Delphi's Acquisition of Cal-Nev-Ari, Nevada Due Diligence Package

44 Pages·2017·3.76 MB·English

Delphi’s
Acquisition of
Cal-Nev-Ari, Nevada
Due Diligence Package

July 16, 2017

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CAL-NEV-ARI DUE DILIGENCE PACKAGE

Delphi Southern Nevada LLC, identifies underutilized properties and resources and develops them into thriving
ecosystems. Targeting the area surrounding Searchlight, Nevada in 2014, the casino-airport town of Cal-Nev-Ari came up
for sale in early 2016. In addition to 520 acres of land and business assets generating $650,000 annual revenue, the town
includes a publicly regulated utility company with 33,000,000 gallons of annual water rights. As her age and health
accelerated her need to sell the town to avoid probate and to allow maximum continuity for the town’s 375 residents,
Town founder Nancy Kidwell selected Delphi’s bid from over 140 offers.
With a single manager for nearly thirty employees, the present operation underutilizes its water rights, location, and
history. The town is located an hour outside Las Vegas, bisected by the US 95, twenty-five minutes before Laughlin-
Bullhead City-Needles. Holding the history of being Nevada’s first fly-in casino, Cal-Nev-Ari offers gambling, lodging, and
food for the drive-by traffic averaging 10,000 per day with only a 15% seasonal variance.
Most significantly, the public utility company possesses 100.6 acre feet of annual water rights, which is 33,000,000 gallons.
The town currently uses 7,000,000 gallons leaving 26,000,000 gallons to be sold each year, something the current owner
has chosen not to do. At 5 to 25 cents this increases the bottom line by $1.25M to $6.5M annually. The 2017 allocation
can be sold immediately upon close of escrow and again at the beginning of each year.

The acquisition will be followed by a $2M renovation of the existing commercial operation. A $2.5M infrastructure
improvements will follow, the bulk of which is paving and storm draining 8 miles by 18’ wide of existing roads.
To draw a high frequency and volume to Cal-Nev-Ari, Delphi has been developing 155 acres to the north of Cal-Nev-Ari
into a year-round indoor/outdoor event center that will accommodate up to 10,000 overnight guests, the world’s first
music festival theme park that would serve a broad range of events, retreats, conventions, and conferences. Over twenty
events have taken place on the properties and we will start producing and events and hosting other event production
teams this summer starting with a limited capacity. Future events will help draw customers to Cal‑Nev‑Ari’s
accommodations, guest services, and casino as well as raise awareness in our community development and commercial
operations.

In parallel with the business and infrastructure renovations will be the implementation of a large scale aquaponic
operation. Strategic Partner Richard Nelson of SolaRoof has arranged for 4-to-1 financing through a Norwegian Emergent
Technology Fund who will provide capital at 5.5% for 5 years. The modular manufacturing takes place primarily in Norway
with on-site construction starting as early as September, 2017.

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BUSINESS DEVELOPMENT MILESTONES
 Delphi came across the town of Cal-Nev-Ari over a year ago, determined it fit our objectives, and put in an offer.
Approximately 140 offers were made by various parties to purchase the town. We received notification late April
2017 that the owner had chosen our offer.
 Engaged attorneys to write the complex Purchase Agreement and are having a third party prepare a business
valuation.
 Actively and aggressively fundraising since learning of the owner’s choice.
 Recruited an accomplished and extensively networked Executive and Management Team and an exemplary
Advisory Board and team of highly experienced Consulting Advisors.
 Established three separate corporate entities, Delphi Village LLC, Delphi Village Capital LLC, and SymbioNet LLC.
 Located, opened escrow, and started due diligence on 155 acres of gorgeous mountainous property in a great
location.
 Located and started preliminary due diligence on Cal-Nev-Ari, which comes with 33,000,000 gallons of annual
water rights.
 Developed dynamic 10-year multiphased Financial Model which provides instantaneous calculations with the
adjustment of all key drivers, including Attendance Ramp-Up, Phase Duration and Timing, Pricing, Staffing, and
Capital Expenditure Scheduling.
 Created initial business documentation and presentation decks.
 Launched Initial Website and set-up social networking accounts.
 Implemented Accounting, Project Management, and CRM Systems.

LAND ACQUISITION & DEVELOPMENT MILESTONES
 Opened escrow on 155 acres with a lease providing access for due diligence and to obtain permitting to hold
commercial events.
 Obtained legal consult and bid for Special Use Permit to allow live entertainment, camping, events, and retreats
365 days a year. Steps have been made toward developing a partnership with Clark County and Bureau of Land
Management (BLM).
 Significant progress has been made regarding the right-of-way application and environmental studies for the
three access roads serving the property. Collaborative relationships have been established with Clark County,
Bureau of Land Management (BLM), Southern California Edison, and the Department of Energy.
 An Environmental Site Assessment (ESA) valued in excess of $25,000 confirms property is free of environmental
hazards. Due to our team member Pauline van Betten’s professional relationships, the cost to our operation was
only $3,500.
 An Appraisal valued in excess of $25,000 has been completed for less than twenty-five percent of the cost, again
due to Pauline van Betten’s professional relationships.
 Bids for Hydrology Studies, Engineering Reports, Topographical and ALTA Surveys have been obtained.

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Due Diligence Period Budget (4 Months)

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BUSINESS MODEL
Like many casino operations, Cal-Nev-Ari’s operation utilizes several common business models and involves a number of
regulated businesses. Delphi has identified the specialists needed for brokering water from the utility company, running
a casino, handling accommodations rental, and providing dining and entertainment. Initial focus will be on water sales
followed by increasing the volume of pilots and tourists being drawn to the town through a targeted marketing plan.
Currently, between 20-30 pilots fly into Cal-Nev-Ari a week just to dine. With a few ads in flight publications and a better
menu, this number will dramatically increase very quickly. Add in a few events and some entertainment and we have built
a desired destination for the 225,000 private plane owners in the US.
Updated signage and expanded dining options would encourage more of the 3,330,000 vehicles annually that are
estimated to travel the I-95 through Cal-Nev-Ari. to stop, having an instant impact on Point of Sale purchases. Strategic
forwarding of visitors of Delphi Village to Cal-Nev-Ari will keep the motel and RV park full, maximizing the revenue of
those two businesses. Planned events, such as poker tournaments, will also cause the town to be a destination location.
Future larger expansion plans for the airport, casino, accommodations, dining, entertainment, and the undeveloped 420
acres will establish Cal-Nev-Ari as a destination for conscious technology businesses as well as nature-loving tourists.

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CURRENT CASH FLOW AND IMMEDIATE REVENUE GENERATION
The town currently grosses $650,000 per year. The RV park and Motel are grossing nearly $200,000 per year and the
Casino is annually grossing $280,000, with these operations breaking even. Because of the refusal to sell water to her
neighbors while continuing to incur the costs associated with owning, maintaining, and minimally operating a Public Utility
Company, the water company is operating at a $100,000 annual loss.
This could be rectified very easily by selling 3-6 acre feet, or less than 2,000,000 gallons of water, less than 6% of the total
annual water rights. The sale of the water alone could more than quadruple cash flow of the entire town the moment
Delphi closes escrow. Upon acquisition, Delphi will manage 33,000,000 gallons of water, 7,000,000 of which are used by
the current town residents and businesses. This is based on the owner not selling any of the excess 26,000,000 gallons of
water. The water can be sold as construction water for as low as 5 cents a gallon and as high as 25 cents a gallon for
Cal-Nev-Ari’s potable-straight-from-the-ground water, resulting in an increased revenue of $1.25M to $6.5M per annum,
with almost no cost of goods sold. This can be done again in January 2018 and each subsequent year.

REVENUE STREAMS Current Annual Remodeled Year 1 Targeted Annual
Revenue Revenue Revenue
1. Real Estate 100,000 ? ?
2. Water 70,000 2,000,000 5,300,000
3. Casino (Bar, Restaurant) 280,000 1,500,000 4,000,000
4. Accommodations (Motel, RV Rental & Sales) 200,000 500,000 4,000,000
A. Gas Station (Convenience Store, Market) 500,000 2,000,000
B. Composting and Zero-Waste Facility 250,000 1,500,000
C. Aquaponics 500,000 2,000,000
D. Event Production 1,000,000 6,000,000
TOTAL 650,000 6,250,000 24,800,000

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Cal-Nev-Ari Projections and Profit and Loss 170701-3
(A video conference may be scheduled to tour the full financial model.)

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CAL-NEV-ARI REVENUE STREAM 1: REAL ESTATE

Current Operations and Assets
 The current Real Estate operation generates $100,000 through the rental of mobile homes, billboard land-leases,
and a small sale of vacant land.
 The acquisition includes 520 acres of mostly vacant land of appropriately mixed zoning, including one mile of
highway frontage with an average of 10,000 daily drive-by traffic.
 The current owner has no desire, time, nor resources to develop the commercial or residential opportunities. The
town is currently not a destination location and there has been almost no job growth in decades.
 One of the owners of the Rail Road Pass Casino (between Las Vegas and Cal-Nev-Ari) and local developer Joe
DeSimone, Sr. has expressed an interest in developing residential housing in Cal-Nev-Ari. He has also expressed
interest in the casino operation if we become interested in selling it or in having an outside party operate it.

Expanded Operations
 Residential Real Estate Development. Targeting population of 1,000 at the end of Year 1, 3,000 at the end of Year
2, 5,000 at the end of Year 3, and 10,000 at the end of Year 5. Housing to include Single Family Residence (SFR),
Condos, Multi-Family Homes, and alternative housing such as Tiny Houses, Earthships, SolaRoof AgriPODs, and
Geodesic Domes. Included in the sale are 28 large lots that have been subdivided and have utilities run to them,
ready for immediate permitting and construction.
 Fixed Base Operator. Building on the history of Cal-Nev-Ari being the “first fly-in casino” and the existing
Residential Air Park, Cal-Nev-Ari is going to develop Kidwell Airport into a full-scale $50M Fixed Base Operator
(FBO) and Commercial Air Park that will be a base for airplane and helicopter scenic torus of the nearby Grand
Canyon, Valley of Fire, and Red Rock National Park. A two-screen drive-in movie theater will be marketed as the
“first fly-in movie theater” that will allow aircraft to park in a special area and tune into the movies for free.
 Air Museum and Megalithic Art Gallery. The theme for Cal-Nev-Ari’s new operation is Retro Aviation, and since
that is exactly what it is today, Cal-Nev-Ari is going to become a living museum. Dozens of decommissioned
airplanes will be brought to be used throughout the town, with a concentration in a 222 acre Aircraft Boneyard
and Megalithic Art Gallery. Dozens more giant art installations from festivals and events such as Burning Man will
also find a home in our titanic playground with high visibility for the 10,000 daily drive-by traffic on the mile of US
95 highway frontage. This will drive traffic to the remodeled and expanded businesses in the Cal-Nev-Ari
operation.
 Commercial Real Estate Leasing and Sales. With a $50M airport, a complete infrastructure upgrade, and a fly-in
casino, there will be a growing demand for commercial sales and rental. There is opportunity to spec build retail
and commercial buildings for sale and for rental. New billboards will be erected and operated by the town.

Due Diligence
 Lead by Marilyn Fine, our attorneys have been preparing the extensive purchase agreement. Escrow is to be with
Accelerated Escrow while the title insurance policy will come from Chicago Title. Attorneys have billed for
approximately $12,000 with a total estimated between $20,000 and $25,000. This does not include additional
attorney work for the transfer of the licenses.
 The first appraisal in a $40,000 appraisal package is being started on the water company, with appraisals for the
casino-bar-restaurant, accommodations, and real estate to follow.
 A survey will be conducted as will an environmental site assessment.

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