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We are now in the development phase, and in September of 2009 we will be in the training phase, of our business model. Our Current Assets will be racing in July or August of 2010, and we are seeking capital to train our Current Assets for a 9 to 12 month period. See business plan. We will use a corporate finance model to raise capital in order to accomplish our ambitious and challenging goals, mainly through the issuance of Preferred Shares (as defined herein) to private investors. INVESTMENT MODEL We have a corporate type of co-ownership structure. Our corporate model will facilitate an exit strategy for our investors. Also, we believe that our corporate model is the optimal investment model in the thoroughbred industry from the perspective of diversification of risk. A comparison of the industry’s syndicate model with our corporate model will demonstrate this point: The Syndicate Model The syndicate is the typical co-ownership structure in the thoroughbred industry. A syndicate consists of the sale of units of ownership in a specific thoroughbred asset, which are typically sold on a horse-by-horse basis. For instance, assume a thoroughbred management company offers for sale five units (each unit costing US$ 50,000) in horse A and horse B, with the cost base for each horse being US$ 250,000, and that an investor only purchases a share of horse A but not of horse B. Assume further that horse A does not win on the racetrack, but that horse B wins a graded-stakes race and becomes very profitable. In a syndicate, the investor of horse A is not entitled to receive profit from the earnings of horse B (in which he has no investment) to offset his losses on the investment in horse A, even though both horse A and horse B are likely owned and managed by the same company. The illogical flaw in the syndicate model is that it deprives investor A of the ability to diversify his risk of loss on the initial investment capital (e.g., US$ 50,000). To diversify such risk, such investor would have to buy a share (that is, invest US$ 50,000) in Horse B. We do not feel that this is an optimal means of investment. Our Corporate Model In contrast to the syndicate model, our co-ownership structure is more conducive to diversification of risk. Any shareholder in DARC will have an ownership interest in the Current Assets (as well as in each and every thoroughbred acquired, bred, or developed by the Des Amis Group), in a percentage commensurate with the ratio that his or her investment bears in relation to the issued and outstanding capital of DARC. In contrast to the above example, under our corporate model both investors would lose part of their investment on horse A but would share in the profits of horse B (albeit in different amounts if they had different ownership percentages). As a result, our corporate structure is much more investor-friendly and makes more sense from the vantage point of diversification of invested capital than the syndicate model's approach, since the same US$ 50,000 would allow such investor a proportional ownership interest in both horse A and horse B. These are some salient aspects of our corporate model:- · No horse syndications or mark-ups on our Current Assets. · Unlike in a syndicate, each investor has a proportional ownership interest in each of the Current Assets. · Unlike in a syndicate, no investor pays for costs and expenses on a monthly basis of our Current Assets. (In the absence of earnings, costs and expenses are paid from capital contributions, company loans from shareholders, or from preferred equity infusions, as the case may be).
OWNERSHIP OPPORTUNITIES We are no longer offering common shares in DARC to accredited investors. We are, however, offering for sale to accredited investors 200 redeemable, cumulative, preferred shares in DARC (US$ 2,500.00 per share) for a minimum investment of US$ 25,000.00 (“Preferred Shares”). The Preferred Shares will pay, annually, a cash-dividend of 12% on invested capital, provided that DARC has surplus earnings. Insofar as DARC does not have surplus earnings, the cash dividend arrears on the Preferred Shares will accumulate (and will be paid in the next quarter in which DARC has surplus earnings prior to any payment of earnings to DARC’s common shareholders). The Preferred Shares can also be redeemed ( i.e., re-purchased) at any time by DARC. To download a sample of our sale and purchase agreement for Preferred Shares, click here. EXIT STRATEGY The CEO intends to take DARC public when our horses are successful and the timing is right. For a discussion of our exit strategy, please see the relevant heading under the business plan for DARC. If our Current Assets do not perform commensurate to our expectations, they will be dropped into claiming races where they can be claimed (i.e., purchased) by third parties. |
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