in effect. The Penalty Fee shall be based upon the aggregate principal balances of all outstanding Notes, unpaid interest and any accrued Penalty Fees, subject to a ten working day grace period and the occurrence of a force majeure event. Once the default has been remedied, the interest rate will return to that applicable for Loan at that time.

Other Matters

Insurance

Insurance will be maintained by the Company including: 1) a property and casualty insurance coverage for an amount equaling at least the outstanding principal of the Note and 2) general liability insurance for its operations in its facilities.

Information Rights

The Administrative Agent will be provided monthly unaudited financial statements within 45 days of the end of each preceding month as well as an annual unaudited statement for each calendar year within 90 days of the end of each year.

Placement Agent:

Carolina Financial Securities, LLC (“CFS”). CFS, a FINRA-registered broker dealer, is the exclusive Placement Agent for the Offering and will receive a 5.0% placement fee for acting as Placement Agent. CFS may share up to 50% of its fees with Carofin, LLC, an affiliated Broker-Dealer, for its assistance in the placement of the Offering.

Administrative Agent:

CFG Financial Services, LLC (the “Administrative Agent”), an affiliate of CFS, shall serve as administrative agent. The role of the Administrative Agent includes: administration of the Interest Reserve Account, ongoing representation of the Investors to the Borrower, oversight of Borrower compliance with all Loan covenants, processing of interest and principal payments from the Borrower to Investors, preparation and payment of all Regulation D filings (to be reimbursed by the Borrower) and other actions required in the administration of the Loan on behalf of the Investors.

Fees and Expenses

A cash fee equaling five percent (5.00%) will be paid by the Borrower as a placement fee to CFS for acting as exclusive Placement Agent for the Offering.

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Security Visualization

Monthly Payment Visualization

p&i payments (returns cannot be guaranteed)

Liquidation Preference Illustration

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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 Loan being offered should be considered a speculative investment. The ability of the Borrower 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 Borrower’s efforts to continue its business operations will prove to be sufficient to enable the Borrower to generate the funds required to repay the Loan. Anyone investing in the Loan 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.

Credit Risk

A fundamental risk, relating to all Loans, is a chance that the Borrower will fail to make a principal and interest payment when due. Borrowers with higher credit risks typically offer higher yields for this added risk, such as the Borrower. Changes in financial conditions of the Borrower, changes in economic and political conditions in general, changes in economic or political conditions specific to the Borrower are factors that may have an adverse impact on the Borrower’s credit quality and security values.

Reliance on Credit of the Borrower and on the Value of the Collateral

This offering is predicated upon the Loan and Security Agreement between the Borrower and the Lenders for the repayment of its borrowings from Lenders, and, if necessary, on the third-party sale of the Collateral, which secures the Loan. If the Agreement becomes unenforceable or is not honored by the Borrower for any reason it will have a severe adverse effect on the sale of the collateral.

Dependence on the Industry

The Borrower’s business is dependent on the steel and silicon metal industries. If demand were greatly diminished, it could affect the Borrower’s ability to sell product to its current customers and it would have to seek new markets for its product.

No Secondary Market for the Borrower’s Loans

As this Loan is a private transaction, there is currently no public market for the Borrower’s Loans being offered herein. This Loan is not a publicly registered security and will have no secondary sale liquidity.

Refinancing of the Loan

This Loan is scheduled for repayment on July 31, 2023. It may be necessary for the Borrower to meet the projected principal redemption through the issuance of additional debt or equity securities. If the Borrower is unable to successfully raise additional capital, this may have an adverse impact on the timely redemption of the Loan.

Liquidation of Collateral

The Notes in this Offering will have a first lien position to the Company’s currently outstanding debt. If the need should arise for the Company’s creditors to liquidate the collateral for any reason, there may not be sufficient collateral to repay any or all of the principal of these Notes.

B. Industry-Related Risks

Demand Related

Any substantial decline in the demand for products sold by the Borrower, but not limited to, the introduction of substitute products, may cause a decline in the market value of Borrower’s product and negatively impact the Borrower’s financial performance.

Fluctuations in prices and in the availability of materials

Pricing for metallurgical coal varies significantly depending on market conditions. This may negatively impact the Borrower’s financial performance.

Outbreaks of diseases

Outbreaks of disease and other events, which may be beyond the company’s control, producers who sell materials to Straight Creek MetCoal, could significantly affect demand for its products, consumer perceptions of products, the availability of materials for purchase and its ability to conduct its operations.

Quality & Safety of the Products

Success for the Borrower’s business depends, in part, on the quality and safety of the Borrower’s products. If the products are found to be defective or unsafe, or if they otherwise fail to meet customer standards, relationships with customers could suffer. Further, the Borrower’s reputation could be diminished, and the Borrower could lose sales and/or become subject to liability claims, any of which could result in a material adverse effect on the business.

Regulatory Oversight

The Borrower’s activities are subject to international, federal, and state laws. The Borrower’s activities are expected to have a variety of regulatory oversight as development proceeds. Development of any of the Borrower’s operations will be dependent on the Borrower satisfying regulatory guidelines and, where required, being approved by governmental authorities. The Borrower intends to conduct their business activities in a compliant manner and in accordance with all applicable laws but may still be subject to accidents or other unforeseen events which may compromise its performance, and which may have adverse financial implications.

Changes in Laws, Regulations and Policies

Changes in the laws, regulations and policies including the interpretation or enforcement thereof, that are germane to the Borrower’s industry, can affect its business including changes in accounting standards, tax laws, data privacy as well as anti-corruption laws. Additionally, as the Borrower continues to sell and expand its international business, it may be subject to laws relating to selective distribution, environmental or climate change laws, trade accords and customs regulations could adversely affect the Borrower’s distribution endeavors.

Competition

The Borrower competes with other companies in the industry. Competitors include companies that may have greater financial and other resources than the Borrower. Additionally, these competitors may use pricing or other strategies to prevent the Borrower from achieving its business development objectives. This may have a material adverse impact on the financial position and prospects of the Borrower.

C. Management-Related Risks

Reliance on Key Personnel

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

Ability to Manage Growth

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

D. Offering-Related Risks

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

The Borrower 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 Lenders 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 Borrower’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 Borrower’s Tax Position

The Borrower has not requested and will not request any tax ruling from the IRS regarding the tax consequences of the Borrower’s activities. Accordingly, there is no certainty as to the tax consequences of participating in the Loan. The Borrower has not sought or obtained a legal opinion with respect to the tax treatment of the offering proceeds or issuance of the Loan. Accordingly, Lenders 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 Borrower’s income tax returns. If the Borrower’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 Loan.

F. Other Risks

Reliance on Certain Aspects of the Offering

Potential investors should not rely exclusively on one aspect of the security structure, such as the debt service capacity of the Company 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.

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.

Our firms seek to present vital capital with meaningful investment opportunities through the fundamental analysis of the businesses we seek to finance. Such analysis is usually conducted through a First Principles approach.

When we provide you with a recommendation, we have to act in your best interest and not put our interest ahead of yours. At the same time, the way we make money creates some conflicts with your interests. You should understand and ask us about these conflicts because they can affect the recommendations we provide you. Here are some examples to help you understand what this means:

Proprietary Products: Our firms will often present investments that are only available through them, which may result in a higher placement fee. The Firms will receive the placement fee regardless of your investment performing as expected.

Administrative Agent Services: CFG Financial Services, LLC, an affiliate of our firms, will act as Administrative agent for the securities while they are outstanding. Given that our firms have an interest in providing recurring services to the Issuer, while the administrative agent looks after the interests of investors, there may be a conflict of interest between the firms and its affiliates.

Our firms offer brokerage services to accredited investors, exclusively through the sale of private placements. the offerings we bring to market are carefully selected, and any recommendation you may receive from us will be limited to these offerings. Therefore, we may be unable to adequately compare the risks and benefits of the offerings we bring to offerings presented by other financial professionals. While our firms will often present new investments and discuss such investment’s risks and benefits with you, the ultimate authority to make such investment rests solely with you.

Our firms do not hold any investor cash or securities, and securities offered by us often have no easily assessable market value, so our firms will not monitor the market value of your investment on an ongoing basis. The investments we present often require a minimum investment of $5,000 for equity offerings and $10,000 for debt offerings.

Fees and costs may reduce any amount of money you make on your investments over time. Our firms are mostly compensated through placement fees, which are payable by the issuer, meaning that the firms will be compensated by receiving a percentage of the funds raised in an offering, regardless of the investment performing as expected. Such placement fee is usually between 3% and 7% (please find the specific Placement Fee for this offering in the “Placement Agent Fees” section of the “Security Terms”. Given that different investments have different placement fees, we may often have a conflict of interest when presenting these investments to you. The Firms’ bankers are often compensated by receiving a percentage of the placement fee, and may have their own conflict of interest when presenting you with offerings they structure.

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 Laws:

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.