DNP Leasing Company, LLC (the “Borrower,” or “DNP Leasing”) is issuing up to $3,000,000 of 14.00% Secured Promissory Notes (the “Offering,” “Notes,” or “Securities”) to finance the purchase of freezers to expand the distribution of PROOF Hard Ice Cream, a registered trademark of Liquorem Holdings II, LLC (“PROOF”).
These returns cannot be guaranteed
AN INVESTMENT IN THESE PREFERRED INTERESTS IS SPECULATIVE AND IS SUITABLE ONLY FOR PERSONS OF SUBSTANTIAL FINANCIAL MEANS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT AND HAVE NO NEED FOR LIQUIDITY IN THIS INVESTMENT. RETURNS CANNOT BE GUARANTEED.
Regulatory limitations on direct freezer leasing from PROOF to retailers create a bottleneck, hindering PROOF- one of the first movers- in capturing more of the $881mm gourmet food and beverage market.
DNP Leasing allows PROOF to expand into new markets, avoid regulatory bottlenecks, and keep expenses low.
Cocktail-Inspired Gourmet Ice Cream
Proprietary Production Methods
Extensive Supply Chain and Distribution
Current distribution of PROOF Hard Ice Cream (in red)
A Gourmet Product Creates a New Niche
Tipsy Scoop
Limitations:
Buzzed Bull Creamery
Limitations:
The preceding financial projections reflect the Borrower’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 Borrower’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 Borrower’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.
This Term Sheet summarizes the principal terms of the Secured Promissory Notes (the “Notes”) of DNP Leasing Company, LLC, a North Carolina limited liability company (the “Issuer”). Terms capitalized but not defined herein shall have the meaning assigned to them in the Issuer’s closing documents, which may include but not be limited to the Issuer’s (i) Loan and Security Agreement, (ii) Secured Promissory Note, (iii) Subscription Agreement, and (iv) Administrative Agent Agreement (together, the “Loan Documents”).
Up to $3,000,000 of 14.00% Secured Promissory Notes (the “Offering” or “Notes”) are being issued by DNP Leasing Company, LLC (The “Issuer”, “Borrower” or “DNP Leasing”) through one or more tranches (each a “Tranche” and together the “Tranches”) to finance the acquisition of freezers necessary for the expansion of Liquorem Holdings II, LLC’s (“PROOF”) into Illinois.
DNP Leasing Company, LLC
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 DNP Leasing Company, LLC, representing the sole and senior indebtedness of the Issuer, issued in one or more Tranches.
Up to $3,000,000 of Notes in the aggregate, with the first Tranche (the “Tranche I Note”) targeting up to $1,000,000.
The proceeds from the Notes will be used to (1) purchase and lease out assets necessary for PROOF Hard Ice Cream to expand sales and distribution in Illinois and other states, (2) establish a cash reserve, (3) pay offering and administrative expenses.
The minimum investment amount for an investment in the Notes will be $30,000, subject to exception by the Issuer.
Approximately 36 months following the issuance of each Tranche, with the Tranche I Note maturing on June 30th, 2027.
An initial closing of the Tranche I Note is targeted to occur by June 30th, 2024 with additional Tranches to be issued at the discretion of the Issuer through June 30th, 2026 (the “Issuance Period”).
The Notes will pay investors an annual interest rate equaling 14.00%. Each payment will be due on the first day of each month or, if occurring on a weekend or holiday, on the next business day.
Each Tranche shall have a 6-month interest-only period from the time of its issuance. Thereafter, 50% of each Tranche’s principal balance will amortize on a mortgage-style basis until that Tranche’s maturity date. 50% of the Tranche I Note shall begin amortizing with the payment due on January 1st, 2025.
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 14.00% interest as if each Tranche was held for a full year, based upon their original principal investment. Any and all prepayment shall be applied to all outstanding Tranches pro rata to each such Tranche’s outstanding principal amount.
The Notes will represent the sole and senior indebtedness of DNP Leasing, now or in the future. All Tranches will share such secured interest pro rata to each such Tranche’s outstanding principal amount.
Investors will have a first-priority perfected security interest in all assets of DNP Leasing, which shall include the Freezers and other equipment leased to PROOF.
The outstanding principal balance of the Notes shall not exceed the aggregate of (i) 100% of the purchase price of each Liebherr EFE-1152 Mini Ice Cream Merchandisers (each a “Freezer”), plus (ii) 80% of any other equipment purchased by the SPV and leased to Proof, plus (iii) the balance of the Interest Reserve Account, plus (iv) other cash reserves of DNP Leasing.
PROOF shall unconditionally guaranty the repayment of the Notes upon the occurrence of an Event of Default under the Notes.
The Borrower shall maintain an “Interest Reserve Account” for the benefit of the Investors. The Borrower shall retain up to 20% of proceeds from issuance of the Notes, up to an aggregate of $400,000, in such Interest Reserve Account but have full discretion to deploy the funds in such Interest Reserve Account after June 30th, 2025. Prior to such date, the funds in the Interest Reserve Account shall be used solely to fill any deficit between the Freezer lease payments and debt service.
If the Freezer lease payments are insufficient to cover the Borrower’s monthly debt service, the deficit will be made up (i) first from the Interest Reserve Account, (ii) then from PROOF’s working capital.
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.
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.
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 Borrower 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 Investors or an Event of Default no longer exists.
Each of the following events shall constitute an “Event of Default” under the Notes: (i) Failure by the Borrower 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 Borrower for relief under any bankruptcy or similar protection scheme; or (iv) The filing of an involuntary petition against the Borrower pursuant to any bankruptcy statute.
The Loan Documents may be amended by written consent of the Investors holding a Majority (i.e., 50.01%) 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 (iv) waive or release in writing any claim against or obligation of the Borrower.
Carolina Financial Securities, LLC (“CFS”), a FINRA-registered broker dealer, is the 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.
CFG Financial Services, LLC (the “Administrative Agent”), an affiliate of CFS, shall serve as administrative agent. The role of the Administrative Agent includes: ongoing representation of the Investors to the Borrower, custody of the Interest Reserve Account, oversight of Borrower compliance with all Loan covenants, processing of interest and principal payments from the Borrower to Investors, preparation and payment of all Regulation D filings (to be reimbursed by the Borrower) and other actions required in the administration of the Loan on behalf of the investors.
Beginning on the first day of the month following the issuance of the Tranche I Note, PROOF shall pay Carolina Financial Group, LLC (“CFG”, the “Manager” of the Borrower) a monthly management fee equal to the higher of (i) 2.0% of the outstanding principal balance of the Notes, or (ii) $1,500. Additionally, PROOF shall reimburse the Manager for any reasonable out of pocket expenses incurred in the management of the Borrower, such as tax preparation expenses.
This Offering may be surrounded by multiple conflicts of interest, which may include:
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, 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.
Management Fee: With the Manager, an affiliate of CFS and Carofin receiving a Management Fee for so long as the Notes are outstanding, an inherent conflict of interest may present itself as more management fee payments will be received the longer the Notes are outstanding. However, CFS and Carofin are often reliant on the repeat business of its investor base, and Notes that are long outstanding would represent an inability of that investor base to redeploy cash received from repayment of the Notes.
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.
For purposes of these Risk Factors, DNP Leasing and PROOF are referred to collectively as “Companies” given both their reliance on consumer demand for PROOF’s products.
The Companies have limited operational history and have a limited basis to evaluate their potential for future success.
PROOF was formed in 2018 and has, since then, been developing its products 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 PROOF is unsuccessful in addressing these risks and uncertainties, its business will be seriously harmed or may fail.
DNP Leasing will be organized immediately prior to the issuance of the Tranche I Note and will therefore have no operating history.
The Companies may not be able to successfully implement its business model.
The Companies are in the process of implementing their business model. They are still in the early stages of developing its business strategy, sales and implementation practices, technological capabilities, customer relationships and marketing focus. The Companies face 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 Companies may not be able to successfully implement its business model.
The Companies have generated limited revenues, have incurred only losses and may not become profitable in the future.
Since their inception, the Companies have generated limited operational revenues and have incurred only losses, principally from costs relating to research and development, legal expenses, and salaries and consulting fees. PROOF expects to continue to incur net operating losses for the foreseeable future. Their business model and strategies may not be successful and there is no assurance that the Companies will ever become profitable in any future period.
The Companies will require additional funding, which may not be available on favorable terms, or at all.
The Companies plans to continue to expend substantial capital in connection with the development of its products or sales process. If they fail to obtain the funding necessary to fund such development and to satisfy their working capital needs, the Companies may have to delay its plans and miss its market opportunities. The Companies’ current operating plan could change as a result of many known and unknown factors and may require additional funding. In addition, the Companies 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 Companies 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 Companies may be required to curtail operations significantly or even altogether. The Companies’ inability to raise capital on favorable terms could have a material adverse effect on their business, financial condition and results of operations.
The Companies may be held liable for the actions and errors of its management.
Under most conditions, the Companies’ 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 Companies 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 Companies’ assets could be reduced and their business could be impaired.
The Companies’ failure to expand its management systems and controls to support anticipated growth and to hire qualified personnel could seriously harm its business.
The Companies’ inability to manage its growth effectively could affect its ability to pursue business opportunities and expand their business. As the Companies increases the commercialization of its products 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 Companies’ ability to manage growth will depend on the ability of their officers and key employees to implement and improve the Companies’ operational, management information, sales and marketing and financial control systems and to expand, train and manage its work force. The Companies believe that competition for qualified technical, sales, marketing and managerial personnel will be intense. The Companies’ ability to implement their business plan could be adversely affected if they are unable to hire and retain qualified personnel as needed.
PROOF is highly dependent on management and other key employees.
PROOF is highly dependent on the efforts and abilities of its CEO, Jennifer Randall-Collins. 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 Companies rely significantly on the use of information technology. Any technology failures causing a material disruption to operational technology or cyber-attacks on their systems affecting their ability to protect the integrity and security of customer and employee information could harm their reputation and/or could disrupt their operations and negatively impact the Companies’ business.
The Companies increasingly rely 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 Companies’ 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 Companies’ control, including, but not limited to, natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers and other security issues. The Companies’ 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 Companies’ 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 Companies’ 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.
PROOF may be unable to scale its sales processes with increased adoption of its product offerings.
PROOF’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. PROOF 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 PROOF’s sales cycle for these customers from initial evaluation to payment for PROOF’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 PROOF’s offerings prior to adopting its offerings. The timing of PROOF’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, PROOF 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 PROOF’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 alcoholic ice cream, and evolving customer demands.
Changes in the social acceptability, perceptions and the political view of alcoholic products could adversely affect PRROF’s business.
In recent years, there has been an increase in public and political attention on health and well-being as they relate to alcohol based products due in part to public concern over alcohol-related social problems, including driving under the influence, underage drinking and exposure to alcohol advertisements, and health consequences from the harmful use and misuse of alcohol. Negative publicity regarding alcohol based products and changes in consumer perceptions in relation to alcohol based products could adversely affect the sale and consumption of PROOF’s products, adversely affecting PROOF’s business and financial results and DNP Leasing’s ability to lease the Freezers. Additionally, the concerns around alcohol, as well as health and well-being, could result in unfavorable regulations or other legal requirements in certain markets in which PROOF operates, such as advertising, selling, and other restrictions and/or increased taxes associated with PROOF’s sales. Any such regulations or requirements could change consumer and customer purchasing patters and may require PROOF to incur significant compliance costs, which could negatively affect impact its business and financial results.
PROOF’s products will compete for customers against other providers in the market. If PROOF cannot attract customers to buy its products, retailers would be unlikely to offer PROOF’s products and its business would suffer and you could lose your investment.
PROOF will have to compete on the basis of price and flavor with product offerings from other providers in the marketplace. The domestic market for PROOF’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 PROOF’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 PROOF by virtue of their existing sales channels and ability to create repeat business.
If PROOF fails to secure or protect its intellectual property rights, (the “IP”) competitors may be able to use its intellectual property, which could weaken PROOF’s competitive position, reduce its revenue or increase its costs.
PROOF 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 IP will be difficult and PROOF cannot be certain that the steps it has taken will prevent the misappropriation or unauthorized use of its IP, particularly in foreign countries where the laws may not protect its proprietary rights as fully as United States law. PROOF’s competitors may independently develop or may have already developed similar technology, duplicate PROOF’s products or design around its other intellectual property rights.
PROOF 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.
PROOF’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 PROOF 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. PROOF 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 Companies 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.
The disposition of the Collateral may be difficult, expensive, and insufficient to repay the Notes.
With purchased Freezers and other equipment representing a large share of the Notes’ collateral value, the disposition of such collateral may be difficult give, among other factors, the geographical spread of the Collateral’s location, the low cost per unit, and the unwillingness of purchasers to acquire used units. 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.
The Collateral has a specific nature and DNP Leasing may have difficulty finding alternative lessees of the Freezers.
The repayment of the Notes is highly dependent upon the leasing of the Freezers to retailers for the display and sale of PROOF’s products. In the event that such retailers do not wish to display and sell PROOF’s products, it may be challenging for DNP Leasing to find alternatives lessees for the Freezers or leases at the prices projected for the display and sale of PROOF’s products. Any Freezers which are not leased, or leased at a lower price than anticipated, will reduce DNP Leasing’s ability to repay the Notes.
A court of law may recharacterize the relationship between DNP Leasing and PROOF affecting the Investor’s ability to recover the Collateral.
All actions are being taken to have the transactions between DNP Leasing and PROOF constitute a true lease under the Uniform Commercial Code and therefore give DNP Leasing true ownership of the Freezers and other equipment and in turn, the ability to lease such equipment to other parties if necessary. However, any legal challenges to this position may treat the relationship between DNP Leasing as a secured transaction and therefore impair the Investors’ ability to dispose of the Collateral or pursue alternative lessees.
The repayment of the Notes is highly dependent upon future borrowing and the leasing out of additional Freezers to replenish the Interest Reserve Account and/or the creditworthiness of PROOF.
It is expected that lease payments will be unable to cover the expected debt service of the Notes until more Freezers are leased out and the income from such lease payments exceeds the required payments under the Notes. As such, DNP Leasing will be highly dependent upon future borrowings to purchase and lease out additional Freezers and replenish the Interest Reserve Account from the surplus of such lease income. If the Interest Reserve Account is insufficient to meet the expected debt service, DNP Leasing will then be reliant on the creditworthiness of PROOF to fulfill any deficit between the aggregate lease payments received by DNP Leasing and the required debt service to Investors. As such, all Investors should evaluate the creditworthiness of PROOF before purchasing the Notes.
Management will control the way in which the proceeds of this offering will be expended.
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 Securities or liquidate their investment.
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 without the consent of every single investor.
The Loan Documents may be amended by a majority of the outstanding principal under each Tranche and without the affirmative consent of all Investors, buy may include affiliates and employees of PROOF 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.
Any single aspect of the Companies’ 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.
Each Investor should review the general tax risks of an investment in the Notes.
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 Companies 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 Companies. As with any business entity, the Companies cannot predict with certainty all the possible challenges which may confront the Companies’ 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 Companies may occur in the future and have an adverse impact on the ability of the Companies 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.
Best Interest & Other 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 PROOF. The information contained herein has not been independently verified and is dependent on information provided by PROOF to Carolina Financial Securities, LLC.
Our firms seek to present vital capital with meaningful investment opportunities through the fundamental analysis of the businesses we seek to finance. Such analysis is usually conducted through a First Principles approach.
When we provide you with a recommendation, we have to act in your best interest and not put our interest ahead of yours. At the same time, the way we make money creates some conflicts with your interests. You should understand and ask us about these conflicts because they can affect the recommendations we provide you. Here are some examples to help you understand what this means:
Proprietary Products: 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, 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.
Management Fee: With the Manager, an affiliate of CFS and Carofin receiving a Management Fee for so long as the Notes are outstanding, an inherent conflict of interest may present itself as more management fee payments will be received the longer the Notes are outstanding. However, CFS and Carofin are often reliant on the repeat business of its investor base, and Notes that are long outstanding would represent an inability of that investor base to redeploy cash received from repayment of the Notes.
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 the Borrower, PROOF, 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 Borrower 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 Borrower, in its sole discretion, to incur costs, obligations or time delays disproportionate to the net proceeds the Borrower 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.
THIS OFFERING PACKAGE MAY CONTAIN MARKET AND INDUSTRY DATA THAT HAS BEEN OBTAINED FROM INDEPENDENT INDUSTRY SOURCES AND PUBLICATIONS, AS WELL AS FROM RESEARCH AND THIRD-PARTY AND GOVERNMENTAL REPORTS AND PUBLICATIONS PREPARED FOR OTHER PURPOSES. ALTHOUGH IT IS BELIEVED THAT THESE SOURCES ARE RELIABLE, THE DATA OBTAINED FROM THESE SOURCES HAS NOT BEEN INDEPENDENTLY VERIFIED AND THE ACCURACY OR COMPLETENESS OF THE DATA CANNOT BE ASSURED. FORECASTS OR FORWARD-LOOKING DATA OBTAINED FROM THESE SOURCES ARE SUBJECT TO THE SAME QUALIFICATIONS AND ADDITIONAL UNCERTAINTIES REGARDING THE OTHER FORWARD-LOOKING STATEMENTS IN THIS OFFERING PACKAGE.
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 Borrower 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 Borrower, in its sole discretion, to incur costs, obligations or time delays disproportionate to the net proceeds the Borrower 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 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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