Confidential
Private Placement Memorandum
Disclosure Document For
Common Stock Offering
$10.00 per Share
Sales Commission: 10%
Minimum Shares: 5,000
Total Proceeds: $50,000
Maximum Shares: 100,000
Total Proceeds: $ 1,000,000
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Investment in a small business is often risky. You should not invest any funds in this offering unless you can afford to lose your entire investment. See "Risks" for a discussion of the risk factors that management believes present the most substantial risks for you The date of this disclosure document is November 25, 2002. |
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Executive Summary The Western North Carolina Real Estate Fund (The Fund) is to acquire Buncombe County Property ID # 9750.17-01-5921 for a cost of $529,000. The property includes 2.71 +/- acres of land with 7 BR/4 BA Bed & Breakfast Lodge and a detached two car garage. The property is to be leased to the Oasis Mountain Wellness Center (OM) for $1.20 per share annually. This landlord/tenant relationship will preserve investor equity in the real estate from any liability associated with OM, a holistic wellness program also offering substance abuse treatment. OM intends to offer a holistic substance abuse treatment program with a focus on meditation, exercise, nutrition and alternative therapies teaching life skills without toxic substances. OM plans to charge $3,950 per client, inclusive per week, potentially billable to health insurance, and expects to accommodate approximately no more than 14 clients per session. The program is to be licensed by the North Carolina Department of Mental Health as an intensive outpatient program with on-site supervised living accommodations and will initially focus on a niche target market of repeat DUI offenders. Under current NC law, a second time offender may receive day for day credit for residential treatment against the required 7-day minimum incarceration. The 3 state run facilities only offer 12-step, traditional 28-day programs. Marketing for OM will commence with direct mail to DUI offenders generated from an Internet-based court record search engine. Names and addresses can be provided within 24 hours of the DUI charges. In addition extensive promotion of the OM website through print and electronic media is already in process. The program will be implemented by a highly qualified staff. This “Life Coach” staff will be assisted by local Asheville medical doctors, psychologists and other health professionals who will offer individual and group therapy, as well as conduct staff training and supervision. The Fund, as the new property owner, will exist as a conduit for the
rental income to the investors. The CEO and CFO for The Fund will be
responsible for the collection of rents through a property management
agreement with The Real Estate Group of Asheville, where they are both
licensed NC Real Estate Brokers. The Fund is a development stage company
and has never conducted operations. |
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Chief Executive Officer: Art Carter The Offering The underwriting member NASD/SIPC investment banking firm will be: Three
Arrows Capital Corp., 7517 Westfield Dr., Suite A, Bethesda, MD
20817 Les Smith, Registered Representative, will be the Sales Person of Record. Only licensed stockbrokers of cooperating member NASD/SIPC firms will be permitted to sell the stock. The offering will be limited to any certain purchasers and the transfer of shares will be restricted. The offering will initially only be available for sale in North Carolina. There will be a minimum impound of $50,000. NOTE:
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TABLE OF CONTENTS General Description of the Business Suppliers Customer Sales and Orders Competition Marketing Employees Properties Research and Development Government Regulation Company History and Organization Selected Financial Information Management’s Discussion & Analysis of Certain Relevant Factors Description of Securities Offered How These Securities Will be Offered and Sold Management Outstanding Securities Management Relationships and Transactions Additional Information List of Exhibits The most significant risk to the investors will be the potential inability to raise the $529,000 required by the real estate offer to purchase and contract of sale. If required at closing, The Fund is in negotiation with several FDIC commercial lending institutions for backup conventional financing to supplement the offering. Since The Fund is organized to acquire suitable property to house OM, it may be necessary to locate an alternate facility. Under the current agreement with the property seller, The Fund has no risk in the forfeiture of earnest money deposits. Also, per contract, the risk of loss or damage by fire or other casualty prior to closing shall be upon the seller. After closing, and per the terms of the lease, all property, casualty, and liability insurance premiums shall be paid by OM, the tenant. In the event OM cannot meet the scheduled rent payments, The Fund may be forced to either locate a new tenant or sell the real estate. The business of the company is the acquisition of property and the leasing of that real estate for the purpose in producing income. The property selection is based upon a professional feasibility analysis and by the qualifications of the corporate officers. Collection of rent from OM will be through a property management agreement with The Real Estate Group of Asheville where both the CEO and CFO are licensed Realtors. The company has no major supply contracts and is not dependent upon a limited number of suppliers. The CEO and CFO are both members of the Asheville, NC Board of Realtors and the property was chosen through the Board’s Multiple Listing Service. The Company was not limited to, or intends to be limited to, properties listed with member firms; however, by management agreement, all real estate transactions will be handled through The Real Estate Group of Asheville. The company does have a proposed contract of sale for the purchase of the target property at the listing price of $529,000 and an executed lease with OM for the annual rent of approximately $1.20 per share annually. Under the property management agreement with the Real Estate Group of Asheville, a customary fee of 10% of the gross rent will be deducted for services rendered. The remainder will be disbursed to The Fund There are both private and state owned companies that lease property to substance abuse treatment facilities in North Carolina. Many are religious oriented, and most are non-profit enterprises. The Fund will compete as a "for profit" public entity with a professional, holistically oriented, psychologically based tenant. Traditional marketing activities for a company involved with income producing properties are through advertising for suitable real estate and tenants. Since The Fund has the specific purpose of locating a suitable property for OM, property selection was achieved without the expense of advertising by utilizing a network of commercial members in the confidential Multiple Listing Service. Through the contracted arrangement between Ed & Milli Adams (the property owner); Connie Munden, the Listing Agency, and the Real Estate Group of Asheville, Buyer Agency, compensation to the real estate brokers will be paid by the seller at closing and will not be an expense charged to The Fund. The company currently has no employees and all operations, including clerical, administrative, and property management, will be handled on a contract basis. The company is not involved with any collective bargaining arrangements of labor unions. The company does not currently own any real estate assets but intends to purchase property and lease the real estate to OM for the purpose of producing income for The Fund. The Real Estate Group of Asheville has absorbed all research and development expenses for The Fund and will be compensated through real estate commissions at closing and subsequent property management fees. The Real Estate Group of Asheville as licensed by the NC Real Estate Commission will handle the business of acquisition, property management, and divestitures. Three Arrows Capital, member NASD/SIPC, will handle the business of investment banking. The Securities Division of the respective Secretary of State’s Office regulates member firms on a federal level by the Securities and Exchange Commission and on a state level. Substance Abuse Treatment will be the business of the tenant and will be regulated by the North Carolina Department of Mental Health. "The Fund" will not be required to have a permit for any of these activities since they will be addressed through a contractual relationship. The primary material event in the development of the company was the introduction of Les Smith to a unique approach of general wellness at Desert Canyon a treatment facility in Sedona, Arizona, licensed by the Office of Behavioral Health, Arizona Department of Health Services. Smith envisioned the concept of purchasing real estate through a securities offering to own and lease property to a holistic facility to be located in Western North Carolina. Smith, as a broker with the Real Estate Group of Asheville, located the suitable property in the MLS, created "The Fund" to own the real estate, and negotiated the contracted sales price of $529,000. An affiliated tenant entity, OM, will operate as a separate entity from The Fund. In addition to insulating the investor’s equity in the property, the landlord/tenant relationship will also preserve the independence of OM from majority stockholder controls. The rent generated from the activities of OM with a highly qualified staff will be reflected as the primary source of income to The Fund. A preliminary draft proposal for the securities offering was submitted to several Securities Broker/Dealers for due diligence, and Three Arrows Capital was awarded the underwriting. Smith will be a registered representative of the firm for regulatory compliance purposes. Smith chose the Reg. D. Private Placement Memorandum ("PPM") Offering format to serve as a vehicle for the corporate finance. Since syndication expenses for full SEC registration may ultimately dilute the stock value, the reduced cost for a "PPM" Offering as a $1,000,000 size underwriting appeared to be in the best interest of the investors. No stock splits, recapitalizations, mergers, acquisitions, or reorganizations have occurred, are pending, or will be anticipated. Transfer of rental income form OM to the shareholders will be in the form of dividends; however, only in an amount as to not dilute the stock. No spin-offs of this venture are anticipated; however, new entities may be formed in other states as additional opportunities arise. During the 12 months following receipt of the offering proceeds, management intends to maintain profitability by consulting with the tenant regarding improvements to existing structures and additional land development. Up fitting may include an improved fire alarm system, renovating the garage for office and meeting space, the addition of a parking lot, and addressing other issues with regard to compliance with state and local ordinances. This should occur as shares are sold to cover the cost of improvements above and beyond the property acquisition price less the investment banking fees. Assuming a regular increase in property values over time, coupled with future improvements to the real estate, the effect should be an enhancement to stock values. Note:
The Company cannot use the proceeds of this offering unless an impoundment of $50,000 is exceeded. At that point, the funds will be considered a refundable earnest money deposit towards the property targeted for acquisition. Once the minimum capital is raised, the additional offering proceeds, less offering expenses, will be escrowed until a real estate closing has occurred. Legal, accounting, copying, advertising, due diligence, and other expenses will be paid out of the gross commissions and finders fees. In the event that insufficient capital is raised to meet the $529,000 offer to purchase and contract of sale in the allotted 90 days for acceptance by the seller, The Fund may request for an extension from the seller, a lease with the option to buy and/or apply for conventional financing to complete the transaction. In the event that a commercial lender is required, The Fund will accept a subordinated second position on the real estate and make the mortgage payments from the rental income. This factor may reduce the dividends to the investors for the period of the loan. In the event that conventional financing cannot be secured to make-up any deficit in the capital raise, and the seller exercises the right to terminate the contract of sale, the officers of the company will attempt to locate an alternate property suitable for the tenant.
The Company cannot use the proceeds of this offering unless an impound of $50,000 is exceeded. At that point, the funds will be considered a refundable earnest money deposit towards the property targeted for acquisition. Once the minimum capital is raised, the additional offering proceeds, less offering expenses, will be escrowed until a real estate closing has occurred. Legal, accounting, copying, advertising, due diligence, and other expenses will be paid out of the gross commissions and finders fees. In the event that insufficient capital is raised to meet the $1,000,000 offer to purchase and contract of sale in the allotted 90 days for acceptance by the seller, The Fund may request for an extension from the seller and/or apply conventional financing to complete the transaction. In the event that a commercial lender is required, The Fund will accept a subordinated second position on the real estate and make the mortgage payments from the rental income. This factor would reduce the dividends to the investors for the period of the loan. In the event that conventional financing cannot be secured to make-up any deficit in the capital raise and the seller exercises the right to terminate the contract of sale, the officers of the company will attempt to locate an alternate property suitable for the tenant. Note:
NOTE: Since this is a start-up venture, there are no gross or net after-tax earnings or losses for the last fiscal year. No preferred stock, options, or securities other than the authorized 100,000 shares of common stock are to be issued by The Fund. The par, or stated value, of the shares is $10.00 each. Prior to the offering, the company has no assets and therefore there is no net tangible book value for the stock. The management has no options to exercise and will pay the same price per share as the public. The $10.00 per share price of the securities in this offering is determined by the acquisition cost for the real estate of $529,000, improvement and expansion expenses of $371,000, plus the offering expenses of $100,000, divided by the 100,000 shares of common stock authorized. Using the offering price of these securities, the management is attributing a value to the entire company of $1,000,000. If only the minimum offering of 5,000 shares or less is achieved, no offering expenses will be deducted and each share purchased will have a net tangible book value of $10.00. If the offering exceeds the minimum, then a 10% securities commission will be deducted from the impounded funds, and will continue to be deducted on a per share sold basis, until the maximum offering of 100,000 shares is achieved. The difference between the amounts a purchaser pays for a share and the amount of net tangible book value that share represents is the dilution to the purchaser. Since the total offering expenses are included in the 10% securities commissions, and there are no existing stockholders prior to the offering, after the minimum each share will have a net tangible book value of $9.50. It will take the sale of 52,900 shares authorized for the $1,000,000 offering to pay the contracted $529,000 for the real estate. NOTE: Management’s Discussion Since, prior to the offering, the company has no assets or liabilities, it has no cash flow or liquidity problems. The company is not in default of the terms of any note, loan, lease, or other indebtedness of financing arrangement requiring the company to make payments. None of the company’s trade payables are more than 90 days old, nor is the company subject to any unsatisfied judgments, liens, or settlement obligations. The company has no loss from operations since the company has no historical operating results. In the opinion of management, there are no obvious changes now occurring in the underlying economics of the company’s business which will have a significant impact upon the company’s results of operations within the next 12 months. If less than the maximum number of shares are sold, then the available funds will not satisfy the company’s cash requirements for the 12-month period following receipt of the proceeds. In this event, the company will first seek conventional financing to supplement the offering for the purchase of the real estate and make the mortgage payments from the rental income. In the event that insufficient capital is raised to qualify for conventional financing, then The Fund will attempt to locate a suitable alternate property. The securities being offered are common stock. These securities have no cumulative or other special voting rights, no preemptive rights to purchase any new issue of shares, no preference as to dividends or interest, no preference upon liquidation, no anti-dilution rights, and no other special rights or preferences. The securities are not convertible. There are restrictions on the resale of the securities. The offering will be a Private Placement to North Carolina Residents. (See Legends in Exhibits). Preferred Stock Debt Securities Ratio of Earnings to Fixed Charges
NOTE:
How These Securities Will Be Offered and Sold
The only officer of the company that intends to offer or sell these securities is Les Smith, 10 Spruce St., Asheville, NC 28801. Phone: 803-831-2894 Email: leesmithjr@prodigy.net The only compensation that Smith will receive for selling the stock will be 50% of the selling concession for each share received by the investment banking firm, Three Arrows Capital, Member NASD/SIPC, and only after the minimum shares have been sold. Other Sales Persons and Finders The only other sales persons or finders that may receive compensation will be licensed stockbrokers with member NASD/SIPC firms that have an approved selling agreement with Three Arrows Capital. The commission split will be negotiable between the broker/dealer firms and Three Arrows Capital, but the gross selling concession will not exceed the 10% as stated in this memorandum. The offering is not limited to certain purchasers or subject to any purchaser limitations. The company will impound the proceeds of the offering until it raises the minimum offering proceeds. The minimum amount of proceeds that the company must raise and place in an escrow account before the company can receive and use the proceeds is $50,000. If the company has not raised the minimum amount of proceeds, the offering will end in one year from the date of this disclosure document, or November 25, 2003. The company may reserve the right to extend the impoundment period if the company has entered into a contract of sale for an alternate property. The impound agent shall be at the discretion of Three Arrows Capital., 7517 Westfield Dr., Suite A, Bethesda, MD 20817. Any interest earned during the duration of escrow will be paid if the offering proceeds are returned to the investors at the end of the impound period. An account has been established for this purpose at the Mountain Bank and Trust in Asheville, NC. Chief Executive Officer and Chief Operations Officer:
Mr. Carter is currently Broker-In-Charge of The Real Estate Group of Asheville. He is actively involved in commercial and industrial property management and land development. He also has over 20 years of experience in brokering transactions for high net worth individuals, closely held corporations, and local government. He is active in The Asheville Chamber of Commerce, The Rotary Club, and numerous other civic and charitable organizations. Art is originally from New Orleans, and graduated from Louisiana State University in Baton Rouge with a B.A. Degree in Accounting. Chief Financial Officer and Recording Secretary: Mr. Smith is a Commercial Broker with the Real Estate Group of Asheville and is also licensed for Property, Casualty, Liability, Life and Health Insurance as an Independent Agent. He also has over 10 years of experience in the syndication of securities offerings. He has passed the NASD Series 7, 24, and 63 exams to conduct general stockbrokerage and can serve as a registered principal for a member Broker/Dealer. Les attended Wofford College in Spartanburg, South Carolina on a full academic scholarship, and graduated with a B.A. double major in both Philosophy and the Humanities. The officers appoint the 2 directors for the company.
The names and titles are: Consultants
Other Key Persons
The Officers and Directors will be required to enter into a standard non-compete agreement and remain with the company for the duration of their tenure within the limits of the contractual property management agreement between The Fund and the Real Estate Group of Asheville. The company intends to fund the premiums for key man life, health and disability insurance from the rental income, and any replacements will be chosen by the surviving officers and directors. Life insurance face amounts will be for $100,000 each and disability income will be for $10,000 per year each. The insureds will be the owners of the policies and the company will be the beneficiary. No direct compensation has been paid, or intends to be paid, by the company to the officers, directors, or key persons, other than for key man life and disability insurance premiums. The officers and directors are both licensed brokers with The Real Estate Group and will derive their compensation from a property management agreement with The Fund in the amount of 10% of the gross rent from OM, or $0.06 per share annually each for Art Carter and Les Smith. Also, Art Carter and Les Smith will participate in the real estate commissions paid by the seller to Connie Munden for half of her 10% from the gross sales price at closing. This is anticipated to be no more than $13,225 each for Carter and Smith. Art Carter and Les Smith represent over 30 years of combined experience with real estate acquisitions, start-up and development stage enterprises, syndications, and property management. Insolvency No petition for bankruptcy, receivership, or similar insolvency proceedings have been filed against any officer, director, or key person of the company within the last five years, or longer if material; nor has any officer director or key person been an executive officer, director, or in a similar management position for any business entity that was the subject to a petition for bankruptcy, receivership or similar insolvency proceedings within the past five years, or longer if material. Criminal Proceedings No officer, director, or key person is the subject of a pending criminal proceeding, excluding traffic violations or other minor offenses. Les Smith is required to report on NASD Form U-4, as a matter of compliance for securities, an $18 check that bounced to a grocery store in 1993. His lawyer never informed him of the court date. This has never affected his licensed status or continuity of registration and is simply a disclosure. Civil Proceedings No officer, director, or key person has been the subject of a court order, judgment or decree in the last five years related to his or her involvement in any type of business, securities, or banking activity. Les Smith is currently pending arbitration regarding a personal credit card charge on his account in an amount of less than $2,000. Otherwise, no officer, director, or key person is the subject of a pending civil or action related to his or her involvement in any type of business, securities, or banking activity; nor has any civil action been threatened against any officer, director, or key person related to his or her involvement in any type of business, securities, or banking activity. Administrative Proceedings No government agency, administrative agency, or administrative court has imposed an administrative finding, order, decree, or sanction against any officer, director, or key person in the last five years as a result of his or her involvement in any type of business, securities, or banking activity; nor is any officer, director, or key person the subject of a pending administrative proceeding related to his or her involvement in any type of business, securities, or banking activity; nor has any administrative proceeding been threatened against any officer, director, or key person related to his or her involvement in any type of business, securities, or banking activity. Self-Regulatory Proceedings No self-regulatory agency has imposed a sanction against any officer, director, or key person in the last five years as a result of his or her involvement in any type of business, securities, or banking activity; nor, is any officer, director, or key person the subject of a pending self- regulatory organization proceeding relating to his or her involvement in any business, securities, or banking activity; nor have any self-regulatory organization proceedings been threatened against any officer, director, or key person related to his or her involvement in any type of business, securities, or banking activity. Note:
General Dividends, Distributions, and Redemptions The Fund intends to pay, at least, annual dividends generated by the net rental income by the lease of property to OM. The net rental income to be paid as dividends to the investors is to be the gross lease amount of $1.20 per share annually, less any mortgage payments, less 10% for property management fees, and less any unforeseen, incidental or miscellaneous expenses regarding the operations of The Fund. No expenses are anticipated for office space, salaried employees, or major costs normally associated with real estate enterprises since these amounts are already included under the operating budget for The Real Estate Group of Asheville. Options and Warrants Sales of Securities Principal Stockholders
Management Relationships and Transactions The company will not use any offering proceeds to acquire assets from any officer, director, key person or principal stockholder; nor will the company use any offering proceeds to acquire assets from an associate of any officer, director, key person, or principal stockholder. The company will not use offering proceeds to reimburse any officer, director, key person, or principal stockholder for services already rendered, assets previously transferred, or moneys loaned or advanced, or otherwise. The company has not made loans to any officer, director, key person, or principal within the last two years, nor does it plan to in the future. The company does plan to do business with the officers and directors of the company currently and in the future. In order to avoid conflicts of interest, the The Fund will contract with the Real Estate Group of Asheville to provide property management services for 10% of the gross rental income. The officers and directors are licensed brokers with the Real Estate Group and will conduct activities on behalf of The Fund in accordance with the standards and procedures as set forth by the National Association of Realtors. No officer, director, or key person has ever guaranteed or co-signed the company’s bank debt or other obligations. The company is not subject to, or threatened by, any pending litigation or administrative action which has had, or may have, a material effect upon the company’s business, financial condition, or operations. There are no material tax consequences to investors in this offering. Distributions are expected to be taxed as ordinary income unless paid to a custodial for a qualified pension account. There are no other material factors, either adverse or favorable, that will or could affect the company or its business or which are necessary to make any other information in this Disclosure Document not misleading or incomplete. The company intends to provide the stockholders with both quarterly and annual reports, including financial statements, and copies of all press releases relating to the activities of the tenant. Prior to the receipt of proceeds of the offering, the company has no assets, liabilities, income, or expenses to report. The Company’s Chief Executive Officer, Chief Financial Officer, and its directors represent by signing this disclosure document that they have diligently attempted to confirm the accuracy and completeness of the information in this Document. The Chief Financial Officer represents by signing this Document that the financial statements have been prepared in accordance with generally accepted accounting principles which have been consistently applied, except where explained in the notes to the financial statements. He represents that the financial statements fairly state the company’s financial position and results of operations, or receipts and disbursements, as of the dates and periods indicated. He also represents that year-end figures include all adjustments necessary for a fair presentation under the circumstances. Art Carter, __________________________________ Les Smith,
Financial Statements
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Lee Stanley "Les"
Smith, Jr.
6 Hickory Nut Lane,
River Hills Plantation
Lake Wylie, South Carolina 29710 U.S.A.
Home Phone 803-831-2894
Email: leesmithjr@prodigy.net
P E R S O N A L
Les Smith is a licensed broker for stocks, bonds, mutual funds, real estate, and all lines of insurance. You can find a photograph at his Website: http://www.geocities.com/lessmith/mypage.html
E D U C A T I O N
B.A., Philosophy & Humanities, Wofford College, 1982. Full Academic Scholarship.
Salutatorian, Clover High School, 1978. Appointed to Governor’s Youth Advisory Council and S.E. United States Representative to National Student Government.
E M P L O Y M E N T
Investments: 1986-Present
Registered Principal for General Securities. Specializing in
Corporate Finance, Underwriting Compliance, Private Placement
Syndication and Due Diligence.
Real Estate: 1984-Present
Commercial and Investment Realtor. Specializing in Acquisition
and Management for Income Producing Properties and Sales for Land
Development.
Insurance: 1982- Present
Independent Agent for Property, Liability Life & Health
Coverages. Specializing in Risk Management, Estate Planning and
Pension Alternatives for Retirement.
Interests & Activities
· Musician, Poet and Metaphysician.
· Skiing, Golf, Tennis and Harley-Davidson Motorcycles.
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Les Smith's Securities Affiliations and Related Underwritings 06/1996-01/2000
08/1995-06/1996 Ameriprop, Inc., Melville, New York.
01/1995-06/1995
08/1993-01/1995
01/1993-06/1993
01/1992-12/1992
07/1990-12/1991
05/1990-07/1990
08/1989-05/1990
01/1990-04/1990
Earle E. Morris, Jr. Jesse Townsley Art Carter |