ePublishing, LLC (“ePublishing,” the “Buyer,” or the “Company”) is issuing a minimum of $1,500,000 and up to $5,000,000 in 14.0% Secured Promissory Notes (the “Securities”) to finance the acquisition of a Target company (the “Target”) and provide working capital to the Company.
Background: ePublishing, LLC (“ePublishing”, the “Buyer” or the “Company”) is a publishing software platform that provides a full suite of services including content management, data analytics, advertising, and revenue cycle management to some of the world’s largest media brands. ePublishing has grown revenue by 28% per year from 2019 through 2023 to $4.6M, resulting in approximately $900k of adjusted EBITDA. The Company seeks to acquire one additional company to provide additional customers and functionality. Post-acquisition, the Company projects pro forma growth to $5.7M in revenue (before cross selling) and $1.3M of EBITDA.
The Company is financed by an existing senior secured lender, JB Capital, who holds a $2M senior secured note. If the full $5M is raised in the Offering, JB Capital's senior note will be paid in full, and the Notes will be the sole senior security on the balance sheet. If less than the maximum is raised, that debt will be pari passu to JB Capital's note. JB Capital’s Note matures on December 31, 2024, and Carofin intends to assist the Company to refinance the JB Capital Note prior to maturity.
ePublishing is the integrated modern media tech stack driving revenue, improving productivity, and increasing engagement for publishers of content and data. The Company propels business by streamlining editorial and audience workflows, amplifying content delivery, diversifying and growing revenue, and leveraging a unified, data-first publishing ecosystem.
ePublishing unifies Workflow, Content, Data and Monetization tools by integrating with its modern API and cloud-based technology stack offering numerous customer benefits:
Visualization of the ePublishing product suite
The publishing industry is inundated with fragmented "point" solutions that offer valuable functionality. However, these solutions often operate in isolation, disconnected from a central system, which necessitates significant sales and integration efforts compared to more comprehensive platforms like ePublishing. This lack of integration results in disrupted data flows, leading to inefficiencies and lost revenue for end users. These point solutions typically generate between $1 million to $3 million in revenue and can often be acquired at very low multiples, presenting potential opportunities for strategic consolidation.
Many legacy clients show hesitation when it comes to switching to modern solutions. They often rely on outdated in-house systems that fail to meet current demands or are still transitioning from paper-based processes to digital formats. This reluctance to change can stem from the perceived complexity and cost of migrating to new technology. However, the move to a more integrated and efficient digital platform is essential for staying competitive and improving operational efficiencies.
SaaS publishing platforms fall short by relying on outdated technology, lacking critical features, targeting only large publishers, or being prohibitively expensive. ePublishing stands out by leveraging modern technology, offering a comprehensive suite of relevant features, catering to publishers of all sizes, and maintaining affordability. An example of one products market positioning is below:
Financial Model Notes and Assumptions:
Mike has been selling technology to the publishing industry for the past 20 years and built Syncronex into a well-respected technology vendor, continually delivering products that create value.
Through Mike’s sales and Business Development efforts, he has created a “who’s who” customer base.
As President and COO, Mike is responsible for the combined business and suite of products, focused on exceeding customers’ expectations and expanding market share.
Trey is a proven technology and product engineering leader who builds high-performance organizations to deliver business outcomes. He drove ePublishing’s SaaS evolution in the publishing industry for over 20 years.
Trey is responsible for scalability, innovation, and integration across products and new acquisitions.
Prior to rejoining ePublishing, Trey was the SVP of Audience and Identity at Kinesso, an Interpublic Group company, building digital marketing and advertising technology solutions.
Mark has over 30 years of experience providing services and solutions to the publishing industry.
As vice president of Client Services, Mark leads a team responsible for new and existing clients providing them a path to successful project launches and resolved issues.
Mark is aligned with product and software development to make sure the needs of the clients are met in the most efficient manner.
Joni is a graduate of The University of Georgia's Terry College of Business and has been involved in the tech sector for nearly two decades.
She spent the first part of her career in the financial technology industry, holding positions in web services at NCR and Intuit.
Joni leads a team of project managers who focus on ensuring client success, delivering exceptional service and creating world class solutions on ePublishing’s technology stack.
Rob brings over 30 years of experience in software development, from tier-1 technical support to large-scale, multi-tiered systems architecture.
He’s been a full-stack software developer and architect for 20 years, specializing in Microsoft technologies.
Rob has been working with publisher-centric software systems for over 15 years and was the principal designer and developer of Syncronex’s Newspaper Suite’ of products.
Kelli is a product and Innovation leader who creates a strong culture of success, inspiring teams to be forward-thinking, creative and action oriented. Background in the three pillars of Product Management - technology, business, and user experience.
She leads the market availability of ePublishing with over 25 years' experience in the publishing industry.
Prior to joining ePublishing she was Director of Product Strategy for media products at Newscycle, now Naviga Global.
A minimum of $1,500,000 and up to $5,000,000 of secured promissory notes (the “Offering”, “Loan” or “Notes”) is being issued by ePublishing, LLC (“ePublishing”, the “Borrower”, “Issuer” or the “Company”).
A minimum of $1,500,000 (the “Minimum Offering Amount”) and up to $5,000,000 of secured promissory notes (the “Notes”) are being issued in two discrete closings by ePublishing, LLC. (“ePublishing”, the “Borrower”, “Issuer” or the “Company”) to finance i) investment in internal systems and platforms, ii) a company acquisition and pay related transaction costs, (iii) refinance up to $2,000,000 of existing debt, iv) provide working capital to integrate the acquired company into the ePublishing platform, and (v) pay issuance expenses.
ePublishing, LLC
Subscriptions for the Notes shall be aggregated in escrow account with U.S. Bank serving as escrow agent (the “Escrow Account”) until the Minimum Offering Amount is reached, provided that if the Minimum Offering Amount is not reached on or before December 31, 2024 (the “Escrow Termination Date”), such funds shall be promptly returned to Investors without interest thereon. If and when the Minimum Offering Amount is received in the Escrow Account, the Borrower shall receive such Minimum Offering Amount from the Escrow Account (the “Tranche I Closing”) and issue the “Tranche I Note”). Investment funds shall not accrue interest until the Tranche I Closing. If a single investor wishes to subscribe for an amount equal or greater than the Minimum Offering Amount and no funds are currently in the Escrow Account, the funds from such Investor, and any funds committed thereafter, will be sent directly to the Company in lieu of the escrow account.
On or after December 31, 2024, and provided that no Event of Default is outstanding, the Borrower may issue an additional secured promissory note (the “Tranche II Closing”, with the note issued therein referred to as the “Tranche II Note”) of up to $3,5000,000 of principal on terms substantially similar to the Note issued in the Tranche I Closing, provided that the maturity date for the Tranche II Note shall be set at 36 months following the issuance of the Tranche II Note.
Individuals and institutional investors who qualify as accredited investors as defined by Rule 501 of Regulation D of the US securities laws.
Secured promissory notes of the Borrower (the “Offering”, “Loan” or “Notes”), which represent secured indebtedness of the Borrower.
Up to $1,500,000 of secured promissory notes (the “Notes” or “Loans”). Assuming no Event of Default is outstanding, the Issuer may elect to increase principal outstanding by $3,500,000 in a Tranche II Note issued on or after December 31, 2024. Lenders under the Tranche II Note would share seniority and priority, and have a similar term amortization schedule, as the Tranche I Note, with a maturity date set 36 months after the issuance of the Tranche II Note.
The proceeds for any Note issuance will be used for the purposes outlined above under “Summary and Purpose”.
The minimum investment amount for an investment in the Notes will be $100,000.
During the period the Loans are outstanding, each interest payment will be due on the first day of each month or, if occurring on a weekend or holiday, on the next business day. The rate of interest will be calculated as of January 1 and July 1 of each year, on the basis of an annualized interest rate equaling the higher of 14.00% or the U.S. Prime Rate as published in the Wall Street Journal plus 5.0%, calculated on a 30/360 basis, provided that the annual interest rate shall not exceed 17.0%. The rate will be applicable to each interest payment due during the subsequent six months.
The maturity date for the Tranche I Notes will be the 3rd anniversary of the Tranche I Closing (the “Tranche I Maturity Date”), upon which time all outstanding Tranche I Note principal and interest is due and payable.
The maturity date for the Tranche II Notes will be the 3rd anniversary of the Tranche II Closing (the “Tranche II Maturity Date”), upon which time all outstanding Tranche II Note principal and interest is due and payable.
For each of the Tranche I Notes and the Tranche II Notes, after 6 months of interest only payments, the Loan will fully amortize on a mortgage style basis with any outstanding principal then due at the respective maturity date.
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 six months of interest at 14.00% per annum, based upon their original principal investment.
The Loan will represent the shared senior indebtedness of the Borrower now or in the future, which is pari passu with certain existing senior secured indebtedness:
The holders of the Loan will have a perfected security interest in all assets of the company such as accounts receivable, inventory, fixed assets (current or future). A UCC filing will be made with the state of Delaware to perfect these security interests. The same collateral is already subject to the security interest granted to JB Capital in respect of the existing senior secured debt.
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.
Including but not limited to satisfaction of all legal and financial due diligence by the Administrative Agent on behalf of the lenders relating to the Borrower.
Restricted Member Distributions - If it is not in compliance with any other covenants associated with this or any other financing by the Company, the Borrower shall not, without the prior written consent of a majority of the Lenders, make any distributions on a quarterly basis to its members/shareholders, other than (i) tax distributions, which can be made at any time and (ii) distributions to of up to $13,000 per month.
Limitation on Additional Indebtedness – Other than indebtedness existing on the day of the Tranche I Closing or, as the case may be, the Tranche II Closing and typical “Permitted Indebtedness” and “Permitted Liens”, the Company will not create, incur, assume or permit to be outstanding any Indebtedness that exceeds $500,000 and such Indebtedness, if any, will not be allowed to place secondary liens or other lien on the Collateral.
Debt Service Coverage Ratio – with respect to a specific period or date, the ratio of (a) EBITDA for the Borrower for such period or date, to (b) Debt Service for such period or date shall equal at least 1.00, to be calculated monthly together with the delivery of the Borrower’s financial information.
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 of the Tranche I Loans, management, director and owner compensation will be agreed and not changed without consent of a majority of the lenders. All Owner injections shall be subordinated to lenders.
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.
An “Event of Default” under this Loan shall include: (a) Borrower shall fail to pay when due any required interest or principal on the Loans; 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 5 business day grace period.
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 6% (annualized) Penalty Fee per month for so long as such default is in effect. The Penalty Fee shall be based upon the aggregate remaining principal balances of all outstanding Notes, unpaid interest and any accrued Penalty Fees, subject to a five 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 such Loan at that time.
The Administrative Agent will be provided monthly unaudited financial statements within 10 days of the end of each preceding fiscal month, as well as an annual unaudited statement for each calendar year within 90 days of the end of each year.
Carolina Financial Securities, LLC (“CFS”). CFS, a FINRA-registered broker dealer, is the exclusive Placement Agent for the Offering and will receive a 6.00% 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.
Carolina Financial Securities, LLC (“CFS”). CFS, a FINRA-registered broker dealer, is the exclusive Placement Agent for the Offering and will receive a 6.00% 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.
Given the relationships between certain parties, certain conflicts of interest may be inherent to the offering of the Notes:
Proprietary Products: CFS and Carofin will often present investments that are only available through them, which may result in a higher placement fee. CFS and Carofin will receive these fees regardless of your investment performing as expected.
Administrative Agent: CFG Financial Services, LLC (“CFG FS”), an affiliate of CFS and Carofin will serve as administrative agent for the Notes, enforcing certain rights of the Investors against the Borrower.. Given that CFS and Carofin often have a desire to conduct repeat business with its issuers, it may have a conflict of interest in enforcing Investors’ rights against the Borrower. Such conflict is often addressed by having employees that receive no direct compensation from CFS and/or Carofin’s investment banking business perform duties on behalf of CFG FS.
Escrow Proceeds: Investments in the Notes with bona fide investment intent from parties affiliated with the Borrower, CFS, or Carofin, and that therefore may have a financial interest in the this transaction, will be counted towards the Minimum Offering Amount. Investors should rely on their own judgment of the merits of this investment and not rely on the Minimum Offering Amount being met as an indication that enough persons without any financial interest in the transaction see an investment in the Notes as worthwhile.
An investment in the Securities involves certain risks. You should carefully consider all of the following risk factors, in addition to all of the information contained in this Offering Package prior to investing in the Securities. The risk factors described below are not the only ones facing the Company. Additional risk factors not presently known to the Company or that the Company currently deem immaterial may also impair their business operations. The Company’s business, financial condition, results of operations or prospects could be materially and adversely affected by any of these risks. If any of the following risks occur, the Company’s business, financial condition or results of operations could be seriously harmed. In such case, an investor could lose all or part of its investment. The investment in the securities offered hereby is highly speculative, involves a high degree of risk, and should not be made by persons who cannot afford to lose their entire investment.
There may not be sufficient collateral to pay all or any portion of the Loan.
The Loan will be secured by all assets of the Company. The Company cannot assure you that the value of the collateral securing the Loan would be sufficient to pay any amounts due under the notes following any acceleration or collection. The value of the collateral at any time will depend on market and other economic conditions, including the availability of suitable buyers for the collateral. By its nature, some of the collateral may be illiquid and may have no readily ascertainable market value. The value of the assets pledged as collateral for the Loan could be impaired in the future as a result of changing economic conditions, competition, or other future trends.In the event of a foreclosure, liquidation, bankruptcy or a similar proceeding, the Company cannot assure you that the proceeds from any sale or liquidation of the collateral will be sufficient to pay the obligations under the notes, in full or at all.
Precedence of existing senior secured debt
The Company has in place existing senior secured debt obligations to JB Capital that are secured by the same collateral as the Notes. In the event of a default, bankruptcy, or other circumstances that impair the Company’s ability to meet its financial obligations, the holders of the existing senior secured indebtedness will have a claim on the collateral that may have priority over that of the holders of the newly issued Notes. This prioritization could limit the ability of the holders of Notes to recover their investment in the event of the Borrower’s insolvency, liquidation, or bankruptcy. The Borrower’s obligations under the existing senior secured indebtedness may also restrict its operational flexibility, particularly with respect to the incurrence of additional debt, asset sales, and other fundamental business decisions.
Moreover, the existing indebtedness is scheduled to mature prior to the maturity of the Notes. The earlier maturity date of the existing senior secured debt increases the risk that the Company may need to direct financial resources to satisfy those obligations before the notes offered herein become due. This could adversely affect the Company’s liquidity and overall financial condition, potentially impacting its ability to fulfill the terms of the notes being offered.
Investors should consider the Company’s debt structure and the relative priority of the senior secured debt when evaluating the risks associated with this Offering. The existence of senior secured debt with an earlier maturity date secured by the same collateral represents a material risk that could adversely affect the Company’s financial condition and the lenders’ potential return on investment.
The Company has limited operational history and has a limited basis to evaluate its potential for future success.
The Company was formed in 2019 and has, since then, been developing its products and creating its technology through extensive research and development. However, it has limited operational history and cannot fully evaluate its business and prospects. Investors in the Securities must consider the risks and uncertainties frequently encountered by early stage companies like this. If the Company is unsuccessful in addressing these risks and uncertainties, its business will be seriously harmed or may fail.
The Company may not be able to successfully implement its business model.
The Company is in the process of implementing its business model. It is still in the early stages of developing its business strategy, sales and implementation practices, technological capabilities, customer relationships and marketing focus. The Company faces a number of challenges, including a lack of meaningful historical financial data upon which to plan future budgets, competition from a wide range of sources, the need to develop customer relationships and other risks. The Company may not be able to successfully implement its business model.
The Company may face refinancing risk from the existing senior lender.
There is an existing senior lender with principal currently outstanding. If the maximum proceeds are not raised, investors will be pari passu with this lender. As this loan matures December 31, 2024 Carofin will work towards a refinancing plan to account for any additional principal from the existing senior lender, but if unsuccessful, penalties for the company accepting extensions may be applied.
The Company may require additional funding, which may not be available on favorable terms, or at all.
The Company plans to continue to expend substantial capital in connection with the development of its products or sales process. If it fails to obtain the funding necessary to fund such development and to satisfy its working capital needs, the Company may have to delay its plans and miss its market opportunities. The Company’s current operating plan could change as a result of many known and unknown factors and may require additional funding. In addition, the Company may choose to raise additional capital due to favorable market conditions or strategic considerations even if it has sufficient funds for its current operating plan. To the extent available capital resources are insufficient to meet future capital requirements, the Company will have to seek additional funds to continue with its expansion plan. There can be no assurance that such funds will be available on favorable terms, or at all. If adequate funds are not available, the Company may be required to curtail operations significantly or even altogether. The Company’s inability to raise capital on favorable terms could have a material adverse effect on its business, financial condition and results of operations.
The Company may be held liable for the actions and errors of its management.
Under most conditions, the Company’s officers and directors may not be held liable for errors in judgment or other acts or omissions made by them as representatives of the Company because of provisions in its operating agreement holding them harmless and providing them with indemnification against liabilities or losses that arise from such acts or omissions. To the extent that such indemnification provisions are invoked, then Company’s assets could be reduced and its business could be impaired.
The Company’s failure to expand its management systems and controls to support anticipated growth and to hire qualified personnel could seriously harm its business.
The Company’s inability to manage its growth effectively could affect its ability to pursue business opportunities and expand its business. As the Company increases the commercialization of its products and its operations grow, it will need to hire a significant number of additional employees. This growth may place strain on its management and operations. The Company’s ability to manage growth will depend on the ability of its officers and key employees to implement and improve the Company’s operational, management information, sales and marketing and financial control systems and to expand, train and manage its work force. The Company believes that competition for qualified technical, sales, marketing and managerial personnel will be intense. The Company’s ability to implement its business plan could be adversely affected if it is unable to hire and retain qualified personnel as needed.
The Company is highly dependent on management and other key employees.
The Company is highly dependent on the efforts and abilities of its CEO, Mike Pirello and its CTO, Trey Connell. The loss of its CEO, CTO, or any of its other officers or key employees could have a material adverse effect on its financial condition, existing business, or anticipated growth.
The Company relies significantly on the use of information technology. Any technology failures causing a material disruption to operational technology or cyber-attacks on its systems affecting its ability to protect the integrity and security of customer and employee information could harm its reputation and/or could disrupt its operations and negatively impact the Company’s business.
The Company increasingly relies on information technology systems to process, transmit and store electronic information. The future success and growth of its business depends on streamlined processes made available through information systems, global communications, internet activity and other network processes.
The Company’s information technology systems, and those of its third-party service providers, may be vulnerable to information security breaches, acts of vandalism, computer viruses and interruption or loss of valuable business data. Stored data might be improperly accessed due to a variety of events beyond the Company’s control, including, but not limited to, natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers and other security issues. The Company has technology security initiatives and disaster recovery plans in place to mitigate its risk to these vulnerabilities, but these measures may not be adequate or implemented properly to ensure that its operations are not disrupted or that data security breaches do not occur.
Hackers and data thieves are increasingly sophisticated and operate large-scale and complex automated attacks. Any breach of the Company’s network may result in damage to its reputation, the loss of valuable business data, misappropriation of its consumers' or employees' personal information, product fulfillment delays, key personnel being unable to perform duties or communicate throughout the organization, loss of sales, significant costs for data restoration and other adverse impacts on its business. Despite the Company’s existing security procedures and controls, if its network was compromised, it could give rise to unwanted media attention, materially damage its customer relationships, harm its business, reputation, results of operations, cash flows and financial condition, result in fines or lawsuits, and may increase the costs it incurs to protect against such information security breaches, such as increased investment in technology, the costs of compliance with consumer protection laws and costs resulting from consumer fraud.
The Company’s clients may terminate or reduce their relationships with the Company.
The Company’s clients may review their relationship at the end of the average three-year contract period and terminate or reduce their relationships with the Company. The Company’s five largest clients in 2022 accounted for approximately 24% of the Company’s revenue for such year, and a substantial decline in such client’s spending could have material adverse effect upon the Company’s business.
The targeted acquisition may be overvalued or fail to achieve its intended results.
The Company is highly reliant on growing its revenues through the acquisition and integration of its target acquisitions. The evaluation of any such potential acquisition and integrating completed ones mya divert the attention of the Company’s management for ordinary operating matters. The success of these transactions will depend, in part, on the Company’s ability to realize the anticipated growth opportunities and cost synergies through the successful integration of the businesses the Company acquires with its existing business. Even if the Company is successful in integrating the acquired businesses, the Company cannot assure you that these integrations will result in the realization of the full benefit of any anticipated growth opportunities or cost synergies or that these benefits will be realized within the expected time frames.
The Company’s product offerings may be unable to keep pace with other developments in the industry.
The Company’s success depends on continued innovation that make their products useful for existing and prospective customers, but there is no guarantee that the Company’s investments in its technologies and the development thereof will provide it with the benefits it expects. The Company’s technologies must integrate with a variety of network, hardware, mobile, and software platforms and technologies, and the Company may need to often modify and enhance its services to adapt to changes and innovation in these technologies. Any failure of the Company to operate effectively with future infrastructure platforms and technologies could reduce the demand for its services.
The Company may be unable to scale its sales processes with increased adoption of its product offerings.
The Company’s ability to increase its revenue and grow its business is partially dependent on the widespread acceptance of their products and solutions by large businesses and other commercial organizations. The Company may need to spend significant time and resources to better educate and familiarize these potential customers with the value proposition of its products and solutions. The length of the Company’s sales cycle for these customers from initial evaluation to payment for the Company’s offerings will vary substantially from customer to customer and from offering to offering. Customers will often require considerable time to evaluate, test, and qualify the Company’s offerings prior to adopting the Company’s offerings. The timing of the Company’s sales with its enterprise customers and related revenue recognition will be difficult to predict because of the length and unpredictability of the sales cycle for these customers. During the sales cycle, the Company will expend significant time and money on sales and marketing and contract negotiation activities, which may not result in a sale. Additional factors that may influence the length and variability of the Company’s sales cycle include: the effectiveness of its sale force; the discretionary nature of purchasing and budget cycles and decisions; the obstacles placed by customers’ procurement process; economic conditions and other factors impacting customer budgets; the customer’s integration complexity; the customer’s familiarity with communications surveillance and compliance processes, and evolving customer demands.
The Company’s products will compete for customers against well-known service providers in the market. If the Company cannot attract customers to buy its products, its business would suffer and you could lose your investment.
The Company will have to compete on the basis of price and performance with product offerings from service providers that are also well-established in the marketplace. The domestic market for the Company’s products is intensely competitive and is also characterized by frequent introductions of new or enhanced products, price competition, continued emergence of new industry standards and regulatory developments. Some of the Company’s potential competitors have longer operating histories, substantially greater financial, technical, sales, marketing and other resources, established name recognition and an existing customer base. Competitors with an established customer base will have a significant competitive advantage over the Company by virtue of their existing sales channels and ability to create repeat business.
If the Company fails to secure or protect its intellectual property rights, competitors may be able to use its technologies, which could weaken the Company’s competitive position, reduce its revenue or increase its costs.
The Company relies on a combination of patent, copyright, trademark and trade secret laws, and confidentiality procedures to establish and protect its proprietary rights. Policing unauthorized use of its technologies will be difficult and the Company cannot be certain that the steps it has taken will prevent the misappropriation or unauthorized use of its technologies, particularly in foreign countries where the laws may not protect its proprietary rights as fully as United States law. The Company’s competitors may independently develop or may have already developed similar technology, duplicate the Company’s products or design around its other intellectual property rights.
The Company will also rely on trade secrets and new technologies developed by its employees and consultants to maintain its competitive position. Although the Company has confidentiality and intellectual property protections inherent in employee relationships, it cannot be certain that these protections will be effective in preventing them and others from misappropriating its trade secrets.
The Company may be exposed to liability for infringing the intellectual property rights of other companies the cost of which could decrease the value of your investment.
The Company’s success will, in part, depend on its ability to operate without infringing on the proprietary rights of others. It may not be able to do this successfully. Although the Company has conducted searches and are not aware of any patents and trademarks which its products or their use might infringe, it cannot be certain that infringement has not or will not occur. The Company would incur substantial costs in defending infringement lawsuits or in asserting rights in a lawsuit against another party.
This Offering has not been reviewed by any federal, state, or other regulatory authority.
The Securities offered through this Offering will not be registered or qualified under federal and state securities laws or the securities laws of any foreign jurisdiction. The Company anticipates that no regulatory authority or other disinterred entity will review or pass upon the fairness of the disclosure of risks and tax consequences inherent in the investment in the Securities or the other terms of this Offering. Prospective investors should be aware that they do not have all of the protection afforded by applicable federal and state securities laws to investors in registered or qualified offerings.
Accordingly, all investors must evaluate for themselves, or with the assistance of their advisors, attorneys, and accountants, the adequacy of the disclosures and the fairness of the other terms of this Offering without the benefit of prior review by any regulatory authority or other disinterested entity.
Management will control the way in which certain proceeds of this offering will be expended.
Management will have broad discretion to spend or invest certain proceeds from this offering in ways with which new investors may not agree.
Securities Laws will restrict the investors’ ability to transfer the Securities or liquidate their investment.
An investment in the Company is a long-term, speculative commitment. No public market for the Securities exists and no assurance can be made that any such public market will develop in the future. Consequently, investors may not be able to resell any of the Securities sold in this offering. Each purchaser of the Securities will be required to represent that it is an accredited investor and that it is purchasing the Securities for its own account for investment purposes and not with a view to resale or distribution. The Securities have not been nor will be registered under the Securities Act or under any state securities laws, and the Company is under no obligation to register any of the Securities. No transfer of the Securities may be made unless an exemption to such registration applies to any such transfer. See "Transfer Restrictions" under "Security Terms" for more information. Accordingly, investors must be ready to hold the Securities for an indefinite period of time and must be able to bear a risk of total loss of their entire investment.
The Minimum Offering Amount may be met through purchases by affiliates of the Company or other parties with a financial interest in the Offering.
Notes may be purchased by the affiliates of the Company, or by other persons who will receive fees or other compensation or gain dependent upon the success of the Offering. Such purchases may be made at any time and will be counted in determining whether the required minimum level of purchases has been met for the closing of the Offering. Therefore, Investors should not expect that the sale of sufficient Notes to reach the specified minimum, or in excess of that minimum, indicates that such sales have been made to investors who have no financial or other interest in the Offering, or who otherwise are exercising independent investment discretion.
The sale of the specified minimum, while necessary to the business operations of the Company, is not designed as a protection to investors, or to indicate that their investment decision is shared by other unaffiliated investors. Because there may be substantial purchases by affiliates of the Company, or other persons who will receive fees or other compensation or gain dependent upon the success of the Offering, no individual investor should place any reliance on the sale of the specified minimum as an indication of the merits of the Offering. Each investor must make his own investment decision as to the merits of this Offering.
The Company’s loan documents may allow a majority of the lenders to the Company to effect changes to its organizational documents without the consent of every single investor.
The documents governing the Securities may allow for a certain percentage of the lenders to modify them without the affirmative consent of every lender, which may include affiliates and employees of the Company as well as other parties with conflicts of interest. As such, purchasers of the Securities shall carefully weigh how such governance mechanics may adversely affect them as it pertains to their position as a lender to the Company.
Any single aspect of the Company’s business or the Security’s structure is subject to change.
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.
The Company and the Securities are subject to other unforeseen risks.
The foregoing risks, as well as other risks described in this Offering Package are not an all-inclusive listing of the business and other risks facing the Company. As with any business entity, the Company cannot predict with certainty all the possible challenges which may confront the Company’s business in future years. It is possible that events or conditions not foreseeable at present and which may not be subject to control by the Company may occur in the future and have an adverse impact on the ability of the Company to carry out its business objectives in a profitable manner.
FOR ALL OF THE AFORESAID REASONS, AND OTHERS SET FORTH HEREIN, THE SECURITIES OFFERED HEREUNDER INVOLVE A HIGH DEGREE OF RISK. ANY PERSON CONSIDERING AN INVESTMENT IN THE SECURITIES OFFERED HEREBY SHOULD BE AWARE OF THE SUBSTANTIAL RISKS SET FORTH IN THIS OFFERING PACKAGE. THESE SECURITIES SHOULD ONLY BE PURCHASED BY PERSONS WHO CAN AFFORD TO ABSORB A TOTAL LOSS OF THEIR INVESTMENT IN THE COMPANY.
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 U.S. 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: CFS and Carofin will often present investments that are only available through them, which may result in a higher placement fee. CFs and Carofin will receive these fees regardless of your investment performing as expected.
Administrative Agent: CFG Financial Services, LLC (“CFG FS”), an affiliate of CFS and Carofin will serve as administrative agent for the Notes, including the Tranche I Notes and Tranche II Notes, enforcing certain rights of the Investors against the Borrower, with the Borrower itself being an affiliate of CFG FS, CFS, and Carofin. Given that CFS and Carofin often have a desire to conduct repeat business with its issuers, it may have a conflict of interest in enforcing Investors’ rights against the Borrower. Such conflict is often addressed by having employees that receive no direct compensation from CFS and/or Carofin’s investment banking business perform duties on behalf of CFG FS.
Furthermore, given the agent relationship for different tranches with different collateral rights and priorities, CFG FS may be conflicted when acting in the interests of each tranche. This conflict is addressed by assigning different staff members of CFG FS assigned as representatives of different tranches to ensure they have the best interests of such tranche when acting in their capacity as agent.
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 U.S. 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
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Carolina Financial Securities, LLC and Carofin, LLC (“CFS” and “Carofin”, respectively) are affiliated broker-dealers registered with the Securities and Exchange Commission and members of FINRA and SIPC. The fees and services broker-dealers offer differ across the industry and it is important for you to understand such differences.
Free and simple tools to research firms and financial professionals are available at Investor.gov/CRS, which also provides educational materials about broker-dealers, investment advisers, and investing.
You will find certain pertinent questions you may ask us when first establishing a relationship listed as “conversation starters” below. We invite you to visit our Knowledge Base for educational materials on private investments.
Our firms offer brokerage services to accredited investors, exclusively through the sale of private placements. A private placement is an offering of securities that is exempt from registration with the Securities and Exchange Commission and carries significant risks, which may result in the loss of some or all of your investment. Such risks include, but are not limited to, the inability to sell your investment for cash, the lack of publicly available information on the company issuing the security, and no guarantees of returns or periodic payments.
Our firms carefully select the offerings they bring to market, 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. An affiliate of CFS and Carofin, CFG Financial Services, does, however, act as administrative agent for many offerings we bring to market. In this role, CFG Financial Services will monitor an issuer’s compliance with its obligations, make distributions of periodic payments, and, when necessary, intervene in the event that things are not going to plan. When this happens, CFG Financial Services is often compensated by part of the proceeds recovered in settlement or bankruptcy proceedings, which may reduce the return on your investment.
The investments we present often require a minimum investment of $5,000 for equity offerings and $10,000 for debt offerings.
Conversation Starters:You will pay fees and costs whether you make or lose money on your investments. Fees and costs may reduce any amount of money you make on your investments over time. Please make sure you understand what fees and costs you are paying.
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%. Given that different investments have different placement fees, we may often have a conflict of interest when presenting these investments to you.
Given that our placement fees are payable by the issuer, the full amount of your investment will be used to purchase debt or equity securities, even though a certain amount of the proceeds may be immediately redirected by the issuer to CFS and Carofin as placement fees.
Conversation Starters: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 though them, which may result in a higher placement fee.
Management Fees: Our firms will often present investments in which Carolina Financial Group, LLC an affiliate of CFS and Carofin, acts a manager of the company. CFG will often be compensated for such services.
Warrant Position: Our firms will often receive a warrant (an option to purchase an equity security in the future, for a defined price) for certain securities. Given that our firms, or other equity holders in the company, may have an investment time horizon that differs from yours, this may create a conflict of interest.
Equity Trust Company Relationship: Carofin and Equity Trust Company (“ETC”) have entered into an agreement by which Carofin exclusively promotes ETC’s services as IRA custodian, in exchange for the sharing of certain Carofin content by ETC. You can learn more about the services ETC offers, along with the fees associated with such services, at trustetc.com.
Conversation Starters:Our firms have different compensation structures.
CFS financial professionals, which are often the individuals working with the company to structure an appropriate security, receive a percentage of the placement fee received by CFS in the investments they structure. Therefore, these professionals have an interest in presenting you with the investments they have structured.
Carofin financial professionals, on the other hand, are the individuals responsible for understanding and presenting these investments to you. While Carofin professionals are compensated through discretionary bonuses, they may have an interest in presenting you with investments which may result in a higher placement fee to the firm overall.
Yes. You have access to a free and simple tool to research our firms and financial professionals at Investor.gov/CRS.
Conversation Starters:You may learn more about our brokerage services and request a copy of this relationship summary at Carofin.com. You may also contact us directly at 828.393.0088 or [email protected] to request up-to-date information and a copy of this relationship summary. We also encourage you to visit our Knowledge Base for additional educational information on private investments.
Conversation Starters:Form CRS – October 12th, 2020, Ver. 2.0
PRIVATE PLACEMENTS ARE HIGH RISK AND ILLIQUID INVESTMENTS. AS WITH OTHER INVESTMENTS, YOU CAN LOSE SOME OR ALL OF YOUR INVESTMENT.
Securities offered through Carofin, LLC. Carofin, LLC and Carolina Financial Securities, LLC are affiliated Broker-Dealers, Members of FINRA/SIPC, and subsidiaries of Carolina Financial Group, LLC. For more information on the services we offer and details associated with such services, please see our Customer Relationship Summary.
This site is published for residents of the United States only. Representatives may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed until appropriate registration is obtained or exemption from registration is determined. Not all services referenced on this site are available in every state and through every advisor listed. For additional information, please contact Craig Gilmore at 828.393.0088 x 520 and/or [email protected]
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 webpage 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 on this webpage or otherwise offered through Carofin, LLC may be purchased without prior receipt of a complete Private Placement Memorandum or other official offers of sale.
Carolina Financial Securities and Carofin only offer one type of alternative investment, those sold as private placements. Nothing on this website should be interpreted to state or imply that past results are an indication of 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 on this website. 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 impaired if it is sold.
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