EXPLANATORY NOTE

This is a post-qualification amendment to an offering statement on Form 1-A filed by Commonwealth Thoroughbreds LLC (the “Company”). The offering statement was originally filed by the Company on October 16, 2019 and has been amended by the Company on numerous occasions since that date. The offering statement, as amended by pre-qualification amendments, was qualified by the U.S. Securities and Exchange Commission (the “SEC”) on March 30, 2020. Since that date, one post-qualification amendment to the offering statement has also been qualified by the SEC.

Two series of the Company have already been offered as of this date by the Company under the offering statement, as amended and qualified. However, only Series OL2018 will continue to be offered and sold by the Company following the filing of this post-qualification amendment, subject to the offering conditions contained in the offering statement, as qualified. The Series already qualified under the offering statement are as follows:

The purpose of this post-qualification amendment is to amend, update and/or replace certain information contained in the Offering Circular and to add an additional series to the offering statement by means of this post-qualification amendment.

Post-Qualification Offering Circular Amendment No. 2

File No. 024-11130

An offering statement pursuant to Regulation A relating to these securities has been filed with the Securities and Exchange Commission. Information contained in this Preliminary Offering Circular is subject to completion or amendment. To the extent not already qualified under Regulation A, these securities may not be sold nor may offers to buy be accepted before the offering statement filed with the Commission is qualified. This Preliminary Offering Circular shall not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sales of these securities in any state in which such offer, solicitation or sale would be unlawful before registration or qualification under the laws of any such state. We may elect to satisfy our obligation to deliver a Final Offering Circular by sending you a notice within two business days after the completion of our sale to you that contains the URL where the Final Offering Circular or the offering statement in which such Final Offering Circular was filed may be obtained. 

PRELIMINARY OFFERING CIRCULAR

SUBJECT TO COMPLETION; DATED APRIL 13, 2021

COMMONWEALTH THOROUGHBREDS LLC

1450 North Broadway, Lexington, Kentucky 40505

Telephone: (859) 977-0124

Website: www.joincommonwealth.com

Commonwealth Thoroughbreds LLC, a Delaware series limited liability company (“we,” “us,” “our,” “Commonwealth Thoroughbreds” or the “Company”) is offering, on a best-efforts basis, units of membership interest of each of the following series of the Company:

We may refer to the Company’s series offered hereunder collectively as the “Series” and each individually as a “Series.” Likewise, we may refer to the units of membership interests of all the series described above collectively as the “Units” and each, individually, as a “Unit”, and we may refer to the offerings of the Units collectively as the “offerings” and each, individually, as an “offering”.

The Company is managed by Commonwealth Markets Inc., a Delaware corporation, which we refer to in this Offering Circular as the “Manager.”

The sale of Units is being facilitated by Dalmore, a broker-dealer registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and member of FINRA, and is registered in each state where the offer or sales of the Units will occur. We may also refer to Dalmore as the “Broker.” The Company is not offering, and does not anticipate selling, Units in any state where Dalmore is not registered as a broker-dealer. For the avoidance of doubt, Dalmore does not and will not solicit purchases of Units or make any recommendations regarding the Units to prospective investors.

Units of each Series are available for purchase exclusively through the Commonwealth Platform and will be issued in book-entry electronic form only. ClearTrust LLC has been engaged as the Company’s SEC-registered transfer agent and registrar of the Units pursuant to Section 17A(c) of the Exchange Act.

Sale of the Units of each Series will begin upon qualification of this Offering Circular, and Units of each Series will be sold to no more than 2,000 qualified purchasers (no more than 500 of whom cannot be “accredited investors”). In this Offering Circular, we refer to a purchaser of the Units as an “Investor” or as a “Unit Holder.”

There will be a separate closing with respect to each Offering (each, a “Closing”). The Closing of an Offering will take place on the earliest to occur of (i) the date subscriptions for the maximum Units of a Series have been accepted or (ii) a date determined by the Manager of the Company in its sole discretion, provided that subscriptions for the minimum Units have been accepted. If Closing has not occurred, the Offering will terminate on (i) the date one year after the date this Offering Circular, or an Amendment to it, is qualified by the U.S. Securities and Exchange Commission (the “SEC”), which period may be extended by an additional six months by the Manager in its sole discretion, or (ii) any date on which the Manager elects to terminate the offering in its sole discretion. Any subscription funds advanced by a prospective Investor as part of the subscription process will be held in a non-interest-bearing escrow account with North Capital Private Securities Corporation (“North Capital” or the “Escrow Agent”) and will not be commingled with the operating account of the Series, until, if and when there is a Closing with respect to that Investor. See “Plan of Distribution and Subscription Procedure” and “Description of Units Offered” for additional information.

Our previous offering of units in Series TF2019 has been terminated by the Manager. We did not actively solicit investors for the Series TF2019 Offering, choosing to prioritize the Series OL2018 Offering. We received no subscriptions for Series TF2019 units.

This Offering is being conducted under Regulation A (17 CFR 230.251 et. seq.) and the information contained herein is being presented in Offering Circular format. In general, no sale may be made to you in this Offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income or net worth. Different rules apply to accredited investors and non-natural persons. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(c) of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov. The information contained on our Internet website, or any other Internet site described herein, is not a part of, and is not incorporated or deemed to be incorporated by reference into this Offering Circular.

The United States Securities and Exchange Commission does not pass upon the merits of or give its approval to any securities offered or the terms of the offering, nor does it pass upon the accuracy or completeness of any offering circular or other solicitation materials. The Units are offered pursuant to an exemption from registration with the SEC; however, the SEC has not made an independent determination that the Units are exempt from registration. This Offering Circular does not constitute an offer to sell or the solicitation of an offer to buy, nor may there be any sales of these securities in, any state in which such offer, solicitation or sale would be unlawful before registration or qualification of the offer and sale under the laws of that state.

An investment in the Units involves a high degree of risk. See “Risk Factors” on page 20 for a description of some of the risks that you should consider before investing in the Units.

TABLE OF CONTENTS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

The information contained in this Offering Circular includes some statements that are not historical and that are considered “forward-looking statements.” Such forward-looking statements include, but are not limited to, statements regarding our development plans for our business; our strategies and business outlook; anticipated development of the Company, the Manager, each series of the Company and the Commonwealth Platform (defined below); and various other matters (including contingent liabilities and obligations and changes in accounting policies, standards, and interpretations). These forward-looking statements express the Manager’s expectations, hopes, beliefs, and intentions regarding the future. In addition, without limiting the foregoing, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “possible,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” and similar expressions and variations, or comparable terminology, or the negatives of any of the foregoing, may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements contained in this Offering Circular are based on current expectations and beliefs concerning future developments that are difficult to predict. Neither the Company nor the Manager can guarantee future performance, or that future developments affecting the Company, the Manager or the Commonwealth Platform will be as currently anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements.

All forward-looking statements attributable to us are expressly qualified in their entirety by these risks and uncertainties. These risks and uncertainties, along with others, are also described below under the heading “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of the parties’ assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. You should not place undue reliance on any forward-looking statements and should not make an investment decision based solely on these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

GLOSSARY

OFFERING SUMMARY

The following summary is qualified in its entirety by the more detailed information appearing elsewhere in this Offering Circular and in the Exhibits to it. You should read the entire Offering Circular and carefully consider, among other things, the matters set forth in the “Risk Factors” section. We encourage you to seek the advice of your attorney, tax consultant, and business advisor with respect to the legal, tax, and business aspects of an investment in the Units. All references in this Offering Circular to “$” or “dollars” are to United States dollars. Certain terms relating to the Thoroughbred industry are defined in the Glossary immediately preceding this Offering Summary section.

RISK FACTORS

An investment in a Series is highly speculative in nature, involves substantial risks and is suitable only for sophisticated Investors for whom an investment in a Series is only one portion of an investment program, who fully understand and are capable of bearing the risks of the investment and who can afford to lose their entire investment. We cannot assure you that the Company’s investment objectives will be achieved or that a secondary market would ever develop for the Units, whether via the Commonwealth Platform, via third party registered broker-dealers or otherwise. Before making an investment decision, you should carefully consider all information contained in this Offering Circular (and the exhibits hereto) and should give particular consideration to the risks described below. The business, operating results and financial condition of the Company or an individual Series all could be adversely affected by any of the following risks. The risk factors below are not intended to be an exhaustive list of the general or specific risks involved, but merely to identify certain risks that are now foreseen by the Company. Other risks, not now foreseen, may become significant in the future and that the risks which are now foreseen may affect the Company or a Series to a greater extent than is now foreseen or in a manner not now contemplated. Prospective Investors should obtain their own legal and tax advice prior to making an investment in a Series.

Risks Related to the Structure, Operation and Performance of the Company

Our Company was recently formed and has no prior operating history. Therefore, acquiring Units in its Series is a speculative investment. We cannot assure you that you will realize your investment objectives.

An investment in our Units involves a high degree of risk, including the possibility that you may not realize a return on your investment, or that your investment could lose some or all its value. The Company was recently formed, has not generated any revenues to date, and has no operating history upon which prospective Investors may evaluate its performance. There is no guarantee that any Series will generate a financial return or that the value of its Thoroughbred Asset will increase. For these reasons, we urge you to read this Offering Circular carefully, and consult with your legal and financial advisors before deciding to invest in these Units.

The prospects of a Series must be considered in light of the risks, expenses, and difficulties encountered in establishing a new business in a highly competitive industry. The Company will be engaged in a highly speculative business. The future financial performance of each Series will depend on its ability to earn purses from racing, profitably resell its ownership units in runners and breeding stallions, sell broodmares and the progeny of broodmares and engage in other Thoroughbred activities. We cannot assure you the Company can successfully carry out its investment and operational strategy.

An investment made through this Offering constitutes only an investment in a Series and not in the Company or the underlying Thoroughbred.

A purchase of Units in a Series does not constitute an investment in either the Company or the underlying Thoroughbred directly. This limits the voting rights of the Investor solely to the Series, which are further limited by the Company’s Operating Agreement, described further in this Offering Circular. Investors will have voting rights only with respect to certain matters, primarily relating to amendments to the Operating Agreement that would adversely change the rights of their Units and removal of the Manager for “cause.” The Manager thus retains significant control over the management of the Company and the underlying Thoroughbred Assets. Furthermore, because the Units in a Series do not constitute an investment in the Company as a whole, holders of the Units in one Series will not receive any economic benefit from, or be subject to the liabilities of, the assets of any of the Company’s other Series. In addition, the economic interest of a holder in a Series will not be identical to owning a direct undivided interest in the underlying Thoroughbred Asset because, among other things, the Series will be required to pay corporate taxes before distributions are made to the holders, and the Manager will receive a fee in respect of its management of the Series’ Thoroughbred.

Liability of investors between series of membership units.

The Company is structured as a Delaware series limited liability company that issues different series of membership units for each underlying asset. Each series of membership units, including the Series Country Grammer Units and the Series OL2018 Units, will merely be a separate series and not a separate legal entity. The Delaware Limited Liability Company Act (the “LLC Act”) provides that if certain conditions (as set forth in Section 18-215(b) of the LLC Act) are met, the liability of investors holding one series is segregated from the liability of investors holding another series, the assets of one series are not available to satisfy the liabilities of other series, and a series has the power and capacity to, in its own name, sue and be sued independently of the series limited liability company. In addition, approximately 40% of the U.S. states plus the District of Columbia have adopted similar statutes authorizing the formation of series limited liability companies. Although the limitation of liability afforded to each series of a series limited liability company is recognized by the courts of Delaware, and we are not aware of any court case in which a federal or state court has not recognized the limited liability of a series under Delaware law, there is no guarantee that if challenged in the courts of a U.S. state with no series limited liability company statute or a foreign jurisdiction, those courts will uphold a similar interpretation of Delaware corporation law. If the Company’s series limited liability company structure is not respected, then Investors may have to share any liabilities of the Company with all investors and not just those who hold the same series as them. Furthermore, while we intend to maintain separate and distinct records for each series and account for them separately and otherwise meet the requirements of the LLC Act, it is possible a court could conclude that the methods used did not satisfy Section 18-215(b) of the LLC Act and thus potentially expose the assets of Series Country Grammer or Series OL2018 to the liabilities of another series. The consequence of this is that Investors may have to bear higher than anticipated expenses which would adversely affect the value of their Units or the likelihood of any distributions being made by the Series to the Investors. In addition, we are not aware of any court case that has tested the limitations on inter-series liability provided by Section 18-215(b) in federal bankruptcy courts, and it is possible that a bankruptcy court could determine that the assets of one series should be applied to meet the liabilities of another series or the liabilities of the Company generally where the assets of such other series or of the Company generally are insufficient to meet its respective liabilities.

If any fees, costs, and expenses of the Company are not allocable to a specific series, they will be borne proportionately across all the series. Although the Manager will allocate fees, costs and expenses acting reasonably and in accordance with its allocation policy (see “Description of the Business – Allocation of Revenue and Expense”), there may be situations where it is difficult to allocate fees, costs, and expenses to a specific series. Therefore, there is a risk that a series may bear a proportion of the fees, costs and expenses for a service or product for which another series received a disproportionately high benefit.

Initially there will be no public market for the resale of the Units, and no such public market may ever develop.

There is currently no public trading market for any of our Units, and no such public market may ever develop. The Manager has no current plans to facilitate the resale of Units acquired by Investors on the Commonwealth Platform and potentially help provide liquidity to Investors. If an active public trading market for our Units does not develop or is not sustained, it may be difficult or impossible for you to resell your Units at any price. Even if a public market does develop, the market price could decline below the amount you paid for your Units.

There may be state law restrictions on an Investor’s ability to sell the Units.

Each state has its own securities laws, often called “blue sky” laws, which (1) limit sales of securities to a state’s residents unless the securities are registered in that state or qualify for an exemption from registration and (2) govern the reporting requirements for broker-dealers and stockbrokers doing business directly or indirectly in the state. Before a security is sold in a state, there must be a registration in place to cover the transaction, or it must be exempt from registration. Also, the broker must be registered in that state. We do not know whether our securities will be registered, or exempt, under the laws of any states. A determination regarding registration will be made by the broker-dealers, if any, who agree to serve as the market-makers for our Units. There may be significant state blue sky law restrictions on the ability of Investors to sell, and on purchasers to buy, our Units. In addition, Tier 2 of Regulation A limits qualified resales of our Units to 30% of the aggregate offering price of a particular offering. Investors should consider the resale market for our Units to be limited. Investors may be unable to resell their Units, or they may be unable to resell them without the significant expense of state registration or qualification or opinions to our satisfaction that no such registration or qualification is required.

Limited Investor appetite.

Due to the start-up nature of the Company, there can be no guarantee that the Company will reach its funding target from potential Investors with respect to the Series Country Grammer Units, the Series OL2018 Units or any future proposed series of units. If the Company does not reach a funding target, it may not be able to achieve its investment objectives by acquiring additional underlying Thoroughbred assets through the issuance of further series and generating revenue to enable distributions for Investors. In addition, if the Company is unable to raise funding for additional series, this may impact any Investors already holding units as they will not see the benefits that arise from economies of scale following the acquisition by other series of additional Thoroughbred assets and other opportunities to generate revenue from racing, breeding or sales activities.

There are few businesses that have pursued a strategy or investment objective similar to the Company’s.

We believe other companies crowdfunding ownership interests in racehorses or proposing to run a platform for crowdfunding of interests in racehorses has been very limited to date. The Company and the Units may not gain market acceptance from potential Investors, Thoroughbred breeders, or service providers within the racehorse ownership/syndicate industry, including insurance companies, syndicate managers, training facilities or maintenance partners. This could result in an inability of the Manager to manage the career of the Company’s Thoroughbred assets profitably. It could impact the issuance of further series of units and additional Thoroughbred assets being acquired by the Company. It would further inhibit market acceptance of the Company and if the Company does not acquire any additional Thoroughbred assets, Investors would not receive any benefits that arise from economies of scale (such as a reduction in boarding, training and transportation costs and group discounts on insurance).

Offering amount exceeds value of the underlying Thoroughbred.

The size of the Series Country Grammer Offering and the Series OL2018 Offering will each exceed the purchase price of the Thoroughbred Asset of each Series on the date its Offering closes because the proceeds of the Offering in excess of the purchase price of the Thoroughbred Asset will be used to pay fees, costs and expenses incurred in making this Offering, acquiring the Thoroughbred Asset, and establishing reserves to cover Operating Expenses until the Thoroughbred develops and is capable of racing competitively. If a Thoroughbred Asset must be sold before there has been substantial appreciation of the value of the Thoroughbred Asset, the proceeds from the sale remaining after first paying off any liabilities owed in connection with the Thoroughbred Asset at the time of the sale (including but not limited to any outstanding Operating Expenses Reimbursement Obligation) may not be sufficient to repay Investors the amount of their initial investment or any additional profits in excess of that amount.

A Series may not be able to control many of its operating costs, and unexpected costs may adversely affect its financial results.

We cannot provide assurance that the Manager’s estimates regarding the price of Thoroughbreds, the cost of maintaining, training, and racing Thoroughbreds or maintaining and standing stallions, or the cost and expenses associated with buying and reselling pinhooking prospects (as described below) will prove accurate. Numerous factors may affect a Series’ operating expenses, many of which will be beyond its control. The costs of purchasing, boarding, training, providing veterinary care for, and otherwise owning and maintaining Thoroughbreds are substantial and outside the Company’s control. The Company expects these costs and expenses to increase over time due to inflationary factors.

Other factors that could cause a Series’ expenses to be higher than expected include market fluctuations in the Thoroughbred industry, risks associated with transporting the horses to and from races and auctions, the overall health, soundness and competitiveness of the Thoroughbred a Series owns, interest and currency exchange rates, and other factors that are beyond the Company’s control or that cannot be accurately predicted at this time. Outbreaks of infectious diseases could result in quarantines or other restrictions that may halt racing and breeding or restrict movement, and thus impede a Series’ racing and breeding activities. For example, in recent months there were several new reported cases of equine viral herpes, a potentially fatal disease that may render surviving victims infertile. This has resulted in quarantines being imposed at several racetracks and training facilities. Although similar outbreaks have been contained in the past, the disease has the potential to create significant problems with the racing, breeding and transport of horses, which could have a material adverse effect on the activities and revenues of a Series.

The Company intends that each Series will pay its operating expenses from the proceeds from the sale of its Units and future operating revenue. Higher than expected operating expenses could force a Series to sell Series Assets during unfavorable market conditions. Events that increase a Series’ operating expenses or reduce its capital resources and liquidity could prevent the Investors from receiving their anticipated return on investment.

The Company is controlled by the Manager, and Members must rely solely on the judgment of the Manager’s management team, which has limited prior experience in the equine industry.

The success of the Company and each of its Series will depend upon the experience and business judgment of the Manager, its management team, and the advisors the Manager engages. The Manager’s management team has limited prior experience in overseeing Thoroughbred acquisition, training, racing, breeding and sales activities.

The Manager has exclusive control over the day-to-day operations of each Series and most decisions as to the use of the proceeds of this offering following the purchase of the Series’ Thoroughbred Asset. The selection of a Series’ Thoroughbreds will be based on an analysis of bloodlines, evaluations of physical condition, and the past performance of related Thoroughbred horses, none of which is an exact science. To a significant degree, the Manager will be relying on the advice of trainers, bloodstock agents, consignors, members of its advisory board, co-owners of horses owned in part by a Series and other advisors.

The Manager will have full and complete control and authority with respect to the business and affairs of each Series, and will have responsibility for, among other things:

The Members (other than the Manager) will not be able to exercise any significant control or influence over the operation of the business of the Company and each Series, even if Members disagree with the Manager’s decisions or disapprove of its performance. Accordingly, no person should invest in a Series unless he or she is willing to entrust all aspects of control to Commonwealth Markets and to rely on its management ability.

The loss of the Manager’s key executives could jeopardize your investment.

The Company will depend on the efforts and expertise of the Manager’s key employees Brian Doxtator and Chase Chamberlin. If the Manager loses or suffers an extended interruption in the service of one or more of its key personnel, the Company and the Units could be adversely affected. The Manager does not expect to maintain key-man insurance on Messrs. Doxtator and Chamberlin.

The Management Fee paid to the Manager by each Series is based on the performance of the Series.

Each Series pays the Manager a Management Fee that is based upon the Series’ performance. This performance-based fee structure may create an incentive for the Manager to cause the Company to make investments that are riskier or more speculative than might otherwise be the case in the absence of such a fee.

A Series’ financial performance will depend on the Manager’s relationships within the Thoroughbred industry.

The ability to purchase desirable Thoroughbreds may depend in part upon the Manager’s relationships with trainers, bloodstock agents and consultants and Thoroughbred owners. These relationships provide the Manager with access to information that is useful in determining which Thoroughbreds are available in the public and private markets and which have the potential to be successful. The Manager may lose key personnel who maintain key relationships. Any failure to maintain, manage or continue to establish relationships with key individuals and institutions in the Thoroughbred industry may hinder the Manager’s ability to purchase desirable Thoroughbreds for the Company’s Series.

The financial performance of each Series will depend on the quality of the services performed by trainers and other independent contractors.

The Manager will engage independent contractors to perform many essential services required for Thoroughbred racing and breeding, including selection, training, boarding and veterinary care of its Thoroughbreds. These independent contractors often subcontract or employ others who actually perform the contracted for services. Some of these contractors will be also servicing other horses not owned by the Company’s Series. The Company may have to compete for the services of trainers, bloodstock agents, jockeys and consignors, and conflicts of interest may arise from time to time.

Trainers, veterinarians, and jockeys are licensed by regulatory bodies overseeing racing and are subject to fines, suspension, or revocation of their licenses if it is determined that a violation of racing rules occurred. Suspension or revocation of a key trainer’s, veterinarian’s or jockey’s license may interrupt the Manager’s ability to train and race the horses of the Company’s Series in the intended manner until a suitable replacement can be found. Administrative regulations are in effect in some states that provide for the suspension of a horse from competition if a trainer violates a rule involving the participation of the horse in a race or would require an owner to engage personnel unrelated to the suspended trainer to care for or train its horses during the trainer’s suspension. Any adverse administrative rulings, either against a trainer, veterinarian or jockey engaged by a Series or directly against a Series as owner, could result in fines, suspension, or revocation of a license to participate in racing. Such sanctions may result in lost opportunities to race a Series’ Thoroughbred and cause significant damage to the Company’s reputation, jeopardizing the Company’s ability to successfully carry out its business plan and may adversely affect the value of the Series Assets.

Injury, infertility, or death of a Series’ Thoroughbred(s) could diminish revenue and net asset values.

The Company plans to acquire Thoroughbreds with the pedigree quality indicative of the ability to compete and produce offspring who can compete in allowance and stakes races. Because purchasing Thoroughbreds of this caliber can be expected to require a substantial investment by a Series, any illness, injury, accident, impairment, or death of one or more of a Series’ Thoroughbreds could have a material adverse effect on the value of Units. Failure to perform as anticipated due to inability or lack of competitive will, injury, illness, disability, or death of a Thoroughbred that is uninsured or underinsured could materially diminish a Series’ net asset value. A stallion in which a Series owns an interest may be or become infertile to the extent that the stallion becomes a commercial failure. Any infertility problems with stallions could result in possible losses for a Series to the extent fertility insurance proceeds (available only in the first year of a stallion’s breeding career) do not cover the purchase price of the Units. Even if losses are fully insured, a Series will not receive the future earnings stream associated with a Thoroughbred, which could materially reduce a Series’ financial performance.

A Thoroughbred acquired as a yearling or juvenile will require development and training to race competitively. Accordingly, the potential of a yearling or juvenile Thoroughbred to generate revenue for a Series will not be known for a period that could be as short as 30-60 days after acquisition for juveniles to as long as 18 months after acquisition, particularly for yearlings.

The Company intends to acquire interests in yearlings and juvenile Thoroughbreds with a pedigree that indicates the potential to race competitively in allowance and stakes races in the future. However, yearlings acquired in the fall will normally require 6 to 18 months of development before they are able to race competitively. A juvenile (a two-year-old Thoroughbred) purchased in the spring or early summer of its two-year-old year will normally require from 3 to 9 months of additional training prior to racing competitively but may be ready to race within 1-2 months of acquisition. Accordingly, the ability of a yearling or a juvenile Thoroughbred to produce revenue and generate distributable Free Cash Flow from racing will not be known for a variable amount of time, and accurately projecting the timing of receipt of revenues, if any, from yearlings and juveniles is problematic.

The cost of insurance could be high, and caps on coverage could limit a Series’ ability to fully insure its assets.

To reduce the risks associated with possible death of its Thoroughbreds, the Company expects each Series to purchase mortality insurance on the Thoroughbreds in which it owns a substantial interest, as determined by the Manager in its discretion. However, changes in the market for insurance may affect the Company’s ability to obtain the insurance coverage at reasonable rates. Moreover, insurance is typically limited to the purchase price plus 10% and the Company cannot reasonably insure for the potential profit that each horse represents. Insurers have limited coverage on highly valued Thoroughbreds for congenital first year fertility and mortality following significant losses on several prominent racehorses that failed at stud in recent years. Any increase in the cost of such insurance could reduce a Series’ income and its ability to insure its assets. In addition, a Series’ inability to fully insure a highly valued Thoroughbred due to coverage caps could result in a significant reduction in net asset value in the event of the Thoroughbred’s death or infertility.

The Manager cannot predict how long a Series will own its horses, which may adversely affect a Series’ operating expenses.

The Company’s goal is for its Series to own Thoroughbreds for varying lengths of time and resell or breed them when appropriate. A Series may sell the progeny of its mares or sell its mares as broodmare prospects or in foal. A Series may not have sufficient resources to maintain horses for extended periods, which may cause it to resell a horse at a loss. Alternatively, a Series’ inability to resell horses within its expected resale window may result in an unanticipated increase in operating expenses that could adversely affect a Series’ results.

Absence of physical facilities; reliance on others for boarding and maintenance.

Neither the Manager nor the Company currently owns any physical facilities for the boarding or training of the Thoroughbreds that the Company’s Series will own. Therefore, the Company will rely on third parties to board, train and race its Thoroughbreds. We do not expect to have written agreements with trainers, veterinarians, or other third-party vendors, as it is not a customary practice in the industry. Should any third-party contractor fail to competently train or care for a Thoroughbred owned by a Series, the health and/or value of that horse could suffer, which could negatively affect the net asset values of a Series.

Subscribers must be eligible to be licensed to own racehorses.

State horseracing commissions have licensure requirements that require Investors be licensed if they hold a certain ownership interest of a racehorse. For this reason, subscribers for Units must certify that they are eligible to be licensed as a Thoroughbred racehorse owner and are not the subject of any pending disciplinary or legal proceedings that may result in ineligibility for licensure. Subscribers for more than 3% of the Units of a Series may also be required to provide additional personal information sufficient to permit the Manager to assess the prospective subscriber’s ability to be licensed under the applicable regulations of the racing commissions of the various states. A promising Thoroughbred owned by a Series could be excluded from high profile stakes races in New York or other states if a Unit holder becomes ineligible to hold an owner’s license, which could reduce the value of the Thoroughbred and reduce the Series’ return on investment. An Investor who knowingly fails to disclose his or her ineligibility for licensure could be subject to claims for any damages to the Series resulting from such bad faith. See “Plan of Distribution and Subscription Procedure -- Eligibility for Registration as a Racehorse Owner” for more detail about these eligibility requirements.

Potential breach of the security measures of the Commonwealth Platform.

The highly automated nature of the Commonwealth Platform through which potential investors acquire or transfer Units may make it an attractive target and potentially vulnerable to cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions. The Commonwealth Platform processes certain confidential information about investors, Thoroughbred breeders, and Thoroughbred assets held by the Company’s Series. While we intend to take commercially reasonable measures to protect our confidential information and maintain appropriate cybersecurity, the security measures of the Commonwealth Platform, the Company, the Manager, or the Company’s service providers (including Dalmore and North Capital) could be breached. Any accidental or willful security breaches or other unauthorized access to the Commonwealth Platform could cause confidential information to be stolen and used for criminal purposes or have other harmful effects. Security breaches or unauthorized access to confidential information could also expose the Company to liability related to the loss of the information, time-consuming and expensive litigation and negative publicity, or loss of the proprietary nature of the Manager’s and the Company’s trade secrets. If security measures are breached because of third-party action, employee error, malfeasance or otherwise, or if design flaws in the Commonwealth Platform software are exposed and exploited, the relationships between the Company, investors, users, Thoroughbred breeders and equine professionals could be severely damaged, and the Company or the Manager could incur significant liability or have the attention of the Manager’s personnel significantly diverted from racing, breeding and sales activities, which could have a material negative impact on the value of Units or the potential for distributions to be made on the Units.

Because techniques used to sabotage or obtain unauthorized access to systems change frequently and generally are not recognized until they are launched against a target, the Company, the third-party hosting used by the Commonwealth Platform and other third-party service providers may be unable to anticipate these techniques or to implement adequate preventative measures. In addition, federal regulators and many federal and state laws and regulations require companies to notify individuals of data security breaches involving their personal data. These mandatory disclosures regarding a security breach are costly to implement and often lead to widespread negative publicity, which may cause investors, Thoroughbred breeders, or service providers within the industry, including insurance companies, to lose confidence in the effectiveness of the secure nature of the Commonwealth Platform. Any security breach, whether actual or perceived, would harm the reputation of the Company and the Commonwealth Platform and the Company could lose investors and the opportunity to acquire Thoroughbred assets or retain equine service providers. This would impair the ability of the Company to achieve its objectives of acquiring additional Thoroughbred assets through the issuance of further series of Units and conducting racing, breeding and sales activities.

Risks Related to the Thoroughbred Industry

Investing in Thoroughbreds is a speculative venture and highly susceptible to changes in market conditions.

The success of a Series will depend in large part upon racing performance, breeding success, demand for particular types of horses and particular pedigrees, and the present and future values of Thoroughbreds generally, which can be highly volatile. Thoroughbred values often depend on highly subjective and unquantifiable factors. Ownership and the racing of Thoroughbred horses are often regarded more in terms of a sport, rather than a business. As a result, industry practices, structures, and valuation approaches have developed that may not be based solely upon economic considerations and may be inconsistent with the maximization of profits. For instance, a particular bloodline or pedigree might command substantial prices due principally to the interest of a small group of individuals having particular goals unrelated to the economic value of the horse, and a decline in their interest would likely have an unexpected and adverse effect on the value of the bloodline or pedigree. As a result, valuations for particular horses can be subject to sudden and unpredictable reversals that could cause Series Assets to depreciate or appreciate for reasons outside the Manager’s control.

The market for Thoroughbreds has been and will continue to be affected by the state of the economy, the amount of money available for investment purposes, the level of interest of foreign and domestic investors and enthusiasts in horse racing, the availability of purses and racing opportunities, the attractiveness of other investments and currency exchange rates, none of which can be accurately predicted. Other factors that may affect market valuations for Thoroughbreds include, but are not limited to:

On Thursday January 21, 2021, the Kentucky Supreme Court denied a motion to reconsider its September 24, 2020 decision finding that one form of Historical Horse Racing was not “pari-mutuel wagering” as defined by state law. On Saturday January 23, 2021, Keeneland and the Red Mile in Lexington, Kentucky suspended operation of their Historical Horse Racing facilities pending clarification of the legal status of the machines. The inability of racetracks to operate Historical Horse Racing machines in Kentucky will have an adverse impact on purses offered at all race meets in the Commonwealth which have been supplemented by Historical Horse Racing revenues during the last ten years of their operation. Legislation was introduced in the Kentucky Legislature on February 2, 2021 to address the issues raised by the Supreme Court’s decision. The success or failure of the Kentucky Legislature to address the decision by the Supreme Court putting Historical Horse Racing’s continued viability as a source of purses for Kentucky Horse racing could have a material impact on the viability of certain tracks in Kentucky, could have a material adverse effect on the overall economics of horse racing in Kentucky and nationally.

If the Thoroughbred racing industry experiences further declines in revenues, or if general economic conditions deteriorate, the average sales price for quality Thoroughbreds may decline, in which case a Series could suffer substantial losses from owning Thoroughbreds and the value of the Series’ Units would be materially and adversely affected.

Buying and selling Thoroughbreds is highly competitive.

Buying and selling Thoroughbreds is highly competitive, with numerous breeders and individual investors typically competing for prized acquisitions. Some investors have substantially greater resources than our Series will have. Moreover, the market for Thoroughbreds can be inefficient and lack transparency. Some Thoroughbreds may be sold at public auctions in which the Manager may not participate, and the Manager may not have access to private sales of highly desirable horses. Because Thoroughbreds and auctions are frequently advertised internationally, when the Manager purchases Thoroughbreds for the Company’s Series, it may be competing against many industry participants from all over the world, some of whom also have the benefit of favorable currency exchange rates relative to the United States dollar, sales tax exemptions, or other economic advantages not available to the Series. These and other competitive factors may impede the Manager’s ability to implement its strategy to focus on Thoroughbreds that can compete successfully in allowance and stakes races.

Pinhooking is especially volatile.

Pinhooking, which generally involves acquiring weanlings, yearlings or barren or off the track mares for resale as yearlings, two-year-olds, or in foal mares, can be more volatile than other segments of the Thoroughbred industry, and therefore involves greater risk. A Series could incur losses on its investment in weanlings, yearlings or barren or off the track mares for resale as a result of abrupt declines in market prices or the continued disruption of Thoroughbred auctions in 2021 due to Covid19 restrictions as occurred in 2020. In addition, a Series could also incur losses, even in rising markets, if individual horses fail to mature physically, lack recent commercially appealing activity in their pedigree, develop veterinary problems or simply fail to be noticed at a particular sale.

The performance of Thoroughbreds in training or as lightly raced prospects with limited past performances is unpredictable.

A business strategy to purchase yearlings or in-training racing prospects, either before or after making initial appearances in training or actual races, is highly speculative. Intangibles such as racing class and distance/surface preferences or limitations are still highly unpredictable at early stages in a horse’s development. Horses exhibiting precocious talent are often the subject of highly competitive bidding among several interested buyers, including the larger Kentucky-based breeding/stallion operations such as WinStar, Coolmore, Darley (owned by the ruler of Dubai), Lane’s End, Three Chimneys, Stonestreet, Spendthrift Farm and others, either alone or acting together as a partnership, co-ownership or “syndicate.” Therefore, acquiring highly sought prospects from successful bloodlines can require a substantial investment, and there is no assurance such a prospect will compete successfully.

Thoroughbred racing is highly competitive and is undertaken by individuals and entities with significantly greater financial resources than the Company.

The Company, through its different Series, will engage in Thoroughbred horse racing in the United States as one of its primary activities. Future racing success will depend upon the ability of the Manager to purchase all or interests in high-quality Thoroughbreds for the Company’s series, whether those Thoroughbreds are being trained and cared for by highly skilled professionals, and whether the Thoroughbreds will be ridden by highly skilled professional jockeys. Thoroughbred horse racing is an intensely competitive activity, and the Company will be competing with individuals and entities with substantially greater experience and financial resources than the Company and with the financial ability to purchase all of, or interests in, the best racehorses. The Company may not be successful in its effort to acquire competitive Thoroughbreds for its Series, making it more difficult to achieve a return on the investment. Further, if the Company acquires only a partial interest in a Thoroughbred, the Company may have less influence over the training, handling, and management of the Thoroughbred’s career, which could adversely affect the prospect of a financial return for the series.

A Thoroughbred’s ability to compete successfully depends on intangible factors that are difficult to evaluate.

Physical appearance, pedigree and early racing performance in maiden or allowance races can only give some indication of future success. The ability of a Thoroughbred to race successfully also depends on intangible behavioral factors, such as the ability to withstand the rigors of training and racing while maintaining the appropriate demeanor and composure. Factors related to racing at the highest levels, as the Company intends to do, such as frequent travel (often international), change of stabling environment, track surface, extreme weather and soundness issues may compromise the ability to train properly for key races. Ultimately, some horses simply do not have the will to win at the highest levels, even though they may possess the physical talent to do so. This intangible factor cannot be determined with any certainty as physical health and management of the racing career of the horse are often factors in the development or destruction of a horse’s willingness to perform at the highest levels. Examples of well bred, precocious two and three-year-old horses sold for millions of dollars early in their racing or training careers, which ultimately fail to perform competitively when challenged in upper-level stakes races, are common.

Values of fractional interests and related breeding rights in stallions are volatile.

The net asset value of certain Thoroughbred Assets will depend in part upon the present and future values of stallions generally. Buying and selling fractional interests and related breeding rights in stallions are susceptible to rapidly changing market conditions. There can be no assurance that fractional interests will maintain or increase in value or that stud fees will maintain a profitable level in relation to the purchase price of the associated stallion shares or fractional interests.

Market valuations for stallions are affected by the success or lack thereof of the stallions’ progeny on the racetrack, which is highly unpredictable. Past successes of a stallion’s progeny may not be indicative of the success of future progeny. Should the progeny of stallions in which a Series purchases fractional interests later fail to have success on the racetrack, the value of a Series’ Units may decline.

Another factor that affects market valuations for stallions relates to the number of Thoroughbred mares available for breeding and the frequency of breeding a stallion may be able to realize in a given year. Over time there has been a general increase in the number of times a stallion is bred in a given year, resulting in additional revenue to the fractional interest owner and an increase in market valuations for stallions. Should there be a reversal of this trend, market valuations for stallions could decline as a result of reduced potential profitability associated with stallion ownership. Recently the Jockey Club has imposed a cap of 140 mares to be bred to any stallion in a single breeding season. This cap will apply to any stallion born in 2020 or thereafter. This limitation may diminish the value of interests in potential sires and may increase the value of certain proven bloodlines due to the reduction of supply in the face of strong demand.

Highly subjective and unquantifiable factors also affect market values for stallions and their progeny. Ownership and the racing of Thoroughbred horses are often regarded more in terms of a sport than a business. As a result, industry practices, structures, and valuation approaches have developed that are not based upon economic considerations and may be inconsistent with the maximization of profits. For instance, a particular bloodline might command substantial prices due principally to the interest of a small group of individuals having particular goals unrelated to the economic value of the stallion; a decline in such interest would likely have an unexpected and adverse effect on the value of the bloodline. As a result, valuations for particular stallions can be subject to sudden and unpredictable changes, which could cause a Series’ investments to depreciate despite the Manager’s best efforts to carefully select its acquisitions.

If foreign purchasers reduce their participation in U.S. auction markets, prices paid for Thoroughbreds could decline and the Company’s assets could depreciate.

Foreign purchasers have accounted for a significant portion of the purchases of the most expensive yearlings at major auctions over the past several years. In particular, Sheik Mohammed bin Rashid al Maktoum, the ruler of Dubai, and entities owned by Dubai-based families have invested heavily in breeding stock in Australia, North America, South America, Great Britain, and Europe. The recent effort of this group to greatly expand its ownership of top caliber stallions and stallion prospects, and its growing involvement in the Thoroughbred business, fueled by rising oil prices and the devaluation of the dollar, escalated demand and prices for Thoroughbred horses worldwide. In April 2008, a related Dubai-based investment company acquired Fasig-Tipton, a leading North American Thoroughbred auction company, a first-time event in the Thoroughbred business.

Factors that could affect participation by foreign interests in the North American Thoroughbred market include:

The volatility in oil prices and the high levels of debt incurred for development in Dubai may discourage Dubai-based investors from participation in the Thoroughbred business at recent levels. If the Dubai-based group or other foreign investors significantly reduce their participation in public Thoroughbred auctions, or in the Thoroughbred business generally, it could lead to a significant downturn in values for Thoroughbreds. Fluctuations in prices at the major sales in Kentucky could affect prices for Thoroughbreds throughout the world.

The number of Thoroughbred racetracks and available racing opportunities could decrease.

A decrease in the number of racetracks or racing days would reduce the number of races, which would likely reduce the total purses available. In recent years, the operating environment for racetracks has become increasingly challenging. In 2020 the opportunities for live racing diminished due to the Covid19 pandemic with an approximate 25% reduction in actual race days and a 23% decline in actual number of races run. However, wagering per race day increased by 33%, almost completely offsetting the reduction in race days and races run. Total wagering was off less 1% compared to 2019. Decreasing attendance and competition from off-track and alternative forms of wagering, coupled with increasing costs, could jeopardize the continued existence of certain racetracks. If the number of racetracks decreases, reduction or elimination of race dates due to Covid 19 restrictions or other unanticipated business interruptions could reduce demand for Thoroughbreds and depress market values, either of which could adversely affect a Series and its units.

In the first six months of 2019 there were over 30 equine fatalities at Santa Anita Racetrack located in southern California despite a concerted effort by the owner of the track to impose high safety standards. The California legislature recently passed legislation to impose additional safety standards and to allow the California Racing Board greater latitude in evaluating the competition readiness of the horses in training and racing in California. There have been ongoing protests organized and funded by animal rights organizations in response to the equine fatalities with the stated objective of those protests to ban racing from the state. It has become a political issue with the Governor and senior U.S. Senator of California making public statements on the subject. Should horseracing in California be shut down it would have an economic impact on the Thoroughbred business estimated by the National Thoroughbred Racing Association to be in the hundreds of millions of dollars. That development could significantly decrease demand for Thoroughbred horses of all ages and depress prices significantly.

Government regulation of the Thoroughbred racing industry could increase.

The attractiveness of owning Thoroughbreds depends largely upon continued governmental acceptance of Thoroughbred racing as a form of legalized gambling. Though valuable to federal, state, and local government as a source of revenue, Thoroughbred racing could be subjected, at any time, to more restrictive regulation or banned entirely. The value of the Thoroughbreds owned by a Series could be drastically diminished by stricter regulation or a ban, which would have a material adverse effect on the Series and the value of its Units.

On December 27, 2020, The Horse Racing Integrity and Safety Act (the “2020 Act”) was signed into law. The 2020 Act imposes additional safety requirements upon, and further limits medication use during, the conduct of racing in the United States. The 2020 Act will likely increase the costs associated with conducting and participating in U.S. racing and may indirectly limit certain tracks and horses’ ability to participate.

Risks Related to the Offering

We are offering our Units pursuant to Tier 2 of Regulation A, and we cannot be certain if the reduced disclosure requirements applicable to Tier 2 issuers will make our Units less attractive to investors as compared to a traditional initial public offering.

As a Tier 2 issuer, we will be subject to scaled disclosure and reporting requirements which may make an investment in our Units less attractive to investors who are accustomed to enhanced disclosure and more frequent financial reporting. In addition, given the relative lack of regulatory precedence regarding Regulation A, there is a significant amount of regulatory uncertainty in regard to how the SEC or the individual state securities regulators will regulate both the offer and sale of our securities, as well as any ongoing compliance that we may be subject to. If our scaled disclosure and reporting requirements, or regulatory uncertainty regarding Regulation A, reduces the attractiveness of the Units, we may be unable to raise the funds necessary to fund future offerings, which could impair our ability to develop a diversified portfolio of racehorses and create economies of scale, which may adversely affect the value of the Units or the ability to make distributions to Investors.

If we acquire a partial interest in a Thoroughbred for a series, we may have less than complete control, or no control rights, with respect to the management and disposition of the Thoroughbred.

It is not unusual for the seller of a Thoroughbred to retain a minority interest in a promising prospect. We intend that each Series will hold a controlling interest in the assets it acquires and will manage the equine activities in which those assets are engaged. For example, we hold a 75% interest in Biko, and our purchase and co-ownership agreement with the sellers provides that Biko will be trained, raced, and cared for under our exclusive management as long as the Company holds a majority interest. However, the agreement also requires the consent of the holders of 80% of the horse’s ownership to sell Biko or enter the Gelding in a claiming race (in which the Gelding may be purchased by a claimant for a specific price as a condition to entry in the race).

Similarly, from time to time we may have an opportunity to acquire a minority interest in a Thoroughbred that has shown promise as a racehorse, is eligible for stakes or graded stakes races or otherwise presents substantial potential for appreciation in value. If we acquire such a minority interest, we will seek by agreement with other co-owners, whenever possible, to obtain a meaningful degree of management control over the racing or breeding career of the Thoroughbred. However, if we have limited or no control over the management or disposition of a Thoroughbred asset held by a Series, decisions made by others could adversely affect the financial return to the Unitholders of that Series.

Investment in fractional interests; absence of regulatory oversight.

The Manager intends that no Series will hold assets in which the Manager has limited or no management control that would represent more than 40% of the aggregate value of the Series’ total assets, so that it is not considered to be an investment company within the meaning of the Investment Company Act of 1940, as amended. Accordingly, certain provisions of the Investment Company Act (which, among other things, require investment companies to have a certain number of disinterested directors and regulate the relationship between the advisor and the investment company) will not apply.

There may be deficiencies with our internal controls that require improvements, and if we are unable to adequately evaluate internal controls, we may be subject to sanctions.

As a Tier 2 issuer, we will not need to provide a report on the effectiveness of our internal controls over financial reporting, and we will be exempt from the auditor attestation requirements concerning any such report so long as we are a Tier 2 issuer. We are in the process of evaluating whether our internal control procedures are effective and therefore there is a greater likelihood of undiscovered errors in our internal controls or reported financial statements as compared to issuers that have conducted such evaluations.

Impact of non-compliance with regulations.

The Series of Units is being sold by Dalmore, which is a registered broker-dealer under the Exchange Act and will be registered in each state where the Offering and sale of the Series of Unit will occur prior to the launch of the Offering, and it is anticipated that the Units will be offered and sold only in states where Dalmore is registered as a broker-dealer. If a regulatory authority determines that the Manager, who is not a registered broker-dealer under the Exchange Act or any state securities laws, has itself engaged in brokerage activities, the Manager may need to stop operating and therefore, the Company will not have an entity managing the underlying Thoroughbred. In addition, if the Manager is required to register as a ‘broker-dealer’, there is a risk that any series of units offered and sold while the Manager was not registered may be subject to a right of rescission, which may result in the early termination of the Series.

Furthermore, the Company is not registered and will not be registered as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”), and the Manager is not and will not be registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Investment Advisers Act”). Thus, the Series Country Grammer Units do not have the benefit of the protections of the Investment Company Act or the Investment Advisers Act. The Company and the Manager have taken the position that the underlying assets are not “securities” within the meaning of the of the Investment Company Act or the Investment Advisers Act, and thus the Company’s assets will comprise of less than 40% investment securities under the Investment Company Act and the Manager will not be advising with respect to securities under the Investment Advisers Act. This position, however, is based upon applicable case law that is inherently subject to judgments and interpretation. If the Company were to be required to register under the Investment Company Act or the Manager were to be required to register under the Investment Advisers Act, it could have a material and adverse impact on the results of operations and expenses of the Company’s Series, and the Manager may be forced to liquidate and wind up the Company’s Series or rescind any Offering of its Series.

Possible changes in federal tax laws.

The Internal Revenue Code (the “Code”) is subject to change by Congress, and interpretations of the Code may be modified or affected by judicial decisions, by the Treasury Department through changes in regulations and by the Internal Revenue Service through its audit policy, announcements, and published and private rulings. Although significant changes to the tax laws historically have been given prospective application, we cannot assure you that any changes made in the tax law affecting an investment in any series of interest of the Company would be limited to prospective effect. Accordingly, the ultimate effect on an Investor’s tax situation may be governed by laws, regulations or interpretations of laws or regulations which have not yet been proposed, passed, or made, as the case may be.

Lack of diversification.

It is not anticipated that Series Country Grammer and Series OL2018 would own any assets other than their respective Thoroughbred Assets, plus potential cash reserves for maintenance, training, insurance, and other expenses pertaining to the Thoroughbreds and amounts earned by Series Country Grammer from racing, breeding and sales activities. Investors looking for diversification will have to create their own diversified portfolio by investing in other opportunities in addition to Series Country Grammer and Series OL2018.

Industry concentration and general downturn in industry.

Given the concentrated nature of the Series Assets (i.e., only racehorses and related interests in them), any downturn in the racehorse industry is likely to impact the value of the Series Assets, and consequently the value of the Units. In the event of a downturn in the industry, the value of the Thoroughbred Assets of a Series is likely to decrease.

Difficulties in determining the value of interests in Thoroughbreds.

As explained in the “Description of the Business” section, racehorses are difficult to value. Valuations of the underlying assets will be based upon the subjective approach taken by the members of the Manager’s network of experts and members of the Advisory Board, valuation experts appointed by the Company, and other data provided by third parties (such as auction results, health records, past performances, veterinary inspections/examinations, and previous sales history). The Manager sources data from reputable valuation providers in the industry, such as Bill Oppenheim Bloodstock, Keeneland Sales Results, Fasig-Tipton Sales Results, and OBS Sales Results among others; however, the Manager may rely on the accuracy of the underlying data without any means of detailed verification. Consequently, valuations may be uncertain.

The value of Thoroughbred Assets and, consequently, the value of an Investor’s Units can go down as well as up. Valuations are not guarantees of realizable price, do not necessarily represent the price at which the Units may be sold on the Commonwealth Platform and the value of the Series Assets may be materially affected by a number of factors outside the control of the Company, including any volatility in the economic markets and the condition of the horseracing industry.

Risks Related to Ownership of our Units

Lack of voting rights.

The Manager has the unilateral ability to amend the Operating Agreement and the allocation policy in certain circumstances without the consent of the Investors, and the Investors only have limited voting rights in respect of the Series in which they hold Units. Investors will have voting rights only with respect to certain matters, primarily relating to amendments to the Operating Agreement that would adversely change the rights of their Units and removal of the Manager for “cause.” Investors will therefore be subject to any amendments the Manager makes (if any) to the Operating Agreement and allocation policy and also any decision it takes in respect of the Company and its series, which the Investors do not get a right to vote upon. Investors may not necessarily agree with such amendments or decisions, and such amendments or decisions may only be in the best interests of only a limited number of the Investors, but not Investors as a whole.

Furthermore, the Manager can only be removed as manager of the Company and each series in a very limited circumstance, following a non-appealable judgment of a court of competent jurisdiction to have committed fraud in connection with the Company or a series. Investors would therefore not be able to remove the Manager merely because they did not agree, for example, with how the Manager was managing a Series Asset.

The Manager will have substantial discretion to determine whether and when you receive any distributions and the amounts distributed.

The Operating Agreement provides that the Manager will distribute cash available for distribution to the Members of a Series as soon as reasonably practicable after the relevant amounts have been received by the Series, but only after the Manager has reserved amounts reasonably believed to provide adequate future working capital for the Series’ ongoing operations and to meet any future contemplated obligations or contingencies. As revenue generated by racing activity is intermittent and highly unpredictable, planning for a Series’ future cash needs will require the Manager to exercise substantial judgment as to the amounts reasonably available at any time for distribution to the Series’ Members. Investors should not expect to receive distributions regularly, if at all.

A Unit Holder’s ownership of a Series may be diluted if the Manager issues additional units of the Series after the Closing of the Offering of that Series.

The Manager may sell additional Units of a Series from time to time after the Closing of the Offering of that Series in order to raise capital to cover the Series’ ongoing operating expenses. If additional Units are issued in a particular Series, Investors in that Series would have their ownership interest diluted. Dilution could reduce both the current value of the Units of the Series held by existing Investors and the amount of any future distributions payable to the diluted Investors.

The Manager and its affiliates will not be liable to the Company or any Series absent fraud, willful misconduct, or gross negligence. In addition, the Company and its Series are obligated to indemnify its officers and the Manager from liability to third parties.

None of the Manager, nor any current or former directors, officers, employees, partners, shareholders, members, controlling persons, agents or independent contractors of the Manager, members of the Advisory Board, nor persons acting at the request of the Company or any Series in certain capacities with respect to other entities (collectively, the “Indemnified Parties”) will be liable to the Company, any Series or any Unit Holders for any act or omission taken by the Indemnified Parties in connection with the business of the Company or a Series that has not been determined in a final, non-appealable decision of a court, arbitrator or other tribunal of competent jurisdiction to constitute fraud, willful misconduct or gross negligence.

The Operating Agreement requires the Company or, where relevant, each Series of the Company to indemnify the Indemnified Parties out of its assets against all liabilities and losses (including amounts paid in respect of judgments, fines, penalties or settlement of litigation, including legal fees and expenses) to which they become subject by virtue of serving as Indemnified Parties with respect to any act or omission that has not been determined by a final, non-appealable decision of a court, arbitrator or other tribunal of competent jurisdiction to constitute fraud, willful misconduct or gross negligence. Unless attributable to a specific Series or a specific Series Asset, the costs of meeting any indemnification will be allocated pro rata across each Series based on the value of each underlying asset. If a Series is required to indemnify any person as described above, any such payment may reduce or dissipate the assets of a Series.

Conflicts of interest.

The Manager will devote only such time to our business as it deems necessary. The Operating Agreement allows the Manager and its affiliates to participate in business ventures that are similar to, and that may compete with, our business. If the Manager organizes other companies in the future, we will be competing with the other companies for the time and talents of the personnel employed by the Manager rendering services to us.

The offering price for the Units determined by us may not necessarily bear any relationship to established valuation criteria such as earnings, book value of assets that may be agreed to between purchasers and sellers in private transactions or that may prevail in the market if and when our Units can be traded publicly.

The price of the Units of each Series was not derived as a result of arms-length negotiations but was instead based upon various factors including the valuation of the Thoroughbred Asset the Series will acquire, anticipated market demand, our future prospects, our capital structure, as well as certain expenses incurred in connection with the Offering and ongoing boarding and training costs. These estimated values and Unit prices do not necessarily accurately reflect the actual value of the Units or the price that may be realized upon disposition of the Units.

If a market ever develops for the Units, the market price and trading volume of our Units may be volatile.

If a market develops for the Units, the market price of the Units could fluctuate significantly for many reasons, including reasons unrelated to our performance, the underlying Thoroughbred, or the Series, such as the racing performance of related Thoroughbreds, reports by industry analysts, investor perceptions and general economic and industry conditions. For example, to the extent that other companies, whether large or small, within the pari-mutuel gaming industry experience declines in their share price, the value of Units may decline as well.

In addition, fluctuations in operating results of a particular series or the failure of operating results to meet the expectations of investors may negatively impact the price of our Units. Operating results may fluctuate in the future due to a variety of factors that could negatively affect revenues or expenses in any particular reporting period, including vulnerability of our business to a general economic downturn; changes in the laws that affect our operations; competition from other entertainment enterprises; compensation related expenses; application of accounting standards; seasonality; injury to any of the Thoroughbreds owned by the Company’s series, and our ability to obtain and maintain all necessary regulatory approvals, government certifications or licenses to conduct our business.

Funds from purchasers accompanying subscriptions for the Units will not accrue interest while in escrow prior to admission of the subscriber as an Investor in the Series, if it occurs, in respect of such subscriptions.

The funds paid by purchasers for the Units will be held in a non-interest-bearing escrow account until the admission of the subscriber as an Investor in the Series, if it occurs, in respect of the applicable subscriptions. Purchasers may not have the use of such funds or receive interest thereon pending the completion of the Offering. No subscriptions will be accepted, nor Units sold unless valid subscriptions for the Offering are received and accepted prior to the termination of the Offering Period. It is also anticipated that subscriptions will not be accepted from prospective Investors located in states where Dalmore is not registered as a broker-dealer. If we terminate the Offering prior to accepting a subscriber’s subscription, escrowed funds will be returned, without interest or deduction, to the proposed Investor.

Exclusive forum and waiver of jury trial.

Our Operating Agreement, to the fullest extent permitted by applicable law and subject to limited exceptions, provides for investors to consent to exclusive jurisdiction of the Delaware Court of Chancery and for a waiver of the right to a trial by jury with respect to claims relating to the Operating Agreement. These provisions may have the effect of limiting the ability of investors to bring a legal claim against us due to geographic limitations and may limit an investor’s ability to bring such a claim in a judicial forum that it finds favorable for disputes with us. Furthermore, waiver of a trial by jury may disadvantage you to the extent a judge might be less likely than a jury to resolve an action in your favor. In addition, if waiver of a trial by jury is determined to be inapplicable to, or unenforceable in respect of, an action or proceeding against us, it may cause us to incur additional costs associated with resolving these matters in other jurisdictions, which could adversely affect our business and financial condition.

POTENTIAL CONFLICTS OF INTEREST

We have identified the following conflicts of interest that may arise in connection with the Units, in particular, in relation to the Company, the Manager and the underlying assets. The conflicts of interest described in this section should not be considered as an exhaustive list of the conflicts of interest that prospective Investors should consider before investing in the Units.

Our Operating Agreement contains provisions that reduce or eliminate duties (including fiduciary duties) of the Manager.

Our Operating Agreement provides that the Manager, in exercising its rights in its capacity as the Manager, will be entitled to consider only such interests and factors as it desires, including its own interests, and will have no duty or obligation (fiduciary or otherwise) to give any consideration to any interest of or factors affecting us or any of our investors and will not be subject to any different standards imposed by our Operating Agreement, the Delaware Limited Liability Company Act or under any other law, rule or regulation or in equity. These modifications of fiduciary duties are expressly permitted by Delaware law.

We do not have a conflicts of interest policy.

The Company, the Manager and their affiliates will try to balance the Company’s interests with their own. To the extent that such parties take actions that are more favorable to other entities than the Company, however, these actions could have a negative impact on the Company’s financial performance and, consequently, on distributions to Investors and the value of the Units. The Company has not adopted, and does not intend to adopt in the future, either a conflicts of interest policy or a conflicts resolution policy.

Payments from the Company to the Manager and its employees or affiliates.

The Manager will engage, on behalf of the Company, with bloodstock agents, consignors, breeders, owners, insurance companies, trainers and other service providers and thus may receive in-kind discounts, for example, reductions in commissions based upon the volume of sales/purchases in a given period of time, commissions paid by breeding farms directly to the Manager for purchasing a season to use in breeding a mare owned by the Company, a reduction in the price or elimination of expense associated with services (e.g. training, transportation, veterinary etc.) provided for Thoroughbreds under the ownership or management of the Manager or its Members. In such circumstances, it is likely that these in-kind discounts may be retained for the benefit of the Manager and not the Company or may apply disproportionately to other series. The Manager may be incentivized to choose a stallion, transportation company, consignor, boarding facility, or bloodstock agent, based on the benefits it is to receive or all series collectively are to receive rather than that which is best for the Series.

Members of the expert network and the Advisory Board are often Thoroughbred horse owners themselves and therefore will be in competition with the Company and may have access to certain information about the Company that may allow them to better compete with the Company and may cause them to be incentivized to sell the Company their own horses at potentially inflated market prices.

Members of the expert network and the Advisory Board may also be Investors, in particular, if they are holding Units acquired as part of their sale of a Thoroughbred to the Company. They may therefore promote their own self-interests when providing advice to the Manager regarding an underlying asset (for example, by encouraging the liquidation of such underlying asset so they can receive a return in their capacity as an Investor).

If the Operating Expenses exceed the revenue from the underlying Thoroughbred and any cash reserves, the Manager has the option to cause the Series to incur an Operating Expenses Reimbursement Obligation to cover such excess. As interest may be payable on such loan, the Manager may be incentivized to cause the Series to incur an Operating Expenses Reimbursement Obligation to pay Operating Expenses rather than look elsewhere for additional sources of income or to repay any outstanding Operating Expenses Reimbursement Obligation as soon as possible rather than make distributions to Investors. The Manager may also choose to issue additional Units to pay for Operating Expenses instead of causing the Company to incur an Operating Expenses Reimbursement Obligation, even if any interest payable by the Series of Units on any Operating Expenses Reimbursement Obligation may be economically more beneficial to Unit Holders than the dilution incurred from the issuance of additional Units.

The Manager determines the timing and amount of distributions made to Investors from Free Cash Flow of the Series. As a consequence, the Manager also determines the timing and amount of payments made to itself, since payments to the Manager are only made if distributions of Free Cash Flow are made to the Investors. The Manager may thus be incentivized to make distributions of Free Cash Flow more frequently and in greater quantities rather than leaving excess Free Cash Flow on the balance sheet of a particular Series to cover future Operating Expenses, which may be more beneficial to a particular Series.

Ownership of multiple series of interests.

The Manager or its affiliates will acquire interests in each series for their own accounts and may transfer these interests, either directly or through brokers, via the Commonwealth Platform. Depending on the timing of the transfers, this could impact the interests held by the Investors (e.g., driving price down because of supply and demand and over availability of interests). This ownership in each of the series may result in a divergence of interests between the Manager and the Investors who only hold one or certain series (e.g., the Manager or its affiliates, once registered as a broker-dealer with SEC, may disproportionately market or promote a certain series, in particular, where they are a significant owner, so that there will be more demand and an increase in the price of such series).

Allocation of income and expenses as between series of interests

There may be situations when it is challenging or impossible to accurately allocate income, costs and expenses to a specific series and certain series may get a disproportionate percentage of the cost or income, as applicable. In such circumstances, the Manager would be conflicted from acting in the best interests of the Company as a whole or the individual Series. While we presently intend to allocate expenses as described in “Description of the Business – Allocation of Revenue and Expense,” the Manager has the right to change this allocation policy at any time without further notice to Investors.

Conflicting interests of the Manager and the Investors

The Manager may choose to use certain bloodstock agents, appraisers, trainers, or other service providers because they get benefits from giving them business, which do not accrue to the Investors.

The Manager will determine whether or not to sell a Thoroughbred owned by a series in response to an offer to acquire the Thoroughbred. The Manager or its affiliates may be incentivized by the opportunity to receive a Management Fee in connection with the sale of all or a portion of the Thoroughbred even though Investors may prefer to retain the gains from any appreciation in value of the Thoroughbred. Furthermore, when determining to liquidate a Series Asset, the Manager will do so considering all the circumstances at the time, which may include obtaining a price for the asset that is in the best interests of a substantial majority, but not all of the Investors.

Selection of trainers and races for one Thoroughbred over another owned by a different series

The Manager may be incentivized to enter a Thoroughbred in a certain race as to do so may generate higher Free Cash Flow to be distributed to the Manager and investors in the series associated with that particular underlying asset. This may lead the Series Asset(s) to generate lower distributions than the underlying assets of other series. The racing of a Thoroughbred asset could increase the risk of the Thoroughbred getting injured and could impact the value of the Thoroughbred and, as a result, the value of the related series. The Manager may therefore be conflicted when determining whether to race the Thoroughbred to generate revenue, diminish or increase the Thoroughbred’s value or limit the potential exposure to injury. Furthermore, the Manager may be incentivized to utilize Thoroughbreds that help popularize the interests via the Commonwealth Platform, which means of utilization may not generate as much immediate returns as other potential utilization methods.

Conflicts among the Company’s Series

In the future, the Company’s series may be competing for the time and talents of the personnel and service providers employed by the Manager to provide certain services to the Series. At times when the service providers are experiencing high demand and have limited capacity at their facilities or within their respective organizations, their services may not be readily available to the Series or a future series for which the Manager provides management services. Simply because a trainer, jockey veterinarian or other service provider is initially available to the Series is no guarantee that the Series will continue to have access to or will be able to increase the use of that service provider. The Manager may have to make decisions and give preferences, access to or allocations of access to certain service providers in high demand to one series over another, which may not be in the best interests of the affected series. The inability to access the services of a service provider in high demand at a certain time may negatively impact the economic performance of the Series. The Manager and one or more service providers (particularly trainers and veterinarians) may have disagreements over the management of the Series’ Thoroughbreds that lead to the unwillingness of the service provider to continue to provide such services to the Company or to a series. This could lead to a reallocation of the Thoroughbreds among other service providers affording different and less beneficial racing opportunities and lesser quality care of the Thoroughbreds and exposing them to greater risk. Such a reallocation could have an adverse impact on the economic performance of the Series or a series.

The Manager’s discretionary authority to amend the Operating Agreement

The Manager has the ability to unilaterally amend the Operating Agreement and allocation policy. As the Manager is a party, or is subject, to these documents, it may be incentivized to amend them in a manner that is beneficial to it as Manager of the Company or as a holder of units in a particular Series, but which may not benefit all Investors equally. In addition, the Operating Agreement seeks to limit the fiduciary duties that the Manager owes to Investors. Therefore, the Manager is permitted to act in its own best interests rather than the best interests of the Investors. See “Description of the Units Offered” for more information.

Distribution income in addition to the Management Fee.

As the Manager will acquire a percentage of each series, it may be incentivized to attempt to generate more earnings from the underlying assets owned by those series in which it holds a greater stake.

Any profits generated from the Commonwealth Platform (e.g., through advertising) and from issuing additional interests in underlying assets on the Commonwealth Platform (e.g Management Fees) will be for the benefit of the Manager. In order to increase its revenue stream, the Manager may therefore be incentivized to issue additional series and acquire more underlying assets rather than focus on monetizing any underlying assets already held by existing series.

Conflicts between the Advisory Board and the Company.

The Operating Agreement of the Company provides that the resolution of any conflict of interest approved by the Advisory Board shall be deemed fair and reasonable to the Company and the Members and not a breach of any duty at law, in equity or otherwise. As part of the remuneration package for Advisory Board members, they may receive an ownership stake in the Manager. This may incentivize the Advisory Board members to make decisions in relation to the underlying assets that benefit the Manager rather than the Company.

Advisory Board members who participate in the racehorse industry may seek to sell horses to, acquire horses from, or train horses owed by, the Company.

Conflicts between the Legal Counsel, the Company, and the Commonwealth Thoroughbred Parties.

The counsel of the Company is also counsel to the Manager and its affiliates (“Legal Counsel”) and may serve as counsel with respect to other series (collectively, the “Commonwealth Thoroughbred Parties”). Because Legal Counsel represents both the Company and the Commonwealth Thoroughbred Parties, certain conflicts of interest exist and may arise. To the extent that an irreconcilable conflict develops between the Company and any of the Commonwealth Thoroughbred Parties, Legal Counsel may represent the Commonwealth Thoroughbred Parties and not the Company or the Series. Legal Counsel may, in the future, render services to the Company or the Commonwealth Thoroughbred Parties with respect to activities relating to the Company as well as other unrelated activities. Legal Counsel is not representing any prospective Investors of the Series Country Grammer Units in connection with this Offering and will not be representing the members of the Company other than the Manager, although the prospective Investors may rely on the opinion of legality of Legal Counsel provided at Exhibit 12.1. Prospective Investors are advised to consult their own independent counsel with respect to the other legal and tax implications of an investment in the Series Country Grammer Units.

DILUTION

Dilution means a reduction in value, control or earnings of the Units the Investor owns. From time to time, additional Units of a Series may be issued in order to raise capital to cover the Series’ ongoing operating expenses. See “Description of the Business – Operating Expenses” for further details.

The Manager, together with its affiliates, must acquire a minimum of 2% and may acquire a maximum of 10% of the Units in connection with this Offering (of which the Manager may sell all or any portion from time to time following the Closing of the Offering). The Manager may waive the maximum ownership percentage at its discretion. The Manager and its affiliates will pay the price per share offered to all other potential Investors hereunder.

Affiliates of the Manager or its affiliates will purchase 46 Units in the Series Country Grammer Offering, which will represent from 2% to 8% of the outstanding Series OL2018 Units depending on the number of Units sold in the Series Country Grammer Offering.

In addition, $10,000 of principal payable on the convertible promissory note issued by the Company to the Manager to acquire Biko will convert into additional Series OL2018 Units at the purchase price per Unit when the initial Series OL2018 Closing occurs and will be included as offering proceeds raised for purposes of the $80,000 minimum offering amount. The Units issued upon conversion of the note would represent from approximately 8% to 12.5% of the outstanding Series OL2018 Units depending on the number of Units sold in the Series OL2018 Offering. The Manager intends to waive the limitation on its ownership of the Series OL Units if its ownership percentage would otherwise exceed the 10% maximum.

USE OF PROCEEDS – SERIES COUNTRY GRAMMER

We estimate that the gross proceeds of this Offering (including from Series Country Grammer Units acquired by the Manager) will be $113,850 assuming the full amount of this Offering is sold. The following table shows how the expected use of the offering proceeds at both the minimum and maximum offering amounts:

⁽¹⁾         Represents a 7.5% ownership interest if the minimum offering proceeds are raised.

⁽²⁾         Includes costs of due diligence investigation of a potential Series Asset, pre-purchase medical examinations, appraisal fees, auction-related expenses, and interest on funds borrowed to acquire a Series Asset, if any, prior to a series offering. Reimbursement of these expenses incurred by the Manager is limited to 4.4% of the offering proceeds.

⁽³⁾         The Manager has agreed to limit reimbursement of offering expenses equal to no more than 6.6% of offering proceeds.

⁽⁴⁾         Equals 15% of the purchase price of the Thoroughbred interest payable to the Manager for sourcing the opportunity and negotiating the terms of the acquisition.

⁽⁵⁾         Fee of up to 3.0% of the offering proceeds received from the offering of each series of units to reimburse the Manager for expenses incurred to set up the legal and financial framework and compliance infrastructure for the marketing and sale of offerings of each series of units.

⁽⁶⁾         The brokerage fee equals 1% of the amount raised in this Offering excluding any Units purchased by the Manager or its affiliates.

⁽⁷⁾         Donation to the Thoroughbred Aftercare Alliance.

⁽⁸⁾         Represents the Company’s portion of estimated training and racing expenses of $5,000 per month for 24 months based on its ownership interest.

⁽⁹⁾         Represents the Company’s portion of premiums for racing and medical insurance coverage for 24 months based on the Thoroughbred’s estimated value.

On March 27, 2021, Series Country Grammer acquired an option to purchase up to a 30% undivided interest in Country Grammer from WinStar Farm. The Purchase Option, Bill of Sale and Co-Ownership Agreement is attached as Exhibit 6.4 to the Offering Statement. The target purchase price is $42,000. The offering proceeds must attain the maximum offering amount of $113,850 in order for Series Country Grammer to acquire the full 30% interest. The offering must raise the minimum offering proceeds of $28,450 to acquire any ownership in Country Grammer.

The option will be exercised in multiple closings, each occurring at increments of approximately 25% of the maximum offering proceeds. Upon payment of the cash from the offering proceeds to WinStar, the ownership interest in Country Grammer will be owned by the Series and not subject to any liens or encumbrances. Upon each closing, Series Country Grammer will hold a percentage of ownership in Country Grammer that is proportional to the percentage of the maximum offering proceeds raised. For example, when the offering has raised 50% of the maximum offering proceeds ($56,900), a second closing will occur at which Series Country Grammer will pay WinStar a second installment of 25% of the purchase price and will acquire an additional 25% of the 30% interest (or 7.5%). Following that second closing, Series Country Grammer would hold a total interest of 15% in Country Grammer.

WinStar will retain a 70% interest in Country Grammer and will continue to control and manage the Thoroughbred. Country Grammer will race under the silks and colors of WinStar for two out of every three races, and CMWLTH every third race. Country Grammer will race under the joint names of WinStar Farm, LLC and CMWLTH. All income and expenses for Country Grammer will be allocated based on each party’s respective ownership percentage.

Upon each closing of the Offering, proceeds from the sale of the Units will be distributed to the account of the Series. The Series will use those proceeds to pay the amounts shown in the table above based on the percentage of maximum proceeds received at each closing.

Affiliates of the Manager plan to purchase 46 Units in the Offering that would represent 2% of the outstanding Series Country Grammer Units if the maximum offering amount is raised and 8% if the minimum offering amount is raised. The affiliates of the Manager will pay the offering price of $50 per Unit for their Units in the Series Country Grammer Offering. See “Fees and Expenses” for additional information.

The Company intends to donate approximately 2% of the proceeds from the Series Country Grammer Offering and its future offerings to the Thoroughbred Aftercare Alliance (“TAA”). TAA is a 501(c)(3) nonprofit that funds a variety of organizations dedicated to rehabilitating and caring for retired Thoroughbreds. TAA was initially founded by the Breeders’ Cup Ltd., Keeneland Association Inc. and The Jockey Club and is supported by donations. We believe we have an obligation as an organization dedicated to humane Thoroughbred racing to contribute to the care of retired racehorses.

The allocation of the net proceeds of this Offering set forth above represents our intentions based upon our current plans and assumptions regarding industry and general economic conditions, our future revenues, and expenditures. The amounts and timing of our actual expenditures will depend upon numerous factors, including market conditions, cash generated by our operations, business developments, and related rate of growth. The Manager reserves the right to modify the use of offering proceeds based on the factors set forth above. If fewer than the maximum of 2,277 Series Country Grammer Units are sold in connection with this Offering, the Manager may waive the fees to which it would otherwise be entitled and may not seek reimbursement for the full amount of acquisition and offering expenses.

DESCRIPTION OF COUNTRY GRAMMER

Country Grammer is a bay colt born on May 11, 2017 by Tonalist out of Arabian Song by Forestry. Country Grammer was bred by Scott and Debbie Pierce in Kentucky.

To date, a veterinarian has taken radiographs, performed a scope, ultrasound, and physical examination and all were reported within acceptable limits for purchase as a racehorse.

Pedigree

Country Grammer’s sire, Tonalist was a four-time Grade 1 winner that earned over $3.6 million in 16 starts. He ran triple digit Beyers in 11 graded stakes including the Cigar Mile Handicap, Jockey Cup Gold Cup, and Belmont Stakes, among others. Tonalist entered stud in 2016 and he has since sired two crops of racing age, 180 foals, 93 starters, and 53 winners of 89 racers.

Tonalist’s dam Settling Mist, is a half-sister to Easter Bunnette, dam of 2011 American Horse of the Year Havre de Grace. She is also half-sister to G3-placed The Bink, dam of multiple G1 winner Riskaverse and G3 winner Cozzy Corner.

Country Grammer’s dam, Arabian Song, raced as a three-year-old earning $17,533. She is sired by Forestry, who earned $591,225 in 11 starts. Major wins include the G1 King’s Bishop Stakes and the G2 Dwyer Stakes. He sired G1 winners Discreet Cat (lifetime earnings $1.55M), Diplomat Lady (lifetime earnings $552,784), Forest Danger (lifetime earnings $423,000), and 2011 Preakness Winner Shackleford (lifetime earnings $3.09 million). Arabian Song’s third dam, Willstar, is the dam of such horses as Etoile Montante winner of the 2004 Breeders’ Cup Handicap (lifetime earnings $659,277) and dam of Starformer (lifetime earnings $543,126).

Valuation

WinStar Farm purchased Country Grammer from the 2021 Keeneland January Horses of All Ages Sale for $110,000 as part of the dispersal of the estate of Paul Pompa Jr. following his death in October 2020. The $142,000 valuation for Country Grammer was agreed upon based on the auction price plus hauling and training expenses incurred to date.

Development Timetable

Immediately following his purchase at auction in January 2021, Country Grammer was flown to Hall of Fame trainer Bob Baffert to begin full race training in preparation for his four-year old campaign.

Country Grammer has six career starts with two wins, one third and lifetime earnings of $157,320 despite an abbreviated three-year old season due to the impact of Covid-19. His most decisive victory came in July 2020, when he won the G3 Peter Pan Stakes at Saratoga posting a speed figure of 95 and defeating 2021 Dubai World Cup winner Mystic Guide (lifetime earnings $7.3 million) and Graded Stakes placed breeding stallion Caracaro.

USE OF PROCEEDS – SERIES OL2018

We estimate that the gross proceeds of this Offering (including from Series OL2018 Units acquired by the Manager) will be approximately $125,000 assuming the full amount of this Offering is sold, and will be used as shown in the following table:

⁽¹⁾         Represents the portion of the purchase price that will be paid to the Manager in cash from the offering proceeds. The Manager loaned the funds to the Company for its purchase of a 75% interest in Biko for $20,000. When the Series OL2018 Closing occurs, the Manager will be paid $10,000 in cash from the offering proceeds and be issued 200 Series OL2018 Units at the $50 purchase price per Unit in full payment of the loan.

⁽²⁾         Includes costs of due diligence investigation of a potential Series Asset, pre-purchase medical examinations, appraisal fees, auction-related expenses, and interest on funds borrowed to acquire a Series Asset, if any, prior to a series offering. The Manager has agreed to waive reimbursement of these expenses.

⁽³⁾         Equals 10% of the total purchase price of the Thoroughbred interest payable to the Manager for sourcing the opportunity and negotiating the terms of the acquisition.

⁽⁵⁾         Fee of 3.0% of the offering proceeds received from the offering of each series of units to reimburse the Manager for expenses incurred to set up the legal and financial framework and compliance infrastructure for the marketing and sale of offerings of each series of units.

⁽⁵⁾         The Co-ownership Agreement requires the Company to pay 75% of boarding, training, and related expenses. Pre-training expenses are boarding expenses incurred by the Manager from October 2019 until Biko entered training in July 2020.

⁽⁶⁾         Estimated Future Training Expenses represent the Company’s portion of training expenses for 15 to 18 months.

On January 16, 2020, the Company acquired a 75% interest in Biko for a purchase price of $20,000. The Purchase and Sale and Co-Ownership Agreement is attached as Exhibit 6.3 to the Offering Statement. The Manager loaned the $20,000 purchase price to the Company. When the Series OL2018 Closing occurs, the Manager will be paid $ 10,000 in cash from the offering proceeds and will be issued 200 Series OL2018 Units at the $50 purchase price per Unit in full payment of the loan. The 200 Units would represent 7.4% of the Series OL2018 Units outstanding if the maximum of 2,500 Units are sold in the Series OL2018 Offering. The amended convertible promissory note issued by the Company to the Manager is attached as Exhibit 6.2 to the Offering Statement. Upon payment of the cash and the issuance of the Units to the Manager, Biko will be owned by the Series and not subject to any liens or encumbrances.

The seller will retain a 25% interest in Biko. The Company will have the exclusive right to manage Biko as long as it holds a majority ownership interest in Biko. All expenses relating to the reasonable boarding, care, and training of Biko (such as veterinary, farrier and transportation) incurred from October 10, 2019 onward will be borne in accordance with the ownership percentages of the co-owners. The Co-Ownership Agreement names the trainers who will train Biko. All co-owners will be listed in the track program and the Daily Racing Form for races in which Biko is entered, and all purses, bonuses, payments, and awards earned by Biko will be allocated among the co-owners in accordance with their ownership percentages.

Upon each Closing of the Offering, proceeds from the sale of the Units will be distributed to the account of the Series. The Series will use those proceeds to pay the amounts shown in the table above.

The Series OL2018 minimum offering amount has been reduced from $110,000 to $80,000. The Manager’s purchase of $10,000 (200 Units) is also being counted toward the minimum offering amount. These changes were made because we anticipated an initial closing of the Series OL2018 Offering would occur before Biko began training, and the minimum offering proceeds initially included pre-training expenses. However, the postponement of major stakes races in 2020 and restrictions on attendance due to the Covid-19 pandemic disrupted our marketing opportunities, and it became necessary for Biko to enter race training in July 2020. The Manager has paid more than $30,000 in pre-training and training expenses incurred from the commencement of the Series OL2018 offering on May 1, 2020 through the date of this amended offering circular.

Due to our changes to the Series OL2018 Offering with respect to the minimum offering amount, we will be giving those who have already subscribed to Series OL2018 the opportunity to confirm or withdraw their subscriptions. We will be contacting those subscribers directly to provide them with instructions. Subscribers who do not respond by May 12, 2021 will be deemed to have elected not to withdraw their subscriptions. The Notice to Series OL2018 Subscribers is attached as Exhibit 99.1 to the Offering Statement.

The minimum offering amount includes the $10,000 of Series OL2018 Units that will be issued to the Manager upon the initial Closing to repay the loan for the purchase of the interest in Biko. These units would represent from 8% to 12.5% of the Series OL2018 Units outstanding upon completion of the Offering. The Manager will waive the limitation on its ownership of the Series OL Units if its ownership percentage would otherwise exceed the 10% maximum. See “Fees and Expenses” for additional information.

The Manager has elected to waive reimbursement of Acquisition Expenses incurred in connection with this Offering of the Series OL2018 Units. Acquisition Expenses would ordinarily include such items as costs of due diligence investigation of a potential Series Asset, pre-purchase medical examinations, appraisal fees, auction-related expenses, and interest on funds borrowed to acquire a Series Asset prior to a series offering.

The allocation of the net proceeds of this Offering set forth above represents our intentions based upon our current plans and assumptions regarding industry and general economic conditions, our future revenues, and expenditures. The amounts and timing of our actual expenditures will depend upon numerous factors, including market conditions, cash generated by our operations, business developments, and related rate of growth. The Manager reserves the right to modify the Use of Proceeds based on the factors set forth above.

DESCRIPTION OF BIKO

Information About Biko

Biko is a dark bay gelding born in February 2018 by Orb out of Latique by Elusive Quality. Biko was bred by Jack G. Jones, Jr. and Mineola Farm II, LLC.

To date, a veterinarian has taken radiographs and performed a scope, and both were reported within acceptable limits for purchase as a racing prospect.

Pedigree

Biko’s sire, Orb (a son of Malibu Moon) out of Lady Liberty was the winner of the 2013 Kentucky Derby, the 2013 Florida Derby and the 2013 Fountain of Youth Stakes. Orb earned $2,612,516 in his racing career. Orb is the sire of five crops, and his offspring had winnings of $6,192,566 through 2019. Orb’s most successful daughter, Sippican Harbor, winner of the Grade 1 Spinaway Stakes, earned $262,650 and is bred similarly to Biko coming from a Deputy Minister bred mare.

Biko’s dam, Latique is a 2011 bay mare by Elusive Quality out of Chatique by Deputy Minister. She is multiple graded stakes placed and earned $115,716 in her racing career. Her half-brother Tikhvin Flew was purchased for $110,000 as a yearling, is graded stakes placed, and has earned $87,293 in his racing career.

Initial Appraisal

Hyperion Thoroughbred Consultants, Lexington, Kentucky, conducted an initial appraisal of Biko on November 14, 2019 and offered an appraised value of $22,000.

Boarding Arrangements; Development Timetable

Biko began initial training with Tony and Liz Everard at New Episode Training Center (a rural Florida setting with mild winter weather and a six-furlong training track) in Ocala, Florida. Tony Everard also started 2003 Kentucky Derby winner Funny Cide.

In July 2020 he entered full race training with Graham Motion, trainer of 2011 Kentucky Derby winner Animal Kingdom, at the Herringswell Stables’ Fair Hill Training Center in Elkton, Maryland. From July to October the Herringswell team worked to develop Biko’s physical fitness and assessed his ability and running style. In September, it was determined that he would be best suited for two turn (1 mile or longer) races on the turf (grass). Graham Motion believed Biko would have the most success in his three-year old campaign in 2021 as longer turf races become available.

To continue improving, Biko needed to make his first start. Inclement fall weather on the East coast made it difficult to find appropriate turf races, so the team entered him in a six-furlong Maiden Special Weight race at Presque Isle Downs for the sole purpose of gaining confidence and experience. Biko placed 7th in the race against more experienced sprinters but proved that he has the class and stamina to go further distances as expected.

In November, Herringswell shuttled Biko and 15 other horses to Tampa Bay Downs for the winter campaign. Biko settled in well and started to demonstrate the maturity we expected to see as he approached his 3-year-old year. On December 9 he breezed a half mile in 50 seconds. The best work of his career, in perfect form. The following week during a routine veterinary exam, a minor hairline fracture was discovered in his left hind leg. A common injury in young racehorses that is neither life threatening nor career ending. Diagnostic imaging confirmed the prognosis, and we sent Biko to rest for 90 days with Robby Harris, famed prep trainer and agent.

In January 2021, Harris training began the rehabilitation process in their swimming facility to build his cardiovascular fitness and prepare him for returning to work. On top of the low impact daily exercise, he was given 12 hours of daily turn out to keep his mind healthy and allow him to strengthen his bones. During this period of time and in consultation with Graham Motion, Robbie Harris, and other bloodstock advisors, we determined that it was best to castrate Biko. This decision was made for 3 key reasons: 1) turf stallions rarely achieve commercial success as breeding horses 2) as early as last fall Biko’s behavior had become less and less manageable with diminishing focus on his work 3) similar to his sire Orb, Biko’s maturing physique was causing his neck and shoulders to become rather coarse and heavy, which could lead to soundness problems in the future. The team will now focus on developing as long and successful a career as possible for Biko, a particular strength of Graham Motion who has campaigned such great turf geldings as Better Talk Now (LTE: $4.3 million), Main Sequence (LTE: $2.7 million), Ring Weekend (LTE: $1.57 million) and many more.

In March, the team resumed training Biko on the track and will continue to slowly bring him back through April or May. When Robbie Harris and a veterinarian determine that he is race ready, he will return to Graham Motion in preparation for his next start.

PLAN OF DISTRIBUTION AND SUBSCRIPTION PROCEDURE

Plan of Distribution

The Manager of the Company is Commonwealth Markets Inc., a Delaware corporation incorporated in 2019. The Manager also owns and operates a mobile app-based investment platform called the Commonwealth Platform through which investors may indirectly invest, through a series of the Company’s units, in Thoroughbred opportunities that have been historically difficult to access for many market participants. Through the use of the Commonwealth Platform, investors can browse and screen the potential investments and sign legal documents electronically. We intend to distribute the Units exclusively through the Commonwealth Platform. Neither Commonwealth Markets Inc. nor any other affiliated entity involved in the offer and sale of the Units is a member firm of the Financial Industry Regulatory Authority, Inc., or FINRA, and no person associated with us will be deemed to be a broker solely by reason of his or her participation in the sale of the Units.

Each Offering of Units is being conducted under Regulation A under the Securities Act and therefore, the Units are only offered and sold to “qualified purchasers.” In addition, purchasers of Units must be eligible to own interests in racehorses under the rules of racing commissions in North America. For further details on the suitability requirements an Investor must meet in order to participate in this Offering, see “Plan of Distribution and Subscription Procedure – Investor Eligibility Standards.” As a Tier 2 offering pursuant to Regulation A, this offering will be exempt from review under state securities laws, subject to meeting certain state filing requirements and complying with certain antifraud provisions, to the extent that our Units are offered and sold only to “qualified purchasers” or at a time when our Units are listed on a national securities exchange. We anticipate that sales of securities will only be made in states where the Broker is registered.

The initial offering price per Unit of each Series (the “Purchase Price”) was determined by the Manager based on the sum of the following estimated costs, in each case as described below: (i) the purchase price of the Thoroughbred Asset, (ii) the Brokerage Fee, (iii) Offering Expenses, (iv) the Organizational Fee, (v) the Management Fee, and (vi) anticipated post-offering Operating Expenses.

The Closing of an Offering of Units will take place on the earliest to occur of (i) the date subscriptions for the maximum number of Units of such Offering have been accepted or (ii) a date determined by the Manager in its sole discretion, provided that subscriptions for the minimum number of Units of such Offering have been accepted. If Closing has not occurred, the Offering will terminate on (i) the date one year after the date this Offering Circular is qualified by the SEC, which period may be extended by an additional six months by the Manager in its sole discretion, or (ii) any date on which the Manager elects to terminate the offering in its sole discretion. Units are being offered by subscription only in the U.S. and to residents of those states in which the offer and sale is not prohibited. This Offering Circular does not constitute an offer or sale of Units outside of the United States.

Due to racehorse owner licensing requirements of state racing commissions, the Manager reserves the right to terminate an Offering if 35 or fewer persons subscribe for the Units of the Series. See “Eligibility for Registration as a Racehorse Owner,” below.

Those persons who want to invest in the Units must sign a Subscription Agreement, which will contain representations, warranties, covenants, and conditions customary for private placement investments in limited liability companies. See “How to Subscribe” below for further details. A copy of the form of Subscription Agreement is attached as Exhibit 4.1 to the Offering Statement.

Units will be issued in book-entry form without certificates. ClearTrust LLC will serve as transfer agent and registrar to maintain Unit Holder records on a book-entry basis.

In general, the Manager, and not the Company, will pay all of the expenses incurred in offering the Company’s units of membership interest that are not covered by the Brokerage Fee, the Management Fee, the Organizational Fee, Offering Expenses or Acquisition Expenses, including fees to Legal Counsel, but excluding fees for counsel or other advisors to the Investors and fees associated with the filing of periodic reports with the SEC and future filings with state securities departments, as applicable. For both the Series Country Grammer Offering and the Series OL2018 Offering, the Manager has agreed to limit reimbursement of Offering Expenses to 10% of the proceeds raised in each Offering. The Manager has also agreed to waive reimbursement of all Acquisition Expenses in connection with the Series OL2018 Offering. Any Investor desiring to engage separate legal counsel or other professional advisors in connection with this Offering will be responsible for the fees and costs of such separate representation.

Minimum and Maximum Investment

The minimum subscription an Investor can make in this Offering is for one (1) Unit. The maximum subscription an Investor can make in this Offering is for Units representing 10% of the total number of Units of the Series that are issued.

Investor Eligibility Standards

The Units are being offered and sold only to “qualified purchasers,” as defined in Regulation A. “Qualified purchasers” include:

In addition, a purchaser must be eligible to own an interest in a racehorse under the rules of the racing commission of each North American jurisdiction. See “Eligibility for Registration as a Racehorse Owner,” below.

We reserve the right to reject any investor’s subscription in whole or in part for any reason, including if we determine in our sole and absolute discretion that such investor is not a “qualified purchaser” for purposes of Regulation A or is ineligible to own an interest in a racehorse under the rules of the racing commission of any North American jurisdiction.

To qualify as an “accredited investor” for purposes of satisfying one of the tests in the “qualified purchaser” definition, the investor who is a natural person must:

If the investor is not a natural person, different standards apply. See Rule 501 of Regulation D for more details. For purposes of determining whether a potential investor is a “qualified purchaser,” annual income and net worth should be calculated as provided in the “accredited investor” definition under Rule 501 of Regulation D. In particular, net worth in all cases should be calculated excluding the value of an investor’s home, home furnishings and automobiles.

The Units will not be offered or sold to prospective investors subject to the Employee Retirement Income Security Act of 1974 and regulations thereunder, as amended (“ERISA”).

If you live outside the United States, it is your responsibility to fully observe the laws of any relevant territory or jurisdiction outside the United States in connection with any purchase, including obtaining required governmental or other consent and observing any other required legal or other formalities.

Our Manager and Dalmore, in its capacity as broker of record for this Offering, will be permitted to determine whether the subscribers of Units in this offering are qualified purchasers in reliance on the information and representations provided by the subscriber regarding the subscriber’s financial situation. Before making any representation that your investment does not exceed applicable federal thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A. For general information on investing, we encourage you to refer to http://www.investor.gov.

An investment in our Units involves significant risks. Only investors who can bear both the economic risk of the investment indefinitely and the possible loss of their entire investment should invest in the Units. See “Risk Factors.”

Eligibility for Registration as a Racehorse Owner

Investors must be eligible to be licensed as a racehorse owner under the regulations of the various state racing commissions. For example, the New York Racing Commission, which has the most stringent licensure requirements, requires any person who owns, directly or indirectly, an ownership interest of 3% in a Thoroughbred owned by 35 owners or more must be licensed to race on a New York racetrack. If there are fewer than 35 owners of a Thoroughbred, then the New York Racing Commission requires that all the owners must be licensed. For this reason, the Manager reserves the right to terminate the Offering if there are fewer than 35 prospective subscribers for any Series of Units.

The subscription agreement that prospective investors must complete requires them to certify that they are eligible to be licensed as a Thoroughbred racehorse owner and are not the subject of any pending disciplinary or legal proceedings that may result in ineligibility for licensure. In addition, if there are fewer than 35 prospective subscribers for a Series, or if a prospective subscriber subscribes for a number of Units that would result in an ownership percentage in the Thoroughbred(s) owned by the Series requiring licensure by any racing jurisdiction, each prospective subscriber will be required to provide background information sufficient to permit the Manager to assess the prospective subscriber’s ability to be licensed under the applicable regulations of the racing commissions of the various states. State racing commissions often demand shareholder background information as a condition to licensing a Thoroughbred owned by a corporation or limited liability company. This information includes, among other things:

The Manager reserves the right, in its discretion, to reject the subscription of any person whom the Manager believes may be ineligible to hold an owner’s license.

Broker

Dalmore Group, LLC (“Dalmore” or “Broker”), will manage the sale of the Units as an executing broker pursuant to a Broker Dealer Services Agreement effective as of October 20, 2020 (the “Brokerage Agreement”) and will serve as broker of record for the Company’s Regulation A offerings, process transactions by subscribers to the Offering and provide investor qualification services (such as Know Your Customer and Anti Money Laundering checks). Dalmore is a broker-dealer registered with the SEC and a member of the FINRA and the SIPC and will be registered in each state where the Offering and sale of the Series of Unit will occur, prior to the launch of the Offering. Dalmore will not solicit any investors on our behalf or act as underwriter. Instead, Dalmore’s role in the offering is limited to processing transactions of potential investors and providing investor qualification services. For its services, Dalmore will receive a brokerage fee equal to 1.0% plus a one-time consulting fee of $10,000 upon the issuance of a no objection letter by FINRA and SEC qualification. Dalmore will not purchase any Units and, therefore, will not be eligible to receive any discounts, commissions or any underwriting or finder’s fees in connection with the Offering. Dalmore will also receive a one-time advance payment of $5,000for out of pocket expenses, which will be refunded to the extent it is not used. Dalmore will monitor all compensation, from any source, and will ensure that its total compensation for each Offering, and all subsequent Offerings, does not exceed 8% of the total offering proceeds, in the aggregate.

The Brokerage Agreement has an initial term of twelve months and renews automatically, but either party may elect not to renew the agreement by giving written notice to the other party at least 60 days before the current term expires. The Brokerage Agreement may also be terminated if either party breaches a material terms, becomes bankrupt or insolvent, and certain other events. The Brokerage Agreement includes mutual indemnification covenants in which each party agrees to indemnify the other party, its affiliates, and their representatives and agents against losses resulting from or arising out of any legal proceedings to the extent they are based upon a breach of this Agreement by, the wrongful acts or omissions of, the indemnified party. The Company also agrees to indemnify Dalmore against losses resulting from the Offering. A copy of the Brokerage Agreement is attached to the Offering Statement as Exhibit 6.5.

Escrow Agent

North Capital Private Securities Corporation will serve as Escrow Agent for the Offering under the terms of an escrow agreement among Dalmore as broker of record, North Capital as the Escrow Agent, and the Company on behalf of the Series (the “Escrow Agreement”). A copy of the Escrow Agreement is attached to the Offering Statement as Exhibit 8.1(a), as amended by the Amendment attached to the Offering Statement as Exhibit 8.1(b). The escrow fee is $500 per Series, plus $100 for each amendment and for each closing of a Series offering. Each series will generally be responsible for fees due to the Escrow Agent, which are categorized as part of the Offering Expenses described in the “Fees and Expenses” section below.

The Company must indemnify the Escrow Agent and each of its officers, directors, employees, and agents against any losses that are incurred in connection with providing the services under the Escrow Agreement other than losses that arise out of the Escrow Agent’s gross negligence or willful misconduct.

In addition, our Manager pays North Capital Investment Technology, the parent company of the Escrow Agent, a monthly administrative fee of $500 for technology tools to facilitate the offering of securities. Our manager has paid North Capital Investment Technology a one-time installation and setup fee of $2,500. These fees are capped at $11,000 for the Series Country Grammer and OL2018 Offerings.

Additional Information Regarding this Offering Circular

We have not authorized anyone to provide you with information other than as set forth in this Offering Circular. Except as otherwise indicated, all information contained in this Offering Circular is given as of the date of this Offering Circular. Neither the delivery of this Offering Circular nor any sale made hereunder shall under any circumstances create any implication that there has been no change in our affairs since the date hereof.

From time to time, we may provide an “Offering Circular Supplement” that may add, update, or change information contained in this Offering Circular. Any statement that we make in this Offering Circular will be modified or superseded by any inconsistent statement made by us in a subsequent Offering Circular Supplement. The Offering Statement we filed with the SEC includes exhibits that provide more detailed descriptions of the matters discussed in this Offering Circular. You should read this Offering Circular and the related exhibits filed with the SEC and any Offering Circular Supplement together with additional information contained in our annual reports, semiannual reports and other reports and information statements that we will file periodically with SEC.

The Offering Statement and all supplements and reports that we have filed or will file in the future can be read on the SEC website at www.sec.gov. They will also be available on the section for Series Country Grammer on the Commonwealth Platform at www.joincommonwealth.com. The contents of the Commonwealth Platform (other than the Offering Statement, this Offering Circular and the Appendices and Exhibits to them) are not incorporated by reference in or otherwise a part of this Offering Circular.

How to Subscribe

Potential Investors who are “qualified purchasers” may subscribe to purchase Series Country Grammer or Series OL2018 Units. Any potential Investor wishing to acquire Units must:

By executing the Subscription Agreement, you agree to be bound by the terms of the Subscription Agreement and the Company’s Operating Agreement. The Company, the Manager and Dalmore will rely on the information you provide in the Subscription Agreement, including the “Offering Disclosure” attached thereto and the supplemental information you provide in order for the Manager and Dalmore to verify your status as a “qualified purchaser.” If any information about your “qualified purchaser” status changes prior to you being issued Units, please notify the Manager immediately using the contact details set out in the Subscription Agreement.

For further information on the subscription process, please contact the Manager using the contact details set out in the “Where to Find Additional Information” section.

The subscription funds advanced by prospective Investors as part of the subscription process will be held in a non-interest-bearing account with the Escrow Agent and will not be commingled with the operating account of any Series, until if, and when there is a Closing with respect to that Investor. When the Escrow Agent has received instructions from the Manager that the Offering will close and the Investor’s subscription is to be accepted (either in whole or part), then the Escrow Agent will disburse the Investor’s subscription proceeds in its possession to the account of the Series. If the Offering is terminated without a Closing, or if a prospective Investor’s subscription is not accepted or is cut back due to oversubscription or otherwise, the amounts deposited into escrow by prospective Investors will be returned promptly to them without interest or deductions. Any costs and expenses associated with a terminated offering will be borne by the Manager.

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company incurred legal, accounting and compliance expenses to set up the legal and financial framework and compliance infrastructure for the marketing and sale of the Series and all subsequent offerings. These organizational expenses totaled $319,395 during the Inception Period and $61,388 during the six-month period ended June 30, 2020. These organizational expenses were recorded as operating expenses by the Company and as a corresponding capital contribution by the Manager. The Manager will be entitled to receive an organizational fee equal to 3.0% of the proceeds received from the initial offering of each series of units as reimbursement for organizational expenses until the manager has been reimbursed in full.

As a result of operations, the Company incurred net losses of $324,350 for the Inception Period and $77,628 for the six months ended June 30, 2020.

Liquidity and Capital Resources 

As of December 31, 2019, the Company had $2,056 in cash, and no financial liabilities other than a $7,500 note payable and $52 of associated accrued interest used to acquire a Thoroughbred. As of June 30, 2020, the Company had $773 in cash, and no financial liabilities other than $27,500 of notes payable and $234 of associated accrued interest used to acquire Thoroughbred assets to be assigned to its Series (see Note 3 to the financial statements for further detail). From inception, the Company has financed its own business activities and those on behalf of its Series through capital contributions from the Manager or its affiliates. The Company and each Series expect to continue to have access to ample capital financing from the Manager going forward. Until such time as the Series have the capacity to generate cash flows from operations, the Manager may cover any deficits through additional capital contributions or the issuance of additional Units in any individual Series.

Each series will repay any loans used to acquire its underlying asset, plus accrued interest, with proceeds generated from the closing of the offering of the series. No series will have any obligation to repay a loan incurred by the Company to purchase an underlying asset for another series.

Plan of Operations

As of June 30, 2020, our Series had not commenced operations, had not been capitalized and had no assets or liabilities. We intend for each Series to start operations at the time of the initial closing of its Offering. All expenses related to each Series that have been incurred to date and will be incurred until the closing are the responsibility of the Manager, and responsibility for any assets or liabilities related to each Series will not transfer to the Series until such time as a closing has occurred.

If the maximum amount is raised in the Series OL2018 Offering, a portion of the proceeds will be used to reimburse the Manager for boarding fees incurred before Biko began training. The OL2018 Offering originally budgeted a portion of the offering proceeds to pay these pre-training expenses, but due to the uncertain impact of the pandemic on racing in the spring of 2020, the OL2018 Offering did not close before it became time for Biko to enter training.

The Company plans to launch additional offerings in the next twelve months. The proceeds from any offerings closed during the next twelve months will be used to acquire additional Thoroughbred assets. We also intend to engage in racing, sales, and breeding activities, the commencement of which will depend on the stage of development and training of Thoroughbreds when they are acquired. We intend these activities will generate revenues for each series to cover, in whole or in part, the ongoing post-closing operating expenses of the series. However, a Thoroughbred racing and breeding business is subject to numerous risks, and there can be no assurance that the Thoroughbred assets of any series will produce sufficient revenue to cover its operating expenses, much less fund distributions to its unit holders. See “Cautionary Statement Regarding Forward-Looking Statements” and the “Risk Factors” in this Offering Circular.

We do not anticipate any series to generate revenues from racing activities before 2021, when Biko resumes racing as a three-year old. A substantial portion of the proceeds from each Offering will be used to establish reserves to cover boarding, training, medical and other operating expenses until such time as the series would be able to generate racing revenue. For additional information regarding the payment of Operating Expenses, see “Description of the Business – Operating Expenses.”

Trend Information

For a description of the Thoroughbred industry, including trends that could affect the financial condition and operations of each series of the Company, see the “Thoroughbred Industry” section of this Offering Circular.

DESCRIPTION OF THE BUSINESS

Overview

As described in greater detail in the “Thoroughbred Industry” section beginning on page 69, the racing sector of the horse industry, which includes the Thoroughbred industry, had an estimated impact on the United States economy of $36.6 billion in 2017. Historically, participation in racing and breeding Thoroughbreds has been largely limited to wealthy individuals, due to the substantial financial investment required.

The Company aims to provide horse racing enthusiasts with the opportunity for greater involvement in the sport by enabling them to acquire a diversified portfolio of equity interests in Thoroughbreds and equine assets through the Commonwealth Platform.

Our principal objective will be to acquire and manage Thoroughbreds with the pedigree, conformation, and athletic potential to compete successfully, thereby creating opportunities to generate revenue, provide long and short-term capital appreciation, and ultimately distribute Free Cash Flow to equity Investors in the underlying equine assets. “Free Cash Flow” is defined as the net income (as determined under U.S. GAAP) generated by the Series plus any change in net working capital and depreciation and amortization (and any other non-cash Operating Expenses) and less any capital expenditures related to the Series Asset. The Manager may maintain Free Cash Flow funds in a deposit account or an investment account for the benefit of the Series.

The Company aims to make ownership opportunities in Thoroughbred racing available to a significantly larger number of participants than was previously possible. Breeders, racetracks, and professionals in the Thoroughbred racing industry will benefit from greater public interest and participation in horseracing, leading to more races, higher betting handle and purses, and greater attendance. Thoroughbred breeders and owners will benefit from greater liquidity, and potentially lower transaction costs and greater transparency, as compared to traditional methods of conducting Thoroughbred asset transactions.

Business of the Company

The Units represent an investment in a Series of the Company and thus indirectly in the underlying Thoroughbred Assets of the Series. They do not represent an investment in the Company or the Manager.

Series Country Grammer acquired an option to purchase up to a 30% undivided interest in Country Grammer, with the seller retaining a 70% interest. See “Use of Proceeds –Country Grammer” for a description of the terms of purchase. Country Grammer is currently being trained by Bob Baffert in preparation for his four-year old campaign in 2021. We do not intend for Series Country Grammer to acquire any assets other than its interest in Biko.

Series Country Grammer has a minority interest in Country Grammer with no management rights. All expenses relating to the boarding, care, and training of Country Grammer will be borne in accordance with the ownership percentages of the co-owners. All purses, bonuses, payments, and awards earned by Country Grammer will be allocated among the co-owners in accordance with their ownership percentages.

The Company acquired a 75% interest in Biko, with the seller retaining a 25% interest. See “Use of Proceeds – OL2018” for a description of the terms of purchase. The interest in Biko will be transferred to Series OL2018 at the first closing of the Series OL2018 Offering. We do not intend for Series OL2018 to acquire any assets other than its interest in Biko.

The Company will have the exclusive right to manage Biko as long as it holds a majority ownership interest. All expenses relating to boarding, care and training incurred from October 10, 2019 onward will be borne in accordance with the ownership percentages of the co-owners. All co-owners will be listed in the track program and the Daily Racing Form for races in which Biko is entered, and all purses, bonuses, payments, and awards earned by Biko will be allocated among the co-owners in accordance with their ownership percentages.

Biko is currently being boarded at Tampa Bay Downs in Tampa, Florida. The Manager anticipates that Biko will resume training with Graham Motion, trainer of 2011 Kentucky Derby winner Animal Kingdom, and race as the three-year old in 2021.

While the Manager may pursue opportunities from any sector of the Thoroughbred racing and breeding business and may acquire interests in Thoroughbreds of any pedigree or racing level, it intends to concentrate on the upper echelon (allowance and stakes races) within the sport. The Company will seek to acquire Thoroughbreds that can race competitively in allowance and stakes races as well as interests in stallions and broodmares that have the lineage to produce foals that can compete at the allowance and stakes level. The Company may own Thoroughbreds wholly or in conjunction with others.

The Company intends to conduct Thoroughbred racing, breeding, pinhooking, sales and other activities through separate Series. In all instances, the Manager will endeavor to manage the Thoroughbreds of each Series in a manner intended to maximize both the earnings capability and value of the Thoroughbred, and the financial return to the Series. Investors may invest in one or more Series, enabling them to participate more directly in the sport and diversify risk by holding fractional interests in several racing Thoroughbreds or other equine-related assets. We expect that the operations of the Company, including the issuance of additional series and their acquisition of additional assets, may also benefit Investors by enabling the Series to gain access to experienced trainers with successful records and benefit from economies of scale with respect to certain operational costs.

Initially, the Manager intends to use the proceeds from the sale of Units of each Series to acquire an ownership interest in a single Thoroughbred with the potential, based on lineage, to race competitively. We anticipate these early Series will acquire yearlings and juveniles, who will need up to 18 months to develop and mature before they can generate revenue from racing. The Manager will oversee the development, training, and early racing career of the Thoroughbreds acquired by its Series in accordance with each Series’ Management Services Agreement and the Company’s Operating Agreement.

For future Series, the Manager may acquire Thoroughbreds that are in training or actively racing and can earn revenue without a lengthy development period. The Manager may also employ supplemental strategies to generate distributable Free Cash Flow for Investors, including:

Commonwealth Thoroughbreds is intended not only to be an investment platform, but also a vehicle to experience the lifestyle and culture of Thoroughbred ownership by offering investors opportunities to enjoy the benefits made available to owners at racetracks. Depending on the level of ownership in Commonwealth Thoroughbred series, these benefits may include, among other things:

The Commonwealth Platform

The Manager owns and operates the Commonwealth Platform, through which horseracing enthusiasts may indirectly invest, through a series of our membership units, in Thoroughbred assets that historically have required substantial financial resources to own. Investors will be able to use the Commonwealth Platform to browse and screen the potential investments and sign legal documents electronically. We intend to distribute the Units of the Company’s Series exclusively through the Commonwealth Platform.

We aim to use the Commonwealth Platform to:

Through the Commonwealth Platform, investors can view a detailed profile of each series of units. Within the Commonwealth Platform experience, investors can also view:

The process for subscribing for Units through the Commonwealth Platform is described earlier under “Plan of Distribution and Subscription Procedure – How to Subscribe.”

The Manager

The Operating Agreement designates the Manager as the managing member of the Company and each series of its units. The Manager will generally not be entitled to vote on matters submitted to the unit holders. The Manager will not have any distribution, redemption, conversion, or liquidation rights of any series by virtue of its status as the Manager.

The Operating Agreement further provides that the Manager, in exercising its rights in its capacity as the managing member, will be entitled to consider only such interests and factors as it desires, including its own interests, and will have no duty or obligation (fiduciary or otherwise) to give any consideration to any interest of or factors affecting the Company, any series of units or any of the unit holders and will not be subject to any different standards imposed by the Operating Agreement, the LLC Act or under any other law, rule or regulation or in equity. In addition, the Operating Agreement provides that the Manager will not have any duty (including any fiduciary duty) to the Company, any series or any of the unit holders.

If the Manager resigns as managing member of the Company, the holders of a majority of all units of the Company may elect a successor managing member. Holders of units in each series of the Company have the right to remove the Manager as manager of the Company, by a vote of two-thirds of the holders of all units in each series of the Company (excluding the Manager) if the Manager is found by a non-appealable judgment of a court of competent jurisdiction to have committed fraud in connection with a series of units or the Company. If so convicted, the Manager must call a meeting of all the holders of every series of the Company’s units within 30 calendar days after the non-appealable judgment at which the holders may vote to remove the Manager as manager of the Company and each series. If the Manager fails to call such a meeting, any unit holder will have the authority to call such a meeting. If removed, the Manager will be entitled to receive all amounts that have accrued and are due and payable to it. If the holders vote to terminate and dissolve the Company (and therefore the series), the liquidation provisions of the Operating Agreement will apply (as described in “Description of the Units Offered – Liquidation Rights”). If the Manager is removed as manager of the Company, it will also immediately cease to be manager of any series.

The Manager and Company executives have relationships with executives and high-ranking individuals at the Thoroughbred industry’s most well-known breeding farms including: WinStar Farm, Claiborne, Spendthrift, Stonestreet, Lane’s End, Calumet, and Hill ‘n’ Dale.

The Manager and Company executives are focused on building and sustaining relationships with industry leading bloodstock agents. Currently, the Company has relationships with bloodstock agents known for selecting top race prospects including Kentucky Derby winners, Breeder’s Cup winners and Graded Stakes winners.

See “Management” on page 82 for additional information regarding the Manager.

Advisory Board

The Manager is in the process of establishing an Advisory Board consisting of members of the Manager’s expert network and additional advisors. We plan to build the Advisory Board over time and are in advanced discussions with various professionals in the Thoroughbred industry. We have already established an informal network of expert advisors who can support the Company in acquisition of Thoroughbreds, valuations, negotiations, training and racing schedules, and breeding matters.

The Advisory Board’s role will be to support the Company and the Manager and be available to provide guidance to the Manager with respect to the following matters:

Further, the Advisory Board will consult with and support the Manager in the following areas:

Bloodstock Selection: Advisory Board members may review and comment on bloodstock recommendations made by bloodstock agents at public auctions, breeding farms and purchases from other syndication groups.

Racing Management: Advisory Board members may recommend trainers, review racing plans, and make recommendations to further strengthen our racing strategies.

Breeding & Sales: Advisory Board members may provide recommendations when considering the sale of horses for breeding purposes or when entertaining offers to buy horses during the horses’ racing career.

Industry Relationships: Advisory Board members may assist in creating and developing strategic industry partnerships that benefit the Company and promote our interests. (e.g., racetrack partnerships, industry media, breeding farms and bloodstock agents).

Investment, Regulatory and Finance: Advisory Board members may provide advice with regard to navigating and optimizing the regulatory and financial markets to best position the Company and any subsidiaries for success.

The Members of the Advisory Board will not be managers or officers of the Company or any series and will not have fiduciary or other duties to the Unit Holders of any series.

Asset Selection and Acquisition

We plan to work with qualified bloodstock agents, owners, breeders, trainers, and partners to identify and acquire a range of assets including yearlings, two-year-olds and Thoroughbreds of racing age. Target acquisition costs will fall between $70,000 and $250,000 for all or a fractional ownership interest. We will select Thoroughbreds from top-tier auctions, private ownership and breeding farms based on pedigree, conformation and, for horses two years old and older, when available, under tack workout or breeze times and race results.

Selection Criteria

Pedigree. Pedigree is a strong determinant of future success on the track and future commercial values for breeding. Preference will be given to horses with proven pedigrees, where both the sire, dam and siblings of the horse have successful records (past racing performances of merit) on the racetrack and in the breeding shed. The Manager will track current market trends to identify top stallions and top broodmare sires and will look to align these pedigree crosses (or “nicks” as they are often referred to in the bloodstock world) whenever possible.

Conformation. Many factors determine a horse’s ability, including but not limited to breeding, training, mental fitness, and disposition. Analysis of conformation will be used to guide the selection team’s assessment of a Thoroughbred’s potential ability. This will help improve the odds of finding a successful racehorse. Biomechanics, heart scans, detailed gait analysis and endoscopic exams will be used to identify positive physical characteristics and rule out limiting physical characteristics that could make a horse more prone to injury, less athletic, etc.

Under Tack Times and Past Performance. Under tack times indicate a two-year-old’s running ability, running style and overall performance, as well as a metric for comparative analysis against horses of the same age. For Thoroughbreds of racing age, we will also use past performances, race replays, videos of workouts and other data to evaluate the horse’s ability, running style and future potential.

Physical Examination. Each Thoroughbred will undergo pre-purchase and post-purchase physical examinations conducted by a veterinarian. The examination may include but will not be limited to:

A post-purchase examination is important to detect any issue concerning the physical condition of a Thoroughbred. The conditions of sale of leading auctions may provide buyers with certain rights based on the results of a post-purchase examination. For example, dispute resolution procedures for sales of two-year-olds in training can be triggered if radiographs taken within 24 hours after the auction session and before the horse leaves the sales grounds show evidence of injury or disease of bone structure that did not appear on previous radiographs filed in the repository provided by the auction house. This could result in the renegotiation of the purchase price or the rescission of the sale and a refund of the purchase price.

Training and Boarding

A foal will be boarded at a farm until it has developed sufficiently to commence training. Boarding rates for suckling foals are generally no more $15 per day. Rates for weanlings generally range from $25 to $45 per day. Boarding rates are generally stable, rarely increasing by more than 5% annually. Unanticipated cost increases for hay, bedding, or other items due to external factors may sometimes be passed through to boarding customers.

Thoroughbreds purchased for the Company’s Series and in which the Series holds a controlling interest will be sent to trainers who, in the judgment of the Manager, can best realize the Thoroughbred’s potential. Thoroughbreds purchased as juveniles will be boarded at facilities near the Company’s office in Lexington, Kentucky and may be handled by trainers from the ground under tack to familiarize them with the use of the tack necessary to ride them. During this process they may be ridden in a round pen or paddock to provide them with basic skills until they have matured sufficiently to commence training at a training center or racetrack, usually as a two-year-old.

Each trainer employed by the Series will be an independent contractor and will concurrently be handling Thoroughbreds for other owners. Racetrack based trainers generally are paid approximately $85 to $135 per Thoroughbred per day, plus 10%-12% of the Thoroughbred’s gross winnings. Trainers based at non-racetrack affiliated training centers will generally charge lower “day rates” for initial training or training related to rehabilitation from injury than the rates charged by trainers based at racetracks. Trainers may charge stall rent fees in addition to “day rates” charged for horses located at training centers. In general, training fees are generally stable, with annual increases of more than 5% uncommon.

Racing

Once a Thoroughbred horse reaches the final race preparation stage in its training regime, and while racing, certain additional charges for services associated with racing will be incurred. Charges such as having a lead pony take the horse to the gate, fees to have independent contractors handle the horse on race day, race day medication, transportation, jockey’s fees based either on a percentage of winnings for placed horses (first or second, and in some instances third) or a flat fee pursuant to a set schedule for unplaced horses (referred to as “Jock Mounts” in the vernacular,) trainer’s and stable commissions based on a percentage of winnings will be incurred or assessed. For races other than stakes races, there are no entry fees. For stakes races there are nomination or subscription fees, entry and starting fees and, in some instances, supplementary nomination fees to make horses eligible to compete after the closing deadline for nominations.

Each trainer will employ jockeys, who are generally paid a nominal fee plus 10% of the purse if the Thoroughbred finishes first in the race, 5% for second place finishes or sometimes third, and a standard flat fee for lesser placings. In addition, a barn commission amounting to approximately 2% of the purse is usually paid to the groom and barn help of the winning Thoroughbred. This payment is referred to as a “stake” in the stable vernacular.

Because of competition level variables, the racetracks where the Thoroughbreds will be located and the races into which they will be entered will be selected based upon the recommendation of the trainer with the input of the Advisory Board and the Manager’s officers.

There is no guarantee that a horse entered in a race will “draw in” and be able to race. Luck can determine if and how many times a horse may run during a race meet. Eligibility and preference of entries are governed by each track’s procedures to maintain a fair and even-handed approach, but horses are routinely excluded from races based upon the random draw in oversubscribed races. In those cases, a horse in such “entered and excluded” status would generally be given priority for entry in a comparable race in the same meet. In addition, trainers would ordinarily have options to race the horse at racetracks in the region. Although as horse may not be able to run as desired during a meet, the possibility that the horse would be excluded entirely from racing even though entered numerous times would be remote.

Sale of Assets

The Manager expects to sell Thoroughbreds owned by its series from time to time in the ordinary course of operations or in connection with the dissolution of a series. The Manager may sell a particular Thoroughbred if the Manager concludes it would be in the best interest of the series to do so, based on the Thoroughbred’s racing performance and market value.

The Management Services Agreement authorizes the Manager to pay reasonable fees and or commissions consistent with industry standards to unaffiliated agencies such as trainers, sales agencies, or consignors upon any purchase or sale of Thoroughbreds by a series. Some trainers may charge a fee or commission for arranging the sale of a Thoroughbred for the Series. Sales agencies and consignors customarily charge a fee or commission on a set or sliding scale for their services in selling Thoroughbreds at public auctions. The Management Services Agreement requires the Manager to comply with state laws regulating private and public sales of Thoroughbred assets.

Breeding Activities

Thoroughbred breeding activities generally include selling stallion shares and stallion seasons (the right to breed a mare to the stallion in a given breeding season) in a Series Thoroughbred, acquiring stallion shares and stallion seasons, and buying, owning, and selling interests in broodmares. The economic results of breeding activity depend to a large extent on the racing performance of the progeny produced, which usually will not be known for at least two to three years. However, breeding assets such as stallion shares may also generate a less volatile and generally more predictable revenue stream than racing activity.

Insurance

The Manager expects to carry mortality insurance (and fertility insurance if applicable) on the Series’ Thoroughbreds and will decide on a case-by-case basis the amount of coverage on a particular Thoroughbred. Generally, a full mortality policy will insure against loss by death caused directly or indirectly by sickness, accident and/or disease. The amount of recovery generally would be the lesser of the insured amount or the last claiming price (if any) the Thoroughbred has been subjected to at the time of the casualty.

If a Thoroughbred owned by the Series enjoys great racing success or its value otherwise increases substantially (which can sometimes occur when a member of the immediate family wins a prestigious race), the Manager may decide not to increase mortality insurance to the level of the animal’s value because of the relatively high cost of the additional coverage.

Operating Expenses

Upon the Closing, the Series will be responsible for the following costs and expenses attributable to the activities of the Company related to the Series (together, the “Operating Expenses”):

The Manager has agreed to pay and not be reimbursed for Operating Expenses incurred prior to the Closing. The Manager will bear its own expenses of an ordinary nature, including, all costs and expenses on account of office rental, supplies, secretarial expenses, stationery, charges for furniture, fixtures and equipment, payroll taxes, remuneration and expenses paid to employees and utilities expenditures.

If the Operating Expenses exceed the amount of revenues generated from the Series Asset and cannot be covered by any Operating Expense reserves on the balance sheet of the Series Asset, the Manager may (a) pay such Operating Expenses and not seek reimbursement, (b) loan the amount of the Operating Expenses to the Series, on which the Manager may impose a reasonable rate of interest, and be entitled to reimbursement of such amount from future revenues generated by the Series (an “Operating Expenses Reimbursement Obligation”), and/or (c) cause additional Units to be issued in the Series in order to cover such additional amounts.

Allocation of Revenue and Expense

To the extent relevant, the Manager will allocate items of expense and revenue that are allocable to a specific series to be borne by, or distributed to (as applicable), the applicable series of units. If, however, an item is not allocable to a specific series but to the Company in general, it will be allocated pro rata based on the value of underlying assets or the number of units, as reasonably determined by the Manager.

Oversight and Governance

The Series will be able to pay a fee or commission to any advisor or other person affiliated with or related to the Manager, Advisory Board member, or any Member only with the approval of the principals of the Manager who are not parties to the transaction and will be fully disclosed to Series owners. In such situations, the Manager may consult with Advisory Board members who also are not parties to the transaction.

Indemnification of the Manager

The Operating Agreement provides that none of the Manager, nor any current or former directors, officers, employees, partners, shareholders, members, controlling persons, agents or independent contractors of the Manager, members of the Advisory Board, nor persons acting at the request of the Company in certain capacities with respect to other entities (collectively, the “Indemnified Parties”) will be liable to the Company, any series or any interest holders for any act or omission taken by the Indemnified Parties in connection with the business of the Company or any Series that has not been determined in a final, non-appealable decision of a court, arbitrator or other tribunal of competent jurisdiction to constitute fraud, willful misconduct or gross negligence.

The Series will indemnify the Indemnified Parties out of its assets against all liabilities and losses (including amounts paid in respect of judgments, fines, penalties or settlement of litigation, including legal fees and expenses) to which they become subject by virtue of serving as Indemnified Parties with respect to the Company or the Series and with respect to any act or omission that has not been determined by a final, non-appealable decision of a court, arbitrator or other tribunal of competent jurisdiction to constitute fraud, willful misconduct or gross negligence.

Description of the Management Services Agreement

The Series will appoint the Manager to manage the Company’s breeding and racing operations and the Thoroughbred assets of each Series pursuant to a Management Services Agreement. The services provided by the Manager will include:

The Management Services Agreement will have an initial term of one year and will renew for additional consecutive one-year terms until it is terminated in accordance with its terms. Either party may terminate the Management Services Agreement at the end of the initial term or any renewal term by providing the other party with thirty days written notice prior to the expiration of the then effective term. The Management Services Agreement will also terminate upon (i) the removal of the Manager as managing member of the Company (and thus all series of the Company’s units), (ii) notice by one party to the other party following the other party’s failure to cure a material breach of the Management Services Agreement or (iii) such other date as agreed between the parties to the Management Services Agreement.

Each series will indemnify the Manager out of its assets against all liabilities and losses (including amounts paid in respect of judgments, fines, penalties or settlement of litigation, including legal fees and expenses) to which they become subject by virtue of serving as managing member under the Management Services Agreement with respect to any act or omission that has not been determined by a final, non-appealable decision of a court, arbitrator or other tribunal of competent jurisdiction to constitute fraud, willful misconduct or gross negligence.

Management Fee

As consideration for managing the Company’s breeding and racing operations and the Thoroughbred assets of each Series, the Management Services Agreement provides that the Manager will be paid a Management Fee equal to 10% of any Free Cash Flow generated by the Series.

The Management Fee will only become payable if and when there are sufficient proceeds to distribute Free Cash Flow to the Unit Holders.

Legal Proceedings

None of the Company, any series, the Manager, or any director or executive officer of the Manager is presently subject to any material legal proceedings.

THOROUGHBRED INDUSTRY

The information included in the following section has been derived from publicly available Thoroughbred industry sources. We have no reason to believe this information is incorrect, but we have not independently verified its accuracy.

Introduction

In 2017, the horse industry contributed approximately $50 billion in direct economic impact to the U.S. economy, and has a direct employment impact of approximately 1 million jobs.¹ Additionally, the industry itself contributed $38 billion in direct wages, salaries, and benefits.²

From those direct effects, the horse industry’s contribution ripples out into other sectors of the economy, resulting in an estimated total contribution to the U.S. economy of $122 billion, and a total employment impact of 1.7 million jobs.³

The Thoroughbred industry, a subset of the horse industry, traces its roots back over 300 years to England and its contributions to the economy are significant. Thoroughbred racing, together with Quarter Horse and harness racing, had an estimated economic impact of $36.6 billion to the US economy in 2017 with estimated employment impact of 472,000 jobs.⁴

The Company intends to focus its efforts on acquiring, racing, breeding, and selling Thoroughbreds with highly sought, commercially attractive pedigrees from established and successful bloodlines.

Breeding

The Thoroughbred breeding industry is perpetuated by selectively breeding top mares to top stallions to yield top quality racehorses. There is no guarantee that a Thoroughbred, even with the most sought-after pedigree, will be marketable. Conformation flaws, inherent physical fragility, injury, death, or health issues can and often do render a well-bred Thoroughbred completely valueless. The Thoroughbred breeding industry is concentrated largely in central Kentucky with the majority of top-quality broodmares and stallions located in and around Lexington, Kentucky. However, in recent years regional markets, fueled by breeders’ incentive programs and corresponding higher purses (some supplemented by revenues from alternative forms of gaming) in New York, and Florida and elsewhere are exerting a stronger influence on the breeding of high-quality Thoroughbreds. In North America, stallions are bred to broodmares from mid-February to the end of June of each year. The gestation period for a broodmare (a female horse capable of bearing offspring) is approximately eleven months. Thus, most foals in the United States are born between early January and the end of May.

Thoroughbred Sales at Public Auction

The majority of Thoroughbreds are sold at public auction. As the most transparent and efficient market of Thoroughbreds, auction statistics are the traditional barometer for the value of Thoroughbred bloodstock. North American Auction averages for yearling Thoroughbreds (a traditional economic barometer used in the Thoroughbred business) have increased from around $40,000 in 2010 into the $78,000 range in 2019 before backing down to around $62,000 in 2020. The commercial market for Thoroughbred bloodstock, however, has been cyclical. After steady growth throughout the 1970’s, the bloodstock market increased sharply in the early 1980’s, followed by sharp declines in the mid-1980’s, the early 1990’s and again during the latter part of the first decade of the 2000’s.

¹ American Horse Council web page (Economics) available at www.horsecouncil.org/resources/economics.

² Id.
³ Id.
⁴ Equine Business Association Economic Impact Study available at www.equinebusinessassociation.com/2017-economic-impact-study-u-s-horse-industry/.

The average prices paid for Thoroughbreds sold at public auction in North America in the 21^st century have increased over time, peaking in 2018, after significant declines in 2007-2010. Thereafter, the Thoroughbred yearling market (and the overall Thoroughbred market in general) has experienced a slow, but somewhat erratic growth in yearling sales averages and medians, albeit with significantly reduced numbers of horses offered. The North American foal Crop in 1984 was in excess of 50,000 newborn foals, but volume has steadily declined to 19,677 registered foals in 2020. Although total receipts for public sales of Thoroughbred horses exceeded one billion dollars (U.S.) each year from 2004 through 2007, total receipts from public sales decreased to $941,320,193 in 2008, a drop of 23.8% from 2007 totals. Totals in recent years have reached levels just above one billion dollars with a total of all Thoroughbred auction revenues reaching $1,087,528,402 in 2019 before pulling back approximately 26% to a total of $805,203,467 in the Covid 19 interrupted 2020 auction year.

The primary Thoroughbred auctions are conducted by sales companies such as Keeneland, Fasig-Tipton, Barretts and Ocala Breeders Sales, and are held primarily in Kentucky, Florida, New York, Maryland, and California. Auction companies such as these earn a sales commission between 4.5% and 5% on the horses they sell at public auction. The sales held by The Keeneland Association, historically the leading sales company for elite level Thoroughbreds, are considered a measure of industry health due to the large volume and variety of Thoroughbred yearlings sold there. Fasig-Tipton’s standing in the market has increased following its acquisition in 2008 by a firm backed by Dubai’s ruling family.

Weanling Auctions

Selling a horse as a weanling presents the breeder’s initial opportunity to generate revenue. Public auctions for weanlings occur from October through the following January. The gross sales of all weanlings in 2020 totaled over $51.6 million, down 27.5% from $71,236,078 in 2019.⁵ This decrease followed an increase in gross sales from $61.1 million in 2016 to $79.26 million in 2018, an increase of 30.4%. Gross revenue from weanling sales in North America had increased during the two years (2017-2018) prior to the downturns in 2019 and 2020. The average sale price of $51,674 in 2020 represented a 48% decrease from the record average price of approximately $100,000 in 2006.⁶

Yearling Auctions

Yearling sales are traditionally where breeders sell their produce. Public auctions for yearlings occur throughout the country from July through October. In 2020, approximately 43.5% (8,575) of all registered yearlings bred (19,677) were offered for sale and 6,355 (32.2%) were sold at public auction.⁷ The gross sales of all yearlings in 202018 totaled over $395.4 million, down 28.2% from over $551.4 million in 2019. This figure followed a decline of 4.2% in 2018.⁸ The yearling sales market is concentrated in Kentucky where approximately 50% are sold at public auction. There were approximately 45 other public auctions are held in 2020 throughout North America for the sale of yearlings.

⁵ The Blood-Horse Auction Review.

⁶ Id.
⁷ Id.

⁸ Id.

Of the yearling sales, the Keeneland September yearling auction is the largest auction and draws buyers from around the world. The 2020 Keeneland September yearling auction resulted in gross revenues of $248.65 million for the 2,474 horses sold, with the average per yearling down 25% from 2019 figures. The 2019 Keeneland September yearling auction yielded gross revenue of approximately $372.3 million for the 2,974 Thoroughbreds sold. The gross revenue figure decreased by 33.2% from the total reached in 2019 of approximately $372.3 million.⁹ The number of Thoroughbreds sold in 2020 decreased 16.8% to 2,474 sold from the previous year number of 2,974 sold at the 2019 Keeneland September auction.¹⁰ The average price (mean) per yearling at the 2020 Keeneland September yearling auction was $100,509, which represented a 25.0% decrease from the 2019 average of $125,201. The median price was $39,500 in 2020, which represented a 14.95% decrease from $47,000 in 2019.¹¹

Overall, the North American yearling market in 2020, with about 6,350 sold (including “short” yearlings sold in January and February), experienced an 28.3% decrease in gross sales. The average sale price for a yearling decreased 20.3% to $62,229.¹² At the 2020 Fasig-Tipton Selected Yearling Sale held in September 2020 due to the Covid19 delays, 348yearlings changed hands (about 5.4% of the anticipated overall market in 2020) with an average price of $177,486 (an increase on average of 2.7% from 2019 figures (all three Fasig Tipton yearling sales combined.))¹³

The yearling and two-year-old markets have become much more international in recent years with horses bred in the U.S. often being offered in foreign markets. In fact, after not reaching his reserve at a yearling auction in the U.S., War of Will, 2019 Preakness Stakes (G1) winner, was purchased by a U.S. based bloodstock agent for approximately $300,000 at the Arqana May two-year-old in training (or “breeze up” sale as it is referred to in Europe) in France, repatriated to the U.S. and campaigned in the Triple Crown series.¹⁴ In addition to the U.S. and European markets, Australia, New Zealand, South Africa, England, Ireland and Japan have active yearling and two-year-old auctions offering racing prospects that often end up competing at U.S. racetracks.

Two-Year-Old Auctions

Public auctions for two-year-old Thoroughbred racing prospects take place from February through June of each year in warmer locales favorable to training. The major two-year-old sales are held in Florida, Maryland, California, and Kentucky. In 2020, two-year-old sales figures indicate that the gross sales were down 38.2% and averages were down 26.7% from 2019.¹⁵ The average price in 2019 was $89,614, a slight increase of less than 1.0% from 2018 figures.¹⁶

Broodmare Auctions

The number of broodmares sold at public auction in North America during 2020 was 2,763 (about half the number of broodmares sold (5,5286) in 2006), which was the second highest number of broodmares ever sold in a single year at public auction.¹⁷ Gross sales proceeds decreased 9.7% from 2019 to $218,253,650, lowest gross sales since 2012.¹⁸ The average price for a broodmare in 2020 also declined approximately 2.8% to $78,735.¹⁹ Broodmares are usually offered for sale (in foal, barren or maiden) in what are known as breeding stock or bloodstock sales in November and January in the U.S. In January 2020, the Keeneland January Horses of all Ages sale posted a record average of $46,704 per horse with a $15,000 median sale price. There were gross sales of $46,236,600, the second highest gross sales amount since 2008 when the gross reached $70.45 million from a seven-session sale. There were only four sessions in the 2020 sale.²⁰

⁹ Id.

¹⁰ Id.

¹¹ Id.

¹² Id.

¹³ Id.

¹⁴ The Blood-Horse online June 5, 2019, “Agent Casse Proud of War of Will’s Accomplishments” by Ron Mitchell

¹⁵ Id.

¹⁶ Id.

¹⁷ Blood-Horse Sales State of the Market, January 28, 2021

¹⁸ The Blood-Horse online January 15, 2021; Keeneland 2021 January Horses of all ages Sales Results-Overview.

¹⁹ Id.
²⁰ Id.

Private Sales

A substantial private market for Thoroughbreds also exists. Bloodstock agents negotiate the majority of private deals for buyers and sellers. The success of an agent is often predicated on his reputation in the industry and his longstanding relationships with both buyers and sellers. In addition to bloodstock agents, trainers having a horse sold privately while under their care typically will be paid a sales commission of 5% on the gross sales price of the horse.

Marketplace and Competition

The major markets for Thoroughbreds include the nationwide racing circuit, public auctions, and private sales throughout North America. Most buyers are North Americans, but there are a number of significant international buyers from the Middle East, Europe, the U.K., Australia, and Japan. Several hundred individuals and agencies conduct pinhooking operations in the weanling and yearling markets across the United States, as well as thousands of owners and trainers who purchase weanlings and yearlings to eventually race for their own account. Competitors in the two-year-old market consist mostly of racehorse owners trying to acquire top two-year-olds for immediate racing.

Racing

When a yearling becomes a two-year-old on the second January 1 following its birth, it is eligible to race, although two-year-old races are not usually conducted until April of each year. Early two-year-old races can be as short as two to four furlongs (a quarter to one half of a mile) but are generally five to six furlongs. Two-year-old Thoroughbreds competing in these early races, may later race at distances up to one mile and a sixteenth or beyond. During the early two-year-old season, many young horses prove simply too small or fragile for early racing and are “turned out” for further development. For many Thoroughbred horses, racing careers will not begin until their third or fourth year, when they reach full development.

During its career, a Thoroughbred may run in races at a variety of distances and over a variety of surfaces. A “claiming race” is a race in which any horse running may be purchased at a specified “claiming” price, which is posted as a condition of entry. In “allowance” races, the weight each horse will carry is set by conditions written by the track’s racing secretary, making specific allowances in weights for horses with less impressive past performances and saddling better performing horses with more weight. A “weight for age” race utilizes a standard scale of weights established by The Jockey Club, which are then assigned to horses based upon their age and the month of the year.

The most prestigious and lucrative Thoroughbred races, “stakes races,” sometimes run under “handicap” conditions (whereby the track’s handicapper assigns different weights to the horses based upon their relative perceived ability in an effort to achieve a dead heat result, or in other words to give each horse an equal opportunity to win the race, all other factors being equal). These stakes or handicap races attract the best horses and the most public attention. To participate in these types of races, owners must pay a “subscription” or “nomination” fee or a series of nomination fees well in advance, and an entry fee or “starting” fee at the time of the race. Some stakes races allow supplemental nominations if premium nomination fees are paid for otherwise ineligible horses. These fees may or may not be added to the purse money and may be substantial (as much as $360,000 to supplement to the Breeder’s Cup Classic) with no guarantee that any part of the supplementary nomination will be earned back by the horse supplemented. Failure to draw into a stakes race, however, cancels all fees. The stakes money raised by these fees is often supplemented by state breeders’ association awards, the Breeders’ Cup, the track and by sponsorship.

Wagering and Purses

Currently, at least 38 states have adopted legislation permitting pari-mutuel wagering on horse races. Pari-mutuel handle, or the amount of money wagered, on Thoroughbred racing in the United States and North America, peaked in 2003. U.S. handle in 2003 was $15.18 billion. U.S. and North American handle have decreased by 25.77% and 24.99%, respectively, from 2003 through 2018.²¹ U.S. and North American handle increased slightly by 3.28% and 3.47%, respectively, in 2018. U.S. handle in 2018 totaled to $11.27 billion,²² an increase due principally to a 4.1% increase in off-track wagering handle.²³ Handle is down approximately 7.2% through the first six months of 2019.²⁴

In the United States during 2020, total purses decreased dramatically to 869.8 million, the lowest since 1997, not factoring in for inflation. According to information published by the Jockey Club Information Systems Inc., in 2019, $1.167 billion in purses was distributed in 27,700 races at United States tracks representing a 23.5% decrease in the number of races and a decrease from total purses distributed in 2019.of 25.53%²⁵ Average purse per race decreased approximately 2.7% to $31,400 in 2020 from $32,257 in 2019. If purse levels remain constant and the number of runners and races continues to decline due to shrinking foal crops, then the recent trends may continue. The overall trend in purses, however, can be attributed to the decline in the number of races and increased revenue from video lottery terminals, historic horse racing wagers and table games (or “Alternative Gaming”) at racetracks.

Several other sources of revenue support purse-earning opportunities for Thoroughbreds. The sport now has two 24-hour cable channels devoted to it, Horse Racing TV (“HRTV”) and TVG, owned by the British company Betfair Group Ltd. (“Betfair”), an online betting exchange that has been successful in Great Britain and around the world. While betting exchanges (online markets where individuals can act as both bettors and bookmakers with one another) are currently only legal in the United States in New Jersey (which saw Betfair suspend its operations in 2020 due to lower than anticipated handle), more states may authorize online betting exchanges in the near future. In May 2018, the U.S. Supreme Court, adjudicating a case brought before it by the State of New Jersey, struck down a law prohibiting sports gaming in the United States, allowing individual states to pass legislation allowing this form of gambling. To date, Colorado, Louisiana, Maryland, Michigan, New Hampshire, New Mexico (Pueblo of Santa Ana tribe only,) Oregon, Tennessee, Montana, Iowa, Indiana, Illinois and New Jersey, Nevada, Mississippi, Pennsylvania, Virginia, West Virginia, Rhode Island, New York (limited to upstate New York casinos in-person only), Arkansas and Delaware either offer sports wagering or have legislation in place to implement sports wagering.²⁶ Further developments that enhance these potential sources of revenue and allocate a portion to the racing industry could have a positive impact on purses.

²¹ The Jockey Club 2018 Online Fact Book.

²² The Jockey Club 2019 Online Fact Book.

²³ Id.

²⁴ www.astarthor.com/blog/asexpected-pari-mutuel-handle-drops.

²⁵ The Jockey Club 2019 Online Fact Book.

²⁶ www.legalbettingonline.com.

Advance deposit wagering (“ADW”) from simulcasts of live racing transmitted from multiple tracks to viewing outlets is another important source of purse revenue. The Interstate Horseracing Act of 1978, as amended, vests in horsemen’s groups at the host tracks the power to withhold consent to the transmission of the signal unless the horsemen receive a fair portion of the ADW revenue. In 2008, when eighteen tracks and the Thoroughbred Horseman’s Group (the “THG”), an entity representing horsemen from those tracks, could not agree on appropriate rates to charge for the signals, THG withheld its consent. As a result, Churchill Downs and other affected tracks were unable to send their signals to simulcast outlets and ADW companies during their live meets, exclusive of certain races for which there were pre-existing agreements. This reduced handle from all sources at several tracks and led the tracks to announce purse reductions (and in one case, suspension of racing) due to the anticipated loss of revenues. Churchill Downs filed suit alleging that the THG violated antitrust laws by forming a compact to “fix prices” for simulcast signals (television and video feeds for computer access to live racing) in restraint of trade. The parties subsequently settled the lawsuit and agreed upon a new rate structure. However, the episode illustrated that a prolonged period without ADW revenue would adversely impact purses at many North American racetracks.

In recent years, many states have authorized the use of Alternative Gaming at racetracks. Revenues from Alternative Gaming have been a significant new source of purse revenue. Several major racing jurisdictions have considered or passed legislation to enable those states to conduct alternative forms of gaming such as the operation of video lottery and historical racing terminals or slot machines at racetracks. Florida has enacted such legislation, limited to certain counties by local option ballot initiatives, and such gaming is being conducted at multiple locations with mixed economic results. Similarly, in 2005, New York authorized Alternative Gaming at several locations. To date, the authorized gaming at the New York Racing Association’s Aqueduct Racetrack has had a significant positive economic impact on Thoroughbred purses and operators. Pennsylvania has approved up to six licenses for alternative forms of gaming, which have been allocated and operational since 2007. Other jurisdictions with Alternative Gaming include Delaware, Indiana, Iowa, Louisiana, New Mexico, and West Virginia.

To date, the Kentucky legislature has failed to approve casino-style Alternative Gaming at racetracks, but present has a Senate Bill pending to redefine pari-mutuel wagering to include Historical Horse Racing (“HHR”) which has significantly added to purses and racetrack re-development in Kentucky and Arkansas. HHR is being considered in other states in recent years. California also has yet to approve on-track Alternative Gaming despite the intense competition its racetracks face from full casino style gaming at Indian reservations throughout the state. Online gaming is now available in at least eight states, including online poker, sports betting, casino style gaming and lottery games. These competing forms of gaming could adversely impact wagering handle on racing.

If more states do not protect horse racing from competition from Alternative Gaming and online gaming or approve Alternative Gaming at racetracks, purse revenues may decline. Conversely, should additional jurisdictions approve such legislation and fully develop Alternative Gaming facilities, purses in those states could increase significantly. If states, however, amend their enabling legislation to divert Alternative Gaming revenue from supporting Thoroughbred racetracks, purses would be adversely affected. Purse funds in West Virginia have already been tapped by the state government as a source of money to stabilize a troubled workers’ compensation fund.

Stallion Share/Stallion Ownership

Ownership of shares in syndicated stallions entitles the owner to certain rights to breed either the owner’s mares or mares owned by third parties to the stallion and to bonus pool revenues generated by the sale of “bonus nominations” – additional rights to breed the stallion. Usually, syndicates consist of from 36-60 shares (sometimes referred to as “fractional interests”) owned by multiple owners, normally a mixture of individuals, farms, and other entities. The syndicate manager, usually an entity associated with an established commercial breeding farm, has a fiduciary duty to the syndicate members to manage the stallion to maximize its potential in the marketplace, to enhance or maintain the value of the stallion, and to generate revenues to pay the expenses of the syndicate and to make distributions to the syndicate members as set forth in the syndicate (co-ownership) agreement.

Ownership of a stallion share usually entitles an owner to one or two regular nominations (sometimes simply referred to as “seasons” which in effect is the right to breed one mare to the stallion as many times as is reasonably necessary to obtain a pregnancy during a given breeding season) and often a bonus nomination every year, every other year or every third year, as the syndicate agreement provides, on a rotating basis with other share owners. The allocation of bonus nominations is in the discretion of the syndicate manager and can be limited if the stallion is injured, is out of service due to sickness or disease, or is physically unable (usually due to advanced age or semen quality issues) to impregnate mares in large numbers. A stallion share owner may elect to sell both regular and bonus nominations through either private sale, public auction (generally, very limited and almost always subject to the consent of the syndicate manager), or by offering the nominations to the syndicate manager to sell at the farm. Another available option is to sell the contract at a discount (usually in the 75-85% of live foal stud fee range) to a company in the business of factoring such contracts for the immediate payment of cash without further risk of loss.

In response to increases and declines in auction prices for yearlings, most major commercial breeding farms will raise or lower stud fees. Reductions and increases of as much as 20-25% are common in all price ranges of stallions offered for breeding in 2019, depending on market demand and the performance of the stallion’s progeny at the racetrack or his in-foal mares and offspring selling at public auction. Increases and decreases in stud fees can affect the value of stallions, as there is a direct correlation between available stud fee revenue, stud fees actually paid and the overall value of the stallion. Commercial breeding farms may resort to alternative arrangements to ensure mares are attracted to the stallions standing at their respective farms. Some farms are offering breeders incentives, guarantees on sales (stud fee will be no more than the sale price if the progeny of the stallion fails to bring an amount equal to the stud fee), the option to convert a “stands and nurses contract” to a “foal share” arrangement, or the option to pay the stud fee out of the proceeds of sale (essentially interest free financing of the stud fee for up to 30 months). These stallion management strategies can affect anticipated cash flow and asset values of stallions held for appreciation and revenue generation and may have an overall negative or positive affect on the projected revenues and values of the Company’s stallion share portfolio, if any.

Shares in syndicated stallions are available in various price ranges and multiples of stud fees (a common measure of value in the marketplace), since the market demand for stallions varies widely based upon commercial success at the industry sales events and success at the racetracks. Another factor is the stallion’s fertility and libido, which determines the size of the book of mares the stallion may reasonably service in a given breeding season. Stallion books range from a modest 50 mares (or less) to more than 200 mares in the Northern Hemisphere breeding season.

The Southern Hemisphere breeding season begins in August. Some stallions also shuttle to the Southern Hemisphere (primarily South America and Australia, but also to South Africa or New Zealand) either on a lease basis or to stand at an affiliate of the syndicate manager for the benefit of the stallion share owner. They may breed a similar number of mares in the Southern Hemisphere season, but the stud fees are usually reduced by 35%-50% depending upon the location of the stallion and the demand for his services. There are additional costs to the syndicate for transportation and quarantine that are incurred when shuttling stallions. An alternative used less frequently, but with some economic success, however, has North American stallions breeding Southern Hemisphere based mares (or those to be transported to the Southern Hemisphere after breeding) during the Southern Hemisphere breeding season while remaining at their Northern Hemisphere homes.

Colts successful in graded stakes races often are targeted as stallion prospects by major commercial breeding farms. As these horses establish their ability on the racetrack, breeding farms are making assessments of pedigree, conformation, and commercial appeal of the crop of colts racing to determine if they represent viable commercial stallion prospects fitting their future stallion needs. Usually, the prospective stallion buyer projects what the market is willing to pay for the stallion’s services on a live foal basis for these colts upon retirement. Once the projected live foal stud fee is determined, farms will gauge demand and appraise the stallion prospect based on recouping their investment in three years. In recent years Darley and Coolmore, two of the largest commercial breeding farms and aggressive competitors in the marketplace for stallions, have driven up the price of viable stallion prospects considerably.

The breeding rights often will be acquired before the stallion prospect is actually retired from racing. Some owners prefer to retain some or all of the breeding rights and share the upside potential for a stallion should the prospect prove to be successful in the breeding shed. It is also customary to grant to the trainer of the stallion one or two breeding rights per year. Agents involved in the purchase or sale of stallion prospects may also be awarded lifetime breeding rights as part of their compensation for facilitating the transaction whereby the stallion’s breeding rights are sold or purchased. Other owners of male Thoroughbred racehorse stallion prospects retain only breeding rights (but no liabilities) and otherwise sell the breeding rights outright upon retirement of the colt. Revenue generated by ownership of proven or unproven stallions varies as stud fees are routinely adjusted based initially upon sales results and then upon racing performance of the stallion’s progeny.

Share ownership in commercially proven stallions can be lucrative. Investment in unproven stallions is speculative, and the industry generally accepts that one of ten stallion prospects will ultimately be a commercially viable stallion in central Kentucky. Fortunately, there is a secondary market in other states and foreign countries so that stallion prospects failing to establish commercial viability can be sold or leased to stallion operations in such regional markets or in foreign countries. Insurance is available to cover first year congenital infertility. The continued availability of such insurance is subject to rate variability and to caps on coverage. Not all stallion prospects will be fully insurable for mortality or infertility.

Industry Organizations

The Jockey Club, with offices in New York City and Lexington, Kentucky, is the recognized official registry for Thoroughbred horses in the United States. Similar organizations exist in other racing countries throughout the world. The Jockey Club database includes the names of more than 3,000,000 horses tracing back to the late 1800’s. The database also is updated daily to include results of virtually every race in North America and pedigree and racing data from major racing centers throughout the world.

To race in sanctioned races or to register its offspring, a Thoroughbred must be registered with The Jockey Club. Purchasers generally require a Jockey Club Certificate of Foal Registration as a condition of sale. These certificates are now available in electronic form. All the Company’s Thoroughbreds will be registered with The Jockey Club.

The National Thoroughbred Racing Association (“NTRA”) was established in April 1998 by a coalition of Thoroughbred industry interests including owners, trainers, racetracks, horsemen’s groups, jockeys, off-track betting facilities and breeders’ sales companies. At the time, the Thoroughbred industry faced challenges such as declining revenue growth and attendance, an aging fan base and increased competition from new gaming alternatives and other nationally marketed sports. The mission of the NTRA is to increase public awareness of Thoroughbred racing, its fan base, total handle, and purses. The main objective of the NTRA is to create a centralized national structure and successfully implement a comprehensive marketing and television strategy for the Thoroughbred racing industry.

The NTRA has launched several extensive marketing and advertising campaigns with mixed reviews from industry participants. The NTRA is not self-funding and depends on industry contributions to continue its operations. In particular, the NTRA depends on the continued support of Churchill Downs and The Stronach Group, the two major operators of Thoroughbred racetracks. Any withdrawal of financial support by a significant group of racetracks, as has been threatened in the past, could compromise the ability of the NTRA to function as a nationally recognized industry association and could have a significant adverse effect on industry unity and continued viability of the Thoroughbred business.

Racetrack Industry

In the late 1990’s, Churchill Downs, Inc. (“CDI”) and Magna Entertainment Corp. (“MEC”) emerged as the two principal national racetrack operators, buying up major racetracks from coast to coast, as well as some smaller facilities. The consolidation trend ended a few years later when CDI sold Hollywood Park in Inglewood, California to developers and sold Ellis Park in Henderson, Kentucky and Hoosier Park in Anderson, Indiana. During the same period, MEC went through a bankruptcy, sold some of its facilities, emerged as a reorganized company and has been transformed into The Stronach Group headed by its founder’s daughter, Belinda Stronach. The two major players are also finding competition from gaming companies that are interested in racetracks authorized to offer Alternative Gaming. Casino operators like Eldorado Resorts, Hollywood Casinos, MGM Resorts, Boyd Gaming, Caesars Indiana Grand and Indian tribes with gaming industry acumen have entered the racetrack business. Smaller racetrack operators like Penn National Gaming, Inc. and Boyd Gaming earning Alternative Gaming revenue at their tracks have shifted focus to become “gaming” companies and have purchased or opened other small facilities authorized to offer Alternative Gaming.

The consolidation in ownership of major racing facilities brought greater continuity and cohesiveness to the industry. CDI and The Stronach Group are still the two principal national racetrack operators and are partners as well as competitors in various racing related ventures. CDI now owns multiple racetrack properties including Churchill Downs (Louisville, Kentucky), Calder Race Course (Miami Gardens, Florida), Fairgrounds Race Course & Slots (New Orleans, Louisiana), Ocean Downs (Berlin, Maryland), Presque Isle Downs (Erie, Pennsylvania), Arlington Park (Arlington Heights, Illinois) and a new harness track soon to be built in Oak Grove, Kentucky. CDI also owns its own account deposit wagering platform, Twinspires.com; its own research database, Bloodstock Research Information Systems; and off-track betting facilities related to its racetrack holdings. In addition, CDI owns United Tote (a totalizator company it uses to process wagers).

The Stronach Group’s Thoroughbred racetrack holdings include Santa Anita Park (Arcadia, California), Golden Gate Fields (Berkley, California) and Portland Meadows (Portland, Oregon). Beyond racetracks, The Stronach Group owns AmTote, a totalizator service provider for the pari-mutuel industry; Palm Meadows, a training center near Boynton Beach, Florida that provides necessary stabling to conduct live racing at Gulfstream Park; XpressBet, an account deposit wagering platform; and Monarch Content Development, LLC, a simulcast purchase, and sales agent for numerous North American racetracks and wagering outlets. Monarch sells horse racing content from its stable of racetracks to a variety of wagering outlets around the world, including racetracks, casinos, off-track wagering facilities, and internet-based wagering companies. Monarch’s current customers include Santa Anita Park, Del Mar, Gulfstream Park, Pimlico, Laurel Park, Golden Gate Fields, Los Alamitos (TB), Portland Meadows, Meadowlands, Monmouth Park, XpressBet and XBNet.

As a result of this consolidation of racetrack ownership, any significant financial setbacks, or other threats to the ongoing viability of CDI or The Stronach Group could have a material adverse impact on the industry as a whole. The Stronach Group’s racetracks have a significant impact on the Thoroughbred industry. Gulfstream Park and Santa Anita conduct major race meets offering lucrative purses for winter racing. In addition, The Stronach Group’s second tier tracks offer significant opportunities in geographic areas not otherwise offering live racing. If any of the racetracks owned by CDI or the Stronach Group cease to operate, it could have an adverse impact on the overall health of the Thoroughbred industry.

Santa Anita Park conducts most Southern California racing in the fall, winter and spring months since Hollywood Park closed in 2009 to be sold and developed as commercial real estate. If Santa Anita Park were also to be sold for real estate development, the Los Angeles area would be without a major Thoroughbred racing and training facility. The end of live Thoroughbred racing in one of North America’s largest metropolitan areas would greatly reduce the sport’s ability to gain exposure in an important market and would also eliminate some of the highest purses in North America. Santa Anita has also experienced a spate of equine fatalities during the 2019 winter race meet. The potential fallout from this pattern of fatalities could provide the impetus for legislation banning or severely limiting horse racing in California. This would have a significant adverse impact on the Thoroughbred racing and breeding business in North America.

Supervision and Regulation

The supervision and regulation of horse racing and pari-mutuel wagering are principally governed by state law, which varies from state to state. A horse racing board or commission is the state governmental authority that oversees horse racing, pari-mutuel wagering, and related activities for the purpose of, among other things, ensuring the integrity of racing within the state. In general, state racing commissions have authority to supervise and regulate the following activities associated with horse racing:

The National Racing Compact was created as an independent, interstate governmental entity, (the Association of Racing Commissioners International) composed of pari-mutuel racing regulators from participating states, to set standards for individual licenses, accept applications and fingerprints, analyze criminal history information, and issue a national license. The national license is recognized by the 15 compact member states and nine other states that have elected to recognize the national license or the application for the license to a lesser degree.

The National Association of State Racing Commissioners was formed in 1947 to “encourage forceful and honest nationwide control of racing for the protection of the public.” Renamed the Association of Racing Commissioners International, Inc. (RCI) in 1988, the goals of the organization are to facilitate reciprocity in enforcing each other’s official rulings (penalties) and uniform rules and practices. From the beginning, the Association has functioned as a repository and redistribution center for all official rulings by stewards and racing commissioners.

Sales Practices

In three of the four states where a significant percentage of public auctions of Thoroughbreds are conducted, California, Florida, and Kentucky, have enacted statutes governing the documentation of transactions involving horses. (The fourth, New York, has not followed suit.) In general, these statutes require that the purchase or sale of equine assets be accompanied by a written bill of sale signed by both the buyer and the seller or their authorized agent. For purchases and sales made through public auctions, the bill of sale requirement may be satisfied by the issuance of an auction receipt or acknowledgement of purchase generated by the auction house and signed by the buyer or the buyer’s authorized agent.

In response to allegations of unfair and deceptive trade practices, states have begun to enact legislation intended to foster greater transparency in transactions involving equine assets. Florida and Kentucky have enacted laws governing the conduct of agents acting on behalf of buyers and sellers of equine assets. For example, an agent is not permitted to represent both the buyer and seller in the same transaction, unless the agent first discloses the dual representation and obtains the written consent of both the buyer and seller. Similarly, an agent is not permitted to purchase on behalf of a buyer, or recommend that the buyer purchase, any equine asset in which the agent has a direct or indirect interest without the buyer’s prior knowledge and written consent. An agent is also not permitted to receive payments in excess of $500 in connection with the purchase or sale of an equine asset from anyone other than his or her principal, unless the agent and the person making the payment first discloses the payment in writing to both the purchaser and seller, and the agent’s principal consents in writing to the payment. In addition, an agent acting on behalf of a buyer or seller in a transaction involving an equine asset is required, upon the request of his or her principal, to provide the principal with all financial records relating to the transaction.

These laws generally afford a person injured by a violation the right to recover from the violator the difference between the price paid for the equine assets and the actual value of the equine assets at the time of sale, the amount of any undisclosed or unapproved payments made by a third party, and legal fees and expenses.

FEES AND EXPENSES

Offering Expenses

Each series of the Company’s units will generally be responsible for certain fees, costs and expenses incurred in connection with the offering of the units associated with that series. Offering expenses consist of legal, accounting, escrow, underwriting, filing and compliance costs, as applicable, related to a specific offering (and excludes the ongoing costs of operating the series, classified as operating expenses). The Manager has agreed to limit the reimbursement of offering expenses by Series Country Grammer and Series OL2018 to 10% of the offering proceeds.

Acquisition Expenses

Each series of the Company’s units will be responsible for any and all fees, costs and expenses incurred in connection with the evaluation, discovery, investigation, development, and acquisition of the underlying asset related to such series incurred prior to the Closing. Acquisition expenses are expected to consist principally of the purchase price of the Series Asset, plus documentation costs, interest expense, the cost of pre-purchase medical examinations, bloodstock agent and sales fees and commissions, appraisal fees, research fees, transfer taxes, third party industry and due diligence experts, bank fees and interest (if the underlying asset was acquired using debt prior to completion of an offering), auction house fees, travel and lodging for inspection purposes and transportation costs to transfer the Thoroughbred from the seller’s possession. Acquisition expenses do not include the Brokerage Fee described in the following section.

The Manager has elected to waive reimbursement of acquisition expenses in connection with the Series OL2018 Offerings.

Brokerage Fee

As compensation for serving as executing broker providing certain administrative services to the Company in connection with this Offering, Dalmore will receive a Brokerage Fee equal to 1% of the amount raised through this Offering plus a one-time consulting fee of $10,000 after the issuance of a “no objection” letter by FINRA. Each series of the Company’s units will be responsible for paying its own Brokerage Fee to Dalmore in connection with each offering and sale of units. Each of Series Country Grammer and Series OL2018 will be responsible for paying $5,000 of the consulting fee. The Brokerage Fee will be payable from the proceeds of each offering of units immediately upon closing. The Company will also pay Dalmore $1,000 for each post-effective amendment it subsequently files to offer a new series of units.

Please see “Use of Proceeds – Series Country Grammer,” “Use of Proceeds – Series OL2018” and “Plan of Distribution and Subscription Procedure” for further details.

Management Fee

The Company, the Series and the Manager will enter into the Management Services Agreement, pursuant to which the Series will appoint the Manager to manage the Series’ Thoroughbred asset and the conduct of its racing and breeding activities. See “Description of the Business – Description of the Management Services Agreement.”

As consideration for identifying and exploring acquisition opportunities, conducting due diligence evaluations of potential Thoroughbred assets, negotiating, and structuring the terms and conditions of acquisitions and other related functions, the Manager will be paid a fee of up to 15% of the cost of acquiring the Thoroughbred Asset from the proceeds of each offering at closing.

As consideration for providing management services, the Manager will be a Management Fee equal to 10% of any Free Cash Flow generated by the Series.

This portion of the Management Fee will only become payable if there are sufficient proceeds to distribute Free Cash Flow to the Unit Holders. The Manager will not be entitled to any other compensation and will be responsible for its owning operating and administrative expenses.

See also “Use of Proceeds – Series Country Grammer,” “Use of Proceeds – Series OL2018” and “Plan of Distribution and Subscription Procedure.”

Organizational Fee

The Manager will be paid an Organizational Fee equal to 3% of the proceeds received from each offering of units of the Company’s series to reimburse the Manager for legal, accounting and compliance expenses incurred to set up the legal and financial framework and compliance infrastructure for the marketing and sale of the Series Country Grammer Units and all subsequent offerings. Organizational expenses incurred by the Manager totaled $152,500 as of August 31, 2019.

The Organizational Fee would be 3% of the offering proceeds raised in respect of both the Series Country Grammer Offering and the Series OL2018 Offering.

Advisory Board Compensation

Advisory Board members will not be entitled to compensation by the Company or any series for their services advising the Manager. Members of the Advisory Board may be reimbursed by a series for out-of-pocket expenses they incur for services provided to a series (such as, for example, travel related to the evaluation of a Thoroughbred asset).

MANAGEMENT

Manager

The Manager of the Company is Commonwealth Markets Inc., a Delaware corporation formed in 2019. The Company operates under the direction of the Manager, which is responsible for conducting the operation of its business, directing its day-to-day affairs, and implementing our investment strategy. The Manager serves as the “Managing Member” of each series under the terms of the Operating Agreement and the Management Services Agreement of that series.

The Manager will make decisions with respect to all asset acquisitions and dispositions and determine how to manage the Thoroughbred Assets in order, in general terms, to generate revenue, maximize asset value, and evaluate potential sale opportunities, which may lead to the liquidation of a Series. The Manager will be responsible for the development, health, and training of Series Thoroughbreds, including hiring trainers and veterinarians. The Manager and its officers and directors are not required to devote all their time to our business and are only required to devote such time to our affairs as their duties require.

The Company will follow guidelines adopted by the Manager and implement policies set forth in the Operating Agreement unless otherwise modified by the Manager. The Manager may establish further written policies and will monitor our administrative procedures, investment operations and performance to ensure that the policies are fulfilled. The Manager may change our objectives at any time without approval of our Unit Holders. The Manager itself has no track record and is relying on the experience of its individual officers, directors, and advisors.

The Manager performs its duties and responsibilities as set forth in our Operating Agreement. The Manager maintains a contractual, as opposed to a fiduciary relationship, with us and our Unit Holders. Furthermore, we have agreed to limit the liability of the Manager and to indemnify the Manager against certain liabilities.

Responsibilities of the Manager

The responsibilities of the Manager include:

Thoroughbred Sourcing and Disposition Services:

Services in Connection with an Offering:

Thoroughbred Operations:

Unit Holder Relationship Services:

Administrative Services:

Executive Officers, Directors and Key Employees

The following individuals are the principal shareholders, directors, executive officers, and significant employees of the Manager:

Brian Doxtator, age 37, has over 15 years’ experience at the intersection of strategy, operations, and management at companies focused on innovation and growth industries. His formative years were spent in the fields of mergers and acquisitions (“M&A”) and corporate strategy. First, Brian was as an analyst with Legg Mason’s technology M&A group, where he was responsible for structuring and modeling M&A transactions. While at Legg Mason, he was the sole analyst, and heavily involved in drafting SEC offerings memos, for two lead-managed IPOs. Later, as an associate in the M&A and strategy group for IAC/InterActiveCorp (NASDAQ: IAC), Brian worked with dozens of IAC business units to define long-term strategic objectives, and based on those objectives, Brian would identify opportunities to acquire, invest, and partner with other companies to further IAC’s long-term strategy. Once an opportunity was identified, Brian managed a cross-function team of corporate employees to structure and execute the transaction. During his time at IAC, Brian became an expert on digital business models while working with the company’s 80 owned and operated businesses including Ticketmaster, Match.com, LendingTree, HSN, College Humor and many others.

In 2011, Brian moved on to work in venture-backed startups. From March 2011 through March 2016, he served as Vice President, General Manager (the company’s first non-technical executive) of PlayHaven, a mobile marketing platform for mobile app developers. At PlayHaven, Brian and his staff were broadly responsible for all non-technical functions including revenue, account management, data analysis and optimization, legal, finance, marketing, and board management and fundraising. From 2011 to 2016, the PlayHaven platform was integrated into 80% of the top 1,000 mobile apps in the world and 500 million mobile phones around the world. PlayHaven clients included top app developers Supercell, Disney, EA, King, and several others. Brian was instrumental in growing revenue from $0 to $45 million per year and expanding the team from five to 150 employees with offices around the world. Additionally, Brian helped lead the company through multiple VC-backed fundraising rounds and navigate a merger with analytics platform Kontagent.

From February 2017 through June 2018, Brian served as Chief Operating Officer of Model VR, a virtual-reality hardware and software developer for the entertainment and video game industries. Brian’s responsibilities as Model VR were go-to-market strategy and fundraising.

Since April 2014, Brian has also been serving as the co-founder and Chief Financial Officer of LOHO Bride LLC, a high-end bridal brand with retail stores in Los Angeles and San Francisco and online e-commerce operations.

Chase Chamberlain, age 30, has been involved in the equine industry for more than 20 years. A national champion equestrian in both the United States and Canada, Chase has a deep understanding of acquiring and selecting bloodstock, veterinary care, equine performance management, nutrition, training, and breeding. Since June 2013, Chase has served as an independent equine consultant, in which capacity he has personally been involved in brokering more than $3 million in bloodstock with American and foreign buyers.

Since May 2016, Chase has been a Digital Marketing Strategist and Head of Growth for Epipheo Inc., one of the world’s largest digital video agencies. During his time at Epipheo, Chase has been the leading contributor to the organization’s growth, producing over $25 million in award winning digital brand strategies and content for companies such as Google, Proctor and Gamble, Walmart, Amazon, Red Bull, Fifth Third Bank, Travelers, Nickelodeon, Disney, Microsoft, GlaxoSmithKline and many more. In this role, Chase has been responsible for helping clients large and small clarify complex business problems, architecting digital strategies to solve those problems and aligning the right team of world class creative talent to bring those strategies to life.

From June 2013 through December 2014, Chase worked as the Assistant Director, Business Development and Marketing with Great Nursing Care, Inc. In this role, Chase managed the development of a department and initiative responsible for re-branding, repositioning, and growing the 20-year-old home health care organization, which operates in one of the United States’ most competitive markets. During this time, he led the development of strategic relationships with healthcare providers, insurance networks and other local partners.

Advisory Board

Responsibilities of the Advisory Board

The Advisory Board’s role will be to support the Company and the Manager and be available to provide guidance to the Manager with respect to the following matters:

The Members of the Advisory Board will not be managers or officers of the Company or any series and do not have fiduciary or other duties to the Unit Holders of any series.

Compensation of the Advisory Board

Advisory Board members be compensated by the Manager; they will not be entitled to compensation by the Company or any series for their services. Members of the Advisory Board may be reimbursed by a series for out-of-pocket expenses they incur for services provided to a series (such as, for example, travel related to the evaluation of a Thoroughbred asset).

Members of the Advisory Board

We plan to continue to build the Advisory Board over time and are in advanced discussions with professionals in the Thoroughbred industry. We have already established an informal network of expert advisors who can support the Company in acquisition of Thoroughbreds, valuations, negotiations, training and racing schedules, and breeding matters.

COMPENSATION

Compensation of Executive Officers

The Company currently has no employees, nor do we currently intend to hire any employees who will be compensated directly by the Company. Each of the executive officers of the Manager manage our day-to-day affairs, oversee the review, selection and recommendation of acquisition and disposition opportunities, and monitor the development, health, and training performance of acquired Thoroughbreds, consistent with our business objectives. In the future, each of these individuals may receive compensation from Commonwealth Markets Inc. for their services, including services performed for us on behalf of the Manager, although they have not received any such compensation to date. Although we will indirectly bear some of the costs of the compensation paid to these individuals, through fees we pay to the Manager, we do not intend to pay any compensation directly to these individuals.

Compensation of Manager

The Manager may receive Management Fees and reimbursement for costs incurred relating to this and other offerings (such as Offering Expenses and Acquisition Expenses) and a Management Fee. Neither the Manager nor its affiliates will receive any selling commissions or dealer manager fees in connection with the offer and sale of the Units.

The compensation of the Manager from the date of the Company’s inception on June 12, 2019 through January 31, 2021, was as follows:

To date, no Management Fees have been paid by any series.

A more complete description of the management of the Company is included in “Description of the Business” and “Management.”

PRINCIPAL INTEREST HOLDERS

As of January 31, 2021, the securities of the Company were beneficially owned as follows:

(1)         Affiliates of the Manager will purchase 46 Units in the Offering that will represent 2% to 8% of the outstanding Series Country Grammer Units, depending on the total number of Units sold in the Offering..

(2)         $10,000 of the principal payable on the $20,000 convertible promissory note issued by the Company to the Manager to acquire Biko will convert into additional Series OL2018 Units at the $50 purchase price per Unit when the Series OL2018 Closing occurs.

Commonwealth Markets acquired 50 of the Company’s Series A1 Units in exchange for a capital contribution of $5,000. The Series A1 Units represent the Manager’s capital account in the Company, which is treated as a partnership or disregarded entity for all federal and state tax purposes, although each of the Company’s series offered to investors will elect to be taxed as a “C” corporation. See “Material United States Tax Considerations.”

Holders of Series A1 Units are not entitled to vote on matters submitted for the consent or approval of all of the Company’s members generally. No separate vote or consent of the holders of Series A1 Units is required to approve any matter, except as required by the Delaware Act or the Operating Agreement. The affirmative vote of the holders of a majority of the Series A1 Units then outstanding is required for:

Upon any liquidation of the Company, subject to the preferential rights, if any, of holders of any other class or series of units, all property held solely by the Company and not by a specific Series, and all amounts in excess of the amount required to discharge liabilities of the Company only (and not of a specific Series) will be distributed to the holders of the Series A1 Units on an equal per unit basis as provided in the Operating Agreement.

Holders of Series A1 Units have no conversion, exchange, sinking fund, redemption or appraisal rights, no preemptive rights to subscribe for any securities of the Company and no preferential rights to distributions.

DESCRIPTION OF THE UNITS OFFERED

The following is a summary of the principal terms of, and is qualified by reference to the Operating Agreement, attached hereto as Exhibit 2.2, and the Subscription Agreement, attached hereto as Exhibit 4.1, relating to the purchase of the applicable Series of Units. This summary is qualified in its entirety by reference to the detailed provisions of those agreements, which should be reviewed in their entirety by each prospective Investor. If the provisions of this summary differ from the provisions of the Operating Agreement or the Subscription Agreement (as applicable), the provisions of the Operating Agreement or the Subscription Agreement (as applicable) shall apply. Capitalized terms used in this summary that are not defined herein shall have the meanings ascribed thereto in the Operating Agreement.

Description of the Units

The Company is a series limited liability company formed pursuant to Section 18-215 of the Delaware Limited Liability Company Act (the “LLC Act”). The purchase of membership units in any Series of the Company is an investment only in that Series and not an investment in the Company as a whole. In accordance with the LLC Act, the Series Country Grammer and Series OL2018 Units are, and any other series of units if issued in the future will be, a separate series of units of limited liability company interest of the Company and not in a separate legal entity. The Company has not issued, and has no current intention to issue, any class or series of Units entitled to any preemptive, preferential, or other rights that are not otherwise available to Investors purchasing Units in connection with the Series Country Grammer and Series OL2018 Offerings.

Title to the Thoroughbred Assets will be held by, or for the benefit of, the applicable Series of Units. We intend that each Series will own its own Thoroughbred Asset(s). We do not anticipate that Series Country Grammer will acquire any Thoroughbred asset other than its interest in Country Grammer, or that Series OL2018 will acquire any Thoroughbred asset other than its interest in Biko. A new series will be issued for future Thoroughbred Assets. An Investor who invests in this Offering will not have any indirect interest in any other Thoroughbred Assets unless the Investor also participates in a separate offering associated with those other Thoroughbred Assets.

Section 18-215(b) of the LLC Act provides that, if certain conditions are met, (including that certain provisions are in the formation and governing documents of the series limited liability company, and if the records maintained for any such series account for the assets associated with such series separately from the assets of the limited liability company, or any other series), then the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular series shall be enforceable only against the assets of such series and not against the assets of the limited liability company generally or any other series. Accordingly, the Company expects the Manager to maintain separate, distinct records for each series and its associated assets and liabilities. As such, the assets of a series include only the horse associated with that series and other related assets (e.g., cash reserves). As noted in the “Risk Factors” section, the limitations on inter-series liability provided by Section 18-215(b) have never been tested in federal bankruptcy courts and it is possible that a bankruptcy court could determine that the assets of one series should be applied to meet the liabilities of the other series or the liabilities of the Company generally where the assets of such other series or of the Company generally are insufficient to meet the Company’s liabilities.

Section 18-215(c) of the LLC Act provides that a series established in accordance with Section 18-215(b) may carry on any lawful business, purpose, or activity, other than the business of banking, and has the power and capacity to, in its own name, contract, hold title to assets (including real, personal, and intangible property), grant liens and security interests, and sue and be sued. The Company intends for each series to conduct its business and enter into contracts in its own name to the extent such activities are undertaken with respect to a particular series and title to the relevant Thoroughbred asset will be held by, or for the benefit of, the relevant series.

All Units offered by this Offering Circular will be duly authorized and validly issued. Upon payment in full of the consideration payable with respect to the Units of a Series, as determined by the Manager, the Unit Holders of that Series will not be liable to the Company to make any additional capital contributions with respect to the purchased Units (except for the return of distributions under certain circumstances as required by Sections 18-215, 18-607 and 18-804 of the LLC Act). Holders of the Units offered by this Offering Circular have no conversion, exchange, sinking fund, redemption or appraisal rights, no pre-emptive rights to subscribe for any Units and no preferential rights to distributions.

In general, Unit Holders (which may include the Manager or its affiliates) will receive 90% of the Free Cash Flow derived from all sources, including racing, breeding and sales activities related to the Series Asset less expenses (as described in “Distribution Rights” below).

The Manager, together with its affiliates of the Company, must own a minimum of 2% and a maximum of 10% of the units of each of the Company’s series acquired for the same price as all other Investors. The Manager may sell any of its Units from time to time after the Closing of an Offering.

The Manager has the authority under the Operating Agreement to cause the Company to issue Units to investors as well as to other persons or entities for such cost (or no cost) and on such terms as the Manager may determine, subject to the terms set forth in the applicable Series Designation. The Series Designations are attached as Exhibits to the Offering Statement.

An Investor in this Offering will acquire an ownership interest in the Series in which the Investor purchased Units and not, for the avoidance of doubt, in (i) the Company, (ii) any other series if the Company’s Units, (iii) the Manager, (iv) the Commonwealth Platform or (v) the Series Asset or any underlying asset owned by any other series of interest. Our Units will not immediately be listed on a securities exchange and a liquid market in the Unit cannot be guaranteed. We currently have no plans to create our own trading market or partner with an existing platform to allow for trading of the Units. We encourage you to review the additional risks related to liquidity in the “Risk Factors” section.

Further Issuance of Units

Only Series Country Grammer Units and Series OL2018 Units are being offered and sold pursuant to this Offering Circular. The Operating Agreement provides that the Manager may limit the number of beneficial owners of Units of each Series to no more than 2,000 qualified purchasers (no more than 500 of whom cannot be accredited investors). The Manager has the option to issue additional Units of a Series (in addition to those issued in connection with this Offering) on the same terms as the Units offered hereunder as is required from time to time in order to pay any Operating Expenses which exceed revenue generated from the Series Asset.

Distribution rights

The Manager has sole discretion in determining what distributions of Free Cash Flow, if any, are made to Unit Holders except as otherwise limited by law or the Operating Agreement. The Company expects the Manager to distribute any Free Cash Flow on a semi-annual basis as set forth below. However, the Manager may change the timing of distributions or determine that no distributions shall be made in its sole discretion.

Any Free Cash Flow generated by a Series from the utilization of the Series Asset will be applied, with respect to the Series, in the following order of priority:

No Series will distribute a Series Asset in kind to its Unit Holders.

The LLC Act (Section 18-607) provides that a member who receives a distribution with respect to a series and knew at the time of the distribution that the distribution was in violation of the LLC Act will be liable to the series for the amount of the distribution for three years. Under the LLC Act, a series limited liability company may not make a distribution with respect to a series to a member if, after the distribution, all liabilities of such series, other than liabilities to members on account of their limited liability company interests with respect to such series and liabilities for which the recourse of creditors is limited to specific property of such series, would exceed the fair value of the assets of such series. For the purpose of determining the fair value of the assets of the series, the LLC Act provides that the fair value of property of the series subject to liability for which recourse of creditors is limited shall be included in the assets of such series only to the extent that the fair value of that property exceeds the nonrecourse liability. Under the LLC Act, an assignee who becomes a substituted member of a company is liable for the obligations of his assignor to make contributions to the company, except the assignee is not obligated for liabilities unknown to it at the time the assignee became a member and that could not be ascertained from the operating agreement.

Redemption provisions

The Units are not redeemable.

Registration rights

There are no registration rights in respect of the Units.

Voting rights

The Manager is not required to hold an annual meeting of Unit Holders. The Operating Agreement provides that meetings of interest holders may be called by the Manager and a designee of the Manager shall act as chairman at such meetings. The Investor does not have any voting rights as an interest holder in the Company or a series except with respect to:

Each unit holder will be entitled to one vote per unit owned on all matters submitted to a vote of the unit holders of an applicable series or of the unit holders of all series of the Company, as applicable. The removal of the Manager as manager of the Company and all series of units must be approved by two-thirds of the votes that may be cast by all unit holders in any series of the Company. All other matters to be voted on by the unit holders must be approved by a majority of the votes cast by all unit holders in any series of the Company present in person or represented by proxy.

The consent of the holders of a majority of the units of a series is required to amend the Operating Agreement in a manner that would adversely change the rights of the units of the series, result in mergers, consolidations, or conversions of the units of the series and for any other matter as the Manager, in its sole discretion, determines will require the approval of the holders of the units of the series voting as a separate class.

The Manager and its affiliates (if they hold units of a series) may not vote as unit holders in respect of any matter put to the unit holders. However, the submission of any action of the Company or a series for a vote of the unit holders must first be approved by the Manager, and no amendment to the Operating Agreement may be made without the prior approval of the Manager if the amendment would decrease the rights of the Manager or increase the obligations of the Manager.

The Manager has broad authority to take action with respect to the Company and any series. See “Management” for more information. Except as set forth above, the Manager, in its sole discretion, may amend the Operating Agreement without the approval of the unit holders to, among other things, reflect the following:

In each case, the Manager may make such amendments to the Operating Agreement provided the Manager determines that those amendments do not adversely affect the unit holders (including any particular series of units as compared to other series) in any material respect.

Furthermore, the Manager retains sole discretion to create and set the terms of any new series and will have the sole power to acquire, manage and dispose of underlying asset of each series.

Liquidation rights

The Operating Agreement provides that the Company will remain in existence until the earlier of the following: (i) the election of the Manager to dissolve it; (ii) the sale, exchange or other disposition of substantially all of the assets of the Company; (iii) the entry of a decree of judicial dissolution of the Company; (iv) at any time that the Company no longer has any members, unless the business is continued in accordance with the LLC Act; and (v) a vote by two-thirds of all unit holders of the Company following the for-cause removal of the Manager. In no circumstances may the Company be wound up pursuant to Section 18-801(a)(3) of the LLC Act upon the vote of members who hold more than two-thirds of the interests in the profits of the Company.

A series will remain in existence until the earlier of the following: (i) the dissolution of the Company, (ii) the election of the Manager to dissolve such series; (iii) the sale, exchange, or other disposition of substantially all of the assets of the series; or (iv) at any time that the series no longer has any members, unless the business is continued in accordance with the LLC Act. In no circumstances may a series be wound up pursuant to Section 18-801(a)(3) of the LLC Act upon the vote of members who hold more than two-thirds of the interests in the profits of the series.

Upon the occurrence of one of the foregoing events, the Manager (or a liquidator selected by the Manager) is charged with winding up the affairs of the series or the Company as a whole, as applicable, and liquidating its assets. Upon the liquidation of a series or the Company as a whole, as applicable, the underlying assets will be liquidated and any after-tax proceeds distributed: (i) first, to any third party creditors, (ii) second, to any creditors that are the Manager or its affiliates (e.g., payment of any outstanding Operating Expenses Reimbursement Obligation), and thereafter, (iii) to the unit holders of the relevant series, allocated pro rata based on the number of units held by each unit holder (which may include the Manager and any of its affiliates and which distribution within a series will be made consistent with any preferences that may exist within such series).

Transfer restrictions

The Units are subject to restrictions on transferability. A Unit Holder may not transfer, assign, or pledge its Units without the consent of the Manager. The Manager may withhold consent in its sole discretion, including when the Manager determines that such transfer, assignment or pledge would result in (a) there being more than 2,000 beneficial owners of the Series or more than 500 beneficial owners of the Series that are not “accredited investors”, (b) the assets of the Series being deemed “plan assets” for purposes of ERISA, (c) the transferee Unit Holder holding in excess of 19.9% of the Series, (d) a change of U.S. federal income tax treatment of the Company and the Series, or (e) the Company, the Series or the Manager being subject to additional regulatory requirements. The transferring Unit Holder is responsible for all costs and expenses arising in connection with any proposed transfer (regardless of whether such sale is completed) including any legal fees incurred by the Company or any broker or dealer, any costs, or expenses in connection with any opinion of counsel and any transfer taxes and filing fees. The Manager may transfer all or any portion of the Units held by the Manager at any time and from time to time.

Additionally, unless and until the Units of the Company are listed or quoted for trading, there are restrictions on the holder’s ability to the pledge or transfer the Units. We cannot assure you that we will, or will be able to, register the Units for resale. Therefore, Investors may be required to hold their Units indefinitely. Please refer to Exhibit 4.1 – Form of Subscription Agreement for additional information regarding these restrictions. To the extent certificated, the Units issued in this Offering will bear a legend setting forth these restrictions on transfer and any legends required by state securities laws.

Agreement to be Bound by the Operating Agreement; Power of Attorney

By purchasing Units, the Investor will be admitted as a member of the Company and will be bound by the provisions of, and deemed to be a party to, the Operating Agreement. Pursuant to the Operating Agreement, each Investor grants to the Manager a power of attorney to, among other things, execute and file documents required for the Company’s qualification, continuance, or dissolution. The power of attorney also grants the Manager the authority to make certain amendments to, and to execute and deliver such other documents as may be necessary or appropriate to carry out the provisions or purposes of, the Operating Agreement.

Duties of officers

The Operating Agreement provides that, except as may otherwise be provided by the Operating Agreement, the property, affairs, and business of each series of units will be managed under the direction of the Manager. The Manager has the power to appoint the officers and such officers have the authority and exercise the powers and perform the duties specified in the Operating Agreement or as may be specified by the Manager. Commonwealth Markets Inc. is the Manager of each series and manages the underlying assets.

The Company may decide to enter into separate indemnification agreements with the directors and officers of the Company, the Manager (including if the Manager appointed is not Commonwealth Markets Inc.). If entered into, each indemnification agreement is likely to provide, among other things, for indemnification to the fullest extent permitted by law and the Operating Agreement against any and all expenses, judgments, fines, penalties, and amounts paid in settlement of any claim. The indemnification agreements may also provide for the advancement or payment of all expenses to the indemnitee and for reimbursement to the Company if it is found that such indemnitee is not entitled to such indemnification under applicable law and the Operating Agreement.

Books and reports

The Company is required to keep appropriate books of the business at its principal offices. The books will be maintained for both tax and financial reporting purposes on a basis that permits the preparation of financial statements in accordance with GAAP. For financial reporting purposes and tax purposes, the fiscal year and the tax year are the calendar year, unless otherwise determined by the Manager in accordance with the Internal Revenue Code. The Manager will file periodic reports of the Company with the SEC as required by 17 CFR §230.257.

Under the Securities Act, we must update this Offering Circular upon the occurrence of certain events, such as asset acquisitions. We will file updated offering circulars and offering circular supplements with SEC. We are also subject to the informational reporting requirements of the Exchange Act that are applicable to Tier 2 companies whose securities are registered pursuant to Regulation A, and accordingly, we will file annual reports, semiannual reports, and other information with SEC. In addition, we plan to provide Unit Holders with periodic updates, including offering circulars, offering circular supplements, pricing supplements, information statements and other information.

We will provide such documents and periodic updates electronically through the Commonwealth Platform. As documents and periodic updates become available, we will notify Unit Holders of this by sending the Unit Holders an email message or a message through the Commonwealth Platform that will include instructions on how to retrieve the periodic updates and documents. If our email notification is returned to us as “undeliverable,” we will contact the Unit Holder to obtain an updated email address. We will provide Unit Holders with copies via email or paper copies at any time upon request. The contents of the Commonwealth Platform are not incorporated by reference in or otherwise a part of this Offering Circular.

Exclusive jurisdiction; waiver of jury trial

To the fullest extent permitted by applicable law, any dispute in relation to the Operating Agreement is subject to the exclusive jurisdiction of the Court of Chancery of the State of Delaware, and each Investor will covenant and agree not to bring any such claim in any other venue. If a Unit Holder were to bring a claim against the Company or the Manager pursuant to the Operating Agreement, it would have to do so in the Delaware Court of Chancery. This exclusive forum provision will not apply to claims which are vested in the exclusive jurisdiction of a court or forum other than the Delaware Court of Chancery, or for which the Delaware Court of Chancery does not have subject matter jurisdiction. The Operating Agreement also contains a waiver of trial by jury, to the fullest extent permitted by applicable law, although that waiver is not intended to apply to claims or suits under federal securities laws.

Listing

None of the Units of any Series of the Company are currently listed or quoted for trading on any national securities exchange or national quotation system.

MATERIAL UNITED STATES TAX CONSIDERATIONS

The following is a summary of the material United States federal income tax consequences of the ownership and disposition of the Units to United States holders but does not purport to be a complete analysis of all the potential tax considerations relating thereto. This summary is based upon the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations promulgated thereunder, administrative rulings and judicial decisions, all as of the date hereof. These authorities may be changed, possibly retroactively, so as to result in United States federal income tax consequences different from those set forth below. We have not sought any ruling from the Internal Revenue Service (the “IRS”), with respect to the statements made and the conclusions reached in the following summary, and we cannot assure you that the IRS will agree with such statements and conclusions.

This summary also does not address the tax considerations arising under the laws of any United States state or local or any non-United States jurisdiction or under United States federal gift and estate tax laws. In addition, this discussion does not address tax considerations applicable to an Investor’s particular circumstances or to Investors that may be subject to special tax rules, including, without limitation:

In addition, if a partnership, including any entity or arrangement, domestic or foreign, classified as a partnership for United States federal income tax purposes, holds Units, the tax treatment of a partner generally will depend on the status of the partner and upon the activities of the partnership. Accordingly, partnerships that hold Units, and partners in such partnerships, should consult their tax advisors.

You are urged to consult your tax advisor with respect to the application of the United States federal income tax laws to your particular situation, as well as any tax consequences of the purchase, ownership and disposition of our Units arising under the United States federal estate or gift tax rules or under the laws of any United States state or local or any foreign taxing jurisdiction or under any applicable tax treaty.

Definitions

U.S. Holder. A “U.S. Holder” includes a beneficial owner of the Units that is, for U.S. federal income tax purposes, an individual citizen or resident of the United States.

Taxation of each Series of Units as a “C” Corporation

The Company, although formed as a Delaware series limited liability company eligible for tax treatment as a “partnership,” has affirmatively elected for each series of its units, including the Series Country Grammer and Series OL2018 Units, to be taxed as a “C” corporation under Subchapter C of the Code for all federal and state tax purposes. Thus, each series of units (other than the Series A1 Units held exclusively by the Manager) will be taxed at regular corporate rates on its income before making any distributions to Unit Holders as described below.

Taxation of Distributions to Investors

Distributions to U.S. Holders out of the Company’s current or accumulated earnings and profits will be taxable as dividends. A U.S. Holder who receives a distribution constituting “qualified dividend income” may be eligible for reduced federal income tax rates. U.S. Holders are urged to consult their tax advisors regarding the characterization of corporate distributions as “qualified dividend income”. Distributions in excess of the Company’s current and accumulated earnings and profits will not be taxable to a U.S. Holder to the extent that the distributions do not exceed the adjusted tax basis of the U.S. Holder’s units. Rather, such distributions will reduce the adjusted basis of such U.S. Holder’s units. Distributions in excess of current and accumulated earnings and profits that exceed the U.S. Holder’s adjusted basis in its Units will be taxable as capital gain in the amount of such excess if the Units are held as a capital asset.

Investors should note that Section 1411 of the Code imposes a 3.8% tax on certain investment income (the “3.8% NIIT”). In general, in the case of an individual, this tax is equal to 3.8% of the lesser of (i) the taxpayer’s “net investment income” or (ii) the excess of the taxpayer’s adjusted gross income over the applicable threshold amount ($250,000 for taxpayers filing a joint return, $125,000 for married individuals filing separate returns, $250,000 for qualifying widow(er)s with a dependent child and $200,000 for other taxpayers). In the case of an estate or trust, the 3.8% tax will be imposed on the lesser of (x) the undistributed net investment income of the estate or trust for the taxable year, or (y) the excess of the adjusted gross income of the estate or trust for such taxable year over a beginning dollar amount of the highest tax bracket for such year (for 2019, that amount is $12,750). U.S. Holders should note that dividends will be included as investment income in the determination of “net investment income” under Section 1411(c) of the Code.

Taxation of Dispositions of Units

Upon any taxable sale or other disposition of our Units, a U.S. Holder will recognize gain or loss for federal income tax purposes on the disposition in an amount equal to the difference between the amount of cash and the fair market value of any property received on such disposition; and the U.S. Holder’s adjusted tax basis in the Units. A U.S. Holder’s adjusted tax basis in the Units generally equals his or her initial amount paid for the Units and decreased by the amount of any distributions to the Investor in excess of the Company’s current or accumulated earnings and profits. In computing gain or loss, the proceeds that U.S. Holders receive will include the amount of any cash and the fair market value of any other property received for their Units, and the amount of any actual or deemed relief from indebtedness encumbering their Units. The gain or loss will be long-term capital gain or loss if the Units are held for more than one year before disposition. Long-term capital gains of individuals, estates and trusts currently are taxed at a maximum rate of 20% (plus any applicable state income taxes) plus the 3.8% NIIT. The deductibility of capital losses may be subject to limitation and depends on the circumstances of a particular U.S. Holder; the effect of such limitation may be to defer or to eliminate any tax benefit that might otherwise be available from a loss on a disposition of the Units. Capital losses are first deducted against capital gains, and, in the case of non-corporate taxpayers, any remaining such losses are deductible against salaries or other income from services or income from portfolio investments only to the extent of $3,000 per year.

Backup Withholding and Information Reporting

Generally, the Company must report annually to the IRS the amount of dividends paid to you, your name and address, and the amount of tax withheld, if any. A similar report will be sent to you.

Payments of dividends or of proceeds on the disposition of the Units made to you may be subject to additional information reporting and backup withholding at a current rate of 24% unless you establish an exemption. Notwithstanding the foregoing, backup withholding and information reporting may apply if either we or our paying agent has actual knowledge, or reason to know, that you are a United States person.

Backup withholding is not an additional tax; rather, the United States income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund or credit may generally be obtained from the IRS, provided that the required information is furnished to the IRS in a timely manner.

The preceding discussion of United States federal tax considerations is for general information only. It is not tax advice. Each prospective investor should consult its own tax advisor regarding the particular United States federal, state, and local and foreign tax consequences, if applicable, of purchasing, holding, and disposing of our Units, including the consequences of any proposed change in applicable laws.

WHERE TO FIND ADDITIONAL INFORMATION

The Manager will answer inquiries from potential Investors concerning the Series Country Grammer and Series OL2018 Units, the Company, the Manager, and other matters relating to the offer and sale of Units under this Offering Circular. The Company will afford the potential Investors in the Units the opportunity to obtain any additional information to the extent the Company possesses such information or can acquire such information without unreasonable effort or expense that is necessary to verify the information in this Offering Circular.

All potential Investors in the Units are entitled to review copies of any other agreements relating to the Units we are offering described in this Offering Circular, if any. In the Subscription Agreement, you will represent that you are completely satisfied with the results of your pre-investment due diligence activities.

Any statement contained in this Offering Circular or in any document incorporated into it by reference shall be deemed to be modified or superseded for purposes of this Offering Circular to the extent that a statement contained in this Offering Circular or in any other subsequently filed document that also is or is deemed to be incorporated by reference into this Offering Circular modifies or replaces such a prior statement. Any such statement so modified or superseded shall not be deemed to constitute a part of this Offering Circular, except as so modified or superseded.

Requests and inquiries regarding this Offering Circular should be directed to:

Commonwealth Thoroughbreds LLC

1450 North Broadway

Lexington, Kentucky 40505

E-Mail: brian@joincommonwealth.com

Telephone: (859) 977-0124

Attention: Brian Doxtator

We will provide requested information to the extent that we possess such information or can acquire it without unreasonable effort or expense.

INDEX TO FINANCIAL STATEMENTS

Commonwealth Thoroughbreds LLC

NOTE:    Commonwealth Thoroughbreds LLC was formed on June 12, 2019 and had no operations or financial results through June 30, 2019. Accordingly, financial statements for the nineteen-day period from June 12 through June 30, 2019 have not been included.

INDEX TO FINANCIAL STATEMENTS

Commonwealth Thoroughbreds LLC

Report of Independent Auditors

Commonwealth Markets Inc. as Manager of Commonwealth Thoroughbreds LLC

Lexington, Kentucky

Report on the Financial Statements

We have audited the accompanying financial statements of Commonwealth Thoroughbreds LLC, which comprise the balance sheet as of December 31, 2019, the related statements of operations, changes in member’s equity and cash flows for the period from June 12, 2019 (inception) through December 31, 2019, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express No such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Commonwealth Thoroughbreds LLC as of December 31, 2019, and the results of its operations and its cash flows for the period from June 12, 2019 (inception) through December 31, 2019 in accordance with accounting principles generally accepted in the United States of America.

Emphasis of Matter Regarding Going Concern

The accompanying financial statements have been prepared assuming that Commonwealth Thoroughbreds LLC will continue as a going concern. As discussed in Note 1 to the financial statements, Commonwealth Thoroughbreds LLC has not generated any profits, lacks liquidity to satisfy obligations as they come due, and expects to continue to incur losses which raises substantial doubt about its ability to continue as a going concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.

/s/ Dean Dorton Allen Ford, PLLC

Lexington, Kentucky

July 28, 2020

Commonwealth Thoroughbreds LLC

Notes to Financial Statements

June 12, 2019 (Inception) through December 31, 2019

NOTE 1 - NATURE OF OPERATIONS

Description of Organization and Business Operations

Commonwealth Thoroughbreds LLC (the “Company”) is a Delaware series limited liability company formed on June 12, 2019 and headquartered in Lexington, Kentucky. The Company's fiscal year ends on December 31. Commonwealth Markets Inc. is the sole owner of units of membership interest of the Company. The Company was formed to engage in the business of acquiring and managing Thoroughbred racehorses and related equine breeding and sales activities. It is expected that the Company will create several separate series of membership interests (the “Series” or “Series”), including the Series TF2019, and different Thoroughbred assets will be owned by separate Series, and that the assets and liabilities of each Series will be separate in accordance with Delaware law. Investors will acquire units of membership interest (“Units”) of a Series and will be entitled to share in the return of that particular Series but will not be entitled to share in the return of any other Series.

Commonwealth Markets Inc. (the “Manager”), a Delaware corporation formed on January 10, 2019, is a technology and marketing company that operates the Commonwealth Platform and App ("the Platform"). The Manager manages the Company, the assets owned by the Company and the assets of each Series.

The Company intends to sell Units in several separate and individual Series of the Company. Investors in any Series acquire a proportional share of the assets, income and liabilities pertaining to a particular Series. The Manager has the authority to conduct the ongoing operations of each Series in accordance with the Company’s limited liability company agreement, as amended and restated from time to time (the “Operating Agreement”). Unit holders have only the limited voting and management rights provided in the Operating Agreement or required by law.

Going Concern and Capital Resources

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not generated profits since inception. The Company has a net loss of $324,350 for the period from inception to December 31, 2019 and has member’s equity of $3,868 as of December 31, 2019. The Company lacks liquidity to satisfy obligations as they come due. All of the liabilities on the balance sheet as of December 31, 2019 are obligations to the Manager or its stockholders. All of these liabilities, other than for which the Manager does not seek reimbursement, will be covered through the proceeds of future offerings for the various Series.

Through December 31, 2019, neither the Company nor its Series have recorded any revenues generated through the utilization of underlying Thoroughbred assets. The Company does not expect to generate any revenues for Series TF2019 from its current Thoroughbred foal for the first year of operations or longer. Series TF2019 will continue to incur operating expenses including, but not limited to, boarding, insurance, transportation and training expenses on an ongoing basis.

From inception, the Company has financed the business activities of its Series through capital contributions from the Manager or its affiliates. The Company and each Series expect to continue to have access to ample capital financing from the Manager going forward. Until such time as the Series have the capacity to generate cash flows from operations, the Manager may cover any deficits through additional capital contributions or the issuance of additional Units in any individual Series. In addition, parts of the proceeds of future offerings may be used to create reserves for future Operating Expenses for individual series at the sole discretion of the Manager.

The Company’s ability to continue depends upon management’s plan to raise additional funds, capital contributions from the Manager and the ability to achieve profitable operations. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The financial statements do not include any adjustments that might be necessary if the Company is not able to continue as a going concern.

Commonwealth Thoroughbreds LLC

Notes to Financial Statements

June 12, 2019 (Inception) through December 31, 2019, continued

NOTE 1 – NATURE OF OPERATIONS, CONTINUED

Initial Offering

The Company’s initial offering for Series TF2019 is described in the Offering Circular included in the Offering Statement on Form 1-A initially filed with the SEC on October 16, 2019. Proceeds from the offering of Series TF2019 Units will be used to repay the loan from an officer of the Manager (if not converted into Series TF2019 Units) (see Note 3) and pay for other offering related fees and expenses.  These will include a fee of $10,000 plus 1% of the amount raised in the offering (excluding any Units purchased by the Manager or its affiliates) payable to the clearing broker upon completion of the offering. Series TF2019 currently has not started operations and has No capitalization, assets or liabilities.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America ("GAAP"). In the opinion of management, all adjustments considered necessary for the fair presentation of the financial statements for the period presented have been included.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from Company estimates.

Risks and Uncertainties

The Company has a limited operating history. The Company’s business and operations are sensitive to general business and economic conditions in the United States. A host of factors beyond the Company’s control could cause fluctuations in these conditions. Adverse conditions may include: recession, downturn or otherwise, local competition or changes in consumer taste. These adverse conditions could affect the Company’s financial condition and the results of its operations.

Cash

The Company considers short-term, highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. Cash consists of funds held in the Company’s checking account.

Offering Expenses

Offering Expenses relate to the offering for a specific Series and consist of underwriting, legal, accounting, escrow, compliance, filing and other expenses incurred through the balance sheet date that are directly related to a proposed offering and will generally be charged to member’s equity upon the completion of the proposed offering. Offering expenses that are incurred prior to the closing of an offering for that Series are being funded by the Manager and will generally be reimbursed through the proceeds of the offering related to the Series. However, the Manager has agreed to pay and not be reimbursed for more than $15,000 of Offering Expenses incurred with respect to the Series TF2019 Offering. Should the proposed offering prove to be unsuccessful, these costs, as well as additional expenses to be incurred, will be charged to the Manager.

Commonwealth Thoroughbreds LLC

Notes to Financial Statements

June 12, 2019 (Inception) through December 31, 2019, continued

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

In addition to the discrete Offering Expenses related to a particular series, the Manager has also incurred legal, accounting and compliance expenses of $319,395 through December 31, 2019 to set up the legal and financial framework and compliance infrastructure for the marketing and sale of the Series TF2019 Units and all subsequent offerings. The Manager will receive an Organizational Fee equal to 3.0% of the proceeds received from the offering of each series of units as reimbursement for these expenses.

As of December 31, 2019, the Manager had incurred Offering Expenses of $0 related to Series TF2019.

Operating Expenses

Operating Expenses related to a particular horse include stabling, training, insurance, transportation (other than the initial transportation from the horse’s location to the Manager’s boarding facility prior to the offering, which is treated as an “Acquisition Expense”, as defined below), maintenance, annual audit and legal expenses and other equine-specific expenses as detailed in the Manager’s Allocation Policy. The Company distinguishes between pre-closing and post-closing Operating Expenses. Operating Expenses are expensed as incurred.

Except as disclosed with respect to any future Series offering, expenses of this nature that are incurred prior to the closing of an offering of Series are funded by the Manager and are not reimbursed by the Company, Series or economic members. These are accounted for as capital contributions by the Manager for expenses related to the business of the Company or a Series.

Upon closing of an offering, a Series becomes responsible for these expenses and finances them either through revenues generated by a Series or available cash reserves at the Series. Should revenues or cash reserves not be sufficient to cover Operating Expenses the Manager may (a) pay such Operating Expenses and not seek reimbursement, (b) loan the amount of the Operating Expenses to the Series at a reasonable rate of interest and be entitled to reimbursement of such amount from future revenues generated by the Series (“Operating Expenses Reimbursement Obligation(s)”), and/or (c) cause additional units to be issued in order to cover such additional amounts.

As of December 31, 2019, the Manager had incurred $2,537 of pre-closing Operating Expenses related to Series TF2019. Operating expenses incurred prior to the offering’s closing will be borne by the Manager and not reimbursed.

Thoroughbred Assets

Thoroughbred assets are recorded at cost. The cost of the Thoroughbred includes the purchase price, including any deposits paid by the Manager, the Sourcing Fee, Brokerage Fee and “Acquisition Expenses”, including transportation of the asset to the Manager’s stables, pre-purchase medical examinations, pre-offering expenses, and other costs detailed in the Manager’s Allocation Policy.

The Brokerage Fee and Sourcing Fee are paid from the proceeds of any successfully closed offering. Should an offering be unsuccessful, these expenses do not occur. As of December 31, 2019, no offerings had closed, and No such fees were paid.

Acquisition Expenses related to a particular Series are initially funded by the Manager but may be reimbursed with the proceeds from an offering related to such Series, to the extent described in the applicable offering document. Acquisition Expenses are capitalized into the cost of the horse as per the table below. Should a proposed offering prove to be unsuccessful, the Company will not reimburse the Manager and these expenses will be accounted as capital contributions. At December 31, 2019, $10,600 of Acquisition Expenses were incurred, as shown in the following table.

Commonwealth Thoroughbreds LLC

Notes to Financial Statements

June 12, 2019 (Inception) through December 31, 2019, continued

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

Depreciation is provided using the straight-line method based on useful lives of the asset. Thoroughbred assets are depreciated using the straight-line method over 36 months with No estimated salvage value. A horse is treated as placed in service upon its acquisition by the Company. The Company reviews the carrying value of Thoroughbred assets for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the use of the property, and the effects of health, demand, competition, and other economic factors.

Income Taxes

The Company intends that the separate Series will elect and qualify to be taxed as a corporation under the Internal Revenue Code. The separate Series will comply with the accounting and disclosure requirement of Accounting Standards Codification (“ASC”) Topic 740, "Income Taxes," which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The master series of the Company intends to be taxed as a “partnership” or a ”disregarded entity” for federal income tax purposes and will not make any election or take any action that could cause it to be separately treated as an association taxable as a corporation under Subchapter C of the Internal Revenue Code.

Earnings per Membership Unit

Upon completion of an offering, each Series intends to comply with accounting and disclosure requirement of ASC Topic 260, "Earnings per Share." For each Series, earnings per membership unit will be computed by dividing net income for that particular Series by the weighted average number of outstanding units in that particular Series during the period.

Commonwealth Thoroughbreds LLC

Notes to Financial Statements

June 12, 2019 (Inception) through December 31, 2019, continued

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

For a period of net loss, basic and diluted earnings per unit are the same as the assumed exercise of stock options and warrants and the conversion of convertible debt are anti-dilutive. 50 units were outstanding during 45% of the period presented for approximately 23 weighted units.

Recent Accounting Pronouncements

The Financial Accounting Standards Board issues updates to amend the authoritative literature in ASC. There have been a number of updates to date that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable or (iv) are not expected to have a significant impact on the financial statements.

NOTE 3 – RELATED PARTY TRANSACTIONS

On August 20, 2019, the Company acquired the Thoroughbred asset to be assigned to Series TF2019 from a principal executive of the Manager in exchange for a convertible promissory note in the principal amount of $7,500, which accrues interest at a rate of 1.91% per annum. The purchase price was equal to the appraised value of the Thoroughbred provided by an independent third-party appraiser. Other key terms of the loan include (i) the requirement to repay the loan within 14 days of the Series TF2019 Offering closing and (ii) the ability for the Company to prepay the loan at any time. The promissory note initially provided that the holder could elect to convert the principal amount of the note plus accrued interest into Series TF2019 Units at the purchase price for Series TF2019 Units in this Offering. On December 10, 2019, the parties amended the promissory note for the purchase of the Timido Filly (see Note 3) to convert automatically into Series TF2019 Units upon the closing of the offering of Series TF2019 Units and No longer at the election of the holder.

The Company received an initial $5,000 capital contribution for member units in the Company from the Manager in order to pay operating expenses incurred prior to the closing of the offering of Series TF2019 Units. The Manager may cover future operating expenses of the Company through additional capital contributions or a non-interest-bearing revolving credit to the Company.

When the Company acquired the Thoroughbred asset to be assigned to Series TF2019 on August 20, 2019, the monthly boarding expenses had already been paid by the Manager. The Manager will not seek reimbursement for the prorated $116 of boarding expense.

On July 16, 2019, the Manager paid $200 to Hyperion Thoroughbred Consultants to conduct an appraisal of the Thoroughbred asset to be assigned to Series TF2019. The Manager will not seek reimbursement.

The Manager has paid a total of $416 of rent expense on behalf of the Company. The Manager will not seek reimbursement.

Additionally, professional fees of $319,395 were incurred at the Manager level to support the Company.

The Manager expects to maintain cash reserves funded from offering proceeds on behalf of each of the Company’s series to cover the series’ operating expenses.

During the period from June 12, 2019 (inception) through December 31, 2019, executives of the Manager provided services to the Company for No compensation at the Manager level or Company level. Management expects in the future these executive services will be compensated through the management fee agreement (see Note 5).

NOTE 4 – REVENUE, EXPENSE AND COST ALLOCATION METHODOLOGY

The Company distinguishes expenses and costs between those related to the purchase of a particular Thoroughbred asset and Operating Expenses related to the management of that asset.

Commonwealth Thoroughbreds LLC

Notes to Financial Statements

June 12, 2019 (Inception) through December 31, 2019, continued

NOTE 4 – REVENUE, EXPENSE AND COST ALLOCATION METHODOLOGY, CONTINUED

Fees and expenses related to the purchase of an underlying Thoroughbred asset include the Offering Expenses, Acquisition Expenses, Brokerage Fee and Sourcing Fee.

Within Operating Expenses, the Company distinguishes between Operating Expenses incurred prior to the closing of an offering and those incurred after the close of an offering. Although these pre- and post- closing Operating Expenses are similar in nature and consist of expenses such as stabling, training, insurance and transportation, pre-closing Operating Expenses are borne by the Manager and may or may not be reimbursed by the Company or the economic members of the series, as outlined within that particular Series Designation. Post-closing Operating Expenses are the responsibility of each Series and may be financed through (i) revenues generated by the Series or cash reserves at the Series; (ii) contributions made by the Manager, for which the Manager does not seek reimbursement; (iii) loans by the Manager, for which the Manager may charge a reasonable rate of interest; or (iv) issuance of additional Units in a Series.

Allocation of revenues and expenses and costs will be made amongst the various Series in accordance with the Manager's allocation policy. The Manager's allocation policy requires items that are related to a specific Series be charged to that specific Series. Items not related to a specific Series will be allocated pro rata based upon the value of the underlying Thoroughbred assets or the number of Thoroughbred assets, as stated in the Manager’s allocation policy and as reasonably determined by the Manager. The Manager may amend its allocation policy in its sole discretion from time to time.

Commonwealth Thoroughbreds LLC

Notes to Financial Statements

June 12, 2019 (Inception) through December 31, 2019, continued

NOTE 5 - DISTRIBUTIONS AND MANAGEMENT FEES

As compensation for the services provided by the Manager under the Management Services Agreement, the Manager will be paid a semi-annual fee equal to:

The Management Fee will only become due and payable at the time there is a distribution of Free Cash Flow to Unit Holders of the Series. For tax and accounting purposes the Management Fee will be accounted for as an expense on the books of the Series.

“Free Cash Flow” is defined as the net income (as determined under GAAP) generated by any Series plus any change in net working capital and depreciation and amortization (and any other non-cash Operating Expenses) and less any capital expenditures related to the relevant Series.

As of December 31, 2019, no distributions or management fees had been paid by the Company or in respect of any Series.

NOTE 6 - MEMBER CONTRIBUTIONS

Member contributions primarily reflect the assumption of payables that support the Company’s operating results.  Constructive payments made by the member on behalf of the Company have been included in the statement of cash flows as financing activities.  The Company has treated the other member contributions as noncash activity to better reflect the actual cash movement that benefited the Company. The member contributions during the period from June 12, 2019 (inception) to December 31, 2019 were as follows: