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will not require liquidity in the investment.
Investors must be prepared for the possible loss of
their entire investment.
The offering memorandum then proceeded to discuss a number
of specific, and significant, risk factors associated with an
investment in San Nicholas. Among those risks, the offering
memorandum warned: (1) Research and development risks were so
great that an investment in San Nicholas should be considered
“highly speculative”; (2) the general partner had no previous
experience in dealing in jojoba; (3) there was no structured
market or distribution system for jojoba; (4) there were no
facilities dedicated to the processing of jojoba; (5) commercial
applications of jojoba are not extensive; (6) the general partner
had not conducted any market analysis or similar studies; (7)
there was no assurance of any increase in marketing or production
facilities or in the demand for jojoba; (8) in the absence of any
such increase, the production of jojoba might be unprofitable,
regardless of any technology that might be developed by the R&D
contractor; and (9) there was the likelihood of audit by the
Internal Revenue Service. Indeed, the discussion concerning the
tax risks associated with an investment in San Nicholas
constituted half of the section on “Risk Factors”.
The offering memorandum also included projections of
revenue, cashflow, and taxable income or loss. Investors were
warned, however, that those projections, which had been prepared
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