PCM Public Offering Memorandum
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PCM Public Offering Memorandum PCM Public Offering Memorandum Document Transcript

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  • THIS OFFERING IS ONLY OPEN TO CALIFORNIA RESIDENTS. PEOPLE’S COMMUNITY MARKET, INC. PREFERRED STOCK OFFERING MEMORANDUM PEOPLE’S COMMUNITY MARKET, INC. A California Corporation 1814 Franklin Street, Suite 800 Oakland, CA 94612 info@peoplescommunitymarket.com Telephone: (510) 995-7498 Contact: Brahm Ahmadi, CEO ii
  • Our Social MissionTo build community in West Oakland, to enhance the health and quality of life of local families and to empower our customers with knowledge about food and health.To nurture a thriving local economy, to create opportunity for local families and to support the entrepreneurial culture that sustains the vitality of our community.To connect our community to its regional food system and to reignite an appreciation for the producers, suppliers and workers who nurture and feed us. Our Service Mission We Nourish and Serve Our Community With Pride, Purpose and Integrity Offering Quality, Healthy and Flavorful Foods Providing Caring and Knowledgeable Service Creating Unique and Enjoyable Experiences That Enrich and Improve People’s Lives iii
  • Letter to Our SupportersDear Friends,In 2002, I co-founded People’s Grocery -- the nonprofit organization from which emerged this for-profitenterprise, People’s Community Market -- in order to lay the groundwork necessary to open a full-service neighborhood food store, health resource center and social hub in West Oakland. The plan backin 2002, was that, by operating smaller-scale food projects, we would acquire the managementexperience and community relationships that would enable us to pursue this larger food enterprise.The vision we conceived ten years ago, and the patient course we have taken, has worked wonderfully.Everything we have experienced, every enterprise and project we have created and every person wehave come to know, have all been essential preparation. With a strong entrepreneurial track record, anextensive network of relationships, a wide breadth of knowledge and a seasoned management team,we’re taking the next critical step in creating People’s Community Market – raising money to build it.This offering memorandum, and the community investment campaign of which it is part, are theculmination of those many years of hard work. It is also an embodiment of our belief that this enterpriseshould be financed, at least in part, by people of all economic backgrounds who want to support ourmission and want to help create an innovative, sustainable and community-based solution to WestOakland’s nutritional, social and economic needs.We have chosen a Direct Public Offering (DPO) as a community investment vehicle to allow a diversity ofresidents of California to become co-founders and shareholders in People’s Community Market. Ourdesire is to reach out and build meaningful relationships and partnerships with people who care aboutinvesting with their values in local businesses that operate, first and foremost, to make a positive impactand to create a better world for everyone.If you are a California resident who believes in our mission and values, and you fulfill the suitabilityrequirements contained in this memorandum, you can invest in People’s Community Market andpartner with us in this effort to create something that is fresh, different and very much needed today.Sincerely,Brahm AhmadiCEO/PresidentPeople’s Community Market 4
  • People’s Community Market, Inc.Direct Public Offering MemorandumTable of Contents Page Number1. Brief Description of Offering 62. About the Company 63. Target Market 7 3.1 Competition 74. Business Plan Summary 75. Management 96. Plan Of Distribution 117. Preferred Stock Attributes 11 7.1 Dividends 11 7.2 Liquidation Preference 12 7.3 Conversion Rights 12 7.4 Voting Rights 12 7.5 Redemption 12 7.6 Benefits to Preferred Shareholders 12 7.7 Company Right of First Refusal 13 7.8 Other Restrictions on Transferability 138. Use of Offering Proceeds 13 8.1 Pre-launch Operating Expenses and Selling Expenses 14 8.2 Scenario Analysis of Sources and Uses of Funds 149. Additional Financing 1510. Financial Matters 1611. Litigation and Legal Matters 1612. Management Ownership and Compensation 1613. Projected Post-Financing Capitalization 1614. Investor Suitability Requirements 16 14.1 General 16 14.2 Suitability Requirements 17 14.3 Other Requirements 17 14.4 No Revocation 1715. How to purchase Preferred Shares 1716. RISK FACTORS GENERALLY 18 16.1 Risks Related to an Investment in our Company 1817. RESTRICTIONS AND WARRANTIES 20 17.1 Other Information Is Not Authorized. 20 17.2 Withdrawal, Cancellation or Modification 21 17.3 No Warranty of Projections or Assumptions 21 17.4 Forward-Looking Statements 21Exhibit A 23Exhibit B 24Exhibit C 26Exhibit D 28 5
  • OFFERING MEMORANDUM California Qualification by Permit $2,000,000 Preferred Stock1. Brief Description of OfferingPeople’s Community Market, Inc. (“PCM” or the “Company”), is offering up to $2 million in preferredstock (the “Securities”) to finance capital expenditures, inventory, working capital and operatingexpenses relating to the construction and operation of a retail grocery store in West Oakland. Theminimum investment for each unaccredited Investor is one thousand dollars ($1,000) and the minimuminvestment for each accredited Investor 1 is five thousand dollars ($5,000). There is no maximuminvestment, except as described in the section on Suitability Requirements. Until the minimumaggregate offering amount ($500,000) is secured, funds will be held in escrow. If the minimum offeringamount is not secured within one year of the commencement of the offering, all funds will be returnedto Investors. The offering will terminate one year from the date of commencement, unless suchtermination date is extended, at the discretion of management and subject to the consent of theCalifornia Department of Corporations. The offering is limited to California residents.2. About the CompanyPCM is a new business that is emerging from and building on the ten years of experience, track record andsocial relations of its sister organization, People’s Grocery, which is a non-profit that has operated numerousfood projects (including the Mobile Market and the Grub Box), urban gardens and nutrition educationprograms. The Company’s purpose is to create and operate a small-format, full-service grocery store in WestOakland, which is a community that has not had a full-service grocer for several decades. In addition toretailing fresh foods and groceries, the business will offer information, resources and services to supportcustomers in improving their health and provide a community venue in support of community building.1 An Accredited Investor is defined as follows: (a) A bank, insurance company, registered investment company, business development company, or small business investment company; (b) an employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million; (c) a charitable organization, corporation, or partnership with assets exceeding $5 million; (d) a director, executive officer, or general partner of the company selling the securities; (e) a business in which all the equity owners are accredited Investors; (f) a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person; (g) a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or (h) a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes. 6
  • 3. Target MarketWest Oakland is a 2.5 square mile inner-city area with 26,000 residents who are predominantly AfricanAmerican and Latino. Although West Oakland is known today as a lower-income neighborhood, it has arich and diverse history. Before the 1950’s there were numerous grocery stores and supermarketslocated throughout the neighborhood that offered a variety of groceries, produce and prepared foods.Many of these stores had a unique Southern character and catered to the special food desires of localcustomers. These stores also provided places for people to get together and socialize. But, beginning inthe 1950’s, many of the grocery stores in West Oakland shut down or relocated to new suburbs thatcould offer more profits and cheap land for bigger stores. It became virtually impossible to buy freshproduce or quality food products in the neighborhood. This problem persists today.The annual expenditure for groceries for West Oakland residents is over $58 million. Despite this sizablebuying power, there are few food shopping outlets in West Oakland. As a result, 70% of the annualgrocery expenditures of West Oakland residents takes place outside of the community at stores insurrounding cities. But West Oakland residents (many of whom do not own a vehicle and rely on publictransportation) must travel far to get to distant supermarkets. The inconvenience, time and cost ofthese shopping trips leads many residents to regularly shop at nearby corner stores that carry mostlyprocessed, poor quality foods sold at high prices.These limited food choices are contributing to high rates of diet-related chronic disease in WestOakland. Today, forty eight percent of residents are obese or at an unhealthy weight and thecommunity’s diabetes hospitalization rate is three times that of Alameda County. But many residentsalso understand the connection between diet and health and are increasingly demanding healthier foodchoices, more knowledge and information, and supportive social settings and services.3.1 CompetitionWest Oakland has a limited competitive environment for food retail. No supermarkets or full-servicegrocery stores currently exist within the trade area. While there are two supermarkets that are locatedapproximately 1/2 to 1 mile from the edge of the trade area boundaries, many West Oakland residentsare unable to frequently shop at these locations due to limited vehicle ownership and a reliance ofwalking and pubic transportation. There is an abundance of corner liquor stores in the trade area thatprimarily sell snack foods, sugary beverages, alcohol and tobacco products. These stores carry limitedgrocery merchandise or produce and typically sell such items at high prices. A 99¢ Only Store offers alimited assortment of food merchandise consisting mostly of canned and packaged goods. A smallnatural foods coop carries a limited and exclusive selection of organic food items. PCM’s primaryresearch has determined that the food retail square footage per capita in West Oakland is 1.2 squarefeet, which falls well below the 3.0 square feet per capita that is considered by the industry to be a well-served trade area. This deficiency in existing food retail in West Oakland underscore a sizable need andmarket opportunity for more food store within the trade area.4. Business Plan SummaryBuilding on the ten years of food enterprise experience of its sister nonprofit organization, People’sGrocery, the Company is creating a full-service neighborhood food store, health resource center andcommunity hub that supports West Oakland families to attain healthier and more socially connected 7
  • lives. PCM will apply its understanding of the local market area to create a highly targeted businessmodel that makes it easy to buy quality fresh foods at affordable prices in the neighborhood. The storewill be roughly 12,000 square feet in size, which will allow the Company to reduce its development costsby circumventing the costly real estate development that is often associated with building supermarketsin dense urban areas. The store will be housed in a simple pavilion structure that will further reduce thecost and time required for construction while still providing for adequate security, an appropriatelyconditioned food environment and a satisfactory store setting and shopping experience.The smaller footprint will also allow PCM to operate at an optimal retail location with high populationdensity, vehicle traffic and accessibility by foot and public transportation. A desirable location for theCompany’s retail operation has been identified which is located at the center of the West Oakland tradeand that offers many compelling characteristics including: 1) over 17,000 residents live within a 15-minute walking distance; 2) over 66,000 people live within a 5-minute driving distance; 3) it is located atthe busiest intersection in the trade area with over 19,000 vehicles daily; 4) there are 10 bus stops and 5bus routes within a 5-minute walking distance; and 5) the site features a large adjacent parking lot w/ample ingress and egress. The current owners of the property have expressed a willingness to enter intoa lease negotiation with the Company.PCM’s planned store size also caters the smaller, more frequent purchasing patterns that arecharacteristic to the neighborhood. The store will stock about 40% of the inventory carried bysupermarkets, allowing PCM to reduce its inventory costs and target the fill-in items that lower-incomeshoppers often buy at a high rate and in between less frequent, larger shopping trips. PCM will use acustom SKU optimization strategy that offers a broad product assortment with ample category selectionwhile reducing the SKU count in each category, allowing for a more lean and efficient assortment that’sadequate for both selection and convenience.The product mix will be targeted to categories that are least available in the neighborhood: freshproduce, packaged perishable goods and quality prepared foods. The initial product mix will be 60%conventional to reflect the current primary demand in the neighborhood. Organic and local offerings willbe increased over time as demand increases. As the trade area lacks quality prepared food outlets,the full-service deli will be a key offering, featuring a unique menu targeted to the distinct culturalpreferences of the area that will differentiate the store’s value proposition, attributes as a destinationand total store gross margin.The retail store will source its food products through a variety of procurement channels includingwholesale distributors and regional suppliers. When possible, the Company will procure productsdirectly from small and mid sized producers that can meet its volume, quality and pricing targets. Bysourcing directly from producers, the Company will be more able to support the regional food economyand reduce its procurement and inventory costs in order to offer more affordable pricing.The Company will employ a variety of strategies to ensure affordable prices for its customers, especiallyin produce. In its preliminary planning, the Company conducted a modeling exercise to determine whatsize store it needed to operate in order to generate the sales volume, and hence purchasing power withsuppliers, necessary to secure both sufficient margins and its targeted pricing structure. While PCM 8
  • plans to build a store that is considered to be relatively small by industry standards, the Company hasalso set a threshold for the minimum size of a retail footprint necessary to enhance its buying power.Additional strategies that PCM will employ to provide affordable pricing include: 1) offsetting themargins in certain departments that are important to sell affordably, such as produce, with the marginsof other departments that can price at higher markups, such as prepared foods; 2) using its flexibility asan independent grocer to employ less-traditional sourcing tactics like procuring odd lots (batches ofproducts that don’t meet uniformity specifications) and overruns (surplus inventory that manufacturerswant to move quickly).; 3) engaging in direct purchasing from suppliers to reduce distribution costs.PCM will be More Than a Grocery Store by providing value to its customers beyond quality food retailingand addressing customers’ desires to be more supported in improving their health, building communityand becoming more socially connected. PCM will partner with community and health organizations tooffer a variety of education programs, food such as demonstrations and workshops, as well as healthservices such as screenings. The store will provide a community gathering space through its Front Porchcourtyard and eatery, which will feature family seating, a stage, a kids play area, a deli service windowand a venue for events and other social activities.The Company will support and encourage its customers to purchase fresh and healthy food products by offeringa variety of promotional and incentive programs such as reward cards, weekly specials, giveaways anddiscounts for food stamp usage. The Company will offer a variety of education programs, such asdemonstrations, workshops and tours, as well as health services such as free screenings and nutritionalcounseling. The Company will partner with community and health organizations in order to costeffectively deliver these offerings and utilize the expertise of its partners.The primary objectives for PCM’s marketing efforts will be to create customer loyalty and word-of-mouth promotions. These objectives will be achieved by building relationships with customers,providing them with exceptional experiences and establishing a social destination in the community. TheCompany will strive to create a word-of-mouth marketing, in which customers recommend the businessto others, by attaining a high level of customer satisfaction in areas such as product quality, selection,and price; knowledgeable and caring customer service; a pleasing shopping experience and setting; andpositive social interactions, events and activities. Community outreach will be a central marketingstrategy and will largely be conducted through partnerships with local organizations that have strongties and networks in the community. PCM will implement a variety of promotional programs such asreward cards, weekly specials, giveaways and discounts for food stamp usage that will be communicatedthrough various forms of advertising such as weekly circulars, email updates, radio announcements, andnewspaper ads, as well as emerging mobile, social media and other online marketing tools.Finally, it is a goal of PCM to become an employee owned and controlled business in the future.Although the Company has not yet implemented any steps toward becoming an employee ownedenterprise, and recognizes the possibility under certain circumstance that such steps may not beimplemented, a general process for how the Company could potentially advance toward becoming anemployee-owned business has been drafted. A central element of this process would be an equityincentive plan (EIP) that would provide employees with either option grants or restricted stock awards. 9
  • Stock would be awarded to employees on the basis of individual performance and merit. Employeeswould be eligible for such awards upon completion of their first full year of employment.5. ManagementChief Executive Officer & PresidentBrahm is a co-founder of People’s Grocery and was the Executive Director of the nonprofit for eightyears. Brahm brings experience in executive leadership, organizational development, management andplanning. He has first-hand experience in developing food enterprises, marketing healthy foods in theinner city and providing training and education to low-income residents. Brahm has an MBA inSustainable Management from the Presidio Graduate School and is a 2011-2013 Food and CommunityFellow with the Institute for Agriculture and Trade Policy.Chief Financial OfficerDavid Guendelman brings years of experience with start up companies that make a positive socialimpact in the world. In 2004, David was a member of the founding team as CFO of World of Good, whichhe led through two rounds of equity financing, helped to scale to become one of the leading fair tradeproduct companies with a line in Whole Foods and a partnership with eBay, and then oversaw its sale toEbay in 2010. David is the first CFO at Saveup.com, an online rewards program, as well as a financialconsultant to Lotus Foods, which imports handcrafted and sustainably produced heirloom rices.OperationsAnthony Gilmore has 33 years of experience in the supermarket business. Mr. Gilmore served as VicePresident of Safeways Lifestyle and Concept Development Division. He came to Safeway after a twelve-year tenure with Whole Foods Market, where he was successively the regional president of the Midwestregion, the Southwest region and the Northwest region. Prior to joining Whole Foods Market, Mr.Gilmore worked at Safeway for 20 years, where he managed seven stores in the San Francisco Bay Area.He is a member of PCM’s Board of Directors and is assisting in planning for operations, talentrecruitment and construction.MarketingMichele Thorne has a background in food industry sales, marketing and graphic design, as well as foodeducation and wellness services. Michele was the Sales and Marketing Manager for the David Riobeverage company in San Francisco, as well as the Wellness and Outreach Director for SOMA BeverageCompany/Metromint. Before moving to the Bay Area, Michele was Executive Chef at the award winningCounter Restaurant in New York City. Michele is assisting in brand development, marketing and in-storeprogramming. She is a member of PCM’s Board of Directors and is currently the Board Secretary.TreasurerAri Derfel is a serial food entrepreneur in the San Francisco Bay Area. In 2010, Ari co-founded Gather, anall-organic, sustainably designed restaurant, at the renowned David Brower Center in Berkeley,California. Ari also founded Back to Earth Organic Catering in 2003, the first organic catering company inthe US. He is the former Executive Director of Slow Money USA. Ari is Treasurer of PCM’s Board ofDirectors and is assisting in strategy and financing.Deli DepartmentRene Cage has 35 years experience in the restaurant, deli and food service industry as a chef, manager,and planning consultant for dozens of food businesses. Mr. Cage currently operates a dinner service atRaphael’s Shutter Café in El Cerrito. He is working with PCM in developing the deli and prepared foodprogram including the menu, production schedule, and food safety certification. 10
  • Produce DepartmentBill Fujimoto is a fresh grocer and produce pioneer in the San Francisco with over 40 years of experiencein the grocery business. Formerly at Monterey Market in Berkeley, where he built a highly successfulfresh food market centered on direct procurement and unique promotional strategies, Mr. Fujimoto isworking with PCM in the planning of the produce department and produce procurement.Grocery DepartmentJoni Wong began as a Buyer in general merchandising at a small food store in Urbana, IL, known as theCommon Ground Food Co-op. She later became the Grocery Department Manager and then the Co-Manager, assisted in expanding the store to a location that was three times the size of the original store.Joni moved to California in 2011 and currently works at a Trader Joe’s store in Oakland in generalmerchandising. Joni is assisting PCM in planning its grocery department management and operations.6. Plan Of DistributionThis offering will be offered and sold on a minimum/maximum basis, with a minimum aggregate offeringamount amount of $500,000 and a maximum aggregate offering amount of $2,000,000 to be secured.The offering will terminate one year from the date of commencement (unless such termination date isextended, at the discretion of management and subject to the consent of the California Department ofCorporations). Funds will be held in an impound account until the minimum aggregate offering amountis secured.The Company employees, officers and directors will conduct the offering. They will not receive anycommission or other compensation for their distribution efforts. The Company will not use any broker-dealers or any other agents in connection with this offering.The Company will advertise the offering in its own newsletters and email communications; in thenewsletters and email communications of other organizations and businesses; in newspaper andmagazine ads and/or articles; on radio and television interviews; on the Company’s web site and onlinesocial media sites; in an online promotional video; and at events, conferences, trade shows, andpresentations. All communications will direct Prospective Investors to our offering memorandum whichwill be available in hardcopy and in digital format. The Company will offer and sell the Securities only toCalifornia residents.7. Preferred Stock AttributesPCM is offering up to One Million (1,000,000) shares of non-voting, non-convertible Series A PreferredStock (the “Purchased Shares”) at a price of Two Dollars ($2.00) per share (the “Purchase Price”).7.1 DividendsThe Purchased Shares shall be entitled to receive cumulative dividends at a rate of 3.00% per year,when, as, and if declared by the Board of Directors, prior and in preference to any payment of anydividend on the Common Stock. Unpaid and/or undeclared dividends shall continue to accrue each year.To the extent that dividends are not declared by the Board of Directors, they will continue to accrue, butno payments upon such accrued undeclared dividends will be due to the shareholders. The Board ofDirectors may choose to declare dividends, or not, at its sole discretion; subject to the requirements ofthe California Corporations Code. 11
  • Dividend rights shall be senior to the Common Stock. After the dividend preferences of the PurchasedShares have been paid in full for a given calendar year, all remaining dividend in such calendar year willbe paid solely on the Common Stock.7.2 Liquidation PreferenceIn the event of a “Liquidation Event” (including a liquidation, dissolution or winding up, merger oracquisition, consolidation or change in control, or a sale of substantially all of the Company’s assets),holders of the Purchased Shares will be entitled to receive an amount equal to their original investmentplus all accrued but unpaid dividends thereon, whether or not such dividends have been declared or not(the “Preference Amount”).After the Preference Amount has been paid to the holders of the Purchased Shares, all remaining fundsand assets of the Company legally available for distribution to shareholders will be distributed pro rataamong the holders of the Common Stock.7.3 Conversion RightsThe Purchased Shares are NON-convertible.7.4 Voting RightsThe Purchased Shares are NON-voting. Election of the Directors of the Company shall be by vote ofCommon Stock holders only.7.5 RedemptionSubject to any legal restrictions on the Company’s redemption of shares, at any time on or after theseventh (7th) full year of business operations from the date in which the Company opens its business tocustomers (the “Redemption Start Date”), the Company, at its option, may redeem the PurchasedShares held by all or any number of selected Investors, by payment to such Investors of the PreferenceAmount. Company shall provide all such Investors (whose Purchased Shares are to be redeemed) a sixty(60) day notice of its intent to redeem such Investor’s Purchased Shares prior to effecting suchredemption.Subject to any legal restrictions on the Company’s redemption of shares, at any time on or after theRedemption Start Date, the Investors, individually or jointly, at their option, shall have to right to requirethe Company to redeem all of such Investors’ Purchased Shares by payment to such Investor of thePreference Amount. Any Investor seeking to exercise this redemption right shall provide the Companywith at least sixty (60) day notice of such Investor’s intent to exercise this redemption right.7.6 Benefits to Preferred ShareholdersSo long as an Investor continues to hold the Purchased Shares originally purchased by such Investorprior to the expiration of the Redemption Start Date, such Investor will receive an annual store creditequal to One Percent (1%) of their initial investment in the Purchased Shares. Each annual credit mustbe redeemed in the year in which it is credited and cannot accrue to an amount exceeding One Percent(1%) of such Investor’s investment. 12
  • This “Additional Benefit” will no longer be provided to any Investor who, through sale, transfer,redemption, or other transaction, no longer holds all of the Purchased Shares originally purchased bysuch Investor in this DPO. The Additional Benefit shall not be granted to any holder of Purchased Sharesafter the Redemption Start Date. Investment Annual Credit Annual Value $1,000 1% $10.00 $5,000 1% $50.00 $10,000 1% $100.00 $25,000 1% $250.007.7 Company Right of First RefusalThe Company shall have a right of first refusal (“ROFR”) to purchase any of the Purchased Sharesthat any Investor proposes to sell, transfer, gift, pledge, assign, distribute, encumber orotherwise dispose of to a third party, except for transfers which are part of an inheritance.Company’s ROFR will be assignable by Company to any other Investor and/or shareholder of theCompany. The ROFR will terminate upon a Liquidation Event.7.8 Other Restrictions on TransferabilityIn addition to Company’s (assignable) ROFR and any other restrictions imposed upon thetransfer of the Purchased Shares by securities or other laws, Company will restrict holders of thePurchased Shares from transfers of such shares to competitors or potential competitors of theCompany.The following legend will be imprinted on the Shares prohibiting their transfer except in accordancetherewith:“IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY INTERESTTHEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFORE, WITHOUT THE PRIOR WRITTEN CONSENTOF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED INTHE COMMISSIONER’S RULES.” 28. Use of Offering ProceedsThe Company intends to use the proceeds from the sale and issuance of its Securities, along with theproceeds of a loan from California FreshWorks Fund (described below) as follows:2 For more information pertaining to the legend and the rules permitted by the Commissioner see Exhibit XCalifornia Code of Regulations Section 260.141.11., Restriction on Transfer, attached at the end of this OfferingMemorandum. 13
  • 8.1 Pre-launch Operating Expenses and Selling ExpensesPrior to reaching the minimum aggregate offering amount, the Company may borrow money to financemarketing costs associated with selling of the Securities and other pre-launch operating expenses. Oncethe minimum aggregate offering amount is secured, the Company may use up to $75,000 of offeringproceeds earmarked for pre-launch operating expenses to repay any debt issued for this purpose.The selling expenses of this offering shall not exceed 15% of the minimum aggregate offering amount.California regulations define selling expenses as the total underwriting and brokerage discounts andcommissions (including fees of the underwriters attorneys paid by the issuer) paid in connection withthe offering plus all other expenses incurred by the issuer relating to printing, engraving, mailing,salaries of employees while engaged in sales activity, charges of transfer agents, registrars, trustees,escrow holders, depositaries, and engineers and other experts, expenses of qualification of the sale ofthe securities under Federal and State laws, including taxes and fees, and any other expenses incurredby the issuer directly related to the offering and sale of the securities, but excluding accountants andthe issuers attorneys fees and options to underwriters.8.2 Scenario Analysis of Sources and Uses of Funds Minimum Target Maximum No Debt Financing Financing Financing Financing Source of Funds Equity $500,000 $1,200,000 $2,000,000 $500,000 Debt $1,000,000 $2,400,000 $2,000,000 Total Sources of Funds $1,500,000 $3,600,000 $4,000,000 $500,000 Use of Funds Build Out $1,500,000 $1,800,000 Furnishings, Fixtures & Equip. $500,000 $700,000 $700,000 $100,000 IT Systems & Hardware $50,000 $100,000 $100,000 $50,000 Opening Inventory $200,000 $300,000 $300,000 $150,000 Pre-launch Operating Expenses $150,000 $300,000 $300,000 $50,000 Beginning Cash $600,000 $700,000 $800,000 $150,000 Total Uses of Funds $1,500,000 $3,600,000 $4,000,000 $500,000Target FinancingThis budget scenario assumes that the Company is able to secure $1,200,000 in financing from Investorsand, as a result, secure a $2,400,000 loan. In this scenario, the Company would proceed with its currentproject plan without revision, including the proposed site, planned construction and estimatedimprovement, inventory, pre-launch and operating expenses.Minimum FinancingThis scenario assumes that the Company is only able to secure the minimum aggregate offering amountof $500,000 in financing from Investors and $1,000,000 in debt financing, at a 2:1 debt-equity ratio. In 14
  • this scenario, the Company would make significant revisions to the project plan in order to reduce theproject’s cost. The primary revision would be to forgo construction on the proposed site, and instead,lease an alternative site that has an existing building. The property owner would cover any build outcosts as tenant improvements. The minimum financing scenario would also result in a store of smallersize, which would reduce the requirements for inventory, pre-launch operations and operating cash.Maximum FinancingThis scenario assumes that the Company is able to secure the maximum aggregate amount of$2,000,000 in financing from Investors. In this scenario, the company would borrow $2,000,000. Thisscenario also assumes a higher cost for construction than currently projected in order to provide aconservative cushion for over runs in construction costs.No Debt FinancingThis scenario assumes that the Company secures the minimum aggregate offering amount of $500,000in equity financing but is unable to secure debt financing. In this scenario, the Company would revise itsproject plan to reduce the projects overall cost by eliminating the project’s largest expenditure, theconstruction of a new store location. Instead, the Company would lease an alternative site with anexisting retail space suitable for the Company’s needs. As a condition of entering into such a lease, theCompany would require that the property owner either contribute capital or make a tenantimprovement allocation to cover any build out costs and a portion of the costs for furnishings andfixtures; this will allow the Company to avoid such expenditures while not significantly compromising itsoriginal plans. This scenario may result in the Company opening a store smaller in size than the storecontemplated under the minimum financing scenario, thus further reducing the capital requirementsneeded for inventory, pre-launch operations and operating cash.9. Additional FinancingPCM has garnered the interest of a lending institution, known as the California FreshWorks Fund(CFWF), in providing a below market-rate loan in an amount of up to two times the amount of equitysecured in this offering. CFWF has provided the Company with a Letter of Interest stating that it shallrequire that one-third of the project’s capital costs be financed through equity sources and that theequity capital be secured prior to the commencement of a formal loan application. The proceeds fromthe sale and issuance of PCM’s Securities shall be applied toward the equity portion of this financing inorder to proceed with a loan financing application with CFWF for the remaining capital required.To support PCM in securing equity financing, CFWF has awarded the Company a $25,000 grant to payfor the legal and filing costs pertaining to its direct public offering of securities, as well as a $10,000augmentation grant in support of marketing activities related to the Direct Public Offering.Presently, the Company’s plan is to undertake the management and direct cost of the construction of itsretail location, including the procurement of architectural, engineering, and general contractor services.However, the Company is attempting to acquire the service of a real estate developer in which thedeveloper assumes the management and direct cost of the construction. If the Company succeeds insecuring a developer in this manner, the Company’s total capital requirement for the project would bereduced by approximately 50% to $1,900,000. In such event, the Company would reduce the amount ofequity capital it would be raising from the sale and issuance of securities. 15
  • 10. Financial MattersThe Company began operations in 2010. The Company’s Fiscal Year ends January 31. Financialstatements are attached as Exhibit A. The Company has also developed a financial model and pro formaforecast with assistance from financial and retail professionals that projects expected financialperformance, operating costs and capital requirements. Management believes that its financialforecasts present a reasonable outlook. The Company’s Consolidated Pro Forma Financial Statement isattached as Exhibit B.11. Litigation and Legal MattersThe Company is not presently party to any litigation, nor to the knowledge of management is anylitigation threatened against the Company, any of its management, or any affiliate, which may materiallyaffect operations or projected goals.12. Management Ownership and CompensationOwner of Record Amount % OwnershipBrahm Ahmadi 1,000,000 shares common stock 100%The CEO, Brahm Ahmadi, has received $23,000 in compensation in 2010 for his general services inleading the company through its formation, planning and pre-development.13. Projected Post-Financing CapitalizationAssuming the offering is fully-subscribed and, in addition, the Company sells or grants rights to acquireFive Hundred Thousand (500,000) additional shares of Common Stock at one dollar ($1.00) per share toemployees, the projected capitalization of the Company upon the closing of the offering would be:Shareholders Type of Stock Shares Total Value % HoldingFounder Common 1,000,000 $1,000,000 40%Employees Common 500,000 $500,000 20%Investors Preferred 1,000,000 $2,000,000 40% 2,500,000 $3,500,000 100%14. Investor Suitability Requirements14.1 GeneralInvestment in Securities is highly speculative, involves significant risks, and is suitable only for persons ofadequate financial means who have no need for liquidity from the investment and who can bear theeconomic risk of a complete loss of their investment. This offering is made in reliance on the intrastateoffering exemption safe harbor of Rule 147 promulgated under Section 3(a)(11) of the 1933 SecuritiesAct (“the Securities Act”) and the public offering qualification under section 25113(b)(1) of the CaliforniaCorporate Securities Law (“California Securities Laws”) and other applicable laws or regulations.The Suitability Requirements discussed below represent minimum requirements for ProspectiveInvestors. The satisfaction of such requirements by a Prospective Investor does not necessarily mean 16
  • that the Securities are a suitable investment for such Prospective Investor. Prospective Investors areencouraged to consult their financial advisors to determine whether an investment in the Securities isappropriate. The Company may reject subscriptions, in whole or in part, in its absolute discretion.14.2 Suitability RequirementsThe Suitability Requirements for the offering require that the Investor: (1) represent that (i) if Investor is an individual, he or she resides in the state of California; and (ii) if the Investor is an entity, then the office in which its investment decision was made is located in the state of California. (2) invest less than $2,500 total in the company, including any investments made during the prior 12 months; OR (3) have a minimum net worth of at least $75,000 and minimum gross income of $50,000 AND the investment does not exceed 10 percent of that net worth; OR (4) have a minimum net worth of $150,000 AND the investment does not exceed 10 percent of that net worth.Net worth shall be determined exclusive of homes, home furnishings, and automobiles.14.3 Other RequirementsSubscriptions will not be accepted from Prospective Investors whom the Company has reason to believemay not meet the requirements described in above. The Company shall require that all ProspectiveInvestors complete a Suitability Questionnaire prior to issuance of a Subscription Agreement in order toprovide certain necessary information to allow the Company to determine the satisfaction of theSuitability Requirements of the Direct Public Offering by such Prospective Investors.Each Investor will be required to make certain representations and warranties to the Company and toagree to indemnify, hold harmless, and pay all fees and expenses that are incurred by, and all judgmentsand claims made against the Company, its affiliates and counsel, for any liability that is incurred as aresult of any misrepresentation made by Investor.14.4 No RevocationOnce a person has executed a Subscription Agreement and submitted funds, such subscription may notbe revoked without the consent of the Company.15. How to purchase Preferred Shares1. Review this Offering Memorandum and all exhibits.2. Complete the blank fields of the Suitability Questionnaire provided by the Company on its website (orpaper copy by request), including the Signature Page of the Suitability Questionnaire, and submit to theCompany for review. 17
  • 3. Upon confirmation of the satisfaction of the Suitability Requirements, complete the blank fields of theSubscription Agreement provided by the Company on its website (or paper copy by request), includingthe Signature Page of the Subscription Agreement, and submit to the Company for review.If an entity, the Subscription Agreement must be executed by an agent authorized to bind the Investor.4. Write a check payable to the financial institution (the “Financial Institution”) 3 designated in theinstructions contained in the Subscription Agreement and on the Company’s website, for the number ofshares desired for purchase (note: this amount must be at least $1,000 for unaccredited and $5,000 foraccredited Investors). Mail the check to the Financial Institution. Note: fractional shares will not be sold.5. The Company will mail you a copy of your share certificate. Important: Your investment has not beenaccepted by the Company until you receive a share certificate from the Company. The Companyreserves the right to reject any prospective investment for any reason.The Investor, not the Company, bears the responsibility of delivery of the Subscription Agreement,payment, and any other documents that required in order for the Investor to purchase preferred stock.16. Risk Factors GenerallyEACH INVESTOR IS AWARE THAT AN INVESTMENT IN THE COMPANY IS SPECULATIVE AND INVOLVES AHIGH DEGREE OF RISK, INCLUDING THE POSSIBLE LOSS OF THE ENTIRE INVESTMENT, AND SUCHINVESTOR HAS CAREFULLY READ AND CONSIDERED THE FOLLOWING RISK FACTORS AND ALL MATTERSSPECIFIED IN THESE SUBSCRIPTION DOCUMENTS IN DETERMINING WHETHER OR NOT TO INVEST IN THECOMPANY AS SPECIFIED HEREIN. EACH INVESTOR UNDERSTANDS THAT THE FOLLOWING FACTORS ARENOT AN ALL-INCLUSIVE LIST OF POSSIBLE RISKS INHERENT IN THE OFFERING.16.1 Risks Related to an Investment in our CompanyCertain Factors May Affect Future SuccessAny continued future success that the Company might enjoy will depend upon many factors, includingfactors beyond the control of the Company and/or which cannot be predicted at this time. These factorsmay include but are not limited to cost overruns in construction; the Company’s ability to secure a lease;changes in or increased levels of competition, including the entry of additional competitors and/orincreased success by existing competitors; changes in general economic conditions; increases in laborand/or operating costs; the Company’s ability to generate sufficient demand, expand its customer baseand retain key customers; and reduced margins caused by competitive pressures, rising food costsand/or other increased operating costs. These conditions may have a material adverse effect upon theCompany’s business, operating results, and financial condition.Dependence on Key PersonnelMuch of the Company’s success depends on the skills, experience, and performance of its key persons.The Company currently does not have a firm plan fully detailing how to replace any of these persons inthe case of death or disability. The Company’s success also depends on the Company’s ability to recruit,3 Once the minimum aggregate offering amount of $500,000 is secured and funds are released from the impoundaccount, checks will be made payable to People’s Community Market. 18
  • train, and retain qualified personnel. The loss of the services of any of the key members of seniormanagement, other key personnel, or the Company’s inability to recruit, train, and retain seniormanagement or key personnel, may have a material adverse effect on the Company’s business,operating results, and financial condition.Control of the CompanyControl of the Company and all of its operations are solely with its managers and will remain with them.Investors must rely upon the judgment and skills of the managers.No Guarantee of ReturnNo assurance can be given that an Investor will realize a substantial return on investment, or any returnat all, or that an Investor will not lose a substantial portion or all of the investment. For this reason, eachProspective Investor should carefully read this memorandum and all exhibits attached hereto andconsult with an attorney, accountant, and/or business advisor prior to making any investment decision.Tax RisksNo representation or warranty of any kind is made by the Company, the officers, directors, counsel tothe Company, or any other professional advisors thereto with respect to any tax consequences of anyinvestment in the Company. EACH PROSPECTIVE INVESTOR SHOULD SEEK THE INVESTOR’S OWN TAXADVICE CONCERNING THE TAX CONSEQUENCES OF AN INVESTMENT IN THE COMPANY.Revisions to Use of ProceedsIt is possible that the Company’s use of the proceeds from this offering will be revised by itsmanagement. If proceeds from this offering are insufficient in terms of the actual start-up costs, theCompany could experience financial problems, which may adversely affect its ability to implement itsbusiness plan. Management will have significant flexibility in applying the net proceeds of this offering.The failure of management to apply such funds effectively could have a material adverse effect on theCompany’s business, prospects, financial condition, and results of operations.Development CostsThe Company has procured architectural and construction plans and cost estimates. While costestimates are based on known assumptions and factors affecting construction costs, such as the cost ofmaterials and the timetable for construction, there is risk that any one or more base assumptionsaffecting the cost estimates may be incorrect and/or may change in the future in a manner that theCompany cannot anticipate. Such changes may cause an increase to the costs of construction in excessof the Company’s finances, thus requiring additional capital or revision to the business plan.Site LeaseThe Company has identified an optimal location for the retail store. The Company does not presentlycontrol a lease for the property as neither party wishes to enter such agreement until adequatefinancing has been secured. The Company has made its plans based on this particular location with theassumption that the Company will secure a lease upon sufficient financing. It is a risk that the PropertyOwner may no longer wish to lease the location, may demand different lease terms than have beendiscussed, may demand lease terms that may be beyond the Company’s financial abilities or may lease 19
  • the property to another party at any time. Such changes may cause the Company to experiencesubstantial delays in the project and/or in locating a suitable alternative location for the retail store.Cost of Labor and OperationsThe Company has developed a plan and forecast based on certain assumptions about the costs of laborand operations such as wages, benefits, utilities, taxes, and freight costs. While cost estimates are basedon known assumptions and factors affecting labor and operating costs, there is a risk that one or moreof the base assumptions affecting the cost estimates may be incorrect and/or may change in the futurein a manner that the Company cannot anticipate. Such changes may cause an increase to the costs oflabor and/or operations such that the Company may have to increase its prices, reduce its margins,and/or reduce its accrued distributable profits.Operating MarginsThe Company has developed a plan and forecast based on certain targets and base assumptions aboutthe operating margins that the Company must achieve in order to remain financially solvent, producesufficient retained earnings and accrue distributable profits. There is a risk that one or more of the baseassumptions used to determine the target operating margins may be incorrect and/or may change in thefuture in a manner that the Company cannot anticipate. Such changes may cause the Company to notachieve its annual targets for operating margins, which may jeopardize the Company’s financial solvencyand/or its ability to pay its employees, vendors, shareholders and/or other parties.Consumer DemandThe Company has developed a plan and forecast based on certain targets and base assumptions aboutthe level of consumer demand, and the corresponding level of sales potential, that exists in the targetedtrade area. There is a risk that one or more of the base assumptions used to determine the consumerdemand in the trade and/or the Company’s sales potential may be incorrect and/or may change in thefuture in a manner that the Company cannot anticipate. Such changes may case the Company to notachieve its annual targets for sales and operating margins, which may jeopardize the Company’sfinancial solvency and/or its ability to pay its employees, vendors, shareholders and/or other parties.Supply Chain ManagementThe Company has developed a plan and forecast based on certain targets and base assumptions abouthow it will manage its supply chain and cost effectively procure the desired product inventory and thedesired pricing structure. There is a risk that one or more of the base assumptions for the Company’ssupply chain management and procurement strategy may be incorrect and/or may change in the futurein a manner that Company cannot anticipate. Such changes may cause the Company to be unable toefficiently manage its supply chain and suppliers and cost effectively procure the desired products andthe desired pricing, resulting in a different product mix, pricing scheme and/or operating margin thanthe Company had planned.17. RESTRICTIONS AND WARRANTIES17.1 Other Information Is Not Authorized.NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONWITH RESPECT TO THE COMPANY OR THIS OFFERING EXCEPT SUCH INFORMATION AS IS CONTAINED IN 20
  • THIS MEMORANDUM. ONLY INFORMATION OR REPRESENTATIONS CONTAINED HEREIN MAY BE RELIEDUPON AS HAVING BEEN AUTHORIZED.THE INFORMATION IN THIS MEMORANDUM SUPERSEDES AND REPLACES IN ITS ENTIRETY ANYINFORMATION PREVIOUSLY DISTRIBUTED TO, PROVIDED TO, OR VIEWED BY ANY INVESTOR.17.2 Withdrawal, Cancellation or ModificationTHIS OFFERING IS MADE SUBJECT TO WITHDRAWAL, CANCELLATION, OR MODIFICATION BY THECOMPANY WITHOUT NOTICE. OFFERS TO PURCHASE THESE SECURITIES MAY BE REJECTED IN WHOLE ORIN PART BY THE COMPANY AND NEED NOT BE ACCEPTED IN THE ORDER RECEIVED. THE COMPANYRESERVES THE RIGHT, IN ITS SOLE DISCRETION, TO ALLOT TO ANY PROSPECTIVE INVESTOR LESS THANTHE AMOUNT OF THE SECURITIES SUCH INVESTOR DESIRES TO PURCHASE. THE COMPANY SHALL HAVENO LIABILITY WHATSOEVER TO ANY OFFEREE AND/OR INVESTOR IN THE EVENT THAT ANY OF THEFOREGOING SHALL OCCUR.THE STATEMENTS IN THIS MEMORANDUM ARE MADE AS OF THE EFFECTIVE DATE UNLESS OTHERWISESPECIFIED.17.3 No Warranty of Projections or AssumptionsProjections concerning the business or financial affairs of the Company that may be provided toProspective Investors, including without limitation those set forth in this Memorandum and its exhibits,are for illustrative purposes only. These projections are based upon assumptions that management ofthe Company believes to be reasonable. However, there can be no assurance that actual events willcorrespond to the assumptions, and the projections should be viewed merely as financial possibilitiesbased on the assumptions stated and not as a prediction or guarantee of future performance. Theassumptions upon which these projections are based should be carefully reviewed by each ProspectiveInvestor. Projections or conclusions regarding the financial condition of the Company, includingprojections regarding the profitability of the Company, may be substantially adversely affected byvariances from the assumptions made by the Company.17.4 Forward-Looking StatementsThis statement is being included in connection with the safe harbor provision of the Private SecuritiesLitigation Reform Act. THIS MEMORANDUM CONTAINS FORWARD LOOKING STATEMENTS. FROM TIMETO TIME, ADDITIONAL WRITTEN FORWARD LOOKING STATEMENTS MAY BE MADE BY THE COMPANY.SUCH FORWARD LOOKING STATEMENTS ARE WITHIN THE MEANING OF THAT TERM IN SECTION 27A OFTHE SECURITIES ACT AND MAY INCLUDE PROJECTIONS OF REVENUES, INCOME OR LOSS, CAPITALEXPENDITURES, BUSINESS RELATIONSHIPS, FINANCINGS, PROPOSED FINANCINGS OR INVESTMENTS BYTHIRD PARTIES, PRODUCT DEVELOPMENT, PLANS FOR FUTURE OPERATIONS, PLANS RELATING TOPRODUCTS OF THE COMPANY, AS WELL AS ASSUMPTIONS RELATING TO THE FOREGOING. SUCHSTATEMENTS ARE BASED UPON MANAGEMENT’S CURRENT EXPECTATIONS, BELIEFS, ANDASSUMPTIONS ABOUT FUTURE EVENTS, AND ARE OTHER THAN STATEMENTS OF HISTORICAL FACT ANDINVOLVE A NUMBER OF RISKS AND UNCERTAINTIES. 21
  • THE WORDS “BELIEVE,” “EXPECT,” “INTEND,” “ANTICIPATE,” “ESTIMATE,” “PROJECT,” AND SIMILAREXPRESSIONS IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE THESTATEMENT WAS MADE, BUT ARE NOT THE EXCLUSIVE MEANS OF IDENTIFYING SUCH STATEMENTS.FORWARD-LOOKING STATEMENTS ARE INHERENTLY SUBJECT TO RISKS AND UNCERTAINTIES, SOME OFWHICH CANNOT BE PREDICTED OR QUANTIFIED. FUTURE EVENTS AND ACTUAL RESULTS COULD DIFFERMATERIALLY FROM THOSE SET FORTH IN, CONTEMPLATED BY, OR UNDERLYING THE FORWARD-LOOKING STATEMENTS. STATEMENTS IN THIS MEMORANDUM -- INCLUDING THOSE CONTAINED IN THESECTION ENTITLED “RISK FACTORS” -- DESCRIBE FACTORS, AMONG OTHERS, THAT COULD CONTRIBUTETO OR CAUSE SUCH DIFFERENCES. 22
  • Exhibit A * **PCM has been keeping its expenses to a minimum over the past two years in preparation to procurefinancing. During this time the Company has operated from the following capital infusions: 1) $70,000 grant from the USDA Farmer’s Market Promotion Program. 2) $25,000 grant from the California FreshWorks Fund. 3) $30,000 subordinated note from People’s Grocery (reduced to a balance of $20,000). 4) $25,000 subordinated note from a private individual. 23
  • Exhibit BSales Forecast: The Company’s sales forecast is based on a market analysis by an independent researcher utilizing a regression and correlationmodel to analyze pertinent data such as consumer expenditures, demographics, and retail operations in analogous markets and, from that data,to estimate the target area’s market size and of the Company’s sales potential over five years. The sales forecast is based on the followingprimary factors:• Per Capita Expenditures and Market Size: The average annual per capita expenditure for groceries in the targeted trade area is estimated at $2,301. With a trade area population of over 25,000 people, the current aggregate annual food expenditure, or market size, is estimated to be over $58M.• Per Capita Sales Potential: The Company’s annual capture rate is estimated to likely reach $333 in per capita sales by the fifth year of operations. This accounts for 17% of the trade area market share. Given a high level of trade area expenditure leakage and a limited competitive environment, the Company’s Management believes that this forecasts presents a reasonable outlook.• Revenue Per Square Foot (RPSF): The Company utilizes RPSF to validate its sales forecast against industry standards and the performance of food stores in analogous markets. The Company projects that RPSF in years 1 and 2 will be below the industry average of $593 and that RPSF in years 3-5, while above the industry average, will be below the RPSF attained by some analogous stores, which range from $1,000 - $1,500. The Company’s Management believes that a RPSF projection at maturity that moderately outperforms the industry is achievable.• Transaction Size: The Company’s forecasted average per capita transaction size is estimated at $19.85 by the fifth year of business. This per capita transaction forecast has been compared to transaction data gathered from independent retail stores and from industry sources and has been assessed to be consistent with average the transaction sizes attained by retail stores in similar markets.Gross Margin: The forecasted Cost of Good Sold (COGS) of 65.54% is reflective of inventory and procurement costs incurred by analogous storesand cited by industry standards. The resulting Gross Margin of 34.47% is determined to be a sufficient margin target for the financial andoperational requirements of the business and is reflective of factors that are specific to the Company’s business plan and retail operating model,including:• The product class that the Company intends to carry is anticipated to be able to produce gross margins in the range of 30-35%, as demonstrated by analogous retail operations in similar demographic areas with similar ranges in gross margins.• The price markups that the Company intends to implement above its COGs are targeted to bring the gross margin into the forecasted range.• The Company will implement a departmental margin strategy in which higher margin departments, such as the Deli, offset lower margin departments, such as produce, and enable the total store gross margin to reach the forecasted range.Operating Margin: The Company’s operating expenses, excluding personnel, are drawn from industry averages and analogous stores of similarsize, operations and market demographics. The Company’s has targeted its total labor expense at 15% of sales, which is consistent withcompensation rates for unionized retail markets. The resulting operating margin projection by the fifth year of operations is slightly above theindustry average of 6.85%. The Company has determined that the projected operating margin is a sufficient to cover the operating cash needs ofthe business as well as its forecasted interest and tax expenses. 24
  • Balance sheet assumes the “Target Financing” scenario” (see Use of Offering Proceeds on page 13 for details), which consists offinancing from $1,200,000 in Preferred Shares and $2,400,000 in Long-Term Debt.Cash Flow Statement assumes the “Target Financing” scenario” (see Use of Offering Proceeds on page 13 for details), which consists offinancing from $1,200,000 in Preferred Shares and $2,400,000 in Long-Term Debt.Statements that are not based on historical fact are forward-looking statements. Although such statements are based on management’s currentestimates and expectations, and currently available competitive, financial, and economic data, forward-looking statements are inherentlyuncertain. We, therefore, caution the reader that there are a variety of factors that could cause business conditions and results to differmaterially from what is contained in our forward-looking statements. 25
  • Exhibit C California Code of Regulations Section 260.141.11. Restriction on Transfer.It is unlawful for the holder of [this] security to consummate a sale or transfer of such security, or anyinterest therein, without the prior written consent of the Commissioner (until this condition is removedpursuant to Section 260.141.12 of these rules), except:(1) to the issuer;(2) pursuant to the order or process of any court;(3) to any person described in Subdivision (i) of Section 25102 of the Code or Section 260.105.14 ofthese rules;(4) to the transferors ancestors, descendants or spouse, or any custodian or trustee for the account ofthe transferor or the transferors ancestors, descendants, or spouse; or to a transferee by a trustee orcustodian for the account of the transferee or the transferees ancestors, descendants or spouse;(5) to holders of securities of the same class of the same issuer;(6) by way of gift or donation inter vivos or on death;(7) by or through a broker-dealer licensed under the Code (either acting as such or as a finder) to aresident of a foreign state, territory or country who is neither domiciled in this state to the knowledge ofthe broker-dealer, nor actually present in this state if the sale of such securities is not in violation of anysecurities law of the foreign state, territory or country concerned;(8) to a broker-dealer licensed under the Code in a principal transaction, or as an underwriter ormember of an underwriting syndicate or selling group;(9) if the interest sold or transferred is a pledge or other lien given by the purchaser to the seller upon asale of the security for which the Commissioners written consent is obtained or under this rule notrequired;(10) by way of a sale qualified under Sections 25111, 25112, 25113, or 25121 of the Code, of thesecurities to be transferred, provided that no order under Section 25140 or subdivision (a) of Section25143 is in effect with respect to such qualification;(11) by a corporation to a wholly owned subsidiary of such corporation, or by a wholly owned subsidiaryof a corporation to such corporation;(12) by way of an exchange qualified under Section 25111, 25112 or 25113 of the Code, provided that 26
  • no order under Section 25140 or subdivision (a) of Section 25143 is in effect with respect to suchqualification;(13) between residents of foreign states, territories or countries who are neither domiciled nor actuallypresent in this state;(14) to the State Controller pursuant to the Unclaimed Property Law or to the administrator of theunclaimed property law of another state; or(15) by the State Controller pursuant to the Unclaimed Property Law or by the administrator of theunclaimed property law of another state if, in either such case, such person (i) discloses to potentialpurchasers at the sale that transfer of the securities is restricted under this rule, (ii) delivers to eachpurchaser a copy of this rule, and (iii) advises the Commissioner of the name of each purchaser;(16) by a trustee to a successor trustee when such transfer does not involve a change in the beneficialownership of the securities;(17) by way of an offer and sale of outstanding securities in an issuer transaction that is subject to thequalification requirement of Section 25110 of the Code but exempt from that qualification requirementby subdivision (f) of Section 25102; provided that any such transfer is on the condition that anycertificate evidencing the security issued to such transferee shall contain the legend required by thissection. 27
  • Exhibit DAmended and Restated Articles of Incorporation 28
  • AMENDED AND RESTATED ARTICLES OF INCORPORATION PEOPLE’S COMMUNITY MARKET, INC. ARTICLE I: NAMEThe name of the Corporation is PEOPLE’S COMMUNITY MARKET, INC. (the “Corporation” or the “Company”). ARTICLE II: PURPOSEThe purpose of the Corporation is to engage in any lawful act or activity for which a corporation may beorganized under the General Corporation Law of California other than the banking business, the trustcompany business or the practice of a profession permitted to be incorporated by the CaliforniaCorporations Code. ARTICLE III: AUTHORIZED STOCKThis Corporation is authorized to issue two classes of stock to be designated, respectively, “CommonStock” and “Preferred Stock.” The total number of shares which the Corporation is authorized to issue isfive million (5,000,000) shares; four million (4,000,000) shares of which shall be Common Stock (the“Common Stock”), and one million (1,000,000) shares of which shall be Preferred Stock (the “PreferredStock”). The Preferred Stock and the Common Stock shall each have a par value of one hundredth of adollar ($0.01) per share. All of the one million (1,000,000) shares of Preferred Stock are herebydesignated “Series A Preferred Stock” (the “Series A Preferred”). ARTICLE IV: RIGHTS, PREFERENCES AND PRIVILEGES OF STOCKThe rights, preferences, privileges, restrictions granted to and imposed on, and other matters relatingto, the Series A Preferred and the Common Stock are as follows:1. DEFINITIONS. For the purposes of this Article IV, the following definitions apply: 1.1 “Board” shall mean the Board of Directors of the Corporation. 1.2 “Common Stock Dividend” shall mean a stock dividend declared and paid on theCommon Stock that is payable in shares of Common Stock. 29
  • 1.3 “Dividend Rate” shall mean three percent (3%), or Six Cents ($0.06) per share perannum for the Series A Preferred Stock (as adjusted for any future stock dividends, combinations, splitsrecapitalizations and the like with respect to such shares). 1.4 “Original Issue Date” shall mean, the date on which the first share of Series A Preferredis issued by the Corporation. 1.5 “Original Issue Price” shall mean Two Dollars ($2.00) per share for the Series A PreferredStock. Each Original Issue Price shall be as adjusted for any future stock splits, stock dividends,recapitalizations or the like, with respect to the Series A Preferred. 1.6 “Permitted Repurchases” shall mean the repurchase by the Corporation of shares ofCommon Stock held by employees, officers, directors, consultants, independent contractors, advisors, orother persons performing services for the Corporation or a subsidiary that are subject to restricted stockpurchase agreements or stock option exercise agreements under which the Corporation has the optionto repurchase such shares: (i) at cost, upon the occurrence of certain events, such as the termination ofemployment or services; or (ii) at any price pursuant to the Corporation’s exercise of a right of firstrefusal to repurchase such shares. 1.7 “Preferred Stock” shall mean the Series A Preferred Stock.2. DIVIDEND RIGHTS. 2.1 Series A Preferred Stock. The holders of the then outstanding Series A Preferred Stockshall be entitled to receive, when, as and if declared by the Board, out of any funds and assets of theCorporation legally available therefor, cumulative dividends at the annual Dividend Rate for the Series APreferred Stock, prior and in preference to the payment of any dividend on the Common Stock (otherthan a Common Stock Dividend). Such dividends shall accrue on each share of Series A Preferred Stockfrom the date on which such share of Series A Preferred Stock is issued by the Corporation, and shallaccrue from day to day until paid, whether or not earned or declared. No accumulation of dividends onthe Series A Preferred Stock shall bear any interest. To the extent that dividends are not declared by theBoard, they will continue to accrue, but no payments upon such accrued and undeclared dividends willbe due to holders of Series A Preferred, subject to Section 3 and 4 below. The Board has sole discretionas to if and/or when dividends may be declared, or not, subject to any requirements of the CaliforniaCorporations Code. Unless the full amount of any accrued and unpaid cumulative dividends accrued onthe Series A Preferred Stock shall have been paid or declared in full and a sum sufficient for the paymentthereof reserved and set apart, no dividend (other than a Common Stock Dividend) shall be paid ordeclared on any Common Stock; provided, however, that this restriction shall not apply to PermittedRepurchases. 2.2 No Participation Rights. If, after dividends in the full preferential amounts specified inthis Section 2 for the Preferred Stock have been paid or declared and set apart in any calendar year ofthe Corporation, the Board shall declare additional dividends out of funds legally available therefor inthat calendar year, then such additional dividends shall be declared solely on the Common Stock. 30
  • 3. LIQUIDATION RIGHTS. In the event of any liquidation, dissolution or winding up of the Corporation,whether voluntary or involuntary, the funds and assets that may be legally distributed to theCorporation’s shareholders (the “Available Funds and Assets”) shall be distributed to shareholders in thefollowing manner: 3.1 Series A Preferred Stock. The holder of each share of Series A Preferred Stock thenoutstanding shall be entitled to be paid, out of the Available Funds and Assets (and prior and inpreference to any payment or distribution setting apart of any payment or distribution of any AvailableFunds and Assets on Shares of Common Stock), an amount per share equal to the Original Issue Price ofthe Series A Preferred Stock plus all accrued and unpaid dividends thereon, to and including the date fullpayment of such amount shall be tendered to the holders of the Series A Preferred Stock with respect tosuch liquidation, dissolution or winding up (the “Preference Amount”). If upon any liquidation,dissolution or winding up of the Corporation, the Available Funds and Assets to be distributed to theholders of the Series A Preferred Stock shall be insufficient to permit the payment to such shareholdersof their full preferential amount described in this subsection, then all of the Available Funds and Assetsshall be distributed among the holders of the then outstanding Series A Preferred Stock pro rataaccording to the number of outstanding shares of Series A Preferred Stock held by each holder thereof. 3.2 Remaining Assets. If there are any Available Funds and Assets remaining after thepayment or distribution (or the setting aside for payment or distribution) to the holders of the PreferredStock of their full preferential amounts described above in this Section 3, then all such remainingAvailable Funds and Assets shall be distributed among the holders of the then outstanding CommonStock pro rata according to the number of shares of Common Stock held by each holder thereof. 3.3 Deemed Liquidation Events. Each of the following transactions shall be deemed to be aliquidation, dissolution or winding up of the Corporation as those terms are used in this Section 3: (a)any reorganization by way of share exchange, consolidation or merger, in one transaction or series ofrelated transactions (each, a “combination transaction”)), in which the Corporation is a constituentcorporation or is a party with another entity if, as a result of such combination transaction, the votingsecurities of the Corporation that are outstanding immediately prior to the consummation of suchcombination transaction (other than any such securities that are held by an “Acquiring Shareholder”, asdefined below) do not represent, or are not converted into, securities of the surviving entity of suchcombination transaction (or such surviving entity’s parent entity if the surviving entity is owned by theparent entity) that, immediately after the consummation of such combination transaction, togetherpossess at least a majority of the total voting power of all securities of such surviving entity (or its parententity, if applicable) that are outstanding immediately after the consummation of such combinationtransaction, including securities of such surviving entity (or its parent entity, if applicable) that are heldby the Acquiring Shareholder; or (b) a sale of all or substantially all of the assets of the Corporation, thatis followed by the distribution of the proceeds to the Company’s shareholders. For purposes of thisSection 3.4, an “Acquiring Shareholder” means a shareholder or shareholders of the Corporation that (i)merges or combines with the Corporation in such combination transaction or (ii) owns or controls amajority of the voting power of another entity that merges or combines with the Corporation in suchcombination transaction.4. REDEMPTION RIGHTS. 31
  • 4.1 Redemption by Company. (a) Subject to any liquidation preference rights which may have been previouslyinvoked under Section 3 hereof, to the extent that any outstanding shares of Series A Preferred have notbeen previously redeemed at any time on or prior to the end of the seventh (7th) full year of businessoperations of the Corporation (the “Redemption Start Date”), the Corporation may, at the option of theBoard, redeem in whole or in part at any time on or after the Redemption Start Date, shares of Series APreferred held by all or any number of selected holders of Series A Preferred Stock, as such holders maybe selected by the Board in its sole discretion, in cash at the Redemption Price specified in subsection4.3 below, subject to the legal availability of funds therefor; and provided that immediately followingany such redemption, the Corporation shall have outstanding a class of common shares that is notsubject to redemption. (b) Company Redemption Notice. At least sixty (60) days prior to the date uponwhich the Corporation intends to effect a redemption pursuant to section 4.1 above (such date, a“Company Redemption Date”), written notice shall be mailed by the Corporation, postage prepaid, toeach holder of Series A Preferred Stock to be redeemed (the “Redeemed Holders“), at the address lastshown on the records of the Corporation for such Redeemed Holder or given by such holder to theCorporation for the purpose of notice or, if no such address appears or is given, at the place where theprincipal executive office of the Corporation is located, notifying such holder of the redemption to beeffected, specifying the subsection hereof under which such redemption is being effected, the CompanyRedemption Date, the applicable Redemption Price, the number of such holder’s shares of Series APreferred Stock to be redeemed, the place at which payment may be obtained and calling upon suchholder to surrender to the Corporation, in the manner and at the place designated, the certificate orcertificates representing the shares to be redeemed (the “Company Redemption Notice”). 4.2 Redemption by Holder. (a) Request for Redemption. Subject to the terms and conditions of this Section 4and subject to any liquidation preference rights which may have been previously invoked under Section3 hereof, to the extent that all of the outstanding shares of Series A Preferred Stock held by a givenholder of such Series A Preferred (each, a “Series A Holder”) have not been redeemed prior to theRedemption Start Date, the Corporation shall, upon receiving a written request at any time after theRedemption Start Date, signed by such Series A Holder (the “Holder Redemption Notice”), redeem, onthe date that is sixty (60) days following its receipt of such Holder Redemption Notice from such Series AHolder (the “Holder Redemption Date”), the full number of shares of Series A Preferred Stock then heldby such Series A Holder on the date the Corporation receives the Holder Redemption Notice from suchSeries A Holder; provided that immediately following any such redemption, the Corporation shall haveoutstanding a class of common shares that is not subject to redemption. The Series A Preferred Stockheld by such Series A Holder shall be redeemed in cash at the Redemption Price specified in Section 4.3below and shall be paid from any source of funds legally available therefor, until all outstanding sharesof Series A Preferred Stock to be redeemed have been redeemed as provided in Section 4 or theRedemption Request has been withdrawn or terminated as provided below. (b) Withdrawal or Termination of Request. A Holder Redemption Notice may bewithdrawn or terminated upon the request of the Series A Holder who originally submitted such Holder 32
  • Redemption Notice, provided that none of the Series A Preferred shares held by such Series A Holderhave been redeemed pursuant to such Holder Redemption Notice. After any such withdrawn orterminated Holder Redemption Notice, the shares of Series A Preferred Stock held by such Series AHolder shall again be subject to redemption pursuant to this Section 4. 4.3 Redemption Price. The redemption price for each share of Series A Preferred Stock shallbe an amount in cash equal to the Original Issue Price for the Series A Preferred Stock (as adjusted forany future stock dividends, combinations, splits, recapitalizations, and the like with respect to theshares) plus the amount of all accrued and unpaid dividends thereon (the “Redemption Price”). 4.4 Redemption Default Event (a) Insufficient Legally Available Funds. If upon any Company Redemption Date orHolder Redemption Date (each a “Redemption Date”) scheduled under this Section 4 for the redemptionof Series A Preferred Stock, the funds and assets of the Corporation legally available to redeem suchstock shall be insufficient to redeem all shares of Series A Preferred Stock then scheduled to beredeemed, then any such unredeemed shares shall be carried forward and shall be redeemed (togetherwith any other shares of Series A Preferred Stock then scheduled to be redeemed) at the next suchscheduled Redemption Date to the full extent of legally available funds of the Corporation at such time,and any such unredeemed shares shall continue to be so carried forward until redeemed. Shares ofSeries A Preferred Stock that are subject to redemption hereunder but have not been redeemed due toinsufficient legally available funds and assets of the Corporation shall continue to be outstanding andentitled to all dividend, liquidation and other rights, preferences, privileges and restrictions of the SeriesA Preferred Stock respectively until such shares have been redeemed. (b) Redemption Failure. Any failure on the part of the Corporation to pay in cash the fullamount of accrued and unpaid dividends due to any holder of Series A Preferred Stock on anyRedemption Date for any reason shall constitute a “Redemption Failure”. In addition, any failure on thepart of the Corporation to pay in cash the full amount of accrued and unpaid dividends due to anyholder of Series A Preferred Stock, pursuant to Section 3 above, shall also constitute a RedemptionFailure. If a Redemption Failure exists, for whatever reason, for a cumulative time of at least eightquarters (whether or not such quarters are consecutive in time), then, upon the end of the eight quarterof such Redemption Failure, the Corporation shall be deemed to have a “Redemption Default Event”.Upon such Redemption Default Event, the voting requirements set forth in Section 5.2 of this Articleshall be in effect, and shall remain in effect as set forth in Section 5.2. 4.5 Surrender of Certificates. On or before each designated Redemption Date, each holderof Series A Preferred Stock to be redeemed shall surrender the certificate(s) representing such shares ofSeries A Preferred Stock to be redeemed to the Corporation, in the manner and at the place designatedin the Company Redemption Notice, if any, or at the place where the principal executive office of theCorporation is located, and thereupon the redemption price for such shares shall be payable to theorder of the holder whose name appears on such certificate(s) as the owner thereof, and eachsurrendered certificate shall be cancelled and retired. If less than all of the shares represented by suchcertificate are redeemed, then the Corporation shall promptly issue a new certificate representing theunredeemed shares. 33
  • 4.6 Effect of Redemption. If the Company Redemption Notice and/or the HolderRedemption Notice (each a “Redemption Notice”) shall have been duly given, and if on the RedemptionDate the Redemption Price is either paid or made available for payment through the depositarrangements specified in subsection 4.7 below, then notwithstanding that the certificates evidencingany of the shares of Series A Preferred Stock so called for redemption shall not have been surrendered,all dividends with respect to such shares shall cease to accrue after such Redemption Date, such sharesshall not thereafter be transferred on the Corporation’s books and the rights of all of the holders of suchshares with respect to such shares shall terminate after such Redemption Date, except only the right ofthe holders to receive the redemption price without interest upon surrender of their certificate(s)therefor. 4.7 Deposit of Redemption Price. On or prior to the Redemption Date, the Corporationmay, at its option, deposit with a bank or trust company in the State of California having a capital andsurplus of at least Fifty Million Dollars ($50,000,000), as a trust fund, a sum equal to the aggregateRedemption Price for all shares of Series A Preferred Stock called for redemption and not yet redeemed,with irrevocable instructions and authority to the bank or trust company to pay, on or after theRedemption Date, the Redemption Price to the respective holders upon the surrender of their sharecertificates. From and after the Redemption Date, the shares so called for redemption shall beredeemed. The deposit shall constitute full payment of the shares to their holders, and from and afterthe Redemption Date, the shares shall be deemed to be no longer outstanding, all dividends withrespect to such shares shall cease to accrue and the holders thereof shall cease to be shareholders withrespect to such shares and shall have no rights with respect thereto except the right to receive from thebank or trust company payment of the Redemption Price of the shares, without interest, upon surrenderof their certificates therefor. Any funds so deposited and unclaimed at the end of one (1) year from theRedemption Date shall be released or repaid to the Corporation, after which time the holders of sharescalled for redemption who have not claimed such funds shall be entitled to receive payment of theRedemption Price only from the Corporation.5. VOTING RIGHTS. 5.1 Non-Voting Stock. The Series A Preferred Stock is NON-voting. 5.2 Board. The holders of record of the outstanding shares of Common Stock of theCorporation shall be entitled to elect all directors of the Corporation, provided, however, that upon aRedemption Default Event, so long as such Redemption Default Event is continuing, the holders ofrecord of at least a majority of the outstanding shares of Series A Preferred Stock, voting separately as aseparate class, shall have the right, but not the obligation, to elect a majority of the directors of theCorporation (“Series A Election Right”). The Series A Election Right shall remain in place until such timeas the payment of all arrears of dividend due to holders of Series A Preferred Stock have been paid infull.6. CONVERSION RIGHTS. The Series A Preferred Stock is NON-convertible.7. NO REISSUANCE OF PREFERRED STOCK. No share or shares of Preferred Stock acquired by theCompany by reason of redemption, purchase, conversion or otherwise shall be reissued; and in addition, 34
  • the Articles of Incorporation shall be appropriately amended to effect the corresponding reduction inthe Company’s authorized stock. ARTICLE V: LIMITATION OF LIABILITY The liability of the directors of the corporation for monetary damages shall be eliminated to thefullest extent permissible under California law. Unless applicable law otherwise provides, anyamendment, repeal or modification of this Article V shall not adversely affect any right or protection of adirector under this Article V that existed at or prior to the time of such amendment, repeal ormodification. ARTICLE VI: INDEMNIFICATION 1. The Corporation is authorized to provide indemnification of agents (as defined inSection 317 of the General Corporation Law of California) for breach of duty to the Corporation and itsshareholders through bylaw provisions or through agreements with agents, or both, in excess of theindemnification otherwise permitted by Section 317 of the General Corporation Law of California,subject to the limits on such excess indemnification set forth in Section 204 of the General CorporationLaw of California. If, after the effective date of this Article, California law is amended in a manner whichpermits a corporation to limit the monetary or other liability of its directors or to authorizeindemnification of, or advancement of such defense expenses to, its directors or other persons, in anysuch case to a greater extent than is permitted on such effective date, the references in this Article to“California law” shall to that extent be deemed to refer to California law as so amended. 2. Any repeal or modification of this Article shall only be prospective and shall not affectthe rights under this Article in effect at the time of the alleged occurrence of any action or omission toact giving rise to liability. 35