Point-of-Sale Software & Retail Managment System Provider
The Company will migrate its customers to Verifone hardware and WAS processing. InfoTouch expects nearly 100% customer participation, more than doubling revenue without additional sales or increased expense.
The Promissory Notes (the “Notes”), offered herein, are secured by all assets of InfoTouch.
Infotouch Corporation, (“Infotouch”, “The Company”, “ITC” or “Borrower”) is issuing a minimum of $1,925,000 and up to $2,500,000 (the “Note” or “Securities”) to (i) refinance existing indebtedness (ii) fund the transition to a direct payment processing business model, (iii) fund the Note’s Interest Reserve (iv) pay Note issuance expenses.
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
Provider of hybrid point-of-sale and inventory management systems for brick & mortar retailers.
30-year operating history and a highly diversified customer base across multiple low-volatility industries including alcohol, tobacco, and firearms.
Each member of senior management has between 9 and 18 years of experience at InfoTouch.
Senior management and shareholders have spent decades with the company and have a proven operational track record.
InfoTouch has successfully migrated its merchants to new POS systems three times in the past.
Security Description: Secured Promissory Notes of InfoTouch (the “Notes”), which represent the senior indebtedness of InfoTouch, except for a $499,147 EIDL Loan by the U.S. SBA.
Offering Amount: A minimum of $1,925,000 and up to $2,750,000 through a combination of exchanges of currently outstanding secured promissory notes of the Company and new cash for direct subscriptions.
Interest: The Note will pay investors an annual interest rate of 14.0%, non-compounded, payable monthly on the 1st of each month.
Amortization: Equal monthly payments of interest and principal shall begin on the first day of the month following the first anniversary of the First Closing and continue until the Maturity Date.
Maturity: 48 months after the First Closing.
Collateral: The Notes will have a perfected security interest in all of the assets of the borrower, including all software products, intellectual property, cash, and accounts receivable. A UCC will be filed with the state of Texas to perfect these security interests.
Investors will be repaid from InfoTouch’s “residuals” (the difference between what InfoTouch charges its merchants and what InfoTouch pays to payment processors).
This source of repayment is available to note holders before the Company’s other operating expenses
Lower levels of consumer spending – If consumer spending in the U.S. declines overall, consumers who purchase through InfoTouch’s merchants may spend less resulting in lower residual revenues to InfoTouch.
Attrition in InfoTouch’s merchants – Competition among POS providers may result in a reduction in the number of merchants using InfoTouch.
Migration to the Woodforest payment processing system – Though merchants are financial incented to migrate, some may refuse to migrate
Variable Monthly Cash Flows - Residual Revenue is based on customer transactions and is not a fixed or guaranteed income stream.
Merchant Industry Decline or Contraction - Residual Revenues may decrease if an industry with many merchant clients using InfoTouch software experiences a sharp decline in demand.
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.
Headquartered in San Antonio, Texas, InfoTouch Corporation (“InfoTouch” or the “Company”) was founded in 1986. The Company was purchased by its current CEO, Harry Nass, as well as John Welch, in 2006. InfoTouch has focused on developing comprehensive point-of-sale technology for specialty retailers, and service industry businesses.
The Company’s entirely configurable point-of-sale platform provides end-to-end integration, enabling small and medium-sized businesses access to seamless back office and inventory management.
InfoTouch is both a pioneer and leading innovator in touchscreen hybrid point-of-sale and retail management systems for retailers with anywhere between 1 and 1,000 locations. Its RetailOS software runs thousands of stores, combining sophisticated POS, ERP, CRM, SCM from a platform that is entirely configurable to the merchant's needs.
InfoTouch is the author of Point-of-Sale software, which licenses to 3rd party merchants to account for their retail business transactions utilizing a computer running the InfoTouch software system.
The system allows for ‘integrated payment processing’ which routes the request for charge authorization to the merchant’s payment processor while, crucially, also allowing for an internal accounting for the merchant of amount due for deposit, general ledger entries, etc.
Woodforest Acceptance Solutions and Verifone
A new, more direct system for moving payments to merchants
Lower cost to InfoTouch and its merchants
Implementation Plan
Increased InfoTouch revenues
InfoTouch earns Residual Revenues when a customer presents a credit payment to a merchant using InfoTouch software. InfoTouch functions as either an Independent Sales Organization (ISO), or a Direct Agent for the merchant and earns residual revenues (a percentage of the transaction between customer and merchant) accordingly.
InfoTouch maintains a portfolio of merchants comprising more than 900 individual retailers with an average relationship ranging between 4 to 5 years. These retailers are largely in the alcohol, firearms and tobacco industries and include meat markets and gardening centers, limiting volatility in volume and amount of customer transactions.
Current Payment Processing Partners
InfoTouch holds contracts with two large payment processors, FiServ and WorldPay which direct the flow of merchant fees from customer transactions at brick-and-mortar retailers to InfoTouch and other service providers.
Payment Amount by Processor Type
InfoTouch Corporation receives an agreed upon percentage of residual payments through existing contracts based on service type. Residual income is linearly dependent on customer transactions.
Mechanics of Credit Transaction - WAS Case
At the beginning of the COVID-19 pandemic and through YE 2020, Infotouch saw an increase in monthly residual income, primarily due to the nature and types of merchants responsible for generating the cash flows – namely the alcohol, tobacco and firearm industries, recession-proof verticals.
In addition to the stable product mix of the underlying merchant base, there are over 900 merchants using InfoTouch products, diversifying the risk to InfoTouch of any single merchant not performing.
About the Point-of-Sale Software Industry
This industry develops point-of-sale software which tracks, organizes, and facilitates sales at physical locations (brick & mortar retailers) where goods are sold. Software services allow increased ease of access in managing sales, tracking, and organizing within retail, e-commerce, and wholesale trade industries.
Major Players
The largest player within the point-of-sale software industry is NCR Corporation. There is a common comparison drawn between players in the industry and hardware firms like Square and VeriFone, but these companies are much more significant in the POS payment processing hardware industry, not the POS software industry.
Primary Activities, Products, and Services
Within this industry, the main activities are the development of POS software for retail, hospitality, food service, healthcare, and educational uses. The major product in the industry is developed software, which is sold to retail, e-commerce, and the wholesale trade spaces.
Supply Chain
The supply chain for POS software begins with the creation of the software itself. It is then licensed by end-users and implemented via existing (or new) hardware within the retail, e-commerce, and wholesale trade spaces.
Available from Carofin due diligence files “C01 IBISWorld POS Software Developers Industry Report 2020.02.pdf”
Available from Carofin due diligence files “C02 WFMJ POS Hardware Market Players 2020.08.12.pdf”
Industry Size and Growth Projections:
Model Assumptions:
Associated Risks:
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
Part of the proceeds raised from this Note (referred to in this Section as the “New Note”) will be utilized to make a payment to certain holders of a secured promissory note previously issued to investors sourced by Carofin and CFS on May 28th, 2021 (the “Current Note”, with holders thereof referred to herein as the “Current Noteholders”) in the original principal amount of $2,500,000, with $1,917,138.97 remaining outstanding.
Before the First Closing, Current Noteholders shall exchange their Current Note for either (i) the New Note, or (ii) the “Exit Note”, which will carry no interest but include payments of principal equal to (i) 50% of the Exit Note principal on or within 1 business day of the First closing (the “Principal Reduction Payment”), (ii) 25% of the Exit Note principal on the first anniversary of the First Closing, and (iii) 25% of the Exit Note principal on the second anniversary of the First Closing (the “Exit Note Maturity”).
The New Note and Exit Note will share their collateral and payment rights, with standard payments of interest and principal allowed to be made on either the New Note or the Exit Note for so long as no Event of Default is outstanding under either note.
Given the exchange of Current Note principal, the “Minimum Offering Amount” of $1,925,000 is likely to be comprised of a combination of (i) new subscriptions for the New Notes (the “New Cash”), and (ii) credits towards the Minimum Offering Amount from exchanges of Current Note principal into the New Note.
** The Placement Fee may also be comprised of cash due to the Placement Agent at the first closing and certain credits that function as a legal fiction resulting from the establishment of a Minimum Subscription amount. Please see “Escrow Amount Illustration” later in this Offering Summary for an illustration.
Following the First closing, any funds committed to the New Note by way of subscription agreements will be forwarded directly to the Borrower through one or more closings (the “Multiple Closings”) and used as follows:
The “Placement Fee” will be adjusted down proportionately if less than $825,000 is raised through the Multiple Closings, and always equal 6% of the New Cash raised during the Multiple Closings.
Harry Nass is a technical and financial business operator with over 40 years’ experience bringing technology, business process and finance together in production. He has been involved in projects requiring hardware, software, design and financial systems to coalesce new products in the constantly evolving technology-based information and financial transaction environment.
In 2006, Mr. Nass, with another investor, acquired Atlanta based InfoTouch Corporation (founded in 1986) and he has served as its President and CEO since 2011. Mr. Nass and his partner relocated InfoTouch to San Antonio in 2012 where it remains today with a network of nationwide distributors and end-user merchants in the point-of-sale computer and payment processing industry.
Jeff Ballard is a general manager who has worked with many teams to help companies grow to their full potential. Jeff believes that through teamwork, good training, and proper guidance all goals can be achieved. Jeff is an integral leader at InfoTouch, facilitating efforts by leadership, staff, partners, suppliers, and others to make the company what it can be. This 30-year-old company is undergoing an entrepreneurial phase, accelerating innovation, and creating a product line that leverages pioneering architecture with today’s technologies for a hybrid solution made for the future.
Jeff’s background and education make him well suited for this chapter in the POS industry. A decorated veteran, he understands how to organize and motivate all teams. His engineering degree and aerospace experience prepared him to solve problems, taking him to some of the nation’s largest retail chains and positioning him to devise and lead training programs through numerous expansions and renovations.
On April 27, 2018, InfoTouch Corporation was named as a defendant in a complaint filed by Chetu, Inc., in the Florida Circuit Court in and for Broward County, alleging that InfoTouch entered into a written contract with Chetu for computer software development services and failed to pay Chetu $50,487.66 for services rendered. This matter was settled in arbitration but on May 23rd, 2024, Chetu filed another civil compliant against InfoTouch alleging that a balance of at least $33,333.33 remains unpaid from the settlement. That amount will be paid as an account payable item in the “Use of Proceeds” as elsewhere disclosed.
On February 13, 2019, Bridgehead Networks, Inc., a company for which Harry Nass acts as President, filed a Chapter 11 bankruptcy petition in the U.S. Bankruptcy Court for the Western District of Texas to gain standing to sue the Comptroller of Public Accounts of the State of Texas. Upon the resolution of issues between Bridgehead Networks and the Texas Comptroller, the company’s largest creditor, the courts approved exit from the bankruptcy case on June 06, 2019 with no plan of reorganization and therefore no compromise to any creditor.
On May 3rd, 2024, Robert Half, a human resource consulting firm, filed a civil lawsuit against InfoTouch Acquisition Corporation, an affiliate of InfoTouch, for alleged failure to pay for services provided. Robert Half alleges that unpaid services amount to at least $30,637.50 and is also attempting to recover attorney’s fees in the amount of at least $10,212.00. Those amounts will be paid as an account payable item in the “Use of Proceeds” as elsewhere disclosed.
On July 3rd, 2024, Rainey’s Custom Butchering, Inc., filed a civil lawsuit in the Bexar County District Court alleging multiple causes of action related to Rainey’s allegations that Rainey’s purchased point-of-sale equipment from InfoTouch for $26,551.80 but such equipment was never installed. This case remains pending and the amount in dispute will be paid as an account payable item in the “Use of Proceeds” as elsewhere disclosed.
due 48 months after First Closing
The Company shall issue secured promissory notes (the “New Notes”, with the issuance and sale thereof referred to herein as the “Offering”) including fully amortizing interest and principal payments following the first anniversary of the First Closing (as further defined herein) and on the 1st day of each month until their maturity on the 4th anniversary of the First Closing. The proceeds from the Offering facilitate the (i) refinancing of existing indebtedness (ii) transition to a direct payment processing business model, (iii) Note’s Interest Reserve, and (iv) payment of Note issuance expenses
Infotouch Corporation, a Texas corporation and Transaction Technology Systems, Inc., a Texas corporation and wholly owned subsidiary of Infotouch Corporation (together, the “Company”)
A minimum of $1,925,000 (the “Minimum Offering Amount”) and up to $2,750,000 from accredited investors identified by the Company (the “Investors”, each an “Investor”). Funds will be placed in an escrow account until the Minimum Offering Amount is received in such escrow account (the “First Closing”). Thereafter, funds will be set directly to the Company in one or more closings (the “Multiple Closings”). Please see the “Escrow Terms” section of this term sheet and the “Refinancing Description” section of this Offering Summary for more details.
Given the nature of the transaction and the contribution of certain exchange credits towards the Minimum Offering Amount, the principal amount of the New Note is likely to be higher than the Minimum Offering Amount required to achieve the First closing. See “Escrow Illustration” under the “Refinancing Description” for more details.
The minimum investment amount for the New Notes is $25,000, subject to exception at the Issuer’s full and absolute discretion.
On or before the First Closing, Current Noteholders shall (i) elect whether to convert their Current Note principal into the Exit Note or New Note, and (ii) execute an agreement forbearing from foreclosing on the Company’s assets until the earlier of the First Closing or December 15th, 2024. Current Noteholders shall continue to receive interest payments under the Current Note until the First Closing.
The "Maturity Date" shall be the 4th anniversary of the First Closing. For purposes of illustration, if the First closing Occurs on September 15th, 2024, the Maturity Date will be September 15th, 2028.
Whether at the Maturity Date or other date as a result of an acceleration or pre-payment, each Investor shall receive, in addition to any outstanding interest and/or principal, a fee that would result in each Investor earning an Internal Rate of Return (“IRR”) over the life of the New Notes of 20.00%
The IRR discussed herein is solely a contractual provision of the New Notes and shall not be interpreted as a projection or guarantee of performance. For more details, see the “Internal Rate of Return” section of this term sheet under “Other Terms”)
The New Notes shall accrue interest at the rate of 14.00% per annum, on a 30/360 basis. Following the First Closing, any accrued but unpaid interest will be due on the first day of each month or, if occurring on a weekend or holiday, on the next business day.
Equal monthly payments of interest and principal following a mortgage-style amortization shall begin on the first day of the month following the first anniversary of the First Closing and shall continue until the Maturity Date, at which point all outstanding interest and principal is due. For purposes of illustration, if the First closing occurs on September 15th, 2024, amortizing payments of principal and interest shall begin on October 1st, 2025.
In the event that an Investor purchases New Notes during the Multiple Closing period and on or after the 16th day of the month immediately preceding a month in which an amortizing payment is due, such Investor shall receive a payment of interest only for that upcoming month, and begin receiving amortizing payments on the first day of the month thereafter. For purposes of illustration, if the First Closing occurs on September 15th, 2024, and an Investor purchases the New Notes on October 20th, 2025, such Investor begins receiving amortizing payments on December 1st, 2025 and receives a payment of interest only on November 1st, 2025.
The New Note may be prepaid at any time and for any reason, so long as (i) no Event of Default is outstanding under the Exit Note, and (ii) a pro rata payment of principal is made on the Exit Note. For purposes of illustration:
Additionally, if the pre-payment on the New Note will repay it in full, each investor in the New Note must receive an aggregate amount resulting in each Investor earning an IRR of 20%.
The Notes shall be secured by all assets of the Company (the "Collateral"), with the Investors in the New Note holding a secured interest junior to the EIDL Loan described below) and of equal priority with the Exit Loan (also described below). The secured interest granted pursuant to the Notes shall be shared amongst Investors pro-rata to their outstanding principal amount and regardless of their investment date. A financing statement perfecting this secured interest shall name CFG Financial Services, LLC, as the secured party.
In addition to the New Notes, the Company will also carry the following indebtedness, which may hold a valid lien on the collateral (each a “Permitted Encumbrance”):
The Company currently carries the following indebtedness, which will be extinguished at the First Closing (the “Retired Loans”):
(3) The “OnDeck Loan”, with outstanding principal of $69,540.00 as of July 5th, 2024. The OnDeck Loan will be repaid in full and extinguished with proceeds from the First Closing; and
(4) The “Nass Loan”, an unsecured loan in the outstanding principal amount of $138,500 to be repaid in full with proceeds from the First Closing.
The Company currently carries the following unsecured indebtedness, which shall be fully subordinated to the New Note on or before the First Closing (the “Subordinated Loans”). The Company may make ordinary, scheduled payments of interest until the first anniversary of the First closing, at which point these loans may amortize, in either case so long as no Event of Default is outstanding under the New Note or the Exit Note:
The Minimum Offering Amount must be received in the Escrow Account (as further defined herein) on or before December 15, 2024 (the “Escrow Termination Date”). Following the First Closing, the Issuer may continue to receive investment funds at its full and absolute discretion.
Until the Minimum Offering Amount is aggregated in an escrow account with U.S. Bank serving as escrow agent (the “Escrow Account), all Investor funds will be aggregated in the Escrow Account and, if the Minimum Offering Amount is not reached on or before the Escrow Termination Date, returned to Investors without interest thereon. Investment funds shall not accrue interest until the First 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.
The Minimum Offering Amount may be reached through a combination of new subscriptions for the New Notes, and certain credits from the Exchange of principal under the Current Note. As such, Investors shall not interpret the reaching of the Minimum Offering Amount to mean that a certain numbers of Investors agree with their judgment of the merits of this Offering. Furthermore, certain bona fide investments by persons with a financial interest in the Offering (such as employees of the Issuer of the Placement Agent) may purchase New Notes or convert principal under the Current Note and have it counted towards the Minimum Offering amount. See “Risk Factors” for more information.
On or before the First Closing, the Company and the Placement Agent shall:
(i) Ensure the Minimum Offering Amount, through a combination of cash in the Escrow Account and credits as described in the “Escrow Illustration” section hereof, has been met;
(ii) Receive duly executed subordination agreements pertaining to the Subordinated Loans; and
(iii) Receive a duly executed certificate from the Company verifying that all warranties & representations in the New Notes remain accurate and that no event having a material adverse effect on the business of the Company has occurred since the execution of the Notes.
The Administrative Agent shall maintain a Reserve Account (the “Reserve Account”) on its books holding an amount equal to at least $100,000 as of the First Closing. The amount in the Reserve Account as of the First Closing shall accrue interest as if it had been advanced to the Company.
Funds in the Interest Reserve Account shall be utilized at the Administrative Agent’s sole and absolute discretion, and only (i) immediately prior to an Event of Default, if such Event of Default were to be caused by any failure by the Company to make a payment of interest and principal when due, were it not for the deployment of the funds in the Interest Reserve Account, or (ii) by the Administrative Agent, for the benefit of investors, to pursue any action to recover collateral or otherwise protect the interests of the Investors.
Following the First Closing, the Administrative Agent shall place 50% of the Company’s Excess Cash Flow (as further defined herein) in the Reserve Account as described in the “Sweep & Excess Cash Flow” section below, so long as the aggregate balance of the Reserve Account does not exceed (i) $100,000 plus (ii) the amount required to make the next scheduled principal payment on the Exit Note, for so long as the Exit Note is outstanding.
No longer than 10 business days following the First closing, the Company shall provide to the Administrative Agent a Deposit Account Control Agreement (the “DACA”, with each account subject thereto as “DACA Account”) duly executed on behalf of each financial institution holding a deposit account of the Company.
Beginning on the first day of the month following the First closing, the Administrative Agent shall “sweep” the DACA Accounts for an amount equal to the aggregate of (i) the upcoming payment of interest and/or principal due on the first day of such month, and (ii) 50% of the Company’s Excess Cash Flow (with such aggregate amount referred to herein as the “Swept Amount”). The Swept Amount shall be placed in the Administrative Agent custodial account and thereafter directed to the Investors as interest and/or principal payments and to the Reserve Account, as applicable. Any Excess Cash Flow placed in the Reserve Account shall not incur interest.
The Company’s “Excess Cash Flow” shall mean the difference between (i) the aggregate funds deposited in the DACA accounts between the first and last day of the preceding month (the “Residual Revenues”), and (ii) the required interest and/or principal payment due on the first day of such month.
Standard for this type of financing, which may include (i) delivery of reporting requirements, including unaudited monthly and annual financial statements, (ii) Collateral requirements, (iii) notices, (iv) financial records, (v) existence/nature of business, (vi) insurance, (viii) payment of expenses, (viii) payment of taxes, (ix) Maintenance of properties, (x) field examinations, (xi) appraisals, (xii) material contracts, and (xiii) compliance with laws, (xiv) Licenses, Permits and protection of Collateral, (xv) control of accounts, and (xvi) use of proceeds.
The Company’s intellectual property, cash, accounts receivable, fixed assets, and inventories (calculated at cost) shall always exceed 125% of the outstanding principal balance of the New Notes and the Exit Note. The Company shall provide the Administrative Agent (as further defined herein) with a borrowing base certificate evidencing such calculating and certifying the Company’s compliance with such requirement.
Standard for this type of financing, which may include (i) Loans and investments, (ii) liens, (iii) limitation on indebtedness, (iv) articles of organization or operating agreement, (v) transactions among affiliates, (vi) prepayments of indebtedness, (vi) distributions, (vii) change in accounting principles or fiscal year, (viii) sale and leaseback, (ix) maintenance of corporate existence and nature of business, (x) special covenants as to Collateral, (xi) disposal of assets, and (xii) anti-corruption laws.
(i) Collateral Coverage: The Company’s intellectual property, cash, accounts receivable, fixed assets, and inventories (calculated at cost) shall always exceed 125% of the outstanding principal balance of the New Notes and the Exit Note.
(ii) Debt Service Coverage Ratio: With respect to every preceding month, the ratio of (a) the Residual Revenues for such period or date, to (b) the aggregate debt service for such period or time (excluding any principal payments on the Exit Note), shall equal at least 1.00.
The Company shall provide the Administrative Agent (as further defined herein) with a compliance certificate evidencing such calculations and certifying the Company’s compliance with all covenants.
If the Investor does not receive any payment by the end of the date on which it is due or an Event of Default is outstanding, the Company will pay the Investor a “Default Charge” calculated as if it were additional interest on the outstanding principal balance at the rate of 6% per annum until such payment is received by the Investor or an Event of Default no longer exists.
The following events shall constitute an “Event of Default” under the Notes:
(i) Failure by the Company to pay any amounts when due, subject to a 5-business day cure period, and accompanied by the Default Charge;
(ii) Failure to comply with any provision of the Loan Documents, including affirmative and negative covenants;
(iii) The filing by the company for relief under any bankruptcy or similar protection scheme; or
(iv) The filing of an involuntary petition against the company pursuant to any bankruptcy statute.
The New Notes may be amended by written consent of the Investors holding a Majority (i.e., 50.00%) of the principal outstanding at any time such amendment is sought.
Notwithstanding the foregoing, the written consent of Investors holding a Super Majority (i.e., 66.67%) of the then outstanding principal is required to (i) change the Maturity Date, change the Interest Rate, Default Charge, or any other fees payable, (ii) release or subordinate any Collateral, or (iii) waive or release in writing any claim against or obligation of the Company.
No modifications to the New Note or the Exit Note may be made without the consent of a majority of such note if such modification could reasonably be determined to be detrimental to the holders of the other note without the consent of a Majority of such note being affected in a detrimental manner.
CFG Financial Services, LLC (“CFG FS”), an affiliate of CFS and Carofin, shall be appointed as Administrative Agent by the Company and the Investors regarding the New Notes purchased by Investors.
Carolina Financial Securities, LLC ("CFS") shall receive a cash placement fee equal to 6% of the gross proceeds received by the Company in this Offering, including the conversion of Current Note principal into the New Note, with such fee being payable by the Company simultaneously with the closing of any investment. Up to 50% of such placement fee may be shared with Carofin, LLC, an affiliated Broker-Dealer, for its assistance in the placement of the Offering. Please see the “Escrow Illustration” section of this Offering Summary for more details.
In addition to the cash compensation described above, CFS and Carofin will also receive, at the First closing, a warrant to purchase common stock representing 8% of the Company’s fully diluted, as-converted capitalization.
Internal Rate of Return”, or “IRR” will be utilized solely as a calculation to determine the Maturity Fee due to each Investor. Each Investor’s IRR immediately prior to such distribution will be calculated as follows: ~irr
The IRR figure described herein is used solely as a formula for the calculation of the Maturity Fee and shall not be implied to represent a promised or expected rate of return for any Investor in 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 New Notes and Exit Note, enforcing certain rights of the Investors against the Company. 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 Company. 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, the Administrative Agent may often be conflicted in its role representing both the New Note and the Exit Note, as the interest of one note may be adverse to the interests of the other note. Once again, this conflict is often addressed by assigning different employees of the Administrative agent represent the interest of each note when such conflicts are presented.
Escrow Proceeds: Investments in the New Notes with bona fide investment intent from parties affiliated with the Company, CFS, or Carofin, and that therefore may have a financial interest in 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 New Notes as worthwhile.
What is Carofin?
Carofin is a FINRA broker dealer, an investment bank headquartered in Brevard, North Carolina, that specializes in financing smaller businesses. Carofin’s parent company Carolina Financial Group, LLC, was established in 1995 and its affiliates have privately placed over $1 billion of debt and equity securities.
Is this security registered with the Securities Exchange Commission (S.E.C.)?
No. It is being privately placed under Rule 506c of Regulation D of the S.E.C.
Must Investors in the Note be Accredited Investors?
Yes. They must have household income of $300,000 (for married couples) OR a net worth of $1,000,000, excluding the value of their primary residence, OR qualify for an institutional category of investor.
What Happens if the Issuer Defaults on a Payment or Violates a Covenant?
In the event of a default CFG Financial Services, an affiliate of Carofin and administrative agent during the life of the Notes, will notify the Issuer of such default or violation, interface with the Issuer to understand the underlying causes of such default and expected curing timeline, and work with Investors on any required forbearance or recovery of collateral.
Will Investors Continue to Receive Information About the Note After Issuance?
Given its role as the administrative agent, CFG Financial Services is able to keep Investors informed about any unexpected changes in the Issuer's business, covenant compliance, or any potential prepayments or defaults.
What if I have questions in the future about the Note’s performance?
Carofin will distribute updates to investors at least quarterly, including account statements. You should feel free to also email Carofin at investorrelations@carofin.com or telephone us at 828.393.0088.
Who is heading up the conversion process to Verifone and Woodford Acceptance Corp?
Harry Nass is directly responsible for management of the process both on the development side (implementation of InfoTouch systems) and merchant side. He will work through the Company’s business manager Jeff Ballard, who has 20+ years of experience with the InfoTouch product.
The client contacts will be managed by Caren in the ISO division of the company along with Tracey who operates today in a client liaison position. InfoTouch anticipates hiring 2 and if needed a total of 3 additional human resources to accelerate the conversions once the Company have a number of merchants moved and fully understand the details of the new system’s requirements to bring them to full operation.
How does InfoTouch plan to mitigate/eliminate possible attrition from customers who do not want to migrate to the new model?
The significant motivator to move will be the lower cost to the merchant. Where needed, InfoTouch can apply pressure within the system (e.g. “new version requirements, new security requirements leading to new PIN pad hardware requirements and thereby the “new system”).
Many InfoTouch merchants have migrated from DOS based models, through Windows and now into hardware that supports Windows 10 and of course, moving into Windows 11. This is an extension of an ongoing process one must face in the Windows/Intel model of computer hardware/software evolution.
What is the expected timeframe for conversion?
There is a provision for a four-month ramping time in the financial plan as InfoTouch needs to get the new PIN pad integration with the Verifone cloud embedded in their software.
The Company will then start to move the WorldPay clients- the clients who’s current margins are the lowest (27BPS).
After integrating WorldPay clients, InfoTouch will move ISO apex clients (larger clients, higher volume and margins with fewer touches); then, the Company will start moving at approximately 10 per month the balance of the merchant book . The last six months of the conversion timeline will likely be shortened from estimates as InfoTouch completes the migration process.
Can InfoTouch provide a detailed outline of the steps involved towards executing the conversion?
When switching to this new system, completion of an electronic form is required which can be prepopulated using pertinent data from InfoTouch’s ERP. The Company will provide a current and then post conversion cost model to them and likely will get buy-in early on.
The new PIN pad hardware will be discussed after the current merchant context is determined (e.g. is their site in need of an update / upgrade in the normal course, etc.).
The Verifone program provides for an outright purchase (of which InfoTouch is offered favorable pricing) and they offer a “rental” option so for those not wanting to face any capital outlay (InfoTouch is in the range of $450/unit which is consistent with InfoTouch’s current costs for inferior PIN pads), they may elect the rental option which includes a perpetual replacement commitment (from Verifone) as is their responsibility.
InfoTouch will remotely review the on-site network and any requirements for additional Ethernet switch ports will be identified along with the Company’s recommended switching solutions if needed. Following confirmation that the network is in place, the support team will position the equipment on site and update the software to switch over the merchant from current processing to new processing.
This is a routine process save for the needed review of network ports on their LAN to support the new devices. InfoTouch is opting out of the USB based devices due to security issues anyway (next 24-36 months) and moving to the permeant Ethernet / cloud connections used at places like Walgreens and CVS.
In addition to facilitating the migration of the Company’s merchant-customers from the current FiServ system to WAS processing, the New Notes also refinance the Current Note. Given that investors holding the Current Note have an option to exchange their current principal into either (i) the New Note, or (ii) the Exit Note, which requires a repayment of certain principal upon the First Closing, the Minimum Offering Amount will be reached through a combination of cash from new subscriptions for the New Note and credits towards the Minimum Offering Amount from holders of the Current Note exchanging the principal of their Current Note for the New Note.
In addition to the credits from exchanges of Current Note principal for the New Note, the Minimum Offering Amount will also be comprised of credit towards the Placement Fee payable to the Placement Agent.
Scenarios A and B Below demonstrate how the Minimum Offering Amount is met through a combination of cash and credits depending on the amount of Current Note principal that is exchanged for the New Note compared to the Exit Note.
Scenario A: 75% of the Current Note principal is exchanged into the New Note
Scenario B: 75% of the Current Note principal is exchanged into the Exit Note.
As a result of these conversions and an immediate reduction of principal on the Exit Note, Investors should understand that the actual principal balance of the New Note will be is likely to be higher than the Minimum Offering amount, as the entirety of principal converted from the Current Note into the New Note is carried over as principal to the New Note, but only 50% of such amount is credited towards the Minimum Offering Note.
The table below illustrates what the principal amount of the New Note (and as a result, the Exit Note) will be following the same Scenarios A and B:
Finally, the Placement Fee due to the Placement Agent is also variable based on the actual conversion of Current Note principal, since no amount is due on the Current Note principal converted into the Exit Note.
The table below illustrates how the Placement Fee due to the Placement Agent is affected by the same conversion Scenarios A and B:
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. EACH PROSPECTIVE INVESTOR IS URGED TO CONSIDER CAREFULLY THE BUSINESS, LEGAL, TAX, AND OTHER RISKS SUMMARIZED BELOW, AND EACH PROSPECTIVE INVESTOR MUST CONSULT WITH THEIR OWN LEGAL, TAX, AND FINANCIAL ADVISORS WITH RESPECT THERETO. PROSPECTIVE INVESTORS SHOULD BE AWARE OF THE RISK FACTOES DISCUSHSED BELOW AND ARE URGED TO CAREFULLY REVIEW THE INFORMATION CONTAINED ELSEWHERE IN THIS OFFERING PACKAGE.
The Company is in the process of implementing its direct payment 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 following the business model transition 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.
Since their inception, the Company have generated limited operational revenues and has incurred mostly losses, principally from costs relating to research and development, legal expenses, and salaries and consulting fees. Its business model and strategies may not be successful and there is no assurance that the Company will ever become profitable in any future period.
Adverse global and regional economic conditions such as turmoil affecting the banking system and financial markets, including, but not limited to, tightening in the credit markets, extreme volatility or distress in the financial markets, higher unemployment, higher consumer debt levels, recessionary or inflationary pressures, supply chain issues, reduced consumer confidence or economic activity, and other negative financial news or macroeconomic developments could have a material adverse impact on the demand for the Company’s products or services, including a reduction in the volume and size of transactions on the Company’s platform.
Changes in the laws, regulations, credit card associations or other industry standards affecting the Company’s business may impose costly compliance burdens and negatively impact its business.
There may be changes in the laws, regulations, card association rules or other industry standards that affect the Company’s operating environment in substantial and unpredictable ways. Changes to statutes, regulations, or industry standards, including interpretation and implementation of statutes, regulations or standards, could increase the cost of doing business or affect the competitive balance. Regulation of the payments industry has increased significantly in recent years. Additional regulatory changes may require Infotouch to incur significant expenses to redevelop its products. Also, failure to comply with laws, rules and regulations or standards to which the Company is subject, including with respect to privacy and data use and security, could result in fines, sanctions or other penalties, which could have a material adverse effect on the Company’s financial position and results of operations, as well as damage its reputation.
Furthermore, given the Company’s merchant-customer concentration in highly regulated industries such as firearms, alcohol, and tobacco, changes in regulations affecting such merchant-customers or changes in retail customer sentiment and spending habits towards such industries is also likely to have a material adverse effect on the result of the Company’s operations.
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 their 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 transition 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.
Under most conditions, the Company’s officers, directors, and managers 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 their business could be impaired.
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 adoption of its direct payment system and its operations grow, they may need to hire a significant number of additional employees. This growth may place strain on their management and operations. The Company’s ability to manage growth will depend on the ability of their 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 their business plan could be adversely affected if they are unable to hire and retain qualified personnel as needed.
Infotouch is highly dependent on the efforts and abilities of its CEO, Harry Nass. The loss of its CEO 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 increasingly relies on information technology systems to process, transmit and store electronic information. The future success and growth of their 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’s have technology security initiatives and disaster recovery plans in place to mitigate their risks to these vulnerabilities, but these measures may not be adequate or implemented properly to ensure that their 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 their reputation, the loss of valuable business data, misappropriation of their 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 their business. Despite the Company’s existing security procedures and controls, if their networks were compromised, it could give rise to unwanted media attention, materially damage their customer relationships, harm their business, reputation, results of operations, cash flows and financial condition, result in fines or lawsuits, and may increase the costs they incur 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.
Infotouch’s ability to increase its revenue and grow its business is partially dependent on the widespread acceptance of their direct payment products and solutions by small businesses and other commercial organizations. Infotouch 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 Infotouch’s sales cycle for these customers from initial evaluation to payment for Infotouch’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 Infotouch’s offerings prior to adopting its offerings. The timing of Infotouch’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, Infotouch 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 obstacles placed by customers’ procurement process; economic conditions and other factors impacting customer budgets; the customer’s integration complexity; the customer’s familiarity with the proposed direct payment system, and evolving customer demands.
Infotouch will have to compete on the basis of price and performance with product offerings from other providers in the marketplace. The domestic market for Infotouch’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 Infotouch’s potential competitors have longer operating histories, substantially greater financial, technical, sales, marketing and other resources, established name recognition and a larger existing customer base.
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 disinterested 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.
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.
With a majority of the collateral consisting of payment intangibles, the disposition of such collateral may be difficult given, among other factors, the intangible nature and third-party credit risk related to such payment intangibles. Such difficulties mya result in increased expenses associated with the disposition of such collateral, and in turn, a lower return to the Investors, which may prove insufficient to repay the Notes.
As a result of the Company’s previous default under the Current Note, the Administrative Agent and the Company pursued a sale of substantially all assets of the Company, with the structure for such sale often accompanied by a promissory note from the purchaser, with little or no interest over a two year term. As such, Investors will likely have to rely on another party’s credit risk if a sale of the Collateral is pursued.
After the First Closing, management will have broad discretion to spend or invest the proceeds from this offering in ways with which new investors may not agree. Securities Laws will restrict the investors’ ability to transfer the
An investment in the Notes 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 Borrower 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 Loan Documents may be amended by a majority of the outstanding principal and without the affirmative consent of all Investors, but may include affiliates and employees of Infotouch or CFS as well as other parties with conflict of interest. As such, purchasers of the Securities shall carefully weigh how such governance mechanics may adversely affect them as it pertains to their willingness to purchase the Notes.
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.
There may be tax consequences associated with an investment in the Securities. No tax advice is being given herein with respect to the income tax consequences of an investment in the Securities and prospective investors are urged to consult, and must rely on, their own qualified tax advisors concerning the tax consequences of an investment in the Securities.
The foregoing risks, as well as other risks described in this Offering Summary 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 their 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 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:
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.
Fee Structure: CFS and Carofin will not receive any cash compensation for conversions of Current Note principal into the Exit Note, but will receive a cash fee equal to 6% of the Current Note principal converted into the New Note, payable at the First Closing from proceeds from new cash subscriptions for the New Note.
Administrative Agent: CFG Financial Services, LLC (“CFG FS”), an affiliate of CFS and Carofin will serve as administrative agent for the New Notes and Exit Note, enforcing certain rights of the Investors against the Company. 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 Company. 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, the Administrative Agent may often be conflicted in its role representing both the New Note and the Exit Note, as the interest of one note may be adverse to the interests of the other note. Once again, this conflict is often addressed by assigning different employees of the Administrative agent represent the interest of each note when such conflicts are presented.
Escrow Proceeds: Investments in the New Notes with bona fide investment intent from parties affiliated with the Company, CFS, or Carofin, and that therefore may have a financial interest in 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 New Notes as worthwhile.
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.
A Carofin representative will be in touch soon.
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 compliance@carofin.com 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 cgilmore@carofin.com
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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