Legal
An investment in the company's common stock is speculative and involves a high degree of risk. You could lose all of your investment. Read this page in full.
The following is a summary of material risks. It is not exhaustive; the offering circular and private placement memorandum contain a complete statement of risk factors, and you should read them before investing. Terms such as "target" and "illustrative" describe objectives and assumptions, not expectations of results.
The company's revenue depends almost entirely on the prices of crude oil and natural gas, which are volatile and influenced by factors beyond our control, including global supply and demand, OPEC+ decisions, weather, storage levels, pipeline and LNG capacity, regional basis differentials, geopolitical events and monetary conditions. NAV is struck at forward strip prices and will fall when the curve falls. The company does not hedge. A sustained decline in prices would reduce distributions and NAV and could render working-interest wells uneconomic.
Oil and gas reserves are depleted as they are produced. Absent successful reinvestment or new drilling, production, cash flow and NAV per share are expected to decline over time. Retaining 35% of distributable cash is intended to slow, not eliminate, this decline, and retained capital may be deployed at less attractive prices than the original portfolio. Distributions include a return of capital; a distribution is not evidence that the investment is generating a profit.
As owner of operated working interests the company is the operator of record: it bears lease operating expense, capital expenditure, overhead, regulatory compliance, environmental and safety obligations and third-party claims for its wells, and the entire plugging and abandonment liability for its share, which can exceed the estimate accrued in NAV. Cost overruns, mechanical failures, spills, regulatory bonding requirements or the insolvency of non-operating partners could require cash calls that reduce or eliminate distributions. Non-operated working interests expose the company to joint-interest billings, operator decisions and operator credit. The company limits working interests to 50% of PV-10 and operated interests to 35%, but these limits may be exceeded temporarily as values change.
NAV depends on estimates of proved developed producing reserves and their future cash flows prepared by an independent reserve engineer and rolled forward by management. Reserve estimation is inherently uncertain; actual production, costs and prices may differ materially from estimates, and downward revisions are routine. PV-10 is a standardised measure that does not represent fair market value or the price a buyer would pay. Decline-curve fits to limited production history may be wrong. Because shares are issued and repurchased at NAV, an overstated NAV disadvantages new investors and an understated NAV disadvantages selling shareholders.
Shares are not listed on any exchange and no trading market is expected to develop. Shares bought under Rule 506(c) or Regulation S are restricted for 12 months. Thereafter, liquidity is limited to the quarterly repurchase program, which is capped at 5% of shares outstanding per quarter, priced at NAV less 3% (and a further 2% for shares held under 12 months), filled pro rata if oversubscribed, and may be suspended by the board. You may be unable to sell when you wish, or at all, and may receive less than NAV.
Non-U.S. shareholders are subject to U.S. withholding on the dividend portion of distributions (reported on Form 1042-S) at statutory or treaty rates, and, while the company is a U.S. real property holding corporation, to FIRPTA withholding on the return-of-capital portion and potentially on sales of shares. The split between dividend and return of capital is estimated during the year and finalized after year-end based on the company's earnings and profits; it may differ materially from estimates and may change as depletion deductions are exhausted. Changes in law, treaty status, the company's USRPHC status or IRS positions could increase withholding or tax. U.S. shareholders are taxed on dividends and, on sale, on gains including basis reductions from return of capital. State and local taxes may apply. No tax outcome is guaranteed; consult your own adviser.
The Regulation A Tier 2 offering may not be qualified, may be qualified on different terms, or may be suspended, which would limit the company's ability to raise capital from non-accredited U.S. investors. The company intends not to be an investment company under the Investment Company Act of 1940, relying on its oil and gas business and on keeping investment securities below the 40% threshold; if it were deemed an investment company it would be subject to burdensome requirements and might be forced to restructure or liquidate positions. Registration under Section 12(g) of the Exchange Act would impose additional reporting costs. Regulation S shares are subject to resale restrictions to U.S. persons, and a breach by any holder could affect the exemption. Rules governing stablecoins, digital-asset ledgers and transfer agents are evolving and could require changes to how shares are recorded or distributions delivered.
The company holds a block of shares of American Diversified Holdings, Inc. (ADHI), a related party: the company's chief executive is also an officer of ADHI. The position is restricted, thinly traded, marked to a quoted price that may not be realizable, and concentrated; a decline in ADHI's price would reduce NAV. Conflicts of interest exist in valuing the block and deciding when to sell it. The position must be kept below the Investment Company Act 40% threshold, which could force sales at unfavourable times.
Subscriptions and distributions may be delivered in USDC. A stablecoin may lose its peg, its issuer may fail, freeze or blacklist addresses, or regulation may restrict its use, which could delay or reduce amounts received. Blockchain networks may congest, fork, reorganize or halt. Payments to a wallet address you designated are irreversible; loss of your private keys, a compromised device or a mistyped address may result in permanent loss. The company screens wallets but cannot recover funds sent to a verified address.
The Platform, its service providers and the on-chain ledger are exposed to hacking, phishing, credential theft, insider misuse, software defects and denial-of-service attacks. A successful attack could result in theft of funds, unauthorized transactions, disclosure of personal data, or an inability to publish NAV or pay distributions on time. Insurance may not cover such losses.
On mineral, royalty and non-operated interests the company does not control drilling, completion, operations, marketing, or the timing and accuracy of revenue payments; operators may defer development, shut in wells, deduct post-production costs, become insolvent or fail to plug wells. Mineral title in the United States is derived from historical county records that may be incomplete or contested; interests may carry defects, competing claims or incorrect decimal interests, and curing defects can be costly or impossible. The company relies on Coinbase, banks, identity and screening providers, the transfer agent and others; failure or termination by any of them could disrupt operations.
The company depends on a small team for underwriting, land, operations, finance and technology. Management has discretion over acquisitions, NAV inputs, distributions and reinvestment, and conflicts of interest may arise, including in relation to ADHI. The company's continuous-offering, monthly-NAV structure and the platform have a limited operating history. Illustrations on this site are based on assumptions that may prove wrong and do not reflect actual results. There is no assurance that the company will achieve its objectives or that shareholders will receive any return of or on capital.
Although diversified across basins, operators and both commodities, the portfolio is concentrated in a single asset class and country and, at times, in particular basins or in operated fields. Portfolio limits are targets that may be temporarily exceeded during deployment, after dispositions or as valuations move.
This summary is not an offer. Shares are offered only through the offering documents to eligible investors. Consult your own legal, tax and financial advisers before investing.
Last updated Sep 1, 2026. Questions: investors@fifthmeridian.ai.