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for tax-advantaged investments, would be subject to Federal
income tax at a marginal rate of 50 percent.
The offering memorandum included a section entitled “Risk
Factors”, which was the single longest section. It began with a
general warning:
The purchase of the interests offered hereby
involves various risk factors. Investment in the
Partnership * * * involves an extremely high degree of
risk. Investors should consider carefully the various
risk factors set forth in this and other portions of
this Memorandum. Investment in the Partnership is
suitable only for persons of substantial financial
means who 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,
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