2. 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
3. Our Social Mission
To 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
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4. Letter to Our Supporters
Dear Friends,
In 2002, I co-founded People’s Grocery -- the nonprofit organization from which emerged this for-profit
enterprise, 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 back
in 2002, was that, by operating smaller-scale food projects, we would acquire the management
experience 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 we
have come to know, have all been essential preparation. With a strong entrepreneurial track record, an
extensive 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 the
culmination of those many years of hard work. It is also an embodiment of our belief that this enterprise
should be financed, at least in part, by people of all economic backgrounds who want to support our
mission and want to help create an innovative, sustainable and community-based solution to West
Oakland’s nutritional, social and economic needs.
We have chosen a Direct Public Offering (DPO) as a community investment vehicle to allow a diversity of
residents of California to become co-founders and shareholders in People’s Community Market. Our
desire is to reach out and build meaningful relationships and partnerships with people who care about
investing with their values in local businesses that operate, first and foremost, to make a positive impact
and to create a better world for everyone.
If you are a California resident who believes in our mission and values, and you fulfill the suitability
requirements contained in this memorandum, you can invest in People’s Community Market and
partner with us in this effort to create something that is fresh, different and very much needed today.
Sincerely,
Brahm Ahmadi
CEO/President
People’s Community Market
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5. People’s Community Market, Inc.
Direct Public Offering Memorandum
Table of Contents Page Number
1. Brief Description of Offering 6
2. About the Company 6
3. Target Market 7
3.1 Competition 7
4. Business Plan Summary 7
5. Management 9
6. Plan Of Distribution 11
7. 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 13
8. 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 14
9. Additional Financing 15
10. Financial Matters 16
11. Litigation and Legal Matters 16
12. Management Ownership and Compensation 16
13. Projected Post-Financing Capitalization 16
14. Investor Suitability Requirements 16
14.1 General 16
14.2 Suitability Requirements 17
14.3 Other Requirements 17
14.4 No Revocation 17
15. How to purchase Preferred Shares 17
16. RISK FACTORS GENERALLY 18
16.1 Risks Related to an Investment in our Company 18
17. 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 21
Exhibit A 23
Exhibit B 24
Exhibit C 26
Exhibit D 28
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6. OFFERING MEMORANDUM
California Qualification by Permit
$2,000,000
Preferred Stock
1. Brief Description of Offering
People’s Community Market, Inc. (“PCM” or the “Company”), is offering up to $2 million in preferred
stock (the “Securities”) to finance capital expenditures, inventory, working capital and operating
expenses relating to the construction and operation of a retail grocery store in West Oakland. The
minimum investment for each unaccredited Investor is one thousand dollars ($1,000) and the minimum
investment for each accredited Investor 1 is five thousand dollars ($5,000). There is no maximum
investment, except as described in the section on Suitability Requirements. Until the minimum
aggregate offering amount ($500,000) is secured, funds will be held in escrow. If the minimum offering
amount is not secured within one year of the commencement of the offering, all funds will be returned
to Investors. The offering will terminate one year from the date of commencement, unless such
termination date is extended, at the discretion of management and subject to the consent of the
California Department of Corporations. The offering is limited to California residents.
2. About the Company
PCM is a new business that is emerging from and building on the ten years of experience, track record and
social relations of its sister organization, People’s Grocery, which is a non-profit that has operated numerous
food projects (including the Mobile Market and the Grub Box), urban gardens and nutrition education
programs. The Company’s purpose is to create and operate a small-format, full-service grocery store in West
Oakland, which is a community that has not had a full-service grocer for several decades. In addition to
retailing fresh foods and groceries, the business will offer information, resources and services to support
customers 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.
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7. 3. Target Market
West Oakland is a 2.5 square mile inner-city area with 26,000 residents who are predominantly African
American and Latino. Although West Oakland is known today as a lower-income neighborhood, it has a
rich and diverse history. Before the 1950’s there were numerous grocery stores and supermarkets
located 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 local
customers. These stores also provided places for people to get together and socialize. But, beginning in
the 1950’s, many of the grocery stores in West Oakland shut down or relocated to new suburbs that
could offer more profits and cheap land for bigger stores. It became virtually impossible to buy fresh
produce 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 sizable
buying power, there are few food shopping outlets in West Oakland. As a result, 70% of the annual
grocery expenditures of West Oakland residents takes place outside of the community at stores in
surrounding cities. But West Oakland residents (many of whom do not own a vehicle and rely on public
transportation) must travel far to get to distant supermarkets. The inconvenience, time and cost of
these shopping trips leads many residents to regularly shop at nearby corner stores that carry mostly
processed, poor quality foods sold at high prices.
These limited food choices are contributing to high rates of diet-related chronic disease in West
Oakland. Today, forty eight percent of residents are obese or at an unhealthy weight and the
community’s diabetes hospitalization rate is three times that of Alameda County. But many residents
also understand the connection between diet and health and are increasingly demanding healthier food
choices, more knowledge and information, and supportive social settings and services.
3.1 Competition
West Oakland has a limited competitive environment for food retail. No supermarkets or full-service
grocery stores currently exist within the trade area. While there are two supermarkets that are located
approximately 1/2 to 1 mile from the edge of the trade area boundaries, many West Oakland residents
are unable to frequently shop at these locations due to limited vehicle ownership and a reliance of
walking and pubic transportation. There is an abundance of corner liquor stores in the trade area that
primarily sell snack foods, sugary beverages, alcohol and tobacco products. These stores carry limited
grocery merchandise or produce and typically sell such items at high prices. A 99¢ Only Store offers a
limited assortment of food merchandise consisting mostly of canned and packaged goods. A small
natural foods coop carries a limited and exclusive selection of organic food items. PCM’s primary
research has determined that the food retail square footage per capita in West Oakland is 1.2 square
feet, 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 and
market opportunity for more food store within the trade area.
4. Business Plan Summary
Building on the ten years of food enterprise experience of its sister nonprofit organization, People’s
Grocery, the Company is creating a full-service neighborhood food store, health resource center and
community hub that supports West Oakland families to attain healthier and more socially connected
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8. lives. PCM will apply its understanding of the local market area to create a highly targeted business
model that makes it easy to buy quality fresh foods at affordable prices in the neighborhood. The store
will be roughly 12,000 square feet in size, which will allow the Company to reduce its development costs
by circumventing the costly real estate development that is often associated with building supermarkets
in dense urban areas. The store will be housed in a simple pavilion structure that will further reduce the
cost and time required for construction while still providing for adequate security, an appropriately
conditioned 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 population
density, vehicle traffic and accessibility by foot and public transportation. A desirable location for the
Company’s retail operation has been identified which is located at the center of the West Oakland trade
and 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 at
the busiest intersection in the trade area with over 19,000 vehicles daily; 4) there are 10 bus stops and 5
bus 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 into
a lease negotiation with the Company.
PCM’s planned store size also caters the smaller, more frequent purchasing patterns that are
characteristic to the neighborhood. The store will stock about 40% of the inventory carried by
supermarkets, allowing PCM to reduce its inventory costs and target the fill-in items that lower-income
shoppers often buy at a high rate and in between less frequent, larger shopping trips. PCM will use a
custom SKU optimization strategy that offers a broad product assortment with ample category selection
while reducing the SKU count in each category, allowing for a more lean and efficient assortment that’s
adequate for both selection and convenience.
The product mix will be targeted to categories that are least available in the neighborhood: fresh
produce, 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 will
be 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 cultural
preferences of the area that will differentiate the store’s value proposition, attributes as a destination
and total store gross margin.
The retail store will source its food products through a variety of procurement channels including
wholesale distributors and regional suppliers. When possible, the Company will procure products
directly from small and mid sized producers that can meet its volume, quality and pricing targets. By
sourcing directly from producers, the Company will be more able to support the regional food economy
and 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, especially
in produce. In its preliminary planning, the Company conducted a modeling exercise to determine what
size store it needed to operate in order to generate the sales volume, and hence purchasing power with
suppliers, necessary to secure both sufficient margins and its targeted pricing structure. While PCM
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9. plans to build a store that is considered to be relatively small by industry standards, the Company has
also 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 the
margins in certain departments that are important to sell affordably, such as produce, with the margins
of other departments that can price at higher markups, such as prepared foods; 2) using its flexibility as
an independent grocer to employ less-traditional sourcing tactics like procuring odd lots (batches of
products that don’t meet uniformity specifications) and overruns (surplus inventory that manufacturers
want 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 retailing
and addressing customers’ desires to be more supported in improving their health, building community
and becoming more socially connected. PCM will partner with community and health organizations to
offer a variety of education programs, food such as demonstrations and workshops, as well as health
services such as screenings. The store will provide a community gathering space through its Front Porch
courtyard and eatery, which will feature family seating, a stage, a kids play area, a deli service window
and a venue for events and other social activities.
The Company will support and encourage its customers to purchase fresh and healthy food products by offering
a variety of promotional and incentive programs such as reward cards, weekly specials, giveaways and
discounts for food stamp usage. The Company will offer a variety of education programs, such as
demonstrations, workshops and tours, as well as health services such as free screenings and nutritional
counseling. The Company will partner with community and health organizations in order to cost
effectively 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. The
Company will strive to create a word-of-mouth marketing, in which customers recommend the business
to 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; and
positive social interactions, events and activities. Community outreach will be a central marketing
strategy and will largely be conducted through partnerships with local organizations that have strong
ties and networks in the community. PCM will implement a variety of promotional programs such as
reward cards, weekly specials, giveaways and discounts for food stamp usage that will be communicated
through various forms of advertising such as weekly circulars, email updates, radio announcements, and
newspaper 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 owned
enterprise, and recognizes the possibility under certain circumstance that such steps may not be
implemented, a general process for how the Company could potentially advance toward becoming an
employee-owned business has been drafted. A central element of this process would be an equity
incentive plan (EIP) that would provide employees with either option grants or restricted stock awards.
9
10. Stock would be awarded to employees on the basis of individual performance and merit. Employees
would be eligible for such awards upon completion of their first full year of employment.
5. Management
Chief Executive Officer & President
Brahm is a co-founder of People’s Grocery and was the Executive Director of the nonprofit for eight
years. Brahm brings experience in executive leadership, organizational development, management and
planning. He has first-hand experience in developing food enterprises, marketing healthy foods in the
inner city and providing training and education to low-income residents. Brahm has an MBA in
Sustainable Management from the Presidio Graduate School and is a 2011-2013 Food and Community
Fellow with the Institute for Agriculture and Trade Policy.
Chief Financial Officer
David Guendelman brings years of experience with start up companies that make a positive social
impact in the world. In 2004, David was a member of the founding team as CFO of World of Good, which
he led through two rounds of equity financing, helped to scale to become one of the leading fair trade
product companies with a line in Whole Foods and a partnership with eBay, and then oversaw its sale to
Ebay in 2010. David is the first CFO at Saveup.com, an online rewards program, as well as a financial
consultant to Lotus Foods, which imports handcrafted and sustainably produced heirloom rices.
Operations
Anthony Gilmore has 33 years of experience in the supermarket business. Mr. Gilmore served as Vice
President of Safeway's 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 Midwest
region, 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, talent
recruitment and construction.
Marketing
Michele Thorne has a background in food industry sales, marketing and graphic design, as well as food
education and wellness services. Michele was the Sales and Marketing Manager for the David Rio
beverage company in San Francisco, as well as the Wellness and Outreach Director for SOMA Beverage
Company/Metromint. Before moving to the Bay Area, Michele was Executive Chef at the award winning
Counter Restaurant in New York City. Michele is assisting in brand development, marketing and in-store
programming. She is a member of PCM’s Board of Directors and is currently the Board Secretary.
Treasurer
Ari Derfel is a serial food entrepreneur in the San Francisco Bay Area. In 2010, Ari co-founded Gather, an
all-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 in
the US. He is the former Executive Director of Slow Money USA. Ari is Treasurer of PCM’s Board of
Directors and is assisting in strategy and financing.
Deli Department
Rene 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 at
Raphael’s Shutter Café in El Cerrito. He is working with PCM in developing the deli and prepared food
program including the menu, production schedule, and food safety certification.
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11. Produce Department
Bill Fujimoto is a fresh grocer and produce pioneer in the San Francisco with over 40 years of experience
in the grocery business. Formerly at Monterey Market in Berkeley, where he built a highly successful
fresh food market centered on direct procurement and unique promotional strategies, Mr. Fujimoto is
working with PCM in the planning of the produce department and produce procurement.
Grocery Department
Joni Wong began as a Buyer in general merchandising at a small food store in Urbana, IL, known as the
Common 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 general
merchandising. Joni is assisting PCM in planning its grocery department management and operations.
6. Plan Of Distribution
This offering will be offered and sold on a minimum/maximum basis, with a minimum aggregate offering
amount 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 is
extended, at the discretion of management and subject to the consent of the California Department of
Corporations). Funds will be held in an impound account until the minimum aggregate offering amount
is secured.
The Company employees, officers and directors will conduct the offering. They will not receive any
commission 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 the
newsletters and email communications of other organizations and businesses; in newspaper and
magazine ads and/or articles; on radio and television interviews; on the Company’s web site and online
social media sites; in an online promotional video; and at events, conferences, trade shows, and
presentations. All communications will direct Prospective Investors to our offering memorandum which
will be available in hardcopy and in digital format. The Company will offer and sell the Securities only to
California residents.
7. Preferred Stock Attributes
PCM is offering up to One Million (1,000,000) shares of non-voting, non-convertible Series A Preferred
Stock (the “Purchased Shares”) at a price of Two Dollars ($2.00) per share (the “Purchase Price”).
7.1 Dividends
The 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 any
dividend 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, but
no payments upon such accrued undeclared dividends will be due to the shareholders. The Board of
Directors may choose to declare dividends, or not, at its sole discretion; subject to the requirements of
the California Corporations Code.
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12. Dividend rights shall be senior to the Common Stock. After the dividend preferences of the Purchased
Shares have been paid in full for a given calendar year, all remaining dividend in such calendar year will
be paid solely on the Common Stock.
7.2 Liquidation Preference
In the event of a “Liquidation Event” (including a liquidation, dissolution or winding up, merger or
acquisition, 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 investment
plus 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 funds
and assets of the Company legally available for distribution to shareholders will be distributed pro rata
among the holders of the Common Stock.
7.3 Conversion Rights
The Purchased Shares are NON-convertible.
7.4 Voting Rights
The Purchased Shares are NON-voting. Election of the Directors of the Company shall be by vote of
Common Stock holders only.
7.5 Redemption
Subject to any legal restrictions on the Company’s redemption of shares, at any time on or after the
seventh (7th) full year of business operations from the date in which the Company opens its business to
customers (the “Redemption Start Date”), the Company, at its option, may redeem the Purchased
Shares held by all or any number of selected Investors, by payment to such Investors of the Preference
Amount. 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 such
redemption.
Subject to any legal restrictions on the Company’s redemption of shares, at any time on or after the
Redemption Start Date, the Investors, individually or jointly, at their option, shall have to right to require
the Company to redeem all of such Investors’ Purchased Shares by payment to such Investor of the
Preference Amount. Any Investor seeking to exercise this redemption right shall provide the Company
with at least sixty (60) day notice of such Investor’s intent to exercise this redemption right.
7.6 Benefits to Preferred Shareholders
So long as an Investor continues to hold the Purchased Shares originally purchased by such Investor
prior to the expiration of the Redemption Start Date, such Investor will receive an annual store credit
equal to One Percent (1%) of their initial investment in the Purchased Shares. Each annual credit must
be redeemed in the year in which it is credited and cannot accrue to an amount exceeding One Percent
(1%) of such Investor’s investment.
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13. 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 by
such Investor in this DPO. The Additional Benefit shall not be granted to any holder of Purchased Shares
after 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% $250.00
7.7 Company Right of First Refusal
The Company shall have a right of first refusal (“ROFR”) to purchase any of the Purchased Shares
that any Investor proposes to sell, transfer, gift, pledge, assign, distribute, encumber or
otherwise 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 the
Company. The ROFR will terminate upon a Liquidation Event.
7.8 Other Restrictions on Transferability
In addition to Company’s (assignable) ROFR and any other restrictions imposed upon the
transfer of the Purchased Shares by securities or other laws, Company will restrict holders of the
Purchased Shares from transfers of such shares to competitors or potential competitors of the
Company.
The following legend will be imprinted on the Shares prohibiting their transfer except in accordance
therewith:
“IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY INTEREST
THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFORE, WITHOUT THE PRIOR WRITTEN CONSENT
OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN
THE COMMISSIONER’S RULES.” 2
8. Use of Offering Proceeds
The Company intends to use the proceeds from the sale and issuance of its Securities, along with the
proceeds 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 X
California Code of Regulations Section 260.141.11., Restriction on Transfer, attached at the end of this Offering
Memorandum.
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14. 8.1 Pre-launch Operating Expenses and Selling Expenses
Prior to reaching the minimum aggregate offering amount, the Company may borrow money to finance
marketing costs associated with selling of the Securities and other pre-launch operating expenses. Once
the minimum aggregate offering amount is secured, the Company may use up to $75,000 of offering
proceeds 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 and
commissions (including fees of the underwriters' attorneys paid by the issuer) paid in connection with
the 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 of
the securities under Federal and State laws, including taxes and fees, and any other expenses incurred
by the issuer directly related to the offering and sale of the securities, but excluding accountants' and
the issuer's 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 $500,000
Target Financing
This budget scenario assumes that the Company is able to secure $1,200,000 in financing from Investors
and, as a result, secure a $2,400,000 loan. In this scenario, the Company would proceed with its current
project plan without revision, including the proposed site, planned construction and estimated
improvement, inventory, pre-launch and operating expenses.
Minimum Financing
This scenario assumes that the Company is only able to secure the minimum aggregate offering amount
of $500,000 in financing from Investors and $1,000,000 in debt financing, at a 2:1 debt-equity ratio. In
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15. this scenario, the Company would make significant revisions to the project plan in order to reduce the
project’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 out
costs as tenant improvements. The minimum financing scenario would also result in a store of smaller
size, which would reduce the requirements for inventory, pre-launch operations and operating cash.
Maximum Financing
This 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. This
scenario also assumes a higher cost for construction than currently projected in order to provide a
conservative cushion for over runs in construction costs.
No Debt Financing
This scenario assumes that the Company secures the minimum aggregate offering amount of $500,000
in equity financing but is unable to secure debt financing. In this scenario, the Company would revise its
project plan to reduce the project's overall cost by eliminating the project’s largest expenditure, the
construction of a new store location. Instead, the Company would lease an alternative site with an
existing retail space suitable for the Company’s needs. As a condition of entering into such a lease, the
Company would require that the property owner either contribute capital or make a tenant
improvement allocation to cover any build out costs and a portion of the costs for furnishings and
fixtures; this will allow the Company to avoid such expenditures while not significantly compromising its
original plans. This scenario may result in the Company opening a store smaller in size than the store
contemplated under the minimum financing scenario, thus further reducing the capital requirements
needed for inventory, pre-launch operations and operating cash.
9. Additional Financing
PCM 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 equity
secured in this offering. CFWF has provided the Company with a Letter of Interest stating that it shall
require that one-third of the project’s capital costs be financed through equity sources and that the
equity capital be secured prior to the commencement of a formal loan application. The proceeds from
the sale and issuance of PCM’s Securities shall be applied toward the equity portion of this financing in
order 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 pay
for the legal and filing costs pertaining to its direct public offering of securities, as well as a $10,000
augmentation 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 its
retail 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 the
developer assumes the management and direct cost of the construction. If the Company succeeds in
securing a developer in this manner, the Company’s total capital requirement for the project would be
reduced by approximately 50% to $1,900,000. In such event, the Company would reduce the amount of
equity capital it would be raising from the sale and issuance of securities.
15
16. 10. Financial Matters
The Company began operations in 2010. The Company’s Fiscal Year ends January 31. Financial
statements are attached as Exhibit A. The Company has also developed a financial model and pro forma
forecast with assistance from financial and retail professionals that projects expected financial
performance, operating costs and capital requirements. Management believes that its financial
forecasts present a reasonable outlook. The Company’s Consolidated Pro Forma Financial Statement is
attached as Exhibit B.
11. Litigation and Legal Matters
The Company is not presently party to any litigation, nor to the knowledge of management is any
litigation threatened against the Company, any of its management, or any affiliate, which may materially
affect operations or projected goals.
12. Management Ownership and Compensation
Owner of Record Amount % Ownership
Brahm Ahmadi 1,000,000 shares common stock 100%
The CEO, Brahm Ahmadi, has received $23,000 in compensation in 2010 for his general services in
leading the company through its formation, planning and pre-development.
13. Projected Post-Financing Capitalization
Assuming the offering is fully-subscribed and, in addition, the Company sells or grants rights to acquire
Five Hundred Thousand (500,000) additional shares of Common Stock at one dollar ($1.00) per share to
employees, the projected capitalization of the Company upon the closing of the offering would be:
Shareholders Type of Stock Shares Total Value % Holding
Founder 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 Requirements
14.1 General
Investment in Securities is highly speculative, involves significant risks, and is suitable only for persons of
adequate financial means who have no need for liquidity from the investment and who can bear the
economic risk of a complete loss of their investment. This offering is made in reliance on the intrastate
offering exemption safe harbor of Rule 147 promulgated under Section 3(a)(11) of the 1933 Securities
Act (“the Securities Act”) and the public offering qualification under section 25113(b)(1) of the California
Corporate Securities Law (“California Securities Laws”) and other applicable laws or regulations.
The Suitability Requirements discussed below represent minimum requirements for Prospective
Investors. The satisfaction of such requirements by a Prospective Investor does not necessarily mean
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17. that the Securities are a suitable investment for such Prospective Investor. Prospective Investors are
encouraged to consult their financial advisors to determine whether an investment in the Securities is
appropriate. The Company may reject subscriptions, in whole or in part, in its absolute discretion.
14.2 Suitability Requirements
The 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 Requirements
Subscriptions will not be accepted from Prospective Investors whom the Company has reason to believe
may not meet the requirements described in above. The Company shall require that all Prospective
Investors complete a Suitability Questionnaire prior to issuance of a Subscription Agreement in order to
provide certain necessary information to allow the Company to determine the satisfaction of the
Suitability 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 to
agree to indemnify, hold harmless, and pay all fees and expenses that are incurred by, and all judgments
and claims made against the Company, its affiliates and counsel, for any liability that is incurred as a
result of any misrepresentation made by Investor.
14.4 No Revocation
Once a person has executed a Subscription Agreement and submitted funds, such subscription may not
be revoked without the consent of the Company.
15. How to purchase Preferred Shares
1. Review this Offering Memorandum and all exhibits.
2. Complete the blank fields of the Suitability Questionnaire provided by the Company on its website (or
paper copy by request), including the Signature Page of the Suitability Questionnaire, and submit to the
Company for review.
17
18. 3. Upon confirmation of the satisfaction of the Suitability Requirements, complete the blank fields of the
Subscription Agreement provided by the Company on its website (or paper copy by request), including
the 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 the
instructions contained in the Subscription Agreement and on the Company’s website, for the number of
shares desired for purchase (note: this amount must be at least $1,000 for unaccredited and $5,000 for
accredited 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 been
accepted by the Company until you receive a share certificate from the Company. The Company
reserves 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 Generally
EACH INVESTOR IS AWARE THAT AN INVESTMENT IN THE COMPANY IS SPECULATIVE AND INVOLVES A
HIGH DEGREE OF RISK, INCLUDING THE POSSIBLE LOSS OF THE ENTIRE INVESTMENT, AND SUCH
INVESTOR HAS CAREFULLY READ AND CONSIDERED THE FOLLOWING RISK FACTORS AND ALL MATTERS
SPECIFIED IN THESE SUBSCRIPTION DOCUMENTS IN DETERMINING WHETHER OR NOT TO INVEST IN THE
COMPANY AS SPECIFIED HEREIN. EACH INVESTOR UNDERSTANDS THAT THE FOLLOWING FACTORS ARE
NOT AN ALL-INCLUSIVE LIST OF POSSIBLE RISKS INHERENT IN THE OFFERING.
16.1 Risks Related to an Investment in our Company
Certain Factors May Affect Future Success
Any continued future success that the Company might enjoy will depend upon many factors, including
factors beyond the control of the Company and/or which cannot be predicted at this time. These factors
may 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/or
increased success by existing competitors; changes in general economic conditions; increases in labor
and/or operating costs; the Company’s ability to generate sufficient demand, expand its customer base
and retain key customers; and reduced margins caused by competitive pressures, rising food costs
and/or other increased operating costs. These conditions may have a material adverse effect upon the
Company’s business, operating results, and financial condition.
Dependence on Key Personnel
Much 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 in
the 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 impound
account, checks will be made payable to People’s Community Market.
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19. train, and retain qualified personnel. The loss of the services of any of the key members of senior
management, other key personnel, or the Company’s inability to recruit, train, and retain senior
management or key personnel, may have a material adverse effect on the Company’s business,
operating results, and financial condition.
Control of the Company
Control 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 Return
No assurance can be given that an Investor will realize a substantial return on investment, or any return
at all, or that an Investor will not lose a substantial portion or all of the investment. For this reason, each
Prospective Investor should carefully read this memorandum and all exhibits attached hereto and
consult with an attorney, accountant, and/or business advisor prior to making any investment decision.
Tax Risks
No representation or warranty of any kind is made by the Company, the officers, directors, counsel to
the Company, or any other professional advisors thereto with respect to any tax consequences of any
investment in the Company. EACH PROSPECTIVE INVESTOR SHOULD SEEK THE INVESTOR’S OWN TAX
ADVICE CONCERNING THE TAX CONSEQUENCES OF AN INVESTMENT IN THE COMPANY.
Revisions to Use of Proceeds
It is possible that the Company’s use of the proceeds from this offering will be revised by its
management. If proceeds from this offering are insufficient in terms of the actual start-up costs, the
Company could experience financial problems, which may adversely affect its ability to implement its
business 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 the
Company’s business, prospects, financial condition, and results of operations.
Development Costs
The Company has procured architectural and construction plans and cost estimates. While cost
estimates are based on known assumptions and factors affecting construction costs, such as the cost of
materials and the timetable for construction, there is risk that any one or more base assumptions
affecting the cost estimates may be incorrect and/or may change in the future in a manner that the
Company cannot anticipate. Such changes may cause an increase to the costs of construction in excess
of the Company’s finances, thus requiring additional capital or revision to the business plan.
Site Lease
The Company has identified an optimal location for the retail store. The Company does not presently
control a lease for the property as neither party wishes to enter such agreement until adequate
financing has been secured. The Company has made its plans based on this particular location with the
assumption that the Company will secure a lease upon sufficient financing. It is a risk that the Property
Owner may no longer wish to lease the location, may demand different lease terms than have been
discussed, may demand lease terms that may be beyond the Company’s financial abilities or may lease
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20. the property to another party at any time. Such changes may cause the Company to experience
substantial delays in the project and/or in locating a suitable alternative location for the retail store.
Cost of Labor and Operations
The Company has developed a plan and forecast based on certain assumptions about the costs of labor
and operations such as wages, benefits, utilities, taxes, and freight costs. While cost estimates are based
on known assumptions and factors affecting labor and operating costs, there is a risk that one or more
of the base assumptions affecting the cost estimates may be incorrect and/or may change in the future
in a manner that the Company cannot anticipate. Such changes may cause an increase to the costs of
labor and/or operations such that the Company may have to increase its prices, reduce its margins,
and/or reduce its accrued distributable profits.
Operating Margins
The Company has developed a plan and forecast based on certain targets and base assumptions about
the operating margins that the Company must achieve in order to remain financially solvent, produce
sufficient retained earnings and accrue distributable profits. There is a risk that one or more of the base
assumptions used to determine the target operating margins may be incorrect and/or may change in the
future in a manner that the Company cannot anticipate. Such changes may cause the Company to not
achieve its annual targets for operating margins, which may jeopardize the Company’s financial solvency
and/or its ability to pay its employees, vendors, shareholders and/or other parties.
Consumer Demand
The Company has developed a plan and forecast based on certain targets and base assumptions about
the level of consumer demand, and the corresponding level of sales potential, that exists in the targeted
trade area. There is a risk that one or more of the base assumptions used to determine the consumer
demand in the trade and/or the Company’s sales potential may be incorrect and/or may change in the
future in a manner that the Company cannot anticipate. Such changes may case the Company to not
achieve its annual targets for sales and operating margins, which may jeopardize the Company’s
financial solvency and/or its ability to pay its employees, vendors, shareholders and/or other parties.
Supply Chain Management
The Company has developed a plan and forecast based on certain targets and base assumptions about
how it will manage its supply chain and cost effectively procure the desired product inventory and the
desired pricing structure. There is a risk that one or more of the base assumptions for the Company’s
supply chain management and procurement strategy may be incorrect and/or may change in the future
in a manner that Company cannot anticipate. Such changes may cause the Company to be unable to
efficiently manage its supply chain and suppliers and cost effectively procure the desired products and
the desired pricing, resulting in a different product mix, pricing scheme and/or operating margin than
the Company had planned.
17. RESTRICTIONS AND WARRANTIES
17.1 Other Information Is Not Authorized.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
WITH RESPECT TO THE COMPANY OR THIS OFFERING EXCEPT SUCH INFORMATION AS IS CONTAINED IN
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21. THIS MEMORANDUM. ONLY INFORMATION OR REPRESENTATIONS CONTAINED HEREIN MAY BE RELIED
UPON AS HAVING BEEN AUTHORIZED.
THE INFORMATION IN THIS MEMORANDUM SUPERSEDES AND REPLACES IN ITS ENTIRETY ANY
INFORMATION PREVIOUSLY DISTRIBUTED TO, PROVIDED TO, OR VIEWED BY ANY INVESTOR.
17.2 Withdrawal, Cancellation or Modification
THIS OFFERING IS MADE SUBJECT TO WITHDRAWAL, CANCELLATION, OR MODIFICATION BY THE
COMPANY WITHOUT NOTICE. OFFERS TO PURCHASE THESE SECURITIES MAY BE REJECTED IN WHOLE OR
IN PART BY THE COMPANY AND NEED NOT BE ACCEPTED IN THE ORDER RECEIVED. THE COMPANY
RESERVES THE RIGHT, IN ITS SOLE DISCRETION, TO ALLOT TO ANY PROSPECTIVE INVESTOR LESS THAN
THE AMOUNT OF THE SECURITIES SUCH INVESTOR DESIRES TO PURCHASE. THE COMPANY SHALL HAVE
NO LIABILITY WHATSOEVER TO ANY OFFEREE AND/OR INVESTOR IN THE EVENT THAT ANY OF THE
FOREGOING SHALL OCCUR.
THE STATEMENTS IN THIS MEMORANDUM ARE MADE AS OF THE EFFECTIVE DATE UNLESS OTHERWISE
SPECIFIED.
17.3 No Warranty of Projections or Assumptions
Projections concerning the business or financial affairs of the Company that may be provided to
Prospective 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 of
the Company believes to be reasonable. However, there can be no assurance that actual events will
correspond to the assumptions, and the projections should be viewed merely as financial possibilities
based on the assumptions stated and not as a prediction or guarantee of future performance. The
assumptions upon which these projections are based should be carefully reviewed by each Prospective
Investor. Projections or conclusions regarding the financial condition of the Company, including
projections regarding the profitability of the Company, may be substantially adversely affected by
variances from the assumptions made by the Company.
17.4 Forward-Looking Statements
This statement is being included in connection with the safe harbor provision of the Private Securities
Litigation Reform Act. THIS MEMORANDUM CONTAINS FORWARD LOOKING STATEMENTS. FROM TIME
TO 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 OF
THE SECURITIES ACT AND MAY INCLUDE PROJECTIONS OF REVENUES, INCOME OR LOSS, CAPITAL
EXPENDITURES, BUSINESS RELATIONSHIPS, FINANCINGS, PROPOSED FINANCINGS OR INVESTMENTS BY
THIRD PARTIES, PRODUCT DEVELOPMENT, PLANS FOR FUTURE OPERATIONS, PLANS RELATING TO
PRODUCTS OF THE COMPANY, AS WELL AS ASSUMPTIONS RELATING TO THE FOREGOING. SUCH
STATEMENTS ARE BASED UPON MANAGEMENT’S CURRENT EXPECTATIONS, BELIEFS, AND
ASSUMPTIONS ABOUT FUTURE EVENTS, AND ARE OTHER THAN STATEMENTS OF HISTORICAL FACT AND
INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES.
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22. THE WORDS “BELIEVE,” “EXPECT,” “INTEND,” “ANTICIPATE,” “ESTIMATE,” “PROJECT,” AND SIMILAR
EXPRESSIONS IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE THE
STATEMENT WAS MADE, BUT ARE NOT THE EXCLUSIVE MEANS OF IDENTIFYING SUCH STATEMENTS.
FORWARD-LOOKING STATEMENTS ARE INHERENTLY SUBJECT TO RISKS AND UNCERTAINTIES, SOME OF
WHICH CANNOT BE PREDICTED OR QUANTIFIED. FUTURE EVENTS AND ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE SET FORTH IN, CONTEMPLATED BY, OR UNDERLYING THE FORWARD-
LOOKING STATEMENTS. STATEMENTS IN THIS MEMORANDUM -- INCLUDING THOSE CONTAINED IN THE
SECTION ENTITLED “RISK FACTORS” -- DESCRIBE FACTORS, AMONG OTHERS, THAT COULD CONTRIBUTE
TO OR CAUSE SUCH DIFFERENCES.
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23. Exhibit A
*
**
PCM has been keeping its expenses to a minimum over the past two years in preparation to procure
financing. 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.
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24. Exhibit B
Sales Forecast: The Company’s sales forecast is based on a market analysis by an independent researcher utilizing a regression and correlation
model 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 following
primary 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 stores
and cited by industry standards. The resulting Gross Margin of 34.47% is determined to be a sufficient margin target for the financial and
operational 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 similar
size, operations and market demographics. The Company’s has targeted its total labor expense at 15% of sales, which is consistent with
compensation rates for unionized retail markets. The resulting operating margin projection by the fifth year of operations is slightly above the
industry average of 6.85%. The Company has determined that the projected operating margin is a sufficient to cover the operating cash needs of
the business as well as its forecasted interest and tax expenses.
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25. Balance sheet assumes the “Target Financing” scenario” (see Use of Offering Proceeds on page 13 for details), which consists of
financing 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 of
financing 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 current
estimates and expectations, and currently available competitive, financial, and economic data, forward-looking statements are inherently
uncertain. We, therefore, caution the reader that there are a variety of factors that could cause business conditions and results to differ
materially from what is contained in our forward-looking statements.
25
26. 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 any
interest therein, without the prior written consent of the Commissioner (until this condition is removed
pursuant 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 of
these rules;
(4) to the transferor's ancestors, descendants or spouse, or any custodian or trustee for the account of
the transferor or the transferor's ancestors, descendants, or spouse; or to a transferee by a trustee or
custodian for the account of the transferee or the transferee's 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 a
resident of a foreign state, territory or country who is neither domiciled in this state to the knowledge of
the broker-dealer, nor actually present in this state if the sale of such securities is not in violation of any
securities 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 or
member 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 a
sale of the security for which the Commissioner's written consent is obtained or under this rule not
required;
(10) by way of a sale qualified under Sections 25111, 25112, 25113, or 25121 of the Code, of the
securities to be transferred, provided that no order under Section 25140 or subdivision (a) of Section
25143 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 subsidiary
of a corporation to such corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or 25113 of the Code, provided that
26
27. no order under Section 25140 or subdivision (a) of Section 25143 is in effect with respect to such
qualification;
(13) between residents of foreign states, territories or countries who are neither domiciled nor actually
present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law or to the administrator of the
unclaimed property law of another state; or
(15) by the State Controller pursuant to the Unclaimed Property Law or by the administrator of the
unclaimed property law of another state if, in either such case, such person (i) discloses to potential
purchasers at the sale that transfer of the securities is restricted under this rule, (ii) delivers to each
purchaser 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 beneficial
ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an issuer transaction that is subject to the
qualification requirement of Section 25110 of the Code but exempt from that qualification requirement
by subdivision (f) of Section 25102; provided that any such transfer is on the condition that any
certificate evidencing the security issued to such transferee shall contain the legend required by this
section.
27
29. AMENDED AND RESTATED ARTICLES OF INCORPORATION
PEOPLE’S COMMUNITY MARKET, INC.
ARTICLE I:
NAME
The name of the Corporation is PEOPLE’S COMMUNITY MARKET, INC. (the “Corporation” or the “Company”).
ARTICLE II:
PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be
organized under the General Corporation Law of California other than the banking business, the trust
company business or the practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III:
AUTHORIZED STOCK
This Corporation is authorized to issue two classes of stock to be designated, respectively, “Common
Stock” and “Preferred Stock.” The total number of shares which the Corporation is authorized to issue is
five 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 “Preferred
Stock”). The Preferred Stock and the Common Stock shall each have a par value of one hundredth of a
dollar ($0.01) per share. All of the one million (1,000,000) shares of Preferred Stock are hereby
designated “Series A Preferred Stock” (the “Series A Preferred”).
ARTICLE IV:
RIGHTS, PREFERENCES AND PRIVILEGES OF STOCK
The rights, preferences, privileges, restrictions granted to and imposed on, and other matters relating
to, 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 the
Common Stock that is payable in shares of Common Stock.
29
30. 1.3 “Dividend Rate” shall mean three percent (3%), or Six Cents ($0.06) per share per
annum for the Series A Preferred Stock (as adjusted for any future stock dividends, combinations, splits
recapitalizations 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 Preferred
is issued by the Corporation.
1.5 “Original Issue Price” shall mean Two Dollars ($2.00) per share for the Series A Preferred
Stock. 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 of
Common Stock held by employees, officers, directors, consultants, independent contractors, advisors, or
other persons performing services for the Corporation or a subsidiary that are subject to restricted stock
purchase agreements or stock option exercise agreements under which the Corporation has the option
to repurchase such shares: (i) at cost, upon the occurrence of certain events, such as the termination of
employment or services; or (ii) at any price pursuant to the Corporation’s exercise of a right of first
refusal 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 Stock
shall be entitled to receive, when, as and if declared by the Board, out of any funds and assets of the
Corporation legally available therefor, cumulative dividends at the annual Dividend Rate for the Series A
Preferred Stock, prior and in preference to the payment of any dividend on the Common Stock (other
than a Common Stock Dividend). Such dividends shall accrue on each share of Series A Preferred Stock
from the date on which such share of Series A Preferred Stock is issued by the Corporation, and shall
accrue from day to day until paid, whether or not earned or declared. No accumulation of dividends on
the Series A Preferred Stock shall bear any interest. To the extent that dividends are not declared by the
Board, they will continue to accrue, but no payments upon such accrued and undeclared dividends will
be due to holders of Series A Preferred, subject to Section 3 and 4 below. The Board has sole discretion
as to if and/or when dividends may be declared, or not, subject to any requirements of the California
Corporations Code. Unless the full amount of any accrued and unpaid cumulative dividends accrued on
the Series A Preferred Stock shall have been paid or declared in full and a sum sufficient for the payment
thereof reserved and set apart, no dividend (other than a Common Stock Dividend) shall be paid or
declared on any Common Stock; provided, however, that this restriction shall not apply to Permitted
Repurchases.
2.2 No Participation Rights. If, after dividends in the full preferential amounts specified in
this Section 2 for the Preferred Stock have been paid or declared and set apart in any calendar year of
the Corporation, the Board shall declare additional dividends out of funds legally available therefor in
that calendar year, then such additional dividends shall be declared solely on the Common Stock.
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31. 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 the
Corporation’s shareholders (the “Available Funds and Assets”) shall be distributed to shareholders in the
following manner:
3.1 Series A Preferred Stock. The holder of each share of Series A Preferred Stock then
outstanding shall be entitled to be paid, out of the Available Funds and Assets (and prior and in
preference to any payment or distribution setting apart of any payment or distribution of any Available
Funds and Assets on Shares of Common Stock), an amount per share equal to the Original Issue Price of
the Series A Preferred Stock plus all accrued and unpaid dividends thereon, to and including the date full
payment of such amount shall be tendered to the holders of the Series A Preferred Stock with respect to
such 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 the
holders of the Series A Preferred Stock shall be insufficient to permit the payment to such shareholders
of their full preferential amount described in this subsection, then all of the Available Funds and Assets
shall be distributed among the holders of the then outstanding Series A Preferred Stock pro rata
according 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 the
payment or distribution (or the setting aside for payment or distribution) to the holders of the Preferred
Stock of their full preferential amounts described above in this Section 3, then all such remaining
Available Funds and Assets shall be distributed among the holders of the then outstanding Common
Stock 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 a
liquidation, 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 of
related transactions (each, a “combination transaction”)), in which the Corporation is a constituent
corporation or is a party with another entity if, as a result of such combination transaction, the voting
securities of the Corporation that are outstanding immediately prior to the consummation of such
combination transaction (other than any such securities that are held by an “Acquiring Shareholder”, as
defined below) do not represent, or are not converted into, securities of the surviving entity of such
combination transaction (or such surviving entity’s parent entity if the surviving entity is owned by the
parent entity) that, immediately after the consummation of such combination transaction, together
possess at least a majority of the total voting power of all securities of such surviving entity (or its parent
entity, if applicable) that are outstanding immediately after the consummation of such combination
transaction, including securities of such surviving entity (or its parent entity, if applicable) that are held
by the Acquiring Shareholder; or (b) a sale of all or substantially all of the assets of the Corporation, that
is followed by the distribution of the proceeds to the Company’s shareholders. For purposes of this
Section 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 a
majority of the voting power of another entity that merges or combines with the Corporation in such
combination transaction.
4. REDEMPTION RIGHTS.
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32. 4.1 Redemption by Company.
(a) Subject to any liquidation preference rights which may have been previously
invoked under Section 3 hereof, to the extent that any outstanding shares of Series A Preferred have not
been previously redeemed at any time on or prior to the end of the seventh (7th) full year of business
operations of the Corporation (the “Redemption Start Date”), the Corporation may, at the option of the
Board, redeem in whole or in part at any time on or after the Redemption Start Date, shares of Series A
Preferred held by all or any number of selected holders of Series A Preferred Stock, as such holders may
be selected by the Board in its sole discretion, in cash at the Redemption Price specified in subsection
4.3 below, subject to the legal availability of funds therefor; and provided that immediately following
any such redemption, the Corporation shall have outstanding a class of common shares that is not
subject to redemption.
(b) Company Redemption Notice. At least sixty (60) days prior to the date upon
which 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, to
each holder of Series A Preferred Stock to be redeemed (the “Redeemed Holders“), at the address last
shown on the records of the Corporation for such Redeemed Holder or given by such holder to the
Corporation for the purpose of notice or, if no such address appears or is given, at the place where the
principal executive office of the Corporation is located, notifying such holder of the redemption to be
effected, specifying the subsection hereof under which such redemption is being effected, the Company
Redemption Date, the applicable Redemption Price, the number of such holder’s shares of Series A
Preferred Stock to be redeemed, the place at which payment may be obtained and calling upon such
holder to surrender to the Corporation, in the manner and at the place designated, the certificate or
certificates 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 4
and subject to any liquidation preference rights which may have been previously invoked under Section
3 hereof, to the extent that all of the outstanding shares of Series A Preferred Stock held by a given
holder of such Series A Preferred (each, a “Series A Holder”) have not been redeemed prior to the
Redemption Start Date, the Corporation shall, upon receiving a written request at any time after the
Redemption Start Date, signed by such Series A Holder (the “Holder Redemption Notice”), redeem, on
the date that is sixty (60) days following its receipt of such Holder Redemption Notice from such Series A
Holder (the “Holder Redemption Date”), the full number of shares of Series A Preferred Stock then held
by such Series A Holder on the date the Corporation receives the Holder Redemption Notice from such
Series A Holder; provided that immediately following any such redemption, the Corporation shall have
outstanding a class of common shares that is not subject to redemption. The Series A Preferred Stock
held by such Series A Holder shall be redeemed in cash at the Redemption Price specified in Section 4.3
below and shall be paid from any source of funds legally available therefor, until all outstanding shares
of Series A Preferred Stock to be redeemed have been redeemed as provided in Section 4 or the
Redemption Request has been withdrawn or terminated as provided below.
(b) Withdrawal or Termination of Request. A Holder Redemption Notice may be
withdrawn or terminated upon the request of the Series A Holder who originally submitted such Holder
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33. Redemption Notice, provided that none of the Series A Preferred shares held by such Series A Holder
have been redeemed pursuant to such Holder Redemption Notice. After any such withdrawn or
terminated Holder Redemption Notice, the shares of Series A Preferred Stock held by such Series A
Holder 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 shall
be an amount in cash equal to the Original Issue Price for the Series A Preferred Stock (as adjusted for
any future stock dividends, combinations, splits, recapitalizations, and the like with respect to the
shares) 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 or
Holder Redemption Date (each a “Redemption Date”) scheduled under this Section 4 for the redemption
of Series A Preferred Stock, the funds and assets of the Corporation legally available to redeem such
stock shall be insufficient to redeem all shares of Series A Preferred Stock then scheduled to be
redeemed, then any such unredeemed shares shall be carried forward and shall be redeemed (together
with any other shares of Series A Preferred Stock then scheduled to be redeemed) at the next such
scheduled 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 of
Series A Preferred Stock that are subject to redemption hereunder but have not been redeemed due to
insufficient legally available funds and assets of the Corporation shall continue to be outstanding and
entitled to all dividend, liquidation and other rights, preferences, privileges and restrictions of the Series
A 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 full
amount of accrued and unpaid dividends due to any holder of Series A Preferred Stock on any
Redemption Date for any reason shall constitute a “Redemption Failure”. In addition, any failure on the
part of the Corporation to pay in cash the full amount of accrued and unpaid dividends due to any
holder of Series A Preferred Stock, pursuant to Section 3 above, shall also constitute a Redemption
Failure. If a Redemption Failure exists, for whatever reason, for a cumulative time of at least eight
quarters (whether or not such quarters are consecutive in time), then, upon the end of the eight quarter
of 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 Article
shall 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 holder
of Series A Preferred Stock to be redeemed shall surrender the certificate(s) representing such shares of
Series A Preferred Stock to be redeemed to the Corporation, in the manner and at the place designated
in the Company Redemption Notice, if any, or at the place where the principal executive office of the
Corporation is located, and thereupon the redemption price for such shares shall be payable to the
order of the holder whose name appears on such certificate(s) as the owner thereof, and each
surrendered certificate shall be cancelled and retired. If less than all of the shares represented by such
certificate are redeemed, then the Corporation shall promptly issue a new certificate representing the
unredeemed shares.
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34. 4.6 Effect of Redemption. If the Company Redemption Notice and/or the Holder
Redemption Notice (each a “Redemption Notice”) shall have been duly given, and if on the Redemption
Date the Redemption Price is either paid or made available for payment through the deposit
arrangements specified in subsection 4.7 below, then notwithstanding that the certificates evidencing
any 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 shares
shall not thereafter be transferred on the Corporation’s books and the rights of all of the holders of such
shares with respect to such shares shall terminate after such Redemption Date, except only the right of
the 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 Corporation
may, at its option, deposit with a bank or trust company in the State of California having a capital and
surplus of at least Fifty Million Dollars ($50,000,000), as a trust fund, a sum equal to the aggregate
Redemption 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 the
Redemption Date, the Redemption Price to the respective holders upon the surrender of their share
certificates. From and after the Redemption Date, the shares so called for redemption shall be
redeemed. The deposit shall constitute full payment of the shares to their holders, and from and after
the Redemption Date, the shares shall be deemed to be no longer outstanding, all dividends with
respect to such shares shall cease to accrue and the holders thereof shall cease to be shareholders with
respect to such shares and shall have no rights with respect thereto except the right to receive from the
bank or trust company payment of the Redemption Price of the shares, without interest, upon surrender
of their certificates therefor. Any funds so deposited and unclaimed at the end of one (1) year from the
Redemption Date shall be released or repaid to the Corporation, after which time the holders of shares
called for redemption who have not claimed such funds shall be entitled to receive payment of the
Redemption 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 the
Corporation shall be entitled to elect all directors of the Corporation, provided, however, that upon a
Redemption Default Event, so long as such Redemption Default Event is continuing, the holders of
record of at least a majority of the outstanding shares of Series A Preferred Stock, voting separately as a
separate class, shall have the right, but not the obligation, to elect a majority of the directors of the
Corporation (“Series A Election Right”). The Series A Election Right shall remain in place until such time
as the payment of all arrears of dividend due to holders of Series A Preferred Stock have been paid in
full.
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 the
Company by reason of redemption, purchase, conversion or otherwise shall be reissued; and in addition,
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35. the Articles of Incorporation shall be appropriately amended to effect the corresponding reduction in
the Company’s authorized stock.
ARTICLE V:
LIMITATION OF LIABILITY
The liability of the directors of the corporation for monetary damages shall be eliminated to the
fullest extent permissible under California law. Unless applicable law otherwise provides, any
amendment, repeal or modification of this Article V shall not adversely affect any right or protection of a
director under this Article V that existed at or prior to the time of such amendment, repeal or
modification.
ARTICLE VI:
INDEMNIFICATION
1. The Corporation is authorized to provide indemnification of agents (as defined in
Section 317 of the General Corporation Law of California) for breach of duty to the Corporation and its
shareholders through bylaw provisions or through agreements with agents, or both, in excess of the
indemnification 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 Corporation
Law of California. If, after the effective date of this Article, California law is amended in a manner which
permits a corporation to limit the monetary or other liability of its directors or to authorize
indemnification of, or advancement of such defense expenses to, its directors or other persons, in any
such 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 affect
the rights under this Article in effect at the time of the alleged occurrence of any action or omission to
act giving rise to liability.
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