VBASE SERIES SEED SERIES

OF VENTURESOUTH INVESTMENTS A LLC

Information Statement for Potential Members

May 2024

 

This Information Statement is intended to provide basic information regarding an investment in VBASE Oil Company Inc., a Delaware corporation (the “Company”), by certain members of VentureSouth. The investment will be made through a newly formed series of VentureSouth Investments A LLC, a Delaware series limited liability company (“VSA”), to be called the VBASE Series Seed Series.  As further discussed below, the investment opportunity is limited to “accredited investors.” Investments in early-stage companies are highly risky and you should review the section entitled “Risk Factors” below prior to making any investment.

Overview

 

Purpose and Structure of VSA

VSA was formed as a Delaware series limited liability company to facilitate investments made by members of angel groups affiliated with VentureSouth.  In connection with an investment in the Company, VSA will create a separate series under Delaware law called the VBASE Series Seed Series (the “Investment Series”).  Each person investing through VSA will be a member of the Investment Series (each such member, a “Member”), with such rights and obligations as are described in the Operating Agreement of VSA.  Members of the Investment Series will not directly own any equity or debt securities of the Company.    

 

Proposed Transaction

The Company is seeking to raise up to $2,000,000 in a Series Seed preferred equity offering. The price-per-share will be $10.628, which is based upon a fully-diluted pre-money valuation of approximately $11 million (which includes an increase in the available option pool to 3.7% and conversion of all outstanding convertible notes).

The Series Seed preferred shares will be entitled to a senior 1x non-participating liquidation preference and carry standard information rights, pro-rata investment rights in future rounds and broad-based, weighted average anti-dilution protection. The Company’s board shall consist of three members, including one seat appointed by VentureSouth as the lead investor.

The Investment Series will purchase Series Seed preferred shares pursuant to the amended Certificate of Incorporation, the Stock Purchase Agreement, and other related documents (collectively, the “Investment Documents”). Copies of the Investment Documents will be posted to the VBASE Deal Room in Venture360.

 

Membership

Membership in the Investment Series is limited to members of VentureSouth, which (among other things) requires that each Member be an “accredited investor,” as described below. 

 

Deposit of Funds

To facilitate the closing (the “Portfolio Investment Closing”) of the purchase of the Company’s securities by the Investment Series, VSA may request, and deposit, checks from interested investors in advance of such closing.  Prior to the Portfolio Investment Closing, VSA will return an investor’s funds if a written request from such investor is received a reasonable time prior to such closing.

Summary of Operating Agreement and Admission Agreement

 

The following is a brief overview of the VSA Operating Agreement and Admission Agreement.  Please read the full Operating Agreement and Admission Agreement prior to signing this important document.

 

Governance. VSA and each series of VSA, including the Investment Series, are managed by VentureSouth Capital LLC (the “Manager”).  The Manager is authorized, but not obligated, to seek the approval of the Members of the Investment Series in connection with decisions affecting such series.

 

Administrative Fees and Operating Expenses.  The Administrative Series will be compensated by the Investment Series for certain organizational and other services provided by the Administrative Series, and the Administrative Series will in turn compensate the Manager. Please review the Operating Agreement Section 3.8(a) and the Admission Agreement to the Investment Series to understand fully the extent and purposes of such compensation, and please note a proportion of the additional 4% capital contribution may be paid to the Manager for its ongoing administration of the Investment Series and supervision of the Company.

 

Non-reliance on Members, Directors and Others.  Each Member will expressly acknowledge that he, she or it is not relying on the advice of any Member of the Investment Series or any director, officer, agent or member of VSA or of the Manager, and that he, she or it waives any right to hold such individuals liable, except in cases of actual, intentional fraud on the part of such individuals.

Risk Factors

 

There are a number of risks associated with contributing capital to the Investment Series and making an indirect investment in the Company.  Below are some, but not all, significant risks to consider before deciding to become a Member of the Investment Series.  Investors should also review the due diligence materials available in the Venture360 deal room. 

 

Only those investors who can afford to lose every dollar invested should consider becoming a Member of the Investment Series and making the proposed indirect investment in the Company.  

 

You Must Rely Solely on Your Own Business Judgment  Prospective Members of the Investment Series must decide for themselves the merits of an investment in the Investment Series, and should not rely on any advice, opinions or other information given by members of VentureSouth, other Members of VSA, the Manager, or any officers or directors of the Manager. As a condition to becoming a Member of the Investment Series, the Operating Agreement of VSA requires each Member to waive any right such Member may have to hold others liable for advice, opinions or information, except in cases of actual, intentional fraud on the part of such other persons.  

 

General Risks of Angel Investing Investing in early-stage companies is highly risky.  Based upon research performed by the Angel Capital Association and other groups, it is likely that only a few investments will return more than the amount invested, if any amount is returned, and any such return will likely be after many years.    

 

Risks of Investing in the Proposed Transaction  Because Members will not own securities of the Company directly, Members will not have rights to enforce those obligations of the Company to the Investment Series.  In addition, VentureSouth Capital LLC as the Manager of VSA, has the authority to make decisions regarding the Investment Series and securities of the Company owned by it.  Each prospective investor in the Investment Series should carefully review the related Investment Documents with such investor’s legal, tax and investment advisors.  Under Delaware law, a separate series within VSA (such as the Investment Series) is generally not liable for the liabilities or obligations of VSA or any other series within VSA.  It is possible that the courts of another state may not recognize the separate nature of each series and therefore attempt to assert the liabilities and obligations of VSA or another series against the Investment Series.

 

To the extent interests in the Investment Series are deemed securities, they have not been registered under the Securities Act of 1933 or any applicable state securities laws.  Neither the Securities and Exchange Commission nor any state regulatory authority has approved or disapproved the interests or the terms of participation in the Investment Series, or determined if this Information Statement is truthful or complete. It is illegal for any person to tell you otherwise.

Eligibility

Only persons who are “accredited investors” within the meaning of Regulation D under the federal Securities Act of 1933 are eligible to become Members of the Investment Series.  In general, the following individuals and entities would be considered accredited investors:

 

• An individual with income (exclusive of any income attributable to his/her spouse) of more than $200,000 in each of the two most recent years or joint income with his/her spouse in excess of $300,000 in each of the two most recent years, with a reasonable expectation to reach the same minimum income level in the current year; or
• An individual with a net worth (which may be combined with his/her spouse) in excess of $1,000,000[1]; or
• An individual who holds in good standing a Series 7, 65 or 82 license.
• A corporation, partnership or other entity not formed for the specific purpose of investing in the Investment Series, and which has total assets in excess of $5,000,000; or
• A corporation, partnership or other entity in which all of the equity owners are “accredited investors.”

______________________________________ 

 [1]   For purposes of calculating net worth:  (i) the person’s primary residence should not be included as an asset; (ii) indebtedness that is secured by the person’s primary residence, up to the estimated fair market value of the primary residence at the time of the sale of securities, should not be included as a liability (except that if the amount of such indebtedness outstanding at the time of the sale of securities exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of the primary residence, the amount of such excess should be included as a liability); and  (iii) indebtedness that is secured by the person’s primary residence in excess of the estimated fair market value of the primary residence at the time of the sale of securities should be included as a liability.

 

Tax Consequences

 

It is anticipated that VSA and the related Investment Series will be taxed as a partnership under present federal income tax law, and Members will therefore be taxed as partners.  Accordingly, each item of partnership income, gain, loss, deduction or credit of the Investment Series will be allocated to the Members in the manner provided by the Operating Agreement of VSA and must be reported by the Members on their personal income tax returns.  

 

The application of federal and state income tax laws is highly complex and this very brief summary is not intended to be tax advice.  Each Member should consult such Member’s own tax advisor regarding the tax consequences of being a Member in the Investment Series.

 

Contact Info

Please direct any questions to one of the Managing Directors of VentureSouth:

 

-       Charlie Banks: charlie@venturesouth.vc        | 803-414-6702

-       Paul Clark:      paul@venturesouth.vc           | 864-908-0086

-       Matt Dunbar: matt@venturesouth.vc            | 864-320-1690

VBASE SERIES SEED SERIES

VENTURESOUTH INVESTMENTS A LLC

ADMISSION AGREEMENT

            THIS ADMISSION AGREEMENT is made and entered into as of the date listed below, by and between VENTURESOUTH INVESTMENTS A LLC, a Delaware limited liability company (the “Company”), and the VentureSouth member listed below (the “Member”) in consideration of the admission of the Member as a Member of the VBASE Series Seed Series (the “Investment Series”) of VentureSouth Investments A LLC, the mutual promises and covenants contained herein, and for other good and valuable consideration.

 

            1.         Operating Agreement. The Member acknowledges receipt of a copy of the VentureSouth Investments A LLC Operating Agreement dated as of January 15, 2015 (the “Operating Agreement”). All capitalized terms not otherwise defined herein shall have the meanings assigned such terms in the Operating Agreement. The Member hereby agrees to be bound by all the terms and conditions of the Operating Agreement as a “Member” described therein, including (without limitation) the release of Participants offering Gratuitous Advice described in Section 6.6(a) and the fee structure outlined in Section 3.8(a). Specifically, Members are committing to providing an additional 4% capital contribution to fund initial and ongoing Company Expenses relating to the Investment Series, and to a 10% share of profits (Administrative Fee), payable to the Manager after the Members receive a return of the capital (including the additional capital contribution) invested by them in the Investment Series.

 

2.         Representations, Warranties and Acknowledgement. The Member acknowledges and confirms the representations, warranties and covenants of the Member contained in Section 10.10 of the Operating Agreement. The Member acknowledges and agrees that the Member shall become a member of the VBASE Series Seed Series of the Company, and, unless the Member executes another admission agreement or other agreement acknowledged by the Company, the Member shall not be a member of any other Investment Series described in the Operating Agreement.

 

This Admission Agreement is executed as of the date first above written.