Risk Factors
Any and all references to investments made by the Champion Venture Partners (CVP), the Company, and shall also refer to any company or founder in which the Company may ultimately invest. This is not intended, nor can it be, an inclusive list of any and all risks. An investment in the Company's securities involves substantial risk. Prospective investors should consider carefully the factors referred to below as well as others associated with their investment. In addition, this Memorandum contains forward-looking statements regarding future events and the future financial performance of the Company that involve significant risks and uncertainties. Investors are cautioned that such statements are predictions and beliefs of the Company, and the Company's actual results may differ materially from those discussed herein.
The discussion below includes some of the material risk factors that could cause future results to differ from those described or implied in the forward-looking statements and other information appearing elsewhere. If any of the following risks, or any additional risks and uncertainties not listed below and not presently known to us, actually occur, our business could be harmed or fail. In such case, you may lose all or part of your investment. Additionally, the risks and uncertainties described, are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business. Therefore, we are unable and unwilling to estimate the extent to which they may adversely affect our business, financial condition and results of operations.
General Risks Associated with the Company's Business Plans
We have a limited operating history upon which you may evaluate us. The Company was formed on January 8, 2024. Accordingly, it has limited investment history upon which to base an evaluation of an investment in the Shares offered hereby. The Company's business will be subject to the risks involved with any speculative venture. There can be no assurance that the Company will be able to generate revenues, acquire interests in cutting-edge sports-focused companies, or operate profitably in the future or that any of our investments will be successful.
Our profitability and the success of each investment will be subject to fluctuations in the US and global economy, along with various other risks more particularly described herein. Moreover, our financial condition, results of operations and ability to make or sustain distributions to our investors will depend on many factors, including, but not limited to the following:
- our ability to identify attractive acquisition opportunities that are consistent with our investment strategy;
- our ability, or the ability of the companies in which we invest, to contain operating costs;
- the level and volatility of interest rates, and our access to short and long-term financing on favorable terms;
- our ability, or the ability of the companies in which we invest, to absorb costs that are beyond our control, including but not limited to litigation costs and compliance costs;
- our ability, or the ability of the companies in which we invest, to adapt to judicial and
regulatory developments affecting their respective industries;
- our ability, or the ability of the companies in which we invest, to respond to changes in population or employment trends in our markets; and
- economic conditions in our markets, as well as the condition of the financial markets and the economy generally.
If we are unable to effectively allocate our resources or generate sufficient revenues, our business operating results and financial condition would be adversely affected and we may be unable to execute our business plan, and our business could fail. Moreover, if the Company is unable to operate successfully, any investment produces a loss, or the Company's investments fail to produce sufficient revenues to cover operating and other expenses, investors may suffer a partial or total loss of their investment.
If the Company were deemed an "investment company" under the U.S. Investment Company Act, applicable restrictions could make it impractical for the Company to continue its respective businesses as contemplated and could have a material adverse effect on the Company's businesses and prospects. We do not believe that we are currently an "investment company" as defined in the U.S. Investment Company Act of 1940, as amended, because the nature of our assets and the sources of our income exclude us from the definition of an investment company under the Investment Company.
The Investment Company Act and the rules thereunder contain detailed requirements for the organization and operation of investment companies. Among other things, the Investment Company Act and the rules thereunder limit transactions with affiliates, impose limitations on the issuance of debt and equity securities, generally prohibit the issuance of options and impose certain governance requirements. The Company intends to conduct its operations so that the Company will not be deemed to be an investment company under the Investment Company Act.
If anything were to happen which would cause the Company to be deemed to be an investment company under the Investment Company Act, requirements imposed by the Investment Company Act, including limitations on its capital structure, ability to transact business with affiliates (including subsidiaries) and ability to compensate key employees, could make it impractical for the Company to continue its business as currently conducted, impair the agreements and arrangements between and among it, its subsidiaries and its senior personnel, or any combination thereof, and materially adversely affect its business, financial condition and results of operations.
Accordingly, the Company may be required to limit the amount of investments that it makes as a principal or otherwise conduct its business in a manner that does not subject the Company to the registration and other requirements of the Investment Company Act. The following risk factors, in addition to those discussed elsewhere in this Memorandum, should be carefully considered when evaluating the Company as an investment opportunity.
General Risks Associated with an Early-Stage Company
We have a limited operating history upon which you may evaluate us. The Company was formed on January 8, 2024, as a Delaware corporation. The Company has a limited operating history upon which you may evaluate our business and prospects. Our business and prospects must be considered in light of the risk, expense, and difficulties frequently encountered by companies in early stages of development, particularly companies in highly competitive and evolving markets. If we are unable to effectively allocate our resources our business operating results and financial condition would be adversely affected and we may be unable to execute our business plan, and our business could fail.
Projections are speculative and are based upon a number of assumptions. Any projected financial results prepared by or on behalf of the Company have not been independently reviewed, analyzed, or otherwise passed upon. Such "forward-looking" statements are based on various assumptions, which assumptions may prove to be incorrect. Accordingly, there can be no assurance that such projections, assumptions and statements will accurately predict future events or actual performance. Any projections of cash flow should be considered speculative and are qualified in their entirety by the assumptions, information and risks disclosed in this Offering.
Investors are advised to consult with their own independent tax and business advisors concerning the validity and reasonableness of the factual, accounting and tax assumptions. No representations or warranties whatsoever are made by the Company, its affiliates or any other person or entity as to the future profitability of the Company or the results of making an investment in the Shares.
Our success is dependent on our Board and key personnel. We believe that our success will depend on the continued expertise of Jeff McDermott, Marques Colston, Nicholas Edwards, Austin Panter, Kyle Auffray, Jamil Northcutt, and Ed Crump (see "TEAM"). The success of the Company is therefore expected to be significantly dependent upon the expertise and efforts of these individuals. Our success may also depend on the assistance of advisors, if any. If any of our Board, officers, or any of our advisors, if any, were unable or unwilling to continue in their positions, our business and operations could be disrupted or fail.
We may change its business plan, financing strategy or leverage policies without notice to or consent of investors. The Company may change its business plan and any of its strategies, policies, or procedures at any time without notice to or the consent of investors, which could result in our acquiring assets that are different from, and possibly riskier than, the types of assets and related investments described in this Offering. These changes could adversely affect the Company and its financial condition.
The Board has broad discretion as to the use of proceeds. The net proceeds from this Offering will be used for the purposes described under "USE OF PROCEEDS." The Company reserves the right to use the funds obtained from this Offering for other similar purposes not presently contemplated, which it deems to be in the best interests of the Company and its stakeholders in order to address changed circumstances or opportunities. As a result of the foregoing, the success of the Company will be substantially dependent upon the discretion and judgment of management with respect to application and allocation of the net proceeds of this Offering.
Investors for the Shares offered hereby will be entrusting their funds to the Company's Board, upon whose judgment and discretion the investors must depend. The Board manages the Company. The Company is managed by the Board. The stockholders of the Company, in their capacity as stockholders, have limited authority to govern the affairs of the Company, and only limited voting rights to elect and remove the members of the Board in accordance with the provisions of the Company's Certificate of Incorporation as then in effect and as amended from time to time.
We may not effectively manage growth. The anticipated growth of the Company's business will result in a corresponding growth in the demands on the Company's Board and its operating infrastructure and internal controls. While we are planning for managed growth, any future growth may strain management resources and operational, financial, human and management information systems, which may not be adequate to support the Company's
operations and will require the Company to develop further management systems and procedures. There can be no guarantee that the Company will be able to develop such systems or procedures effectively on a timely basis. The failure to do so could have a material adverse effect upon the Company's business, operating results, and financial condition.
Our efficiency may be limited while our current employees and future employees are being integrated into our operations. In addition, we may be unable to find and hire additional qualified management and professional personnel to help lead us. There is intense competition for qualified personnel in the area of the Company's activities, and there can be no assurance that the Company will be able to attract and retain qualified personnel necessary for
the development of our business.
In addition, there is a risk of a conflict of interest between the interests of our management and key technical personnel, and the interests of the Company, as well as their interests in other potential unrelated activities. If such conflicts arise, this could have a material adverse impact on
the Company's business.
We face substantial competition. Many of our current and potential competitors have longer operating histories and financial and other resources substantially greater than those we possess. As a result, our competitors may be able to more efficiently locate opportunities or more effectively analyze them, or to devote greater resources than we can. Such competitors could also attempt to increase their presence in our markets by forming strategic alliances with other competitors. Such competition could adversely affect our gross profits, margins and results of operations. There can be no assurance that we will be able to compete successfully with existing or new competitors.
Increased IT security threats and more sophisticated and targeted computer crime could pose a risk to our systems, networks, products, solutions and services. Increased global IT security threats and more sophisticated and targeted computer crime pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data.
While we intend to mitigate these risks by employing a number of measures, including employee training, comprehensive monitoring of our networks and systems, and maintenance of backup and protective systems, our systems, networks, products, solutions and services remain potentially vulnerable to advanced persistent threats. Depending on their nature and scope, such threats could potentially lead to the compromising of confidential information, improper use of our systems and networks, manipulation and destruction of data, downtimes and operational disruptions, which in turn could adversely affect our reputation, competitiveness and results of operations.
We may become subject to litigation. There are many risks incident to acquiring and selling securities that may give rise to litigation. For example, the Company may be named as a defendant in a lawsuit or regulatory action. The Company may also incur uninsured losses for liabilities which arise in the ordinary course of business, or which are unforeseen, including, but not limited to, employment liability and business loss claims. There is no assurance that the Company's stockholders will not lose their entire investment in the Company as a result of unforeseen litigation.
There may be unanticipated obstacles to the execution of the Company's business plan. The Company's business plans may change significantly. Our business plan is capital intensive. We believe that our chosen activities and strategies are achievable in light of current economic and legal conditions with the skills, background, and knowledge of our principals and advisors. Our Board reserves the right to make significant modifications to its stated strategies depending on future events.
We have not identified investments or other uses for a significant portion of the net proceeds from this Offering. Therefore, you will be unable to evaluate the allocation of any portion of the net proceeds from this Offering or the economic merits of our investments before making an investment decision to purchase the Shares. We have broad authority to invest the net proceeds from this Offering in any investments that fit the thesis of the Company. You may not agree with some investments. You will be unable to evaluate the economic merit of our investments before we invest in them and will be relying on our ability to select attractive investments. We also have broad discretion in implementing policies regarding investments. In addition, our investment policies may be amended or revised from time to time at the discretion of our Board. These factors will increase the uncertainty, and thus the risk, of investing in the Shares.
Although we intend to use the net proceeds from this Offering to invest in cutting-edgesports-focused Companies, we cannot assure you that we will be able make any such acquisitions or investments. Our failure to apply the net proceeds from this Offering effectively or find suitable investments in a timely manner or on acceptable terms could result in losses, or result in returns that are substantially below expectations.
Prior to the full deployment of the net proceeds of this Offering as described above, the undeployed net proceeds of this Offering may be held in an interest-bearing account, but will likely realize little if any net return. Ultimately, we may not be successful in completing any investments we identify and the investments we acquire may not produce our anticipated, or any, positive returns, and our business could fail.
Lack of diversification. At any given point, the Company may hold a large concentration of its assets in investments in a particular geographical area or type of investment, exposing a large portion of the Company's assets to the risks associated to that particular geographical area or type of investment. There is limited liquidity in private company investments, which could limit our flexibility. Private company investments are relatively illiquid. The Company may not be able to dispose of any assets at an advantageous time and the sale price of any disposition may not recoup or exceed the amount of our investment. In addition, federal or other tax laws may impact our ability to sell an investment, and accordingly could adversely affect our profitability.
Incomplete information on investments. Although the Company expects to obtain and verify all material facts regarding any investment, it is possible that the Company will not discover certain material facts, because information presented to it may be prepared in an incomplete or misleading fashion, and the due diligence efforts of the Company may fail to uncover such facts.
Only individuals who feel comfortable with making an investment in the Company knowing that such crucial information may be missing should consider becoming an investor in the Company.
No audited results of acquisition assets. The Company may rely on unaudited financial information provided by the companies in which the Company invests. Thus, it is possible that information relied upon by the Company with respect to the acquisition of such asset may not be accurate.
Reliance on the Board. Our ability to achieve our investment objectives and to pay distributions is dependent upon the performance of the Board and the individuals involved with the Company. All decisions regarding management of the Company's affairs will be made exclusively by the Board. Accordingly, investors should not purchase Shares unless they are willing to entrust all aspects of management to the Board. Potential investors must carefully evaluate the personal experience and business performance of Jeff McDermott, Marques Colston, and Nicholas Edwards, as well as any Company's advisors, if any (see "TEAM").
The Board may retain independent contractors to provide services to the Company relating to investments. Such contractors have no fiduciary duty to the stockholders of the Company, and may not perform as expected. Additionally, the board may designate authorized individuals to carry out its responsibilities outlined herein.
