Direct Public Offering · Direct Public Offering A case study of a successful DPO in Washington State Using the Small Company Offering Registration (SCOR) option To raise up to $1,000,000

Direct Public Offering

A case study of a successful DPO in Washington State Using the Small Company Offering Registration (SCOR) option

To raise up to $1,000,000 in a 12-month period

www.quimpermerc.com

Port Townsend, Washington

A Community Corporation

Port Townsend

On the Olympic Peninsula

2 hours from Seattle by ferry

County seat and only incorporated city in Jefferson County

Settled in 1851, two years before Washington statehood

aka ”City of Dreams”

Victorian Seaport

Jefferson County

Jefferson County County Local

Demographic Data Ranking among

3141 U.S. Counties

Population 29,924 1429

Households 14,049 1306

Labor Force 12,929 1515

Unemployment 9.7% 1266

Per Capita Income $43,065 316

Median Household Income $45,600 1001

Poverty Rate 12% 2408

H.S. Diploma minimum 94.2 62 (top 2%)

Bachelor's Degree 34.8 195 (top 3%)

Source: Stats America April 2012 All data from 2010 except population count 2011

Tradition: Local Support v  Food Co-op v  NW Maritime Center

v  The Rose Theater v  Fort Worden State Park

Farmers Market 2011 WA State Market of the Year

One of the largest small town markets in the nation

Our Local Challenge: Ø  Swain’s General Store closes Jan 2011 after 14 years

Former Sprouse-Reitz, Safeway, in same spot since 1960s

Downtown anchor location (15,000 sq ft )

Only general merchandise store in the county

Ø  Who will come to save us: Target? Wal-Mart? Rite-Aid?

Committee of business folks and community supporters began meeting at invitation of Mayor Michelle Sandoval in January 2011. We wanted to answer the question of how to fill the gaping hole in our downtown.

Swains General Store

Thanks, Sharon Earhart

Google: CBS, Early Show, Powell Pulls Together

Our Local Action

Jefferson County needs viable local shopping options for many essential goods. 

Using a model of broad based community investment and support, Quimper Mercantile Company will create

and fund a General Store that will meet those needs in an inclusive and innovative manner.

Eventually ended up with a dozen of us committed to a plan of action. Ø  NAME: Quimper Mercantile Company (QMC), Ø  STRUCTURE: Community Corporation (local $$$ and control) Ø  and a MISSION STATEMENT:

QMC Brain Trust

Finding Capital Ø  Our Pro Forma indicated < $1,000,000 capitalization required

Ø  First thought, pitch concept to LION for mix of debt and equity

Ø  Researched DPO options available as ideal way to broaden ownership •  Public Company •  Sell shares directly to the public •  Several options under exemptions to full SEC registration •  The JOBS Act establishes a new one: Crowd Funding

Ø  We chose the SCOR option

SCOR FAST FACTS North American Securities Administrators Association, or NASAA, developed the Small Company Offering Registration. Washington State was instrumental in this effort after Congress allowed Direct Public Offerings in 1982. First use of SCOR was 1989.The SCOR registration (U-7) is the question and answer form that companies (corporations and LLCs in Washington) use as the disclosure document for investors.

SCOR is for state registration of small business securities offerings conducted under the exemption options in SEC's Rule 504 of Regulation D, Securities Act of 1933. Sales up to $1,000,000 in a twelve-month period.

Company may use selling agents or make the shares directly available to the public through mass solicitation technologies. Investors are not limited as to number or type (accredited vs. non-accredited), nor is there any restriction on the amount that may be sold to any one person. Shareholders must live in the state.

Virtually all states and District of Columbia have adopted the SCOR process as one of their DPO options. They establish process to assure compliance with Blue Sky rules and Merit Standards (is the Disclosure adequate and accurate?).

There are many advantages of seeking registration of a securities offering through a SCOR Ø  The SCOR registration was designed to minimize costs for small businesses seeking to raise capital through a securities offering. Ø  The question and answer disclosure was designed so that it may be completed without the expertise of attorneys and accountants who are securities experts. Ø  The form may be reproduced on an office copier and is used as the prospectus in soliciting investors. It is used as the basis for public meetings and all advertising. Ø  Providing satisfactory answers compels a company to create a business plan describing, systematically, its anticipated steps to success. If the form is filled out properly, the assumptions and weaknesses in the plan should be evident, and these should be prominently disclosed in the order of their importance as risk factors in the offering.

Source: Department of Financial Institutions http://www.dfi.wa.gov

Small Company Offering Registration (SCOR) Form Revised: September 28, 1999

Page 1

FORM U-7

DISCLOSURE DOCUMENT

Cover Page - Page 1

QUIMPER MERCANTILE COMPANY (Exact name of Company as set forth in Articles of Incorporation or Organizational Documents)

Street address of principal office: 686 Roosevelt Street, Port Townsend, WA 98368

Company Telephone Number: 360-379-8651

Person(s) to contact at Company with respect to offering: Peter Quinn

Telephone Number (if different from above): 360 379-1360

Type of securities offered: COMMON STOCK

Price per security: $100

Sales commission, if any: NONE

Minimum number of securities offered: 4,250

Maximum number of securities offered: 9,500

Total proceeds: If minimum sold: $425,000

If maximum sold: $950,000

Investment in a small business is often risky. You should not invest any funds in this offering unless you can afford to lose your entire investment. See Item 1 for a discussion of the risk factors that management believes present the most substantial risks to you. The date of this Disclosure Document is September 1, 2011 .

SCOR Submission

Cover Page U-7

Addenda and attachments

8 months, start to finish. 200 hours of staff time. Nearly 100 pages in all

SCOR and QMC Shares Ø The U-7 forced our company to make projections about the use of funds that were solicited.

Ø What is the minimum necessary to make a go of the enterprise? This minimum amount becomes the threshold to which you must commit.

Ø Our minimum was $425,000 (4250 shares @ $100), and the deadline was May 1, 2012

One great advantage of SCOR is the ability to

advertise the offering

Selling QMC Shares Ø  We advertised in the local papers, wrote letters to the editor and perspectives, established a web presence and engaged people on Facebook. We held 8 informational Road Shows throughout the county. We all participated when we could and we brought refreshments to share.

Ø  We set up sales outposts in front of the empty store front, at EDC Team Jefferson office, Food Co-op, at Farmers Market and during Port Townsend’s monthly Gallery Walk event. We did interviews on our community radio station KPTZ, and we passed out our buttons to anyone who would take one.

We had remarkably consistent sales over the course of the

first three months

Trend of Sales

Averaged $30,000 per week up to Impound Goal of $425,000

Infographic

Mount Asset superimposed on the Olympic Mountains

QMC Timeline Ø Had first meetings, due diligence around management & funding options Ø Made decision to make this a Community Corporation, limited control Ø Conference call with Sharon Earhart, The Merc, Powell Wyoming Ø Made decision to sell shares to the public using the SCOR DPO option Ø Distributed a survey about the project (851 responses 2% were against) Ø Began lease negotiations with landlord for bulk of Swain’s space Ø DIY committee to fill out SCOR U-7 and create supporting docs Ø Created a WA State C-Corp, Quimper Mercantile Company Ø Contracted with Jenny Kassan of Cutting Edge Capital re: SCOR Ø Founding members became the board and bought $50,000 in stock Ø First Public presentation on the concept at Chamber of Commerce Ø Submitted SCOR to WA State Dept of Financial Institutions (DFI) Ø Received permit from DFI to sell registered securities (after 3rd iteration). Ø Sold first share & began series of road shows & ads (May 1 deadline) Ø Signed Lease for the new store space and began demolition and refit Ø Reached impound goal of $425,000 and DFI certified our use of funds Ø Continue to sell shares in expectation of reaching our goal of $950,000

Jan 2011 Jan 2011 Feb 2011 Feb 2011

March 2011 March 2011

April 2011 April 2011 April 2011 April 2011 April 2011 Sept 2011 Jan 2012 Jan 2012 Feb 2012

April 2012 May 2012

SCOR Lessons Learned Ø  Seed Money

We had $49,500 from founding board

Ø  Dedicated staff or volunteers

18 months of effort to date

Ø  Legal and Financial Consult

We spent $5000 for legal opinion and GAAP financials

Ø  Prioritize Sales

Like any business, what is the target customer? We spent $6500 promoting.

Ø  Be very persistent

Actually, be very, very persistent Young Shareholder

First Sale got us started in January

Sale that got us over $425,000 impound

QMC CEO Peter Quinn pitching to Port Townsend crowd

to see just how much this picture has changed.

We invite you to visit Port Townsend this fall