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“Each share of Class A Preferred Stock is entitled to cumulative dividends which shall accrue, whether or not declared by the Board and whether or not there are funds legally available for the payment of dividends, on a daily basis in arrears at the rate of 10% per annum on the sum of the invested amount sum plus all unpaid accrued and accumulated dividends thereon.”— PPM p. 41
“ERC 1 is offering Class A Common Stock in this offering.”— PPM p. 39
“Each holder of ERC 1's Class B Common Stock is entitled to five votes for each share on all matters submitted to a vote of the shareholders.”— PPM p. 39
Automated checks across the fund's extracted PPM. Every finding is shown with the evidence it's based on — proven numbers or a verbatim quote and page.
Drafting defects found in the PPM prose — numeric inconsistencies, broken cross-references, unfilled placeholders, and defined-term problems. Each is shown with the offending quote and its page.
Preferred shares outstanding at Dec 31, 2022 are stated as 177,584 in Note 1 but 90,672 on the balance sheet and in Note 5.
“As of December 31, 2022 preferred shareholders owned 177,584 convertible preferred shares [...] Preferred stock, Class A: 8,333,333 shares authorized, 90,672 and 64,318 shares issued and outstanding, respectively”
Preferred dividend rate is stated as 10% per annum in the body but as 8 percent in the financial-statement equity notes.
“cumulative dividends which accrue on a daily basis in arrears at the rate of 10% per year [...] Class A preferred stockholders are entitled to a single vote per share and to an 8 percent annual dividend”
Auditor's report audits the balance sheet as of Dec 31, 2022 and 2021 but states the related statements cover the calendar year periods ended 2021 and 2020.
“which comprise the balance sheet as of December 31, 2022 and 2021, and the related statements of loss and comprehensive loss, changes in shareholders' equity, and cash flows for the calendar year periods ended 2021 and 2020”
Shares outstanding after the offering (2,608,968) cannot be reconciled with 131,898 outstanding before plus the up-to-5,000,000 shares offered.
“Class A Stock Common outstanding before the offering 131,898 shares of Class A Common Stock. [...] Class A Common Stock outstanding after the offering 2,608,968 shares of Class A Common Stock”
Unfilled bracketed placeholder for the sales commencement date shipped in the offering circular.
“Sales of these securities will commence on [__________], 2023.”
Same name-change event is dated December 3, 2020 in the Summary but December 3, 2021 in The Company's Business section.
“subsequently changed its name to ERC Communities 1, Inc. on December 3, 2020. ERC 1 is a subsidiary [...] subsequently changed its name to ERC Communities 1, Inc. on December 3, 2021. ERC Communities 1 is a subsidiary”
Zephyrhills 2 is described as a 60-unit site in prose but listed as 58 units in the statistics table and elsewhere as 58-lot/58 unit.
“a 60-unit site adjacent to the existing site ('ERC Zephyrhills 2') was acquired in September 2022 [...] Intended Number of Units on the Property 60 58 65”
Broken sentence in the forum-selection clause omits the state name: 'the Court of Chancery in the State of or alternatively...'.
“provides that the Court of Chancery in the State of or alternatively if that is not enforceable competent federal courts in the State of Delaware are the exclusive forums”
Questions a standard diligence questionnaire would ask that the PPM leaves unanswered.
The offering documents don't answer a standard institutional DDQ question (Governance). An allocator will ask this directly — the GP should be ready with an answer.
The offering documents don't answer a standard institutional DDQ question (Economics). An allocator will ask this directly — the GP should be ready with an answer.
The offering documents don't answer a standard institutional DDQ question (Economics). An allocator will ask this directly — the GP should be ready with an answer.
The offering documents don't answer a standard institutional DDQ question (Economics). An allocator will ask this directly — the GP should be ready with an answer.
The offering documents don't answer a standard institutional DDQ question (Governance). An allocator will ask this directly — the GP should be ready with an answer.
The offering documents don't answer a standard institutional DDQ question (Economics). An allocator will ask this directly — the GP should be ready with an answer.
The offering documents don't answer a standard institutional DDQ question (Structure). An allocator will ask this directly — the GP should be ready with an answer.
The offering documents don't answer a standard institutional DDQ question (Economics). An allocator will ask this directly — the GP should be ready with an answer.
How much of a standard institutional due-diligence questionnaire this fund's offering documents answer out of the box. Gaps are questions an allocator will ask directly.
What allocators are saying. Diligence notes, open questions, attached scenarios.
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