Investment Risks

The Company’s business, operations, and financial performance are subject to various risks and uncertainties. The Company has described below some risk factors which may adversely affect its business, operations, financial performance or industry. The Investor should carefully consider these risk factors, together with other information in the Offering Memorandum, before making any investment decision about the Promissory Notes.

Doug_Divider

No secondary market exists for the Promissory Notes, nor is one expected to develop.

Sales of securities are much easier, and often only possible, when an active trading market for the securities exists. The Investor should be aware that there will be no market for the Promissory Notes and that the Promissory Notes are subject to restrictions on their transferability as discussed elsewhere in this Memorandum. The Company will not register in order to facilitate trading. The Investor’s principal invested in the Promissory Note will be illiquid until the date of maturity.

Inflation would erode the purchasing power of an Investor’s investment in a Promissory Note.

A Promissory Note generates income for an Investor only through payment to the Investor of interest accrued on the principal balance. Inflation in the economy in general will erode the purchasing power of the amounts of interest and principal paid to the Investor as compared to the purchasing power of those funds at the time of investment.

The tax consequences of a purchase of Promissory Notes may be unfavorable.

The Company makes no representations or assurances about the tax consequences to the Investor of a purchase of Promissory Notes. Even if the tax consequences of holding Promissory Notes currently are satisfactory to an Investor, a change in tax law could adversely affect the Investor. The Investor is urged to consult the Investor’s own tax advisor to determine the tax consequences to the Investor of an investment in Promissory Notes.

Interest rate changes could be unfavorable to the Company and for Promissory Note investors.

Interest rates fluctuate. An increase in interest rates would make future borrowing by the Company from institutional lenders and other Investors more expensive and could adversely affect the Company’s ability to pay existing debt, including the Promissory Notes. Moreover, the interest rate to be paid to the Investor on the Promissory Note will be fixed as of the date of the investment in the Promissory Note. If interest rates were to increase after an Investor makes an investment in a Promissory Note, the Investor would possibly lose the opportunity to earn a higher interest rate as compared with an alternate investment.

The Promissory Notes are not secured by mortgages and are not guaranteed by the government.

Although the Company and its subsidiaries own assets, neither an individual Investor nor Investors collectively will have a mortgage or other security interest in the assets of the Company. Although Douglas Peterson personally guarantees that the payments of interest and repayment of principal will be made, his personal guaranty is not as valuable as the guaranty of most governments. It is possible that, if the Company fails, closes, or becomes bankrupt, assets remaining after the satisfaction of the debts of the secured lenders will either not exist or will be insufficient to repay the Investors and it is similarly possible that Douglas Peterson’s personal assets (although currently greater than the Company’s) could then be insufficient to repay investors.

Investors are likely to receive less than or nothing of their investment if the Company and Douglas Peterson become bankrupt or insolvent.

If the Company and Douglas Peterson were to file for or be forced into bankruptcy or an insolvency proceeding of any sort, it is likely that Investors would either be repaid nothing or would be repaid significantly less than as covenanted pursuant to the Investor Agreement.

No minimum is required to be raised in the Offering before the Company has access to proceeds.

The Company will be able to apply Investor funds as soon as investments in the Promissory Notes are made. Investments used to repay mortgage loans may not be sufficient to reduce the Company’s mortgage debt payments sufficiently to provide additional cash flow to pay amounts due under the Promissory Notes.

The Company has the right to re-mortgage Properties the mortgage debt of which has been paid from investments in Promissory Notes.

Because the Company can borrow against Properties that are debt-free, mortgage lenders may regain priority secured rights in Properties which Promissory Note holders might, as unsecured creditors, have had available as assets to pay part or all of the Promissory Note amounts due.

The Promissory Notes are not subject to early repayment upon Investor demand.

Investors are not entitled to early repayment of their Promissory Notes and will receive interest payments only on the schedule they select when they invest. As a result, an investment in the Promissory Notes is illiquid and funds invested will not be available for reinvestment or for payment of an Investor’s needs.

The Company has the right to prepay any or all Promissory Notes at any time.

Because the Company can repay any or all Promissory Notes at any time, the Company is able to take advantage of changes in the market or interest rates or other factors. The Investor does not have this right. If the Company were to prepay, it would likely do so at a time that is less favorable for the Investor and more favorable for the Company.

Transfer of your Promissory Notes will be restricted by securities laws and your Promissory Notes may not be offered, sold or transferred except in compliance with those laws.

Even if Promissory Notes were to be transferable, no offers, sales or transfers of any Promissory Notes issued in this Offering may be made except pursuant to registration or an exemption from registration under applicable federal and state securities laws. The Intrastate Exemption of federal law, upon which we are relying, does not permit Investors to sell or transfer Promissory Notes to other than New Mexico residents during the Offering and for a period of nine months after the last sale we make in the Offering. We do not intend to register the Promissory Notes. You will need to establish any exemption to our satisfaction. We may require an opinion, satisfactory to us in our discretion, of your counsel, also satisfactory to us in our discretion, that a proposed transfer complies with applicable securities laws. We will put stop transfer instructions in our Promissory Notes ownership records.