Preliminary Offering Circular, Dated April 24, 2020

AN OFFERING STATEMENT PURSUANT TO REGULATION A RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.  INFORMATION CONTAINED IN THIS PRELIMINARY OFFERING CIRCULAR IS SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED BEFORE THE OFFERING STATEMENT FILED WITH THE COMMISSION IS QUALIFIED.  THIS PRELIMINARY OFFERING CIRCULAR SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR MAY THERE BE ANY SALES OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL BEFORE REGISTRATION OR QUALIFICATION UNDER THE LAWS OF ANY SUCH STATE.  WE MAY ELECT TO SATISFY OUR OBLIGATION TO DELIVER A FINAL OFFERING CIRCULAR BY SENDING YOU A NOTICE WITHIN TWO BUSINESS DAYS AFTER THE COMPLETION OF OUR SALE TO YOU THAT CONTAINS THE URL WHERE THE OFFERING CIRCULAR WAS FILED MAY BE OBTAINED.

Remembrance Group, Inc.

365 5th Ave South, Suite 201

Naples, FL 34102

239-666-3440

www.remembrancegroup.com

UP TO 1,200,000 SHARES OF

SERIES A REDEEMABLE PREFERRED STOCK

Remembrance Group, Inc., which we refer to as “our company,” “we,” “our” and “us,” is offering up to 1,200,000 shares of series A preferred stock, par value $0.0001 per share, which we refer to as the series A preferred stock, at an offering price of $10.00 per share, for a maximum offering amount of $12,000,000. There is a minimum initial investment amount per investor of $5,000 for the series A preferred stock and any additional purchases must be made in increments of at least $100.

The series A preferred stock will rank as to dividend rights and rights upon our liquidation, dissolution, or winding up, senior to our common stock, par value $0.0001 per share, which we refer to as our common stock. Holders of our series A preferred stock will be entitled to receive cumulative dividends in the amount of $0.175 per share each quarter in arrears, which is equivalent to 7% per annum; provided that upon an event of default (generally defined as our failure to pay dividends when due or to redeem shares when requested by a holder following the date when redemptions are permitted), such amount shall be increased to $0.25 per quarter, which is equivalent to 10% per annum. The liquidation preference for each share of our series A preferred stock is $15.00. Upon a liquidation, dissolution or winding up of our company, holders of shares of our series A preferred stock will be entitled to receive the liquidation preference with respect to their shares plus an amount equal to any accrued but unpaid dividends (whether or not declared) to, but not including, the date of payment with respect to such shares. Commencing immediately after the initial closing of this offering and continuing indefinitely thereafter, we will have a right to call for redemption all or any portion of the outstanding shares of our series A preferred stock at a call price equal to 150% of the original issue price of our series A preferred stock. Each holder of shares of our series A preferred stock will have a right to put all (but not less than all) of the shares of series A preferred stock held by such holder back to us at a put price equal to 150% of the original issue purchase price of such shares commencing on the fifth anniversary of the initial closing of this offering. The series A preferred stock will have no maturity date and no voting rights (except for certain limited matters) and are not convertible into shares of our common stock. See “Description of Securities” beginning on page 60 for additional details.

This is our initial public offering, and no public market currently exists for our stock. Our common stock is not listed for trading on any exchange or automated quotation system. The offering price of the series A preferred stock may not reflect the market price of our series A preferred stock after this offering. We do not expect to apply to have our series A preferred stock quoted on any national securities exchange or any tier of the OTC Markets.

This offering is being conducted on a “best efforts” basis pursuant to Regulation A of Section 3(6) of the Securities Act of 1933, as amended, or the Securities Act, for Tier 2 offerings. This offering will terminate at the earlier of: (1) the date at which the maximum amount of offered shares has been sold, (2) the date which is 180 days after this offering is qualified by the U.S. Securities and Exchange Commission, or the SEC, subject to an extension of up to an additional 180 days at the discretion of our company and the underwriter, or (3) the date on which this offering is earlier terminated by us in our sole discretion.

Digital Offering LLC, a broker-dealer registered with the SEC and a member of the Financial Industry Regulatory Authority, or FINRA, and the Securities Investor Protection Corporation, or SIPC, which we refer to as the underwriter or managing broker-dealer, is the lead underwriter for this offering. The underwriter is selling our shares in this offering on a best efforts basis and is not required to sell any specific number or dollar amount of shares offered by this offering circular, but will use its best efforts to sell such shares. Cambria Capital LLC, or Cambria Capital, has been appointed by us and the underwriter as a soliciting dealer for this offering. Cambria Capital is an SEC registered broker-dealer and member of FINRA and SIPC. Cambria Capital operates the My IPO platform (available at www.myipo.com) as a separate unincorporated business division. Cambria Capital’s clearing firm, which we refer to as the Clearing Firm, is an SEC registered broker-dealer and member of FINRA and SIPC and is authorized to act as a clearing broker-dealer. Cambria Capital and its My IPO division clear through the Clearing Firm as do other broker-dealers who may participate in this offering. We refer to such other broker-dealers that clear through the Clearing Firm and who may participate in this offering as Other Broker-Dealers.

We may undertake one or more closings on a rolling basis. Until we complete a closing, the proceeds for this offering will be kept in an escrow account maintained at Wilmington Trust, National Association, or, in the case of investors who invest through Cambria Capital, the My IPO platform, or Other Broker-Dealers that clear through the Clearing Firm, proceeds will remain in the investor’s own brokerage account with Cambria Capital or one of the Other Broker-Dealers, as applicable. At a closing, the proceeds will be distributed to us and the associated series A preferred stock will be issued to the investors. If there are no closings or if funds remain in the escrow account upon termination of this offering without any corresponding closing, the funds so deposited for this offering will be promptly returned to investors, without deduction and generally without interest, or, in the case of investors who invest through Cambria Capital, the My IPO platform, or Other Broker-Dealers, their funds will remain unrestricted in their own investment account. See “Underwriting.”

(1) Per Share price represents the offering price for one share of series A preferred stock. 

(2) This table depicts broker-dealer commissions of 7% of the gross offering proceeds. In addition to commissions, we have agreed to reimburse the underwriter for its reasonable, documented out-of-pocket expenses of up to $30,000. We have also agreed to issue to the underwriter warrants to purchase a number of shares of the series A preferred equal to 2% of the number of shares sold in this offering. The underwriter warrants will be exercisable for five years from the effective date of the offering at an exercise price equal to $10.00 per share. Please refer to the section captioned “Underwriting” for additional information regarding total underwriter compensation.

(3) Before deducting expenses of the offering, which are estimated to be approximately $218,000, including a clearing broker processing fee of $60,000. See the section captioned “Underwriting” for details regarding the compensation payable in connection with this offering. This amount represents the proceeds of the offering to us, which will be used as set out in the section captioned “Use of Proceeds.”

Our business and an investment in our series A preferred stock involve significant risks. See “Risk Factors” beginning on page 11 of this offering circular to read about factors that you should consider before making an investment decision. You should also consider the risk factors described or referred to in any documents incorporated by reference in this offering circular, before investing in these securities.

Generally, no sale may be made to you in this offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income or your net worth. Different rules apply to accredited investors and non-natural persons. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov.

THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS OR GIVE ITS APPROVAL OF ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SOLICITATION MATERIALS. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE COMMISSION; HOWEVER, THE COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED ARE EXEMPT FROM REGISTRATION.

This offering circular follows the disclosure format of Part I of Form S-1 pursuant to the general instructions of Part II(a)(1)(ii) of Form 1-A.

The approximate date of commencement of proposed sale to the public is [*], 2020.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This offering circular and the documents incorporated by reference herein contain, in addition to historical information, certain “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that include information relating to future events, future financial performance, strategies, expectations, competitive environment, regulation and availability of resources. These forward-looking statements include, without limitation: statements concerning predictions, expectations, estimates or forecasts for our business, financial and operating results and future economic performance; statements of management’s goals and objectives; trends affecting our financial condition, results of operations or future prospects; statements regarding our financing plans or growth strategies; statements concerning litigation or other matters; and other similar expressions concerning matters that are not historical facts. Words such as “may,” “will,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes” and “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking statements.

Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times, or by which, that performance or those results will be achieved. Forward-looking statements are based on information available at the time they are made and/or management’s good faith beliefs as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause these differences include, but are not limited to:

Potential investors should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. Potential investors should not make an investment decision based solely on our company’s.

The specific discussions herein about our company include future expectations about our company’s business. The expectations are presented in this offering circular only as a guide about future possibilities and do not represent actual amounts or assured events. All estimates are based exclusively on our company management’s own assessment of its business, the industry in which it works and the economy at large and other operational factors, including capital resources and liquidity, financial condition, fulfillment of contracts and opportunities. The actual results may differ significantly from our expectations.

TABLE OF CONTENTS

Please read this offering circular carefully. It describes our business, our financial condition and results of operations. We have prepared this offering circular so that you will have the information necessary to make an informed investment decision.

You should rely only on the information contained in this offering circular. We have not, and the underwriter has not, authorized anyone to provide you with any information other than that contained in this offering circular. We are offering to sell, and seeking offers to buy, the securities covered hereby only in jurisdictions where offers and sales are permitted. The information in this offering circular is accurate only as of the date of this offering circular, regardless of the time of delivery of this offering circular or any sale of the securities covered hereby. Our business, financial condition, results of operations and prospects may have changed since that date. We are not, and the underwriter is not, making an offer of these securities in any jurisdiction where the offer is not permitted.

For investors outside the United States: We have not, and the underwriter has not, taken any action that would permit this offering or possession or distribution of this offering circular in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this offering circular must inform themselves about, and observe any restrictions relating to, the offering of the securities covered hereby or the distribution of this offering circular outside the United States.

This offering circular includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We believe that the data obtained from these industry publications and third-party research, surveys and studies are reliable. We are ultimately responsible for all disclosure included in this offering circular.

We further note that the representations, warranties and covenants made by us in any agreement that is filed as an exhibit to the offering statement of which this offering circular is a part were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating risk among the parties to such agreements, and should not be deemed to be a representation, warranty or covenant to you. Moreover, such representations, warranties or covenants were accurate only as of the date when made. Accordingly, such representations, warranties and covenants should not be relied on as accurately representing the current state of our affairs.

WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY INFORMATION OR REPRESENT ANYTHING NOT CONTAINED IN THIS OFFERING CIRCULAR. YOU SHOULD NOT RELY ON ANY UNAUTHORIZED INFORMATION. THIS OFFEIRNG CIRCULAR IS NOT AN OFFER TO SELL OR BUY ANY SECURITIES IN ANY STATE OR OTHER JURISDICTION IN WHICH IT IS UNLAWFUL. THE INFORMATION IN THIS OFFERING CIRCULAR IS CURRENT AS OF THE DATE ON THE COVER. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS OFFERING CIRCULAR.

RISK FACTORS

An investment in our shares of series A preferred stock involves a high degree of risk. You should carefully read and consider all of the risks described below, together with all of the other information contained or referred to in this offering circular, before making an investment decision with respect to our securities. If any of the following events occur, our financial condition, business and results of operations (including cash flows) may be materially adversely affected. In that event, the value of your shares of series A preferred stock could decline, and you could lose all or part of your investment.

RISKS RELATED TO OUR BUSINESS AND OUR INDUSTRY

The coronavirus pandemic may cause a material adverse effect on our business.

In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China. The virus has since spread to over 150 countries and every state in the United States. On March 11, 2020, the World Health Organization declared the outbreak a pandemic, and on March 13, 2020, the United States declared a national emergency.

The spread of the virus in many countries continues to adversely impact global economic activity and has contributed to significant volatility and negative pressure in financial markets. The pandemic has had, and could have a significantly greater, material adverse effect on the U.S. economy as a whole, as well as the local economy where we conduct our operations. The pandemic has resulted, and may continue to result for an extended period, in significant disruption of global financial markets, which may reduce our ability to access capital in the future, which could negatively affect our liquidity.

Most states and cities have reacted by instituting quarantines, restrictions on travel, “stay at home” rules and restrictions on the types of businesses that may continue to operate, as well as guidance in response to the pandemic and the need to contain it.

The coronavirus pandemic could result in social, economic and labor instability that adversely affects our employee and customer relationships and pre-need sales activity, and in so doing adversely affects our business, financial condition, results of operations and cash flows. For example, governmental actions restricting public gatherings and interaction may result in our customers deferring making purchase decisions regarding pre-need arrangements or delaying holding funeral services and may result in our inability to operate our funeral homes, which would have an adverse impact on our business, financial condition, results of operations and cash flows. Having to adjust our policies and practices to respond to global health concerns could also result in increased operating expenses. We continue to monitor this public health crisis and its impact on our employees, customers and vendors and the overall economic environment within the U.S. and worldwide, but we cannot presently predict the full scope and severity of the disruptions caused by the coronavirus pandemic on our business, financial condition, results of operations and cash flows.

If the current pace of the pandemic cannot be slowed and the spread of the virus is not contained, our business operations could be further delayed or interrupted. We expect that government and health authorities may announce new or extend existing restrictions, which could require us to make further adjustments to our operations in order to comply with any such restrictions. We may also experience limitations in employee resources. In addition, our operations could be disrupted if any of our employees were suspected of having the virus, which could require quarantine of some or all such employees or closure of our facilities for disinfection. We may also delay or reduce certain capital spending and related projects until the travel and logistical impacts of the pandemic are lifted, which will delay the completion of such projects. The duration of any business disruption cannot be reasonably estimated at this time but may materially affect our ability to operate our business and result in additional costs.

Further, our customers’ financial condition may be adversely impacted as a result of the impacts of the coronavirus and efforts taken to prevent its spread, which could result reduced revenue and profitability as customers opt for lower cost options.

The extent to which the pandemic may impact our results will depend on future developments, which are highly uncertain and cannot be predicted as of the date of this prospectus, including new information that may emerge concerning the severity of the pandemic and steps taken to contain the pandemic or treat its impact, among others. Nevertheless, the pandemic and the current financial, economic and capital markets environment present material uncertainty and risk with respect to our performance, financial condition, results of operations and cash flows.

We may not be able to identify, complete, fund or successfully integrate additional funeral home business acquisitions, which could have an adverse effect on our results of operations.

A primary component of our business strategy is to grow through acquisitions of funeral homes at attractive prices and on favorable terms. We cannot assure you that we will be able to identify and acquire businesses on terms favorable to us or at all. We may face competition from other death care companies in making acquisitions. Industry consolidation or rising valuations could lead to a dearth of suitable acquisition targets. To date, we have funded our initial acquisitions primarily through senior debt facilities and seller financing, with limited up front equity (cash) contributions to transactions. Our ability to make acquisitions in the future may be limited by our inability to secure adequate financing, restrictions under our existing or future debt agreements, competition from third parties, or a lack of suitable properties.

In addition, if we complete acquisitions, we may encounter various associated risks, including the possible inability to integrate an acquired business into our operations, diversion of management’s attention, and unanticipated problems or liabilities, some or all of which could have a material adverse effect on our operations and financial performance. We cannot predict the competitive dynamics in a specific market after we acquire a funeral home business. We cannot assure you that we will source, close and effectively provide management services to additional funeral businesses that we do not own.

We are dependent upon highly qualified personnel, including our current management, and the loss of such personnel is a risk to our success.

We will be substantially dependent upon current and future management team members who have experience in our business and complementary firms, to carry out our business plan. A component of our business strategy is to purchase businesses that we believe already employ high quality managers and licensed and unlicensed employees and then retain them after we acquire the firm. We are highly dependent upon the efforts of our acquired businesses’ management and technically skilled personnel, including licensed funeral directors, insurance sales representatives and additional staff, and our future performance will depend in part upon the ability of management to manage growth effectively and to retain the services of these full time and contract employees. Because competition for high quality management, technical and other personnel is intense, we may be unable to retain our key employees or attract other highly qualified employees in the future.

The loss of the services of any of our management team members or the failure to attract and retain additional key employees could have a material adverse effect on our business, financial condition and results of operations. In particular, the success of our business is substantially dependent on the continued services and on the performance of our senior executives including our Chief Executive Officer, Dennis L. Smith, who have extensive experience and expertise in our business and have led our company to execute its business model and strategy during the most recent phase of our growth. While we intend to provide the management team members long-term incentive compensation arrangements to retain them, the loss of the services of Mr. Smith, or the additional members of the management team could harm our business and prospects. We currently do not have key man life insurance policies on our executives.

The death care business and funeral home industry continues to be competitive, both generally and in our target markets.

We face competition in all of our markets. Most of our competitors are and will be independent operations. Our ability to compete successfully depends on our management’s forward vision, timely responses to changes in the business environment, our funeral homes’ ability to maintain a good reputation and high professional standards as well as offer products and services at competitive prices. We anticipate that additional consolidators will enter the industry and likely pursue acquisitions in our market areas, potentially increasing the average consideration required to successfully purchase a funeral home business. If we face price competition in our markets, or if local competitors successfully exploit the fact that our acquired businesses are now owned by a perceived “corporate consolidator,” we may not be able to successfully execute our business plan in a particular market. If we are unable to successfully compete in our markets, our financial condition, results of operations and cash flows could be materially adversely affected.

Our financial results could be negatively affected if acquisitions fail to perform as expected or we realize unexpected liabilities.

Our capital deployed to acquire funeral home acquisitions may be significant individually or in the aggregate. As a result, if a significant investment in one or more businesses fails to perform as expected, our financial results could be more negatively affected and the magnitude of the loss could be more significant than if we had made smaller investments in more businesses. Our financial results could be negatively affected if any of our acquired businesses encounter unexpected financial burdens and fail to perform as expected. Additionally, though our acquisitions are typically structured as asset purchases which somewhat alleviate potential costs and problems associated with unknown liabilities, we may experience various liabilities unknown at the time of acquisition, negatively impacting our expenses, brand and reputation, and our company’s attention required to address such circumstances.

Failure to maintain effective internal control over financial reporting could adversely affect our results of operations.

The accuracy of our financial reporting depends on the effectiveness of our internal control over financial reporting. Internal control over financial reporting can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements and may not prevent or detect misstatements because of its inherent limitations. If we do not maintain effective internal control over financial reporting or implement controls sufficient to provide reasonable assurance with respect to the preparation and fair presentation of our financial statements, our results of operations could be materially adversely affected.

Demand for our products and services are dependent on death rates and are influenced by a variety of general economic factors.

Key drivers of demand are death rates and overall trends related to the national and local economies. While death rates generally have been increasing, medical advances could reverse that trend and negatively impact demand in the funeral services business. Spending on funeral services and related products is dependent on general economic factors; in times of economic distress consumers spend less on funeral services and related products. If the US experiences a general economic downturn, our business results may suffer.

Our operating results may involve significant fluctuations.

Various factors contribute to significant periodic and seasonal fluctuations in our results of operations. These factors include the following:

Accordingly, you should not rely on the results of any period as an indication of our future performance.

An increase in cremation rates would negatively impact total industry revenue and potentially impact our revenue and profitability.

Cremations on average generate approximately 20% of our revenues with the remaining 80% primarily related to traditional burial services. According the Cremation Association of North America, or CANA, cremations accounted for approximately 53.1% of US funeral services in 2018, an increase of 7.9% over a five-year period (i.e., 45.2% in 2013). This change represents an annual growth rate of 1.58% which is expected to continually rise as consumer preferences evolve. Our management has focused on providing consumers with an expanded product and service offering related to cremation memorial services, resulting in higher than market average revenue and profit per case. We have invested heavily in training our staffs on the importance of memorial services when cremation is chosen as a final disposition at our business locations. If we are unable to successfully expand our cremation memorialization products and services and increase revenue per case at our acquired businesses and cremations remain a significant percentage of our funeral services, however, our financial condition, results of operations, and cash flows could be materially adversely affected.

Increasing death benefits related to preneed funeral contracts funded through life insurance contracts may not cover future increases in the cost of providing a price-guaranteed funeral service.

We sell price-guaranteed preneed funeral contracts through various programs providing for future funeral services at prices prevailing when the agreements are signed. Typically, there is an increasing death benefit associated with the contract that may vary over the contract life. There is no guarantee that the increasing death benefit will cover future increases in the cost of providing a price-guaranteed funeral service, and any such excess cost could be materially adverse to our future cash flows, revenue, and operating margins.

The financial condition of third-party insurance companies that fund our preneed contracts may impact our future revenue.

Where permitted, customers may arrange their preneed contracts by purchasing life insurance or annuity policies from third-party insurance companies. The customer/policy holder assigns the policy benefits to us as payment for their preneed contract at the time of need. If the financial condition of the third-party insurance companies were to deteriorate materially because of market conditions or otherwise, there could be an adverse effect on our ability to collect all or part of the proceeds of the life insurance policies, including the annual increase in the death benefits, if we fulfill the preneed contract at the time of need. Failure to collect such proceeds could have a material adverse effect on our financial condition, results of operations, and cash flows.

We have employed a significant amount of leverage to fund acquisitions, an approach we expect to continue.

Bank debt and seller financing have accounted for as much as 100% of the purchase price of certain of our acquisitions. As a result, total senior debt has accounted for up to approximately 70% of our transaction capital structure. We expect to use proceeds from this Offering to provide additional upfront equity capital to fund acquisitions going forward, which we believe may also enhance our ability to secure lending facilities on relatively more favorable terms than if we did not contribute equity capital to transactions. An unexpected downturn related to revenue at our acquired businesses, or increased one time or ongoing expenses experienced by our funeral homes, may impair our ability to service our debt payments and/or pay down our lending facilities.

Changes in economic conditions, including, for example, interest rates, exchange rates, inflation rates, industry conditions, competition, technological developments, political and diplomatic events and trends, tax laws and innumerable other factors, can affect substantially and adversely the business and prospects of our company. While recent indicators suggest modest improvement in the capital markets, there is no assurance that these conditions will not worsen. If these conditions continue or worsen, the prolonged period of market illiquidity may have an adverse effect on the value of our company’s ability to secure senior debt or other forms of capital. None of these conditions will be foreseeable or within the control of our company.

Rising interest rates would lead to higher costs of financing and more stringent terms associated with our debt facilities.

Recent interest rates have been lower than on average over the past twenty years. We anticipate that our lending facilities will include variable interest rates. As our strategy is reliant on senior lending facilities to finance our acquisitions, either through commercial banks or private debt providers, a rise in interest rates would negatively impact earnings and could lead to a slowing in acquisition-related growth. Additionally, we have financed our initial acquisitions with seller financing, such as promissory notes, on relatively favorable terms associated with interest rates, term to maturity, subordination and other material terms. If we are unable to secure similar terms from sellers in the future due to a rise in interest rates generally or if fewer sellers are willing to accept a portion of an acquisition in seller financing, or other market conditions including economic and industry trends, we may experience higher costs of financing our acquisitions.

The sale of our products and services and our local market shares depend to some extent on our reputation.

Reputation is considered a key driver of funeral home selection. Any future degradation of our brand equity or the reputations and brands of our acquired businesses could negatively impact operating results.

Lack of specific performance provisions in our independent operating company option agreements could result in our inability to acquire all or a controlling interest in one of more of the independent operating companies.

We have option agreements in place to acquire, at our option, 100% of the ownership interests in four of the six independent operating companies, and 99% and 99.5%, respectively, in the remaining two independent operating companies. Although each of these option agreements grants us an exclusive right to acquire the specified ownership interests from the members of these companies and any certificates evidencing membership interests in these companies are required, pursuant to the terms of the option agreements, to bear a legend referencing the existence of our option agreement, none of these option agreements contains a specific performance provision that would provide an effective remedy if one or more members of one or more of the independent operating companies were to decide not to honor our right to exercise the options or to sell their membership interests to a third party. As such, we cannot be sure that we will be able to successfully exercise these option agreements and to take ownership of the independent operating companies or that we would be entitled to damages if a contra-party were to breach one of these agreements. A failure to exercise one or more of the option agreements because of a contra-party breach could result in a materially adverse effect on our business.

RISKS RELATED TO THE REGULATORY AND LEGAL ASPECTS OF OUR BUSINESS

Regulation and compliance could have a material adverse impact on our financial results.

Our operations are subject to regulation, supervision, and licensing under numerous federal, state, and local laws, ordinances, and regulations, including extensive regulations concerning trust funds, preneed sales of funeral and cemetery products and services, and various other aspects of our business. For example, the funeral home industry is regulated by the Federal Trade Commission (“FTC”), which requires funeral homes to take actions designed to protect consumers. Our facilities are also subject to stringent health, safety and environmental regulations. Violations of applicable laws could result in fines or sanctions against us, including the loss of licenses necessary to operate the businesses lawfully. Businesses in general are subject to the impact of recent major legislation, including the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). Many provisions of these complex laws could impact our business, and many of the provisions require implementation through regulations that have not yet been promulgated.

Although we do not know the ultimate impact of these laws, we expect such laws will increase our costs and the potential risks of failure to comply. In addition, from time to time, governments and agencies propose to amend or add regulations, which could increase costs and decrease cash flows. For example, foreign, federal, state, local, and other regulatory agencies have considered and may enact additional legislation or regulations that could affect the death care industry. These include regulations that require more liberal refund and cancellation policies for preneed sales of products and services, increase trust deposit requirements, require the deposit of funds or collateral to offset unrealized losses of trusts, and/or prohibit the common ownership of funeral homes and cemeteries in the same market. If adopted by the regulatory authorities of the jurisdictions in which we operate, these and other possible proposals could have a material adverse effect on our financial condition, results of operations, and cash flows.

Compliance with laws, regulations, industry standards, and customs concerning burial procedures and the handling and care of human remains is critical to the continued success of our business and any operations we may acquire. Litigation and regulatory proceedings regarding these issues could have a material adverse effect on our financial condition, results of operations, and cash flows. We are continually monitoring and reviewing our operations and completing risk assessments in an effort to ensure that we are in compliance with these laws, regulations, and standards and, where appropriate, taking appropriate corrective action. However, we cannot ensure investors that a business will be at all times fully in compliance with any of these laws and regulations, or that employees at individual businesses or service providers with which we contract will not violate them.

If state laws or their interpretations change, or new laws are enacted relating to the ownership of funeral homes and/or cemeteries, our business, financial condition and results of operations could be adversely affected.

Some state laws restrict ownership of funeral homes to licensed funeral directors and/or to funeral directors who are licensed in that particular state, and these restrictions typically vary from state to state. If state laws change or new laws are enacted that prohibit us from managing funeral homes in those instances, then our business, financial condition and results of operations could be adversely affected. In some cases, we may acquire cemeteries, typically as part of a multi-business acquisition. Some states require cemeteries to be organized in the nonprofit form but permit those nonprofit entities to contract with for-profit companies for management services. If state laws change or new laws are enacted that prohibit us from managing cemeteries in those states, then our business, financial condition and results of operations could be adversely affected. Additionally, several states are implementing laws that restrict the types of activities companies commonly employ to solicit potential customers of preneed insurance. Although we are not currently engaging in any active preneed marketing efforts, if any of these regulations impede our ability to cost- effectively grow our preneed business or if, in the future when and if we engage in preneed marketing efforts in any of these states, we potentially violate (unknowingly or otherwise) such new rules and regulations, our preneed initiatives may fail to perform.

If state laws or interpretations of existing state laws change or if new laws are enacted, we may be required to increase trust/escrow deposits or to alter the timing of withdrawals from trusts/escrows, which may have a negative impact on our revenues and cash flow.

We are required by most state laws to deposit specified percentages of the proceeds from our preneed sales of funeral services and merchandise into merchandise and service trusts and, once we own cemetery assets, at-need and pre-need sales of interment rights into endowment care trusts. These laws also determine when we are allowed to withdraw funds, whether principal or interest, from those trusts/escrows. If those laws or the interpretations of those laws change or if new laws are enacted, we may be required to deposit more of the sales proceeds we receive from our sales into the trusts/escrows or to defer withdrawals from the trusts/escrows, thereby decreasing our cash flow until we are permitted to withdraw the deposited amounts. This could also reduce our cash available for distribution.

We face risks associated with general liability, civil claims and misconduct, which we may not be able to foresee or control.

Our company faces a general inherent business risk of exposure to service liability and civil claims. A successful claim brought against our company or one of our individual funeral businesses in excess of available insurance coverage, or any claim that results in significant adverse publicity against our company, would have a material adverse effect on our company’s business and financial condition. If an employee, contractor, and/or service provider associated with one of our acquired companies becomes involved in a civil or criminal litigation, our business results could suffer.

Our financial results could be negatively affected if we cannot negotiate favorable agreements with industry vendors and service providers.

A core component of our strategy involves executing agreements with vendors and service providers that are more favorable than those of our acquired firms or a company that currently generates our volume of business. An example of this type of strategic vendor is Hillenbrand Industries/Batesville Casket Company, together with its subsidiaries, such as Batesville Interactive. These agreements allow us to quickly lower costs of goods sold and generate higher gross profit and EBITDA margins after close of an acquisition. If we are unable to negotiate similar agreements or satisfy the minimum volume and other terms in our existing contractual agreements, our financial results could be negatively impacted.

We are subject to environmental and health and safety laws and regulations that may adversely affect our operating results.

Our funeral home operations are subject to numerous federal, state and local environmental and health and safety laws and regulations, as will any future cemetery operations. We may become subject to liability for the removal of hazardous substances and solid waste under the Comprehensive Environmental Response, Compensation, and Liability Act, or CERCLA, and other federal and state laws. Under CERCLA and similar state laws, strict, joint and several liability may be imposed on various parties, regardless of fault or the legality of the original disposal activity. Our funeral home and future cemetery and crematory operations will include the use of some materials that may meet the definition of “hazardous substances” under CERCLA or state laws and thus may give rise to liability if released to the environment through a spill or release. We cannot assure you that we will not face liability under CERCLA or state laws for any environmental conditions at our facilities, and we cannot assure you that these liabilities will not be material. Our funeral home and potential future cemetery operations are subject to regulation of underground and above ground storage tanks and laws managing the disposal of solid waste. If new requirements under local, state or federal laws were to be adopted, and were more stringent than existing requirements, new permits or capital expenditures may be required.

Our funeral home operations are generally subject to federal and state laws and regulations regarding the disposal of medical waste, and are also subject to regulation by federal, state or local authorities under the EPCRA. We are required by EPCRA to maintain, and report, to the regulatory authorities, if applicable thresholds are met, a list of any hazardous chemicals and extremely hazardous substances, which are stored or

used at our facilities.

We expect to acquire crematory operations in the future, either as part of a multi-location purchase or outright. Our future crematory operations may be subject to regulation under the federal Clean Air Act and any analogous state laws. If new regulations applicable to our crematory operations were to be adopted, they could require permits or capital expenditures that could increase our costs of operation and compliance.

RISKS RELATED TO THIS OFFERING AND OWNERSHIP OF THE SERIES A PREFERRED STOCK

The securities being offered will not be publicly tradable following the Offering and there is no assurance that there will ever be a public market for our Securities at any time.

There is no public trading market for our securities at this time and we cannot assure you that any market for our securities will ever develop. We have no plans to pursue a public market for our securities, and we cannot assure that we will ever register our securities or become a publicly traded company. Our securities are not readily marketable, and their value may be subject to adverse conditions that are impossible to predict. There can be no assurance that if it becomes necessary to sell or transfer our series A preferred stock, a buyer could be found, or a suitable purchase price could be obtained. With no public trading market, it may be extremely difficult or impossible for you to resell your series A preferred stock if you should desire to do so. In addition, there can be no assurance that, in the event you are able to find a purchaser for your series A preferred stock, that you will be able to resell such securities at the price you paid in this offering. Therefore, prospective investors who require liquidity in their investment should not rely upon the series A preferred stock being offered under this offering as a short-term component of their return on investment.

This is a fixed price offering and the fixed offering price may not accurately represent the current value of us or our assets at any particular time. Therefore, the purchase price you pay for our shares may not be supported by the value of our assets at the time of your purchase.

This is a fixed price offering, which means that the offering price for our shares is fixed and will not vary based on the underlying value of our assets at any time.  Our board of managers has determined the offering price in its sole discretion.  The fixed offering price for our shares has not been based on appraisals of any assets we own or may own, or of our company as a whole, nor do we intend to obtain such appraisals.  Therefore, the fixed offering price established for our shares may not be supported by the current value of our company or our assets at any particular time.

Management has broad discretion in using the proceeds from this Offering.

We plan to use the proceeds from this offering to fund acquisitions pursuant to existing option agreements with certain of our operating businesses and for debt repayment. We have broad discretion in the application of proceeds and the timing of the expenditure of the proceeds of this Offering. If we fail to apply the proceeds effectively, we may not be successful in implementing our business plan. You will not have the opportunity to evaluate all of the economic, financial or other information upon which we base our decisions.

You will not have a vote or influence on the management of our company.

All decisions with respect to the management of our company will be made exclusively by the officers, directors, managers or employees of our company. You, as an investor in our series A preferred stock, have very limited voting rights and will have no ability to vote on issues of company management and will not have the right or power to take part in the management of our company and will not be represented on the board of directors of our company. Accordingly, no person should purchase our series A preferred stock unless he or she is willing to entrust all aspects of management to our company.

We may amend our business policies without stockholder approval.

Our board of directors determines our growth, investment, financing, capitalization, borrowing, operations and distributions policies. Although our board of directors has no intention at present to change or reverse any of these policies, they may be amended or revised without notice to holders of our series A preferred stock. Accordingly, holders of our series A Preferred stock will not have any control over changes in our policies. We cannot assure you that changes in our policies will serve fully the interests of all holders of our series A preferred stock.

We cannot assure you that we will be able to pay dividends.

Our ability to pay dividends on our series A preferred stock is dependent on our ability to operate profitably and to generate cash from our operations and the operations of our operating businesses. We cannot guarantee that we will be able to pay dividends as required by the terms of our series A preferred stock. 

Certain provisions of our proposed amended and restated charter may make it more difficult for a third party to effect a change-of-control.

Our amended and restated charter which we expect to file with the Secretary of State of the State of Delaware immediately prior to the initial closing of this offering will authorize our board of managers to issue up to a certain number of shares of preferred stock. The preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance by our board of managers without further action by the stockholders. These terms may include voting rights including the right to vote as a series on particular matters, preferences as to dividends and liquidation, conversion rights, redemption rights and sinking fund provisions. The issuance of any preferred stock could diminish the rights of holders of existing shares, and therefore could reduce the value of such shares. In addition, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with, or sell assets to, a third party. The ability of our board of managers to issue preferred stock could make it more difficult, delay, discourage, prevent or make it costlier to acquire or effect a change-in-control, which in turn could prevent our stockholders from recognizing a gain in the event that a favorable offer is extended and could materially and negatively affect the value of our common stock.

Upon the completion of this offering, we do not expect to elect to become a public reporting company under the Exchange Act, or publicly report on an ongoing basis as an “emerging growth company” under the reporting rules set forth under the Exchange Act. In any case, we will be required to publicly report on an ongoing basis under the reporting rules set forth in Regulation A for Tier 2 issuers. As such, we will be subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not “emerging growth companies,” and our stockholders could receive less information than they might expect to receive from more mature public companies.

Upon the completion of this offering, we do not expect to elect to become a public reporting company under the Exchange Act. If we were to elect to do so, we would be required to publicly report on an ongoing basis as an “emerging growth company” (as defined in the JOBS Act) under the reporting rules set forth under the Exchange Act. For so long as we were to remain an “emerging growth company,” we would be able to take advantage of certain exemptions from various reporting requirements that are applicable to other Exchange Act reporting companies that are not “emerging growth companies,” including but not limited to:

A company could remain an “emerging growth company” for up to five years, although if the market value of its common stock that is held by non-affiliates exceeds $700 million as of any June 30 before that time, such company would cease to be an “emerging growth company” as of the following December 31.

We do not expect to elect to become a public reporting company under the Exchange Act and we will be required to publicly report on an ongoing basis under the reporting rules set forth in Regulation A for Tier 2 issuers. The ongoing reporting requirements under Regulation A are more relaxed than for “emerging growth companies” under the Exchange Act. The differences include, but are not limited to, being required to file only annual and semiannual reports, rather than annual and quarterly reports. Annual reports are due within 120 calendar days after the end of the issuer’s fiscal year, and semiannual reports are due within 90 calendar days after the end of the first six months of the issuer’s fiscal year.

In either case, we will be subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not “emerging growth companies,” and our stockholders could receive less information than they might expect to receive from more mature public companies.

We may not raise sufficient funds to implement our business plan.

In our Use of Proceeds discussion below, we present a table showing our expected uses of proceeds assuming the sale of 25%, 50%, 75% and 100% of the securities offered for sale in this offering by us. If we fail to sell at least 25% of the series A preferred stock we are offering, we may not be able to implement a material portion of our planned use of proceeds. This could have a deleterious effect on your investment in us.

We may terminate this Offering at any time during the Offering period.

We reserve the right to terminate this Offering at any time, regardless of the number of shares sold. In the event that we terminate this Offering at any time prior to the sale of all of the shares offered hereby, whatever amount of capital that we have raised at that time will have already been utilized by our company and no funds will be returned to subscribers.

USE OF PROCEEDS

We estimate that we will receive net proceeds of approximately $10,882,000 if the maximum number of shares of series A preferred stock being offered are sold after deducting the estimated underwriting discount and estimated offering expenses payable by us.

The following table below sets forth the uses of proceeds assuming the sale of 25%, 50%, 75% and 100% of the securities offered for sale in this offering by us. For further discussion, see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

For a description of the material terms of the indebtedness listed in the use of proceeds table above, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources,” below.

We intend to use the net proceeds from this offering to fund acquisitions pursuant to the exercise of existing option agreements with certain of our operating businesses and for debt repayment.

As of the date of this offering circular and except as explicitly set forth herein, we cannot specify with certainty all of the particular uses of the net proceeds from this offering. Pending use of the net proceeds from this offering as described above, we may invest the net proceeds in short-term interest-bearing investment grade instruments.

The expected use of net proceeds from this offering represents our intentions based upon our current plans and business conditions, which could change in the future as our plans and business conditions evolve and change. The amounts and timing of our actual expenditures, specifically with respect to working capital, may vary significantly depending on numerous factors. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering.

The above description of the anticipated use of proceeds is not binding on us and is merely a description of our current intentions. We reserve the right to change the above use of proceeds if management believes it is in the best interests of our company.

DETERMINATION OF OFFERING PRICE

There will be no trading market for our series A preferred stock upon issuance and we do not expect any trading market to develop for the series A preferred stock. The series A preferred stock is being sold at a price of $10.00 per share, or the original issue price, and it is expected that at some time after the initial closing of this offering we will exercise our right to call the series A preferred stock for redemption at a call price equal to 150% of the original issue price, or that, after the fifth anniversary of the initial closing of this offering, holders of the series A preferred stock will exercise their right to put their shares of series A preferred stock to us at 150% of the original issue price. Accordingly, the $10.00 price per share of series A preferred stock is arbitrary and represents the amount of investment made by an investor for purposes of determining the redemption price upon a put or call (i.e., the redemption price will be 150% of the purchase price or $15.00 per share of series A preferred stock).

DIVIDEND POLICY

Dividends on the series A preferred stock being offered will be cumulative and payable quarterly in arrears to all holders of record on the applicable record date. Holders of our series A preferred stock will be entitled to receive cumulative dividends in the amount of $0.175 per share each quarter, which is equivalent to the annual rate of 7% of the $10.00 original per share purchase price; provided that upon an event of default (generally defined as our failure to pay dividends when due or to redeem shares when requested by a holder), such amount shall be increased to $0.25 per quarter, which is equivalent to the annual rate of 10% of the $10.00 original per share purchase price. Dividends on shares of our series A preferred stock will continue to accrue even if any of our agreements prohibit the current payment of dividends or we do not have earnings.

Our anticipated source of funds to pay the cumulative dividends for our series A preferred stock will be from net operating income, retained earnings and the proceeds of the refinancing of our other indebtedness.  We believe that our net operating income will increase as we deploy the funds raised in this offering in a manner consistent with the use of proceeds described in this offering circular.  We expect that our retained earnings will increase as we increase net operating income and we expect to refinance other indebtedness on our properties based upon our increased net operating income and then use the proceeds of such refinancing along with our retained earnings to repay investors.

See also “Risk Factors—Risks Related to this Offering and Ownership of Our series A preferred stock—We cannot assure you that we will be able to pay dividends.”

We have never declared dividends or paid cash dividends on our common stock. Our board of directors will make any future decisions regarding dividends. We currently intend to retain and use any future earnings for the development and expansion of our business and, other than as indicted above with respect to the series A preferred stock, we do not anticipate paying any cash dividends in the near future. Our board of directors has complete discretion on whether to pay dividends. Even if our board of directors decides to pay additional dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.

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

The following management’s discussion and analysis of financial condition and results of operations provides information that management believes is relevant to an assessment and understanding of our plans and financial condition. The following selected financial information is derived from our historical financial statements should be read in conjunction with such financial statements and notes thereto set forth elsewhere herein and the “Cautionary Note Regarding Forward-Looking Statements” explanation included herein.

Overview

We acquire and operate funeral homes and related businesses, primarily in Level C and Level D metropolitan area markets in the United States. We are a Delaware corporation that was incorporated on January 31, 2020, but we were formed originally as a Delaware limited liability company on December 11, 2012 under the name PF Management Services, LLC. We converted from a limited liability company to a corporation in Delaware on February 1, 2020. We serve as the management company for one wholly owned and six affiliated, independent operating businesses, all of which we refer to as the operating businesses. We refer to the six affiliated, independent operating businesses, which are independent legal entities, as the independent operating companies. Based in Naples, Florida, we operate seven businesses with 14 locations on a consolidated basis and we plan to operate in 23 states located throughout the Midwest, Mid-South, Appalachian, Mid-Atlantic and Mid-Eastern regions of the United States. These target markets represent our current base of businesses and other markets where we plan to operate in the future. These are the same markets in which our senior management team has operated death care and complementary businesses throughout their careers.

We serve as the management company for the operating businesses of the Remembrance Group, a brand name used to describe our consolidated operating businesses. We provide consulting and management services, such as accounting and bookkeeping services, developing operational plans, and workforce management and recruitment to Remembrance Group’s funeral homes and other non-competing clients. We employ Remembrance Group’s executive officers and have contractual management administrative services agreements, which we refer to as MSAs, with each of Remembrance Group’s six independent operating companies. The MSAs in effect enable the independent operating companies to operate with us on a consolidated basis.

We also have option agreements in place, which we refer to as the option agreements, to acquire, at our option, 100% of the ownership interests in four of the six independent operating companies, and 99% and 99.5%, respectively, in the remaining two independent operating companies. For a detailed discussion of these option agreements, see “Business – Our Option Agreements,” below.

Recent Developments

On February 14, 2020, the Company entered into an agreement to divest one of its funeral home businesses that was not majority owned by the Company but whose financial results were included in the Company’s consolidated financial data as of December 31, 2019 and 2018. The Company has entered into a long-term management agreement with this funeral home business and will receive management fees but will no longer exert the power to direct the activities that most significantly impact this operating business entity’s economic performance. Therefore, the financial results of this business will no longer be included in the Company’s consolidated financial results. The initial term of this agreement is three years, which may be renewed by mutual agreement of the parties. The services to be provided under this agreement are the same as those services provided by the Company under its administrative services agreements with the operating businesses of the Remembrance Group (for a description of these services, see “Our Business – Our Management Services and Fees,” below). We will receive a base management fee, to be paid on a monthly basis, equal to six percent (6%) of the gross revenue of the divested business; however, this business will not be required to pay the first $450,000 of the base management fee so that it can use such funds to pay outstanding promissory note obligations assumed under the divestiture. We will also be reimbursed for all expenses, payments, fees, and other costs incurred by us on behalf of this business. Additionally, if there is a change of control in this business, we will be entitled to a cash fee equal to five percent (5%) in year one of the applicable term, three and one-half percent (3.5%) in year two of the applicable term and two percent (2%) in year three of the applicable term, of the aggregate gross consideration paid in connection with the change of control. Management believes that there will be a minimal financial impact on the consolidated financial results from this divesture.

Impact of the COVID 19 Coronavirus

In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China. The virus has since spread to over 150 countries and every state in the United States. On March 11, 2020, the World Health Organization declared the outbreak a pandemic, and on March 13, 2020, the United States declared a national emergency.

Most states and cities have reacted by instituting quarantines, restrictions on travel, “stay at home” rules and restrictions on the types of businesses that may continue to operate, as well as guidance in response to the pandemic and the need to contain it.

Currently, our operations have been deemed essential by the state and local governments in which we operate, and we are actively working with federal, state and local government officials to ensure that we continue to satisfy their requirements for offering our essential services. The operation of all of our facilities is critically dependent on our funeral directors who are considered essential licensed employees and who staff these locations. To ensure the wellbeing of our employees and their families, we have provided all of our employees with detailed health and safety literature and links to video learning on the coronavirus, such as the Center for Disease Control, or CDCs, industry-specific guidelines for working with the deceased who were and may have been infected with the coronavirus. In addition, we have updated and developed new safety-oriented guidelines to support daily field operations and provided personal protection equipment to our employees, and we have implemented work from home policies for all non-essential employees consistent with CDC guidance to reduce the risks of exposure to the coronavirus while still supporting the families that we serve.

We have also begun implementing virtual meeting options using a variety of web-based tools to ensure that we can continue to connect with and meet our customers’ needs in a safe, effective and productive manner. Some of our locations have also started providing live video streaming and recording of their funeral and burial services to our customers, so that family and friends can connect virtually during their time of grief.

Like most businesses world-wide, the coronavirus pandemic has impacted us financially; however, we cannot presently predict the scope and severity with which the coronavirus will impact our business, financial condition, results of operations and cash flows. We expect that throughout this disruption our funeral homes will remain open and available to serve our families in all the locations in which we operate to the extent permitted by local authorities. To date, our death care business and that of our independent operating companies and our and their financial condition and results of operations have not been negatively impacted by the coronavirus. The limitations of the size of gatherings has not impacted our revenues as we have seen no decline in the number of gatherings, only restrictions in numbers in attendance, and, based on current publicly available information concerning the coronavirus and related government actions, we do not expect any material negative future impact on our operations. In the case of pre-need services, although we do not engage in any significant marketing of pre-need services, we do expect our pre-need sales to be challenged during the coronavirus pandemic. See also “Risk Factors” above.

Factors Affecting Our Operations

We track several factors that affect our operations, including the following:

Two significant variables that we focus on are volume and price and we believe those two factors are the main drivers that affect our funeral revenue. We track, monitor and work to improve the average revenue per call, which is our total revenues divided by total death calls received over the same period, and this number is influenced by the mix of burial and cremation services. Overall, our funeral homes have a relatively fixed cost structure.

Results of Operations

Comparison of Years Ended December 31, 2019 and 2018

Revenues. For the year ended December 31, 2019, we had total revenues of $8,854,905, as compared to $9,166,966 for the year ended December 31, 2018, a decrease of $312,061. Service revenue decreased $85,107 from year ended December 31, 2018 to $5,048,660. Property and merchandise revenue increased $88,034 from year ended December 31, 2018 to $3,595,547. The decrease in revenues between the periods was primarily due to a decrease of $314,988 in other revenues. Other revenues for 2018 included a one-time $39,838 investment gain charge as well as operational gains of $121,751 from pre-arranged funeral performance audits which occurred in 2018 on all preneed funeral trust accounts.

Expenses. For the year ended December 31, 2019, we had total expenses of $10,002,506, as compared to $9,928,864 for the year ended December 31, 2018, an increase of 1%. Total expenses for the year ended December 31, 2019 consisted of costs and expenses applicable to revenue of $1,752,413, corporate payroll expenses of $3,171,285, depreciation and amortization expense of $896,005, other operating expenses of $2,351,628 and interest expense of $1,831,175, while total expenses for the year ended December 31, 2018 consisted of costs and expenses applicable to revenue of $1,745,394, corporate payroll expenses of $3,360,865, depreciation and amortization expense of $899,697, other operating expenses of $2,142,244 and interest expense of $1,780,664.

Corporate Payroll. For the year ended December 31, 2019, we had corporate payroll expenses of $3,171,285, or 36% of revenues, as compared to $3,360,865, or 37% of revenues, for the year ended December 31, 2018, a decrease of $189,580 or 6% year over year. Corporate payroll decreased as a result of our on-going efforts in converting fixed labor costs to variable labor costs utilizing more part time employees and contract labor.

Interest Expense. For the year ended December 31, 2019, we had interest expense of $1,831,175, as compared to $1,780,664 for the year ended December 31, 2018, an increase of $50,511. The increase in interest expense was due to additional debt incurred related to our 2019 borrowings of $1,600,000 in convertible unsubordinated debt and contractual annual increases in our capital lease obligations.

Net Loss. The factors described above resulted in a net loss of $1,805,708 for the year ended December 31, 2019, as compared to $1,175,314 for the year ended December 31, 2018.

Liquidity and Capital Resources

As reflected in the accompanying consolidated financial statements, at December 31, 2019, our company had cash and cash equivalents of $459,099, a working capital deficit of $891,468 and an equity deficit of $11,359,739.

In addition to cash generated through operations, we use a variety of sources to fund our cash needs, including bridge loans, which totaled approximately $1,600,000 in 2019.

Our primary sources of liquidity and capital resources are internally generated cash flows from operating activities. We generate cash in our operations primarily from our “at-need” services, that is, services purchased following a death by a family that has not pre-purchased funeral services. Based on our recent operating results, current cash position and anticipated future cash flows, we do not anticipate any significant liquidity constraints in the foreseeable future. However, if our capital expenditures or acquisition plans change, we may need to access the private or public capital markets to obtain additional funding. There can be no assurances, however, that we would be able to raise additional financing on acceptable terms, if at all. Further, to the extent operating cash flow or access to and cost of financing sources are materially different than expected, future liquidity may be adversely affected. Please see “Risk Factors” starting on page 11.

We intend to use cash on hand, cash that we expect to be able to drawn down from a future credit facility with Live Oak for which we currently have a commitment and capital raised under this offering primarily to refinance existing debt and acquire funeral homes. We believe that our existing and anticipated cash resources will be sufficient to meet our anticipated working capital requirements, capital expenditures, scheduled debt payments, commitments, dividends and acquisitions for the foreseeable future.

Indebtedness

Following is a discussion of all of our material indebtedness for borrowed money, which includes a discussion of (a) debt that we incurred within the past twelve months (including debt that we expect to incur under a future credit facility with Live Oak for which we currently have a commitment), (b) debt that we expect to repay in part from the net proceeds of this offering, and (c) other indebtedness of the Company.

Indebtedness that We Have Incurred Within the Past 12 Months

Credit Facility Commitment – Live Oak

On October 23, 2019, Live Oak Bank, which we refer to as Live Oak, issued a commitment letter, committing to provide (i) Premier Funeral Management Services, LLC, (ii) Premier Funeral Management Services III, LLC, (iii) Premier Funeral Management Group, LLC, (iv) Premier Funeral Management Group II, LLC, (v) Premier Funeral Management Group V, LLC, (vi) Premier Funeral Management Group VI, LLC, and (vii) Premier Funeral Management Group VII, LLC, which we refer to as the PFMG Entities, a credit facility in the aggregate principal amount of $7,098,750. The purpose of this credit facility is to refinance debt originally used for business acquisitions as well as funds for the purchase certain commercial real estate by the PFMG Entities.

The future loan will bear interest at a variable rate of the Wall Street Journal Prime Rate (5% as of the date of the agreement) plus 0.75% which will be adjusted every five years and calculated on a 360-day year base. The first payment by the PFMG Entities will be applied to pay interest only, and thereafter, the principal and interest of this loan shall be amortized over 239 months. The maturity date of this loan will be 240 months from the date of the closing of the loan with a 5-year grace period. The PFMG Entities were required to pay a commitment fee of $13,000 upon the signing of the commitment letter which amount will be credited towards a loan to the PFMG Entities of $3,000,322 that will be funded at closing.

The collateral for this credit facility will consist of the first deeds of trust or mortgages for the properties located at:

In addition, Live Oak’s security interest will include a junior position lien on all business assets of the PFMG Entities. The PFMG Entities are also providing corporate guarantees for this credit facility. Live Oak will determine financial covenants for the PFMG Entities under this loan based on the PFMG Entities’ audited financials.

The PFMG Entities will be required to provide to Live Oak quarterly business statements and annual business tax returns and sign IRS Form 4506T to allow Live Oak to access the PFMG Entities’ tax returns. The PFMG Entities must appoint Live Oak as its true attorney in fact for Live Oak to preserve, perfect or enforce its rights in the collateral. PFMG Entities shall bear all costs relating to the making and administration of the loan.

Material Terms of Indebtedness to be Repaid in Part out of the Net Proceeds of this Offering

The following disclosure describes the material terms of the indebtedness we intend to repay in the amounts indicated in the Uses section of the Use of Proceeds table on page 21 above:

SBA Note – Live Oak

On May 13, 2013, Live Oak Banking Company, or Live Oak, issued to Premier Funeral Management Group, LLC, or PFMG, a note in the aggregate principal amount of $1,110,000. The loan under this note was obtained through the U.S. Small Business Administration, or SBA. This note bears interest at a variable rate equal to the Wall Street Journal Prime Rate plus 2.00%, with an initial interest rate of 5.25% per annum. The interest rate on this note will be adjusted every calendar quarter by Live Oak, which adjustment will occur on the first calendar day of each calendar quarter. In the event that SBA purchases the guaranteed portion of the unpaid principal balance, the interest rate becomes fixed at the rate in effect at the time of the earliest uncured payment default. If there is no uncured payment default, the rate becomes fixed at the rate in effect at the time of purchase.

PFMG must pay principal and interest payments of $6,662.43 on the fifth calendar day of each month, beginning two months from May 2013. Each installment payment by PFMG will be first applied to pay interest accrued to the day Live Oak receives the payment, then to bring principal current, then to pay any late fees, and lastly, to reduce principal. Live Oak must adjust the payment amount at least annually as needed to amortize principal over the remaining term of the note. If a scheduled payment on this note is more than 10 days late, Live Oak may charge PFMG a late fee of up to 5% of the unpaid portion of such scheduled payment.

PFMG may prepay 20 percent or less of the unpaid principal balance on this note at any time without notice. If PFMG prepays more than 20 percent and the note has been sold on the secondary market, PFMG must give Live Oak written notice and pay full 21 days’ interest if the notice is given less than 21 days before the prepayment is made. If PFMG prepays more than 25 percent of the outstanding principal balance of the loan in any one of the first three years from the date when the loan is first disbursed, PFMG must pay a prepayment fee of 5%~1% of the total prepayment amount. All remaining principal and accrued interest is due and payable 25 years from the date of the note. PFMG is in default under this note if PFMG does not make a payment when due, or otherwise fails to perform anything required by the note. This note is secured by collateral of PFMG. If PFMG fails to preserve or account to Live Oak’s satisfaction for the collateral or its proceeds, this constitutes an event of default. In addition, where there is a default, Live Oak may take possession of or dispose of the collateral at public or private sale without advertisement.

SBA Note 1 – Midwest Business

On December 12, 2013, Midwest Business Capital, or Midwest Business, issued to Premier Funeral Management Group II, LLC, or PFMG II, a note in the aggregate principal amount of $1,230,000. The loan under this note was obtained through SBA. This note bears interest at a variable rate equal to the Wall Street Journal Prime Rate plus 2.75%, with an initial interest rate of 6.00% per annum. The interest rate on this note will be adjusted every calendar quarter by Midwest Business, which adjustment will occur on the first calendar day of each calendar quarter. In the event that SBA purchases the guaranteed portion of the unpaid principal balance, the interest rate becomes fixed at the rate in effect at the time of the earliest uncured payment default. If there is no uncured payment default, the rate becomes fixed at the rate in effect at the time of purchase.

PFMG II must pay principal and interest payments of $7,913.38 on the first calendar day of each month, beginning one month from December 2013. Each installment payment by PFMG II will be first applied to pay interest accrued to the day Midwest Business receives the payment, then to bring principal current, then to pay any late fees, and lastly, to reduce principal. Midwest Business must adjust the payment amount at least annually as needed to amortize principal over the remaining term of the note. If a scheduled payment on this note is more than 10 days late, Midwest Business may charge PFMG II a late fee of up to 5% of the unpaid portion of such scheduled payment.

PFMG II may prepay 20 percent or less of the unpaid principal balance on this note at any time without notice. If PFMG II prepays more than 20 percent and the note has been sold on the secondary market, PFMG II must give Midwest Business written notice and pay full 21 days’ interest if the notice is given less than 21 days before the prepayment is made. If PFMG II prepays more than 25 percent of the outstanding principal balance of the loan in any one of the first three years from the date when the loan is first disbursed, PFMG II must pay a prepayment fee of 5%~1% of the total prepayment amount. All remaining principal and accrued interest is due and payable 26 years from the date of the note. PFMG II is in default under this note if PFMG II does not make a payment when due, or otherwise fails to perform anything required by the note. This note is secured by collateral of PFMG II. If PFMG II fails to preserve or account to Midwest Business’s satisfaction for the collateral or its proceeds, this constitutes an event of default. In addition, where there is a default, Midwest Business may take possession of or dispose of the collateral at public or private sale without advertisement.

Financial Lease – McFarland Funeral Chapel in North Carolina

On June 17, 2015, Premier Funeral Management Services III, LLC, or PFMS III, and PFMG Holdings, L.L.C., or lessor, entered into a lease agreement with option to purchase, whereby the lessor provides lease-purchase financing to PFMS III. The leased premise is located at 54 McFarland Dr, Tryon, NC 28782, known as “McFarland Funeral Chapel.” The lease has an initial term of approximately seven years commencing on June 17, 2015 and ending on June 30, 2022. PFMS III has an option to extend the initial term for up to three additional renewal terms of seven years each.

During the first year of the term, the annual rent shall be $146,250. In June of each year, starting with June of 2016, if the Consumer Price Index (the “CPI”) for May of the year then is greater than the CPI of the preceding year, the annual rent shall increase by an amount equal to the product of (i) the percentage difference between the foregoing two CPIs, multiplied by (ii) the rent for the year then. Notwithstanding, in no event shall an annual increase in annul rent be less than 2%. In addition, PFMS III shall pay to the lessor each month, in escrow held by the lessor, property taxes or any other public charges levied against the premise and any personal property located within the premise, as well as sales tax assessed on the rent. PFMS III shall also be responsible for paying utilities, insurance (including, without limitation, building and property insurance and comprehensive general liability insurance) and the costs of maintenance and repair with respect to the premise. PFMS III shall maintain a designated deposit account as its primary depositary and remittance bank account and all payments for the indebtedness of PFMS III to the lessor shall be automatically deducted from the deposit account each month by the lessor.

The premise may not be used for any use other than as funeral home, and PFMS III shall not make alterations or additions to the premise in excess of $50,000 without prior writer consent by the lessor. PFMS III shall indemnify the lessor against any losses to the lessor resulting from past, present or future handling of hazardous materials, if any. PFMS III is required to maintain its books and financial records in accordance with generally accepted accounting principles and allow the lessor to inspect such records during normal business hours. PFMS III is prohibited from subletting any portion of the premise or mortgage or transfer any of its rights or interest created by this lease without the lessor’s prior written consent. The lease contains customary financial covenants and events of default. PFMS III agrees to subordinate this lease to the lien of any mortgage or security interest pledged or to be pledged by the lessor, provided that the beneficiaries named in such mortgage or deeds of trust agree in writing (i) to recognize the interest of PFMS III under this lease, (ii) that so long as PFMS III performs its obligations under this Lease, the rights of PFMS III hereunder shall remain in full force and effect, and (iii) that they will not disturb PFMS III’s occupancy of the premise under this lease in the event of foreclosure or other action taken under the mortgage or deed of trust if PFMS III is not then in default.

The lessor has granted PFMS III an option to purchase during the period beginning on July 1, 2022 and ending on the termination of the lease, provided that (i) PFMS III is not in default of this lease, and (ii) PFMS III has paid in full, without incurring additional debt or refinancing with the lessor, the promissory notes entered between PFMS III and the lessor dated the same date as the date of the lease, in the aggregate original principal amount of $795,000. When this lease terminates, this option, if not having been exercised by then, shall terminate automatically. Upon exercise of the option, PFMS III shall pay a purchase price equal to the quotient of (i) the annual rent for the year in which PFMS III’s purchase of the premise is closed pursuant to this option, divided by (ii) 9.75%. If PFMS III exercises the option, it must purchase all of the parcels constituting the premise. The option to purchase can be exercised early during the period from July 1, 2020 to July 1, 2022, for a purchase price equal to the product of (1)(i) the annual rent for the entire year in which PFMS III’s purchase of the premise is closed, multiplied by (ii) the highest annual percentage change in the annual rent during the lease term up to the date of purchase, and multiplied by (iii) this percentage such number of times as if the option were being exercised at the end of the initial term; divided by (2) 9.75%.

Financial Lease – Premier Sharp Funeral Home in Tennessee

On November 5, 2015, Premier Funeral Management Group V, LLC, or PFMG V, and PFMG Holdings, L.L.C., or lessor, entered into a lease agreement with option to purchase, whereby the lessor provides lease-purchase financing to PFMG V. The leased premise is located at 209 Roane Street, Olive Springs, TN 37840, known as “Premier Sharp Funeral Chapel.” The lease has an initial term of approximately seven years commencing on November 5, 2015 and ending on December 31, 2022. PFMG V has an option to extend the initial term for up to three additional renewal terms of seven years each.

During the first year of the term, the annual rent shall be $100,000. On November 1 of each year thereafter, the rent shall increase by 2.50%. In addition, PFMG V shall pay to the lessor each month, in escrow held by the lessor, property taxes or any other public charges levied against the premise and any personal property located within the premise, as well as sales tax assessed on the rent. PFMG V shall also be responsible for paying utilities, insurance (including, without limitation, building and property insurance and comprehensive general liability insurance) and the costs of maintenance and repair with respect to the premise. PFMG V shall maintain a designated deposit account as its primary depositary and remittance bank account and all payments for the indebtedness of PFMG V to the lessor shall be automatically deducted from the deposit account each month by the lessor.

The premise may not be used for any use other than as funeral home, and PFMG V shall not make alterations or additions to the premise in excess of $50,000 without prior writer consent by the lessor. PFMG V shall indemnify the lessor against any losses to the lessor resulting from past, present or future handling of hazardous materials, if any. PFMG V is required to maintain its books and financial records in accordance with generally accepted accounting principles and allow the lessor to inspect such records during normal business hours. PFMG V is prohibited from subletting any portion of the premise or mortgage or transfer any of its rights or interest created by this lease without the lessor’s prior written consent. The lease contains customary financial covenants and events of default. PFMG V agrees to subordinate this lease to the lien of any mortgage or security interest pledged or to be pledged by the lessor, provided that the beneficiaries named in such mortgage or deeds of trust agree in writing (i) to recognize the interest of PFMG V under this lease, (ii) that so long as PFMG V performs its obligations under this Lease, the rights of PFMG V hereunder shall remain in full force and effect, and (iii) that they will not disturb PFMG V’s occupancy of the premise under this lease in the event of foreclosure or other action taken under the mortgage or deed of trust if PFMG V is not then in default.

The lessor has granted PFMG V an option to purchase during the period beginning on November 1, 2022 and ending on the termination of the lease, provided that (i) PFMG V is not in default of this lease, and (ii) PFMG V has paid in full, without incurring additional debt or refinancing with the lessor, the promissory note entered between PFMG V and the lessor dated the same date as the date of the lease, in the original principal amount of $734,000. When this lease terminates, this option, if not having been exercised by then, shall terminate automatically. Upon exercise of the option, PFMG V shall pay a purchase price equal to the product of (i) the annual rent for the year in which PFMG V’s purchase of the premise is closed pursuant to this option, multiplied by (ii) 10.00. If PFMG V exercises the option, it must purchase all of the parcels constituting the premise.

The lease also contains early buyout options with differing buyout terms for years one (1) to four (4) and for years five (5) to seven (7). The option to purchase can be exercised before November 1, 2019, for a purchase price equal to the lessor of (i) the sum of (A) the purchase price calculated as the product of the annual rent in effect at the time of purchase multiplied by 10.00, plus (B) a premium in the amount of 6% of the purchase price so calculated; or (ii) the product of the annual rent for the last year of the initial term, multiplied by 10.00. During the period from November 1, 2019 to November 1, 2022, the purchase price would equal the lessor of (i) the sum of (A) the purchase price calculated as the product of the annual rent in effect at the time of purchase multiplied by 10.00, plus (B) a premium in the amount of 4% of the purchase price so calculated; or (ii) the product of the annual rent for the last year of the initial term, multiplied by 10.00.

Financial Lease – Adams Funeral Chapel in Illinois

On October 12, 2016, Premier Funeral Management Group VII, LLC, or PFMG VII, and PFMG Holdings, L.L.C., or lessor, entered into a lease agreement with option to purchase, whereby the lessor provides lease-purchase financing to PFMG VII. The leased premise is located at 2330 Shawnee Dr, Charleston, IL 61920, known as “Adams Funeral Chapel.” The lease has an initial term of approximately seven years commencing on September 22, 2016 and ending on September 30, 2023. PFMG VII has an option to extend the initial term for up to three additional renewal terms of seven years each.

During the first year of the term, the annual rent shall be $100,000. On October 1 of each year thereafter, the rent shall increase by 2.50%. In addition, PFMG VII shall pay to the lessor each month, in escrow held by the lessor, property taxes or any other public charges levied against the premise and any personal property located within the premise, as well as sales tax assessed on the rent. PFMG VII shall also be responsible for paying utilities, insurance (including, without limitation, building and property insurance and comprehensive general liability insurance) and the costs of maintenance and repair with respect to the premise. PFMG VII shall maintain a designated deposit account as its primary depositary and remittance bank account and all payments for the indebtedness of PFMG VII to the lessor shall be automatically deducted from the deposit account each month by the lessor.

The premise may not be used for any use other than as funeral home, and PFMG VII shall not make alterations or additions to the premise in excess of $50,000 without prior writer consent by the lessor. PFMG VII shall indemnify the lessor against any losses to the lessor resulting from past, present or future handling of hazardous materials, if any. PFMG VII is required to maintain its books and financial records in accordance with generally accepted accounting principles and allow the lessor to inspect such records during normal business hours. PFMG VII is prohibited from subletting any portion of the premise or mortgage or transfer any of its rights or interest created by this lease without the lessor’s prior written consent. The lease contains customary financial covenants and events of default. PFMG VII agrees to subordinate this lease to the lien of any mortgage or security interest pledged or to be pledged by the lessor, provided that the beneficiaries named in such mortgage or deeds of trust agree in writing (i) to recognize the interest of PFMG VII under this lease, (ii) that so long as PFMG VII performs its obligations under this Lease, the rights of PFMG VII hereunder shall remain in full force and effect, and (iii) that they will not disturb PFMG VII’s occupancy of the premise under this lease in the event of foreclosure or other action taken under the mortgage or deed of trust if PFMG VII is not then in default.

The lessor has granted PFMG VII an option to purchase during the period beginning on September 1, 2023 and ending on the termination of the lease, provided that (i) PFMG VII is not in default of this lease, and (ii) PFMG VII has paid in full, without incurring additional debt or refinancing with the lessor, the promissory note entered between PFMG VII and the lessor dated the same date as the date of the lease, in the original principal amount of $377,000. When this lease terminates, this option, if not having been exercised by then, shall terminate automatically. Upon exercise of the option, PFMG VII shall pay a purchase price equal to the product of (i) the annual rent for the year in which PFMG VII’s purchase of the premise is closed pursuant to this option, multiplied by (ii) 10.00. If PFMG VII exercises the option, it must purchase all of the parcels constituting the premise.

The lease also contains early buyout options with differing buyout terms for years one (1) to four (4) and for years five (5) to seven (7). The option to purchase can be exercised before September 1, 2020, for a purchase price equal to the lessor of (i) the sum of (A) the purchase price calculated as the product of the annual rent in effect at the time of purchase multiplied by 10.00, plus (B) a premium in the amount of 6% of the purchase price so calculated; or (ii) the product of the annual rent for the last year of the initial term, multiplied by 10.00. During the period from September 1, 2020 to September 1, 2023, the purchase price would equal the lessor of (i) the sum of (A) the purchase price calculated as the product of the annual rent in effect at the time of purchase multiplied by 10.00, plus (B) a premium in the amount of 4% of the purchase price so calculated; or (ii) the product of the annual rent for the last year of the initial term, multiplied by 10.00.

Financial Lease – Masciarelli Family Funeral Homes in Massachusetts

On November 1, 2016, Premier Funeral Management Group VI, LLC, or PFMG VI, and PFMG Holdings, L.L.C., or lessor, entered into a lease agreement with option to purchase, whereby the lessor provides lease-purchase financing to PFMG VI. The leased premises under the lease agreement are comprised of (i) one premise located at 225, 243 and 253 Water Street, Fitchburg, Massachusetts; (ii) one premise located at 123 Main Street, Westminister, Massachusetts; and (iii) one premise located at 763 Massachusetts Avenue, Lunenburg, Massachusetts (collectively, referred to as “Masciarelli Family Funeral Homes”). The lease has an initial term of approximately seven years commencing on November 1, 2016 and ending on October 31, 2023. PFMG VI has an option to extend the initial term for up to three additional renewal terms of seven years each.

During the first year of the term, the annual rent shall be $230,000. On October 31 of each year thereafter, the rent shall increase by 2.50%. In addition, PFMG VI shall pay to the lessor each month, in escrow held by the lessor, property taxes or any other public charges levied against the premises and any personal property located within the premises, as well as sales tax assessed on the rent. PFMG VI shall also be responsible for paying utilities, insurance (including, without limitation, building and property insurance and comprehensive general liability insurance) and the costs of maintenance and repair with respect to the premises. PFMG VI shall maintain a designated deposit account as its primary depositary and remittance bank account and all payments for the indebtedness of PFMG VI to the lessor shall be automatically deducted from the deposit account each month by the lessor.

The premises may not be used for any use other than as funeral home, and PFMG VI shall not make alterations or additions to the premises in excess of $50,000 without prior writer consent by the lessor. PFMG VI shall indemnify the lessor against any losses to the lessor resulting from past, present or future handling of hazardous materials, if any. PFMG VI is required to maintain its books and financial records in accordance with generally accepted accounting principles and allow the lessor to inspect such records during normal business hours. PFMG VI is prohibited from subletting any portion of the premises or mortgage or transfer any of its rights or interest created by this lease without the lessor’s prior written consent. The lease contains customary financial covenants and events of default. PFMG VI agrees to subordinate this lease to the lien of any mortgage or security interest pledged or to be pledged by the lessor, provided that the beneficiaries named in such mortgage or deeds of trust agree in writing (i) to recognize the interest of PFMG VI under this lease, (ii) that so long as PFMG VI performs its obligations under this Lease, the rights of PFMG VI hereunder shall remain in full force and effect, and (iii) that they will not disturb PFMG VI’s occupancy of the premises under this lease in the event of foreclosure or other action taken under the mortgage or deed of trust if PFMG VI is not then in default.

The lessor has granted PFMG VI an option to purchase during the period beginning on November 1, 2023 and ending on the termination of the lease, provided that (i) PFMG VI is not in default of this lease, and (ii) PFMG VI has paid in full, without incurring additional debt or refinancing with the lessor, the promissory note entered between PFMG VI and the lessor dated the same date as the date of the lease, in the original principal amount of $148,000. When this lease terminates, this option, if not having been exercised by then, shall terminate automatically. Upon exercise of the option, PFMG VI shall pay a purchase price equal to the product of (i) the annual rent for the year in which PFMG VI’s purchase of the premises is closed pursuant to this option, multiplied by (ii) 10.00. If PFMG VI exercises the option, it must purchase all of the parcels constituting the premises.

The lease also contains early buyout options with differing buyout terms for years one (1) to four (4) and for years five (5) to seven (7). The option to purchase can be exercised before November 1, 2020, for a purchase price equal to the lessor of (i) the sum of (A) the purchase price calculated as the product of the annual rent in effect at the time of purchase multiplied by 10.00, plus (B) a premium in the amount of 6% of the purchase price so calculated; or (ii) the product of the annual rent for the last year of the initial term, multiplied by 10.00. During the period from November 1, 2020 to October 31, 2023, the purchase price would equal the lessor of (i) the sum of (A) the purchase price calculated as the product of the annual rent in effect at the time of purchase multiplied by 10.00, plus (B) a premium in the amount of 4% of the purchase price so calculated; or (ii) the product of the annual rent for the last year of the initial term, multiplied by 10.00.

The above summaries do not purport to be complete and are qualified in their entirety by the provisions of the respective documents which have been filed as exhibits (as referenced above) to the offering statement of which this offering circular is a part.

Unsecured Subordinated Convertible Notes

PF Management Services, LLC, or PFMS, entered into a convertible note purchase agreement, which we refer to as the Purchase Agreement, with certain investors, pursuant to which PFMS issued convertible notes to three investors on March 18, 2019, March 21, 2019 and October 14, 2019, respectively. These notes, in the aggregate principal amount of $1.6 million, bear interest at a fixed rate of 12% per annum. The principal and unpaid accrued interest on each note then outstanding will be due and payable upon demand by the holders of a majority-in-interest of the aggregate principal amount of the notes on or after the date, or the Maturity Date, that is 24 months following the date of the Initial Closing.

We used the proceeds of the convertible loan in the original principal amount of $500,000 that we issued on October 14, 2019 for general corporate and working capital purposes.

Each of the notes is convertible into equity securities upon (i) next equity financing that raises gross proceeds of not less than $5 million in a single transaction or a series of related transactions, (ii) a change of control transaction or sale of all or substantially all of PFMS’s assets, which we refer to as a Corporate Transaction, and (iii) the note’s maturity or any time thereafter. A change of control transaction refers to (i) a merger of PFMS with or into another entity (if after such merger the holders of a majority of PFMS’s voting security immediately prior to the transaction do not hold a majority of the voting securities of the successor entity), or (ii) the transfer of more than 50% of PFMS’s voting securities to a person or group. This offering does not constitute a “next equity financing” under the terms of the convertible notes because the series A preferred stock being offered in this offering is not convertible into common stock of the Company. Accordingly, the convertible notes will not convert into series A preferred stock at the closing of this offering.

In the event of the qualified equity financing, the outstanding principal balance and unpaid accrued interest on each note will automatically convert into equity securities issued in such equity financing. The number of shares of the equity securities upon conversion of each note in such equity financing will equal the quotient from dividing the sum of outstanding principal and interest by a conversion price that is the lesser of (i) 60% multiplied by the lowest per unit purchase price of the offered equity securities, and (ii) the quotient obtained by dividing the valuation cap of $3 million by the fully-diluted capitalization immediately prior to the closing of the equity financing. Upon the occurrence of a Corporate Transaction, the holder of each note may elect to either (i) receive the sum of unpaid principal and interest due on the note, or (ii) convert into such number of PFMS’s common units by dividing the sum of outstanding principal and interest on the note by a conversion price that is the quotient from dividing the valuation cap of $3 million by the fully-diluted capitalization immediately prior to the Corporate Transaction. At the option of each note holder, the notes can be converted into common units of PFMS on and at any time after the Maturity Date of the notes. In this case, the number of common units into which each note is convertible equals the product of (i) the outstanding principal balance and unpaid accrued interest of the note on the date of the conversion, multiplied by (ii) the fully-diluted capitalization immediately prior to such conversion, (iii) divided by the valuation cap of $3 million.

The notes are subject to customary “market stand-off” restrictions on transfer in the event of an underwritten public offering. Each note holder agrees that it will not transfer the notes or converted equity interests to PFMS’s competitors. The notes are general unsecured obligations of PFMS and are subordinate to all indebtedness of PFMS to banks or other financial institutions for borrowed money.

Other Indebtedness

SBA Note 3 – Midwest Business (See Exhibit 3.4)

On October 29, 2014, Midwest Business issued to Premier Funeral Management Group IV, LLC, or PFMG IV, a note in the aggregate principal amount of $4,112,500. The loan under this note was obtained through SBA. This note bears interest at a variable rate equal to the Wall Street Journal Prime Rate plus 2.75%, with an initial interest rate of 6.00% per annum. The interest rate on this note will be adjusted every calendar quarter by Midwest Business, which adjustment will occur on the first calendar day of each calendar quarter. In the event that SBA purchases the guaranteed portion of the unpaid principal balance, the interest rate becomes fixed at the rate in effect at the time of the earliest uncured payment default. If there is no uncured payment default, the rate becomes fixed at the rate in effect at the time of purchase.

PFMG IV must pay principal and interest payments of $26,518.22 on the first calendar day of each month, beginning one month from October 2014. Each installment payment by PFMG IV will be first applied to pay interest accrued to the day Midwest Business receives the payment, then to bring principal current, then to pay any late fees, and lastly, to reduce principal. Midwest Business must adjust the payment amount at least annually as needed to amortize principal over the remaining term of the note. If a scheduled payment on this note is more than 10 days late, Midwest Business may charge PFMG IV a late fee of up to 5% of the unpaid portion of such scheduled payment.

PFMG IV may prepay 20 percent or less of the unpaid principal balance on this note at any time without notice. If PFMG IV prepays more than 20 percent and the note has been sold on the secondary market, PFMG IV must give Midwest Business written notice and pay full 21 days’ interest if the notice is given less than 21 days before the prepayment is made. If PFMG IV prepays more than 25 percent of the outstanding principal balance of the loan in any one of the first three years from the date when the loan is first disbursed, PFMG IV must pay a prepayment fee of 5%~1% of the total prepayment amount. All remaining principal and accrued interest is due and payable 25 years from the date of the note. PFMG IV is in default under this note if PFMG IV does not make a payment when due, or otherwise fails to perform anything required by the note. This note is secured by collateral of PFMG IV. If PFMG IV fails to preserve or account to Midwest Business’s satisfaction for the collateral or its proceeds, this constitutes an event of default. In addition, where there is a default, Midwest Business may take possession of or dispose of the collateral at public or private sale without advertisement.

Paycheck Protection Program Loans

On April 12, 2020, Premier Funeral Management Group, LLC received a U.S. Small Business Administration Loan from Live Oak Banking Company, pursuant to the Paycheck Protection Program established under the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, in the principal amount of $54,700. On April 20, 2020, we received a loan from PNC Bank, National Association pursuant to the Paycheck Protection Program in the amount of $507,800. These loans have a fixed interest rate of 1%, maturity dates of two years from the dates of issuance, and no payments are due on the loans for six months. Additionally, there are no prepayment penalties. Pursuant to the terms of these Paycheck Protection Program loans, we may apply for forgiveness of the amounts due on the loans in an amount equal to the sum of the following costs incurred by us during the eight-week period (or any other period as may be determined by the lenders) beginning on the date of first disbursement of the loans: payroll costs, any payment of interest on a covered mortgage obligation, payment on a covered rent obligation, and any covered utility payment. The amount of forgiveness of these loans will be calculated in accordance with the requirements of the Paycheck Protection Program, including the provisions of Section 1106 of the CARES Act, although no more than 25% of the amount forgiven can be attributable to non-payroll costs. We intend to use all proceeds from the Paycheck Protection Program loans for such qualifying expenses and we expect to apply for forgiveness of these loan amounts.

Off-Balance Sheet Arrangements

As of December 31, 2019, we had no off-balance sheet arrangements.

Critical Accounting Policies

Use of Estimates in the Preparation of Financial Statements

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. As a result, actual results could differ from these estimates.

Cash and Cash Equivalents

For purposes of the consolidated statements of cash flows, our company considers all highly liquid investments that are purchased within three months or less of an instrument’s maturity date to be cash equivalents.

Revenue Recognition

The Company’s revenues are derived from contracts with customers through sale and delivery of death care products and services. Primary sources of revenue are derived from Funeral Home operations generated both at the time of death (“at-need”) and prior to the time of death (“pre-need”), classified on the Consolidated Statements of Operations as Service Revenue and Property and Merchandise Revenue and investment income which includes income earned on assets maintained in service trusts related to sales of Funeral Home services occurring prior to the time of death and required to be maintained in the trust by state law as well as interest earned on pre-need installment contracts. Investment income is presented within Other revenue on the Consolidated Statements of Operations.

Revenue is recognized when control of the merchandise or services is transferred to the customer. Our performance obligations include the delivery of Funeral and Cemetery property, merchandise and services. Control transfers when merchandise is delivered or services are performed. Sales taxes collected are recognized on a net basis in our consolidated financial statements. On our at-need contracts, we generally deliver the merchandise and perform the services at the time of need.

We also sell price-guaranteed pre-need contracts through various programs providing for future merchandise and services at prices prevailing when the agreements are signed. Revenue associated with sales of pre-need contracts is deferred until control of the merchandise or the services is transferred to the customer, which is upon delivery of the merchandise or as services are performed, generally at the time of need. Revenue is recognized at the time of delivery when control of the memorialization merchandise is transferred.

All personalized marker merchandise is sold on an at-need contract, when delivery is made with manufacturer fulfillment, we will:

We recognize revenue during the period in which it was sold. There is no general right of return for delivered items. Costs related to delivery or performance of merchandise and services are charged to expense when merchandise is delivered, or services are performed.

Total consideration received for price-guaranteed pre-need and for at-need contracts with customers represents the stated amount of the contract excluding any amounts collected on behalf of third parties, such as sales taxes. Additionally, pursuant to state or provincial law, all or a portion of the proceeds from merchandise or services sold on a pre-need basis may be required to be deposited into trust funds and earnings on these trust funds, which are specifically identifiable for each performance obligation, are also included in total consideration.

The total consideration received for contracts with customers is allocated to each performance obligation based on relative selling price. Relative selling prices are determined by either the amount we sell the performance obligation for on a stand-alone basis or our best estimate of the amount we would sell it for based on an adjusted market assessment approach that is consistent with our historical pricing practices.

Payment on at-need contracts is generally due at the time the merchandise is delivered or the services are performed. For pre-need contracts, payment generally occurs prior to our fulfillment of the performance obligations. Our pre-need contracts may also have extended payment terms. We do not accrue interest on pre-need receivables if they are not paid in accordance with the contractual payment terms given the nature of our merchandise and services, the nature of our contracts with customers, and the timing of the delivery of our services. We do not consider pre-need receivables to be past due until the merchandise or services are required to be delivered at which time the pre-need receivable is paid or reclassified as a trade receivable with payment terms of less than thirty days. For unfulfilled performance obligations on cancelable pre-need contracts, our Consolidated Balance Sheet reflects the net contract liability, which represents the amount we have collected from customers, in deferred revenue, net.

Pursuant to state or provincial law, all or a portion of the proceeds from services sold on a pre-need basis may be required to be deposited into trust funds. When we receive payments from the customer, we deposit the amount required by law into the service trusts and reclassify the corresponding amount from deferred revenue, net into deferred receipts held in trust. Amounts are withdrawn from the service trusts when we fulfill the performance obligations. Earnings on these trust funds, which are specifically identifiable for each performance obligation, are also included in total consideration. We defer these investment earnings related to the service trusts until the associated services are performed.

If a pre-need contract is canceled prior to delivery, state or provincial law determines the amount of the refund owed to the customer, if any, including the amount of the attributed investment earnings. Upon cancellation, we receive the amount of principal deposited to the trust and previously undistributed net investment earnings and, where required, issue a refund to the customer. In addition, we are entitled to retain, in certain jurisdictions, a portion of collected customer payments when a customer cancels a pre-need contract. We recognized these retained funds, if any, and the attributed investment earnings (net of any investment earnings payable to the customer) as revenue in the Consolidated Statement of Operations. In certain jurisdictions, we may be obligated to fund any shortfall if the amount refundable to the customer exceeds the funds in trust.

Accounts Receivable and Allowance for Doubtful Accounts

Our trade receivables primarily consist of amounts due for funeral services already performed. We provide various allowances and cancellation reserves for our receivables. These allowances are based on an analysis of historical trends of collection and cancellation activity. At-need receivables are considered past due after thirty days. Collections are generally managed by the locations or third-party agencies acting on behalf of the locations, until a receivable is one hundred eighty days delinquent at which time it is fully reserved and sent to a collection agency. These estimates are impacted by a number of factors, including changes in the economy, and demographic or competitive changes in our areas of operation.

Inventories

Funeral merchandise items are stated at the lower of average cost or net realizable value. Inventory costs and Cemetery property are relieved using specific identification in fulfillment of performance obligations on our contracts.

Property and Equipment, Net

Property and equipment is stated at cost or, upon acquisition of a business, at the fair value of the assets acquired and depreciated on a straight-line basis. Maintenance and repairs are charged to expense, whereas renewals and major replacements that extend the assets useful lives are capitalized. Depreciation is recognized ratably over the estimated useful lives of the various classes of assets. Buildings and improvements are depreciated over a period ranging from seven to forty years, equipment is depreciated over a period from three to seven years, and leasehold improvements are depreciated over the shorter of the lease term or the life of the asset. When property or equipment is sold or retired, the cost and related accumulated depreciation are removed from the Consolidated Balance Sheet; resulting gains and losses are included in the Consolidated Statement of Operations in the period of sale or disposal.

Leases

We have lease arrangements related to real estate for funeral service locations that are classified as finance leases at December 31, 2019. Lease terms related to real estate generally range from seven to forty years with options to renew at varying terms. We consider reasonably assured renewal options and fixed escalation provisions in our calculation.

Fair Value of Measurements

We measure the available-for-sale securities held by our funeral services trusts at fair value on a recurring basis. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We utilize a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

An asset’s or liability’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Fixed income commingled funds and money market funds are measured at net asset value. Fixed income commingled funds and money market funds are redeemable for net asset value with two weeks’ notice and immediately, respectively.

We assess our investments in fixed income instruments for other-than-temporary declines in fair value on a quarterly basis. Prior to our adoption of the new guidance on financial instruments discussed below in “Recently Issued Accounting Pronouncements”, we also assessed our investments in equity instruments for other-than temporary declines in fair value on a quarterly basis. Impairment charges resulting from these assessments are recognized as investment losses in other income (expense), net. These investment losses, if any, are offset by the corresponding reclassification in other income (expense), net, related to deferred receipts held in trust.

Insurance-Funded Pre-Need Contracts

Where permitted by state or provincial law, we may sell a life insurance or annuity policy from third-party insurance companies, for which we earn a commission as general sales agent for the insurance company. These general agency commissions are based on a percentage per contract sold and are recognized as funeral revenue when the insurance purchase transaction between the pre-need purchaser and third-party insurance provider is completed. All selling costs incurred pursuant to the sale of insurance-funded pre-need contracts are expensed as incurred. Pre-need funeral contracts to be funded at maturity by third-party insurance policies totaled approximately $13,884,000 on a consolidated basis at December 31, 2019, however these policies are not recorded as an asset or liability on the consolidated balance sheet.

We do not reflect the unfulfilled insurance-funded pre-need contract amounts in our Consolidated Balance Sheet. The policy amount of the insurance contract between the customer and the third-party insurance company generally equals the amount of the pre-need contract. Where jurisdictions allow, the policyholder may have made a revocable commitment to assign the proceeds from the policy to us at the time of need. The proceeds of the life insurance policies or annuity contracts will be reflected in funeral service and merchandise revenue as we perform these funerals.

Deferred Revenues

Revenues from the sale of services and merchandise as well as any investment income is deferred until such time that the services are performed and the merchandise is delivered. In addition to amounts deferred on new contracts, investment income, deferred revenues include deferred revenues from pre-need sales that were entered into by entities prior to our company’s acquisition of those entities or the assets of those entities. The Company provides for a profit margin for these deferred revenues to account for the projected future costs of delivering products and providing services on pre-need contracts that our company acquired through acquisition. These revenues and their associated costs are recognized when the related merchandise is delivered or services are performed and are presented on a gross basis on the Consolidated Statements of Operations.

Income Taxes

The Company was not subject to U.S. federal and most state income taxes for the years ended December 31, 2019 and 2018. For these years, when the Company was a Delaware limited liability company, the then members of the Company are liable for income tax in regard to their distributive share of the Company’s taxable income. Such taxable income may vary substantially from net income reported in the accompanying consolidated financial statements. The Company’s corporate subsidiaries and consolidated affiliates are also not subject to U.S. federal and most state income taxes. The members of the affiliated consolidated companies are liable for income tax in regard to their distributive share of the Company’s taxable income.

Accounting principles generally accepted in the United States of America require the Company to examine its tax positions for uncertain positions. Management is not aware of any tax positions that are more likely than not to change in the next 12 months or that would not sustain an examination by applicable taxing authorities. The Company’s policy is to recognize penalties and interest as incurred in its Consolidated Statement of Operations. The Company’s federal and various state income tax returns for 2017 through 2019 are subject to examination by the applicable tax authorities, generally for three years after the later of the original or extended due date.

Recent Accounting Pronouncements

In June 2016 and November 2018, the FASB amended “Financial Instruments” to provide financial statement users with more decision-useful information about the expected credit losses on debt instruments and other commitments to extend credit held by a reporting entity at each reporting date. This amendment replaces the incurred loss impairment methodology in the current standard with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to support credit loss estimates. The new guidance is effective for us on January 1, 2023, and we are still evaluating the impact of adoption on our consolidated results of operations, consolidated financial position and cash flows.

In February 2016, the FASB issued Accounting Standards Update 2016-02, “Leases”. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard also requires a lessor to classify leases as either sales-type, finance or operating. A lease will be treated as a sale if it transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee. If risks and rewards are conveyed without the transfer of control, the lease is treated as financing. If the lessor doesn’t convey risks and rewards or control, an operating lease results. The new standard is effective for fiscal years beginning after deferred one year to January 1, 2021, including interim periods within those fiscal years. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.

We adopted the new guidance on January 1, 2019 using the full retrospective transition method. The modified retrospective transition method included a number of optional practical expedients and accounting policy elections.

Our current operating lease portfolio is composed of real estate. Upon adoption of this standard, we recognized a right-of-use asset and liability related to lease arrangements which were originally recorded as capital leases. The adoption of the new standard did not significantly impact our consolidated financial position due to the recognition of the right-of-use asset and liability for our leases as the leases were originally recorded as capital leases.

In January 2017, the FASB amended “Goodwill” to simplify the subsequent measurement of goodwill. The amended guidance eliminates Step 2 from the goodwill impairment test. Instead, impairment is defined as the amount by which the carrying value of the reporting unit exceeds its fair value, up to the total amount of goodwill. The new guidance is effective for us on January 1, 2020 and is not expected to have an impact on our consolidated results of operations, consolidated financial position, and cash flows.

In August 2018, the FASB amended “Fair Value Measurements” to modify the disclosure requirements. The amendment removes requirements to disclose (1) the amount of and reasons for transfers between levels 1 and 2 of the fair value hierarchy, (2) our policy for timing of transfers between levels, and (3) the valuation processes used in level 3 measurements. It clarifies that, for investments measured at net asset value, disclosure of liquidation timing is only required if the investee has communicated the timing either to us or publicly. It also clarifies that the narrative disclosure of the effect of changes in level 3 inputs should be based on changes that could occur at the reporting date. The amendment adds a requirement to disclose the range and weighted average of significant unobservable inputs used in level 3 measurements. The amended guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years and is not expected to have an impact on our consolidated results of operations, consolidated financial position, and cash flows.

Our BUSINESS

Our Corporate History and Background

We acquire and operate funeral homes and related businesses, primarily in Level C and Level D metropolitan area markets in the United States. We serve as the management company for our one wholly owned and six affiliated, independent operating businesses, all of which we refer to as the operating businesses. We refer to the six affiliated, independent operating businesses, which are independent legal entities, as the independent operating companies. Based in Naples, Florida, we operate seven businesses with 14 locations on a consolidated basis and we plan to operate in 23 states located throughout the Midwest, Mid-South, Appalachian, Mid-Atlantic and Mid-Eastern regions of the United States. These target markets represent our current base of businesses and other markets where we plan to operate in the future. These are the same markets in which our senior management team has operated death care and complementary businesses throughout their careers.

We serve as the management company for the operating businesses of the Remembrance Group, a brand name used to describe our consolidated operating businesses. We provide consulting and management services, such as accounting and bookkeeping services, developing operational plans, workforce management and recruitment to Remembrance Group’s funeral homes and other non-competing clients. We employ Remembrance Group’s executive officers and have contractual management administrative services agreements, which we refer to as MSAs, with each of Remembrance Group’s six independent operating companies. The MSAs in effect enable the independent operating companies to operate with us on a consolidated basis.

Our Corporate Structure and History

We are a Delaware corporation that was incorporated on January 31, 2020, but we were formed originally as a Delaware limited liability company on December 11, 2012 under the name PF Management Services, LLC. We converted from a limited liability company to a corporation in Delaware on February 1, 2020.

We own 100% of Premier Funeral Management Group V LLC, a Delaware limited liability company, or PFMG V, our one wholly owned operating subsidiary. PFMG V was formed to acquire and operate the Premier Sharp Funeral Home in Tennessee.

Each of the six independent operating companies within the Remembrance Group is a Delaware limited liability company which was formed to acquire and operate one or more specific funeral businesses.

We have option agreements in place to acquire, at our option, 100% of the ownership interests in four of the six independent operating companies, and 99% and 99.5%, respectively, in the remaining two independent operating companies.

The six independent operating companies along with their wholly owned funeral businesses are listed below:

Remembrance Group anticipates consolidating these independent operating companies into a unified ownership structure in the future and expects to use a substantial portion of the net proceeds of the Offering to exercise its acquisition rights under one or more of the option agreements.

The following chart reflects our organizational structure as of the date of this offering circular.

Our Option Agreements

We have option agreements in place to acquire, at our option, ownership interests in each of the six independent operating companies. Currently, we do not have ownership interests in any of these companies. The material terms of these option agreements are described below:

With respect to each of the above described agreements, we expect that we will not have to make any payments to any of an entity’s members as we believe there will be no unpaid tax liabilities in the year in which we might exercise an option.

The foregoing descriptions of the option agreements are only summaries, do not purport to be complete and are qualified in their entirety by reference to the full text of the option agreements, copies of which are attached hereto as exhibits 6.1 through 6.7.

Our Strategy

We believe our corporate and operating strategy positions us for success in the current and evolving death care industry environment. The core elements of our strategy include:

Target Acquisitions in Certain Level C and Level D Metropolitan Area Markets that Offer Specific Profiles. We generally target Level C and Level D metropolitan area markets, primarily in the Midwest, Mid-South, Appalachian, Mid-Atlantic and Mid-Eastern, where our team has operated funeral businesses during its members’ careers. We believe that Level C and Level D metropolitan area markets, which are less suburban and more rural than major metropolitan markets, provide better business opportunities because of, among other things, lower operating costs, including a lower cost of living for our employee base. If we find profitable acquisition opportunities in surrounding markets, we will pursue those acquisitions selectively. We typically pursue businesses that are independently owned, operate one to three locations, and generate approximately $1 - $3 million in gross revenue per location at a multiple of trailing adjusted EBITDA basis. We also seek businesses that hold the leading or number two market share in the local area, which we believe is important for future growth, and have existing management and/or staff members we have evaluated and wish to retain after close.

We believe that our target markets offer numerous benefits. First, we have chosen the target markets based on the likelihood that we can realize rapid improvements at our acquired businesses in partnership with the previous owner and retained staff. Funeral homes in the “trade areas” we have selected are mostly small, independently owned and operated, and have conducted business in the same manner for decades. Funeral homes that meet our criteria in these markets also generally have bloated overhead expenses and inefficient purchasing. Most have extremely dated technology and reporting systems. The funeral homes in these areas generally do not focus on proactive marketing, branding, client development and packaged services for families. We target markets wherein we believe we can grow revenue and market share due to such competitive dynamics. Our “base case” goal is to increase EBITDA margins by 10% within several months after close and generate consistent year over year organic growth. We evaluate and confirm these market attributes during our due diligence process.

Additionally, we have found that these markets offer a large and growing base of owners interested in selling their properties, and we can buy them for near-historically low prices and on favorable terms. Currently, there are few active “consolidators” competing for these businesses in our target markets, creating a relatively large pool of available properties at nearly historically low price multiples and on favorable terms to our company.

Execute a Highly Disciplined and Efficient Acquisition Program. We believe we have developed an efficient and disciplined corporate development program that will allow us to grow continuously but profitably. First, we aim to never “overpay” for a business. We seek to pay a multiple of adjusted EBITDA for the last twelve months for each acquisition (with exceptions, typically for larger, established businesses) and on terms that are favorable to our company. We propose that sellers carry up to 30% of the consideration in a seller promissory note with a term between 10 and 15 years. Through our experience evaluating, buying and restructuring funeral homes, we can complete initial financial and business due diligence within two to three days which allows our company to manage our corporate development efforts efficiently and quickly. Additionally, we leverage the networks and contacts of our local businesses and strategic partners to source potential acquisitions for our company, providing us the benefits of personal “insight” into such prospects and the ability to develop regional, cost-effective, clusters of funeral homes.

Implement an Integration and Operations Plan After Closing an Acquisition. We focus on expanding EBITDA margins through leveraging our volume purchasing agreements for products like caskets and vaults, eliminating or reducing excess expenditures, and right-sizing staffing levels, including contracted or outsourced services. We estimate we can immediately reduce an acquired business’ COGS through our vendor relationships and pricing with suppliers like Batesville, resulting in a gross profit and EBITDA margin expansion of approximately 2.0 - 3.0%. We also implement back office systems and controls, such as accounting and payroll functions, at our acquired businesses, to both improve system functionality and reduce costs associated with facility operations. Recent technological advances, particularly in the area of “cloud based” business services, have enabled us to integrate the systems of an acquired business into our accounting, financial and back- office software programs on a shorter timeframe than was possible even several years ago, providing us with around the clock visibility into the operating and financial performance of each company we acquire. Our goal is to implement these changes in collaboration with the local employees to minimize any disruptions associated with the sale of the business

Focus on Continuous Top Line Growth and Profitability and Unmet Customer Demands. We have carefully chosen our initial target markets based on the likelihood that we can realize rapid improvements at our acquired homes in partnership with the previous owner and retained staff. We also assess each potential market we enter on an individual basis. Funeral homes in the “trade areas” we have selected are mostly small, independently owned and operated, and often have conducted business in the same manner for decades. The homes in these areas generally do not focus on proactive marketing, client development and packaged services for families, in our experience. We embrace evolving consumer expectations of funeral businesses, such as personalized services and cremation-based funerals. We believe these consumer preferences are generally unmet by the industry, an aspect of the funeral industry that has been demonstrated by numerous third-party market studies

In terms of marketing, “modern” practices, like customer relationship management, or CRM, and referral generation initiatives, often don’t exist in a particular trade area. We, however, focus on developing and implementing a customized growth program for each business we acquire. Our general approach involves providing outstanding client service levels and innovative product and service offerings. Our company employs various marketing approaches in each market, including brand differentiation, ongoing client and prospect relationship management, public and community relations, on and off-site events, and various other initiatives proven to drive market share and revenue, as well as client satisfaction. In our experience, such efforts can generate annual double-digit growth at each business location

Build a Talent and Performance Based Company. We believe that a top-tier team - from executive level members to junior employees at our local funeral homes - is a critical element of our strategy to build an industry- leading death care business. We seek to recruit, hire and retain top-performing employees through a systematic process and core focus of our company. Prospective employees are professionally evaluated to assess their skills, interests and potential to succeed in their position. We aim to create individual performance and growth programs for all employees and continually measure and provide feedback associated with established goals and actual performance. We also implement compensation programs that are connected to individual and group performance

Competitive Strengths

We believe that our focus on secondary markets in certain Midwest, Mid-South, Appalachian, Mid-Atlantic and Mid-Eastern states provides our company with several strategic advantages. We believe that these markets offer a large and growing base of owners interested in selling their properties, and we believe we can buy those properties for near-historically low prices and on favorable terms. Twenty of our twenty-three initially targeted states rank in the top twenty-four states for potential funeral services market size. The sector’s competitive dynamics in these geographic areas offer significant opportunities to improve an acquired location’s financial performance and local market share. These areas also are largely insulated from the downward per-service revenue pressure created by the growing trend of cremation due to their location in the “Bible Belt”, which has historically seen greater focus on traditional values and burial practices.

In addition, we believe the following competitive strengths position us well to implement our acquisition and market growth strategy. These include:

Focus on Calls

Senior management’s relentless focus on calls permeates all aspects of our funeral homes’ daily operations. We believe that everything our firm’s employees do in some way ties back to the decision made by a potential client to choose a funeral home for their future needs and we want that funeral home to be one of ours. We constantly educate our employees in this belief.

Experienced, Proven Management Team. Our team includes executives who have spent their careers in the funeral home industry and offer a proven track record of purchasing, integrating and restructuring funeral home properties. The team also includes successful executives from the hospitality, retail, marketing and financial sectors, from which they bring “best practices” generally not employed by the owners of funeral businesses. Additionally, this team has demonstrated an ability to drive top line growth every year, improved client services and expanded EBITDA margins. Members of our executive team also have also accomplished successful exits for their investors in the past.

Operational Expertise and Focus. We believe our management team, network and executives who will join our company after the close of each acquisition possess the expertise and experience in all critical areas required to execute our strategy. Our team includes executives who have spent their lifelong careers in the death care industry and offer a proven track record of purchasing, integrating and operating successful businesses.

Strategic Partnerships and Relationships. Though the Remembrance Group is an early stage firm in the traditional sense, our team possesses decades of experience and we are acquiring mature, existing businesses that believe in us and are leaders in their markets. We also have relationships with Tier 1 suppliers and service providers in the industry and have negotiated discounted rates that we believe are typically provided to the largest corporate death care company owners and operators. Additionally, we have sought out professional advisors which/who are generally considered leading experts in the death care industry; these include financial and accounting advisory; legal and regulatory services; and transaction and acquisition advisory.

Our Management Services and Fees

Through MSAs we provide various management services to the operating businesses in exchange for a management fee as described below.

Services Provided

In accordance with the terms of the MSAs, we act as a management company and have the following rights and responsibilities with respect to the operating businesses:

Management services provided to the operating businesses by us include, but are not limited to, the following:

Reimbursements and Management Fee(s).

In exchange for providing the services listed above, each operating company pays us compensation on an ongoing basis, including a management fee as described below.

Reimbursements. The operating businesses reimburse us for any expenses, payments, fees, and other costs incurred by us on behalf of the businesses. These expenses include, for example, payments associated with casket product purchases and employee benefits programs.

Minimum Balance Amount. Pursuant to the terms of the MSAs, we and the operating businesses establish a minimum level of liquid capital to operate the specific operating business (a Minimum Balance Amount). If the level of liquid capital falls below the Minimum Balance Amount, pursuant to the terms of the MSAs we are required to fund any shortfalls.

Management Fee. Each of the operating businesses pays us a management fee according to the following calculations:

We do not have an MSA in place with PFMG V which we own directly and which we operate through our management team. We do, however, provide PFMG V with the same services that we provide to our independent operating companies and we do take management fees for these services, similar to the fees we charge our independent operating companies under our MSAs with them, as described immediately above.

Pipeline of Late Stage and Potential Acquisitions

A core component of our strategy is to consistently have a robust pipeline of targets we are sourcing, evaluating, pursuing, and moving to acquire.

We seek to accomplish this through managing and building our extensive network of industry brokers, advisors, operators and executives, as well as encouraging the managers at our acquired businesses to source potential transactions for our company. We believe this approach yields valuable insights into the overall quality of a target funeral home business and its staff, plus it allows our company to build regional “clusters” surrounding our existing businesses. However, consummating the proposed acquisitions cannot be guaranteed and is subject to final negotiations which are yet to be determined.

Our Market Opportunity

The Funeral Industry. We believe current market dynamics and trends are ideal to implement our company’s business and growth strategy. In 2018, United States sales related to funeral services totaled nearly $15.2 billion, a 10.7% increase since 2014. As of 2019, there were approximately 19,136 funeral home locations in the United States according to National Directory of Morticians Redbook. The “death care” industry is highly fragmented. There are three publicly traded companies that operate funeral homes and cemeteries in North America, which control an estimated 10.8% of funeral homes in the United States and the remaining 89.2% are privately owned by families or individuals; 97% of these businesses employ fewer than 20 employees and 89% employ less than 10 employees. The publicly traded companies include Service Corporation International, the largest provider of death care products and services in the US, StoneMor Partners, L.P., which primarily focuses on cemetery operations, and Carriage Services, Inc.

Large and Growing Market. The industry is growing steadily, driven by current demographic (baby boomer-death rate) trends. According to ACL.Gov and the Census Bureau, the United States population over 65 years of age was 50.9 million in 2016 and is expected to rise to 83.7 million by 2052, a 64% increase and compound annual growth rate of about 2%. An increase in the number of older Americans inevitably leads to an increasing number of deaths, while controlling for improvements in end-of-life stage healthcare, as well as increases in obesity and associated diseases that reduce life expectancy. The number of deaths per year in the United States was 2.9 million in 2017 according to the Center for Disease Control and Prevention, up from 2.5 million in 2014, an increase of approximately 3% per year.

We have carefully chosen our initial target markets based on the likelihood that we can realize rapid improvements at our acquired Funeral Homes in partnership with the previous owner and retained staff. Funeral Homes in the “trade areas” we have selected are mostly small, independently owned and operated, and have conducted business in the same manner for decades. The Funeral Homes in these areas generally do not focus on proactive marketing, client development and packaged services for families. More “modern” marketing practices, like customer relationship management and referral generation programs, often do not exist in a trade area. We confirm this market attribute during our due diligence process. Funeral homes that meet our criteria in these markets also have bloated overhead expenses and inefficient purchasing. After close of an acquisition, we will expand our earnings before interest, tax, depreciation and amortization (EBITDA) margins through general and administrative expense reductions and implement product purchasing initiatives. By providing back office services, such as accounting and payroll functions, to our acquired businesses, we will both improve system functionality and reduce costs associated with facility operations.

Large and Growing Number of Acquisition Opportunities and Limited Competition to Acquire Them. The owners of independent funeral homes mirror the overall aging population trends in the US. As in many sectors with family-owned businesses, Baby Boomers are getting older and are looking to retire. Often, their children do not wish to take over the family business and instead pursue other opportunities. The main industry association, in fact, predicts an increasing shortage of funeral directors in the near future We believe that this macro trend is creating an increasing number of funeral homeowners who wish to sell. In Level C and Level D metropolitan area markets, on which we focus, there are few buyers for individual funeral homes and associated properties due to the larger size requirements of the publicly traded players and large regional consolidators. This creates a large pool of available properties at nearly historically low price multiples and on favorable terms to our company. With more than 59% of the funeral homes in the US being independently owned and operated and falling within the $1 to $3 million in revenue range, we feel this represents a unique acquisition opportunity for our specific operating model. To date, these businesses have been mostly ignored by consolidators in our industry. There are a limited number of interested buyers for these independent properties in Level C and Level D metropolitan area markets, providing us with acquisition opportunities on favorable terms.

Strong Financial Profile of Funeral Business. We believe that the financial profile of operating a single funeral home – or many of them – makes these businesses a highly attractive asset class for lenders, private equity and a disciplined platform-build strategy. In the last four decades, our core team has demonstrated – in multiple death care companies, US regions, and varied funeral home profiles – that we can quickly expand EBITDA margins, grow revenues and capture additional market share. Minimal capital expenditures, or Capex, are required. Often, the appraised value of the real estate portion of the business is greater than 75% of the total consideration paid for the business. The industry is generally stable, but current population trends suggest continued robust growth. Due to the market conditions already discussed, we are able to buy at low multiples and we estimate sellers will partially finance a transaction up to 30% of the total price. Acquired properties with our target profile are typically cash flow positive upon closing and begin generating cash flow within two months, according to our experience and estimates.

Competition

We face competition in all our markets. Most of our competitors are and will be independent operations. Our ability to compete successfully depends on our management’s forward vision, timely responses to changes in the business environment, our operating business’ ability to maintain a good reputation and high professional standards as well as offer products and services at competitive prices. We anticipate that additional consolidators will enter the industry and likely pursue acquisitions in our market areas, potentially increasing the average consideration required to successfully purchase a Funeral Home business. If we face price competition in our markets, or if local competitors successfully exploit the fact that our acquired businesses are now owned by a perceived “corporate consolidator,” we will be challenged to successfully execute our business plan in a given market. Independent operators of funeral businesses have historically shown immediate defensive marketing efforts when one of their competitors has sold to a consolidator. They begin to label such businesses as “corporate owned” and market their own companies as “locally owned.”

Regulation

Federal, State and/or Local Regulatory Compliance

Our operations are subject to regulation, supervision, and licensing under numerous federal, state, and local laws, ordinances, and regulations, including extensive regulations concerning trust funds, preneed sales of funeral and cemetery products and services, and various other aspects of our business.

For example, the funeral home industry is regulated by the Federal Trade Commission, or FTC, which requires funeral homes to take actions designed to protect consumers.

Our facilities are also subject to stringent health, safety and environmental regulations. For example, the Federal Clean Air Act and analogous state laws, which restrict the emission of pollutants from many sources, including crematories, may require us to apply for and obtain air emissions permits, install costly emissions control equipment, and conduct monitoring and reporting tasks. Also, in the course of our operations, we store and use chemicals and other regulated substances as well as generate wastes that may subject us to strict liability under the federal Resource Conservation and Recovery Act and comparable state laws, which govern the treatment, storage, and disposal of nonhazardous and hazardous wastes, and the federal Comprehensive Environmental Response, Compensation and Liability Act, a remedial statute that imposes cleanup obligations on current and past owners or operators of facilities where hazardous substance releases occurred and anyone who transported or disposed or arranged for the transportation or disposal of hazardous substances released into the environment from such sites.

Additionally, we are subject to the requirements of the federal Occupational Safety and Health Act, as amended (“OSHA”), and comparable state statutes whose purpose is to protect the health and safety of workers. The OSHA hazard communication standard, the Emergency Planning and Community Right to Know Act and implementing regulations and similar state statutes and regulations require that we organize and/or disclose information about hazardous materials used or produced in our operations and that this information be provided to employees, state and local governmental authorities and citizens.

Violations of applicable laws could result in fines or sanctions against us, including the loss of licenses necessary to operate the businesses lawfully. We believe that we are in substantial compliance with all applicable laws and regulations relating to worker health and safety.

Businesses in general are subject to the impact of recent major legislation, including the Care Act and the Dodd-Frank Act. Many provisions of these complex laws could impact our business, and many of the provisions require implementation through regulations that have not yet been promulgated.

Employees

As of April 20, 2020, we had 39 full-time employees and 60 part-time employees.

OUR PROPERTIES

Our company leases its principal office space at 365 5th Ave South, Suite 201, Naples, FL 34102.

Operating Company Owned Properties

The following properties are owned by the respective operating companies listed in the first column.

The properties listed above are all financed through mortgages with traditional bank institutions.

The Premier Funeral Management Group, LLC property is financed through a mortgage note in the outstanding principal amount of $957,287 as of December 31, 2019. This mortgage is secured by substantially all of the assets of this operating company and its affiliates. Interest accrues on this mortgage at the annual rate of prime plus 2% and is paid monthly. This note matures in May 2038.

The Premier Funeral Management Group II, LLC properties are financed through a mortgage note in the outstanding principal amount of $1,090,351 as of December 31, 2019. This mortgage is secured by substantially all assets of this operating company and its affiliates. Interest accrues on this mortgage at the annual rate of prime plus 2.75% and is paid monthly. This note matures in December 2038.

The Premier Funeral Management Group IV, LLC properties are financed through a mortgage note in the outstanding principal amount of $3,727,361 as of December 31, 2019. This mortgage is secured by substantially all assets of this operating company and its affiliates. Interest accrues on this mortgage at the annual rate of prime plus 2.75% and is paid monthly. This note matures in June 2039.

Operating Company Leased Properties

The following properties are leased by the respective operating companies listed in the first column. These properties are all leased from PFMG Holdings, L.L.C., an unaffiliated third party, under seven year leases. The lease agreements contain an option to purchase the real estate assets at the end of initial seven year term, for three of the lease agreements the price equals the then current year’s rent multiplied by ten (10) and the remaining agreement the buyout price for the real estate is the then current annual rent divided by 9.75%. The lease agreements also contain early buyout options with differing buyout terms for years one (1) to four (4) and for years five (5) to seven (7). During years one to four, we would be required to pay a 6.00% premium in addition to the buyout formula amount and during years five to seven, the premium is 4.00%:

The nature of our business requires that our facilities be well maintained. We believe that we meet this standard.

LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

MANAGEMENT

Directors and Executive Officers

The following sets forth information about our directors and executive officers as of the date of this offering circular:

Dennis L. Smith. Mr. Smith has served as our chief executive officer, president and a member of our board of directors since February 2020 and president a member of the board of directors of our predecessor, PF Management Services, LLC, since April 2017. Mr. Smith has been in the industry for more than 44 years, having held senior management positions at Carriage Services (from 2012 to 2015), SCI (from 1995 to 2012), Gibraltar Mausoleum (from 1987 to 1995), and Stewart Enterprises (from 1981 to 1987). He has demonstrated success in all areas of the death care industry, particularly related to scaling businesses, leading multi-location operations, acquiring and integrating new funeral home businesses, and implementing new systems and processes. Mr. Smith earned his Degree of Mortuary Science from University of Miami Dade.  Mr. Smith’s leadership with Carriage services led to the new development and acquisition of Funeral Homes/Cemeteries and Crematories in multiple states.

Michael A. Ryan, CPA, CMA. Mr. Ryan has served as our treasurer since February 2020 and the treasurer of our predecessor, PF Management Services, LLC, since July 2017. Mr. Ryan has more than 20 years of industry experience with a demonstrated history of financial success working in the manufacturing and distribution industries. He has brought a “fresh pair of eyes” to the funeral industry and his expertise in expense management, cash flow, fixed assets, workflow processes and leveraging technology have helped Remembrance focus on improving assets and maximizing cash flow. Before joining our firm Mr. Ryan served as Controller for LW Marketing, Inc. located in Bonita Springs, Fla where he served as their controller for four years. Mr. Ryan earned his Bachelor of Science in Accounting from Youngstown State University in 1994.

Michael Margolies. Mr. Margolies has served as a member of our board of directors since February 2020 and a member of the board of directors of our predecessor, PF Management Services, LLC, since September 2013. Additionally, Mr. Margolies has served as chief executive officer of Littlebanc Advisors, LLC, or Littlebanc, since 2009, where he leverages his extensive expertise and deep professional relationships with many of Wall Street’s most influential professionals to source and finance direct investments. With more than 25 years making principal investments, Mr. Margolies is a respected investment industry veteran. Prior to founding Littlebanc, he founded Avalon Research Group, a highly regarded pioneer of the independent research community. He is also a founding member of Investorside Research Association.

David DeCarlo. Mr. DeCarlo has served as a member of our board of directors since February 2020 and a member of the board of directors of our predecessor, PF Management Services, LLC, since January 2019. Mr. DeCarlo is one of the most accomplished people in the death care industry, having previously joined the board of directors and served as President and Vice Chairman (from 2011 to 2015) of Carriage Services and President at Matthews International (from 1993 to 2005). He brings significant operational and management expertise as well as valuable acquisition sourcing relationships to Remembrance Mr. DeCarlo is now CEO of DeCarlo Solutions Inc. Mr. DeCarlo earned his MBA in Finance, a Masters of Arts in Economics and Statistics and studied towards a Ph.D. in Applied Economics and Finance (all but dissertation) at the Wharton School of Finance and the University of Pennsylvania, as well as a Bachelor of Science degree in Industrial Management from West Virginia University.

Ian M. Beadle. Mr. Beadle has served as a member of our board of directors since February 2020and served as an observer of the board of directors of our predecessor, PF Management Services, LLC, since September 2013.  Mr. Beadle has been a Partner at Concrete Rose Capital since January 2020, an early stage venture investment vehicle deploying financial and social capital to exceptional underrepresented founders and entrepreneurs committed to building diverse teams.  Prior to joining Concrete Rose Capital in 2020, Mr. Beadle worked as a Principal at Littlebanc Advisors, LLC (from May 2014 to December 2019), where he was responsible for sourcing and underwriting investment opportunities as well as implementing growth strategies at acquired companies.  Mr. Beadle received his MBA from the University of Southern California and is a CFA Charterholder.

Poul LeMasters. Mr. LeMasters has served as a member of our board of directors since February 2020. Poul operates, and is principal of, LeMasters Consulting, located in Cincinnati, Ohio, a consulting business entirely for the deathcare profession. He works with funeral home owners/funeral directors/embalmers, cemeteries/cemeterains, and cremationists/crematory owners. He assists in areas of legal, compliance, regulatory, litigation, and operational issues. Poul also serves in various roles with national groups such as: Legal Counsel for NCBVA (National Concrete Burial Vault Association), Legal Advisor to CCC (Catholic Cemetery Conference), and General Counsel to ICCFA (International Cemetery, Crematory and Funeral Association).

Directors and executive officers are elected until their successors are duly elected and qualified. There are no arrangements or understandings known to us pursuant to which any director or executive officer was or is to be selected as a director (or director nominee) or executive officer.

Board of Directors

We operate under the direction of our board of directors, the members of which are accountable to us and our stockholders as fiduciaries.  The management and control of our company is vested in our board of directors which is responsible for the adoption of policy procedures with respect to the business affairs of our company and the approval of certain major decisions. The current members of our board of directors are Dennis L. Smith, Michael Margolies, David DeCarlo, Ian M. Beadle and Poul LeMasters.

Family Relationships

There are no family relationships between any of our directors or executive officers.

Involvement in Certain Legal Proceedings

To the best of our knowledge, except as described below, none of our directors or executive officers has, during the past ten years:

Advisory Board

We intend to establish an Advisory Board to assist us with various matters that impact the business of our company. We anticipate that our advisors will include individuals who possess expertise and expertise in various aspects of our business strategy and the death care industry. Advisors are primarily long-time business colleagues and associates of our company’s senior principals. At this time, there are no contractual relationships between our company and any potential members of our Advisory Board, though we may elect to formalize such arrangements in the future.

EXECUTIVE COMPENSATION

Summary Compensation Table - Years Ended December 31, 2019 and 2018

The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the named persons for services rendered in all capacities, during the noted periods. No other executive officers received total annual salary and bonus compensation in excess of $100,000.

Outstanding Equity Awards

There are no outstanding equity awards granted in the years 2019 or 2018. Award grants under our 2020 equity incentive plan are discussed below.

Employment Contracts

On January 1, 2020, we entered into an employment agreement with Dennis L.Smith, pursuant to which Mr. Smith will serve as chief executive officer and president of our company. We agreed to pay Mr. Smith an annual base salary of $175,000. This annual base salary will be increased to $200,000 if we and our wholly owned subsidiaries and operating affiliates collectively generate $1,000,000 of earnings before interest, tax, depreciation, and amortization, or EBITDA, after January 1, 2020 (calculated on a consolidated basis), and such base salary increase will be effective on the first day of the calendar month after the month in which we and our wholly owned subsidiaries and operating affiliates surpass such $1,000,000 threshold. Mr. Smith’s base salary will be reviewed at least annually by our board of directors and may be increased by the board of directors in its discretion; provided, however, that on January 1, 2021 and each January 1 thereafter during Mr. Smith’s employment with us, his annual base salary shall be increased by 5.0%. Mr. Smith is eligible to receive an annual cash bonus in an amount and subject to terms as may be determined by our board of directors in its sole discretion. If this offering is successful, as determined by our board of directors in its sole discretion, we will pay Mr. Smith a one-time cash performance bonus in the amount of $100,000. In addition, we agreed to grant Mr. Smith an award of 516,305 shares of our restricted common stock of which 25% shall vest on the one year anniversary of Mr. Smith’s employment with us and the remaining 75% shall thereafter vest pro rata on a monthly basis until the fourth anniversary of Mr. Smith’s employment with us. Mr. Smith will be entitled to fringe benefits and perquisites consistent with those provided to similarly situated executives of our company and following completion of this offering we will pay Mr. Smith up to $1,000 per month for a vehicle. We also agreed to reimburse Mr. Smith for all reasonable and necessary out-of-pocket business expenses and to entitle Mr. Smith to participate in all Company employee benefit plans and programs on a basis no less favorable than provided to similarly situated Company executives. Mr. Smith is also entitled to vacation days in accordance with Company practice and to be covered by our company’s directors and officers insurance policies. We have also agreed to obtain a “key person” life insurance policy in the amount of $5,000,000, assuming we determine that we can afford the policy premiums, which shall remain in place for so long as Mr. Smith is employed under his agreement with us and which shall name our company as loss payee with respect to 80% of the policy’s proceeds and Mr. Smith’s estate or other designee with respect to 20% of the policy’s proceeds. The employment agreement contains customary confidentiality provisions and covenants prohibiting Mr. Smith from competing with us or from soliciting any of our employees, consultants or customers within a radius of 75 miles of any business owned or operated by us or by any of our affiliates for a period ending two years after his employment termination. Mr. Smith may, however, purchase or own, as a passive investor, less than five percent (5%) of the stock of a publicly traded corporation engaged in a competitive business. The initial term of the employment agreement is for three years with one-year automatic extensions, unless either party provides 90 days’ prior written notice of its intention not to extend the term for an additional year. The employment agreement may be terminated by either party at any time for any reason, with at least 30 days advance written notice. If Mr. Smith’s employment is terminated for “cause,” as defined in his employment agreement, Mr. Smith shall be entitled to be paid accrued amounts except that he shall forfeit any earned but unpaid annual bonus. If Mr. Smith’s employment is terminated by us without cause, Mr. Smith shall be entitled to receive, in addition to any accrued amounts, one and one-half times his then monthly base salary amount for an additional eighteen (18) months following his termination, assuming certain post-employment conditions are met.

On January 1, 2020, we entered into an employment agreement with Michael A. Ryan, pursuant to which Mr. Ryan will serve as treasurer of our company. We agreed to pay Mr. Ryan an annual base salary of $125,000. Mr. Ryan’s base salary will be reviewed at least annually by our board of directors and may be increased by the board of directors in its discretion; provided, however, that on January 1, 2021 and each January 1 thereafter during Mr. Ryan’s employment with us, his annual base salary shall be increased by 2.0%. If gross proceeds of this offering equal or exceed $12,000,000, we will pay Mr. Ryan a one-time cash performance bonus in the amount of $20,000. In addition, we agreed to grant Mr. Ryan an award of 250,013 shares of our restricted common stock of which 25% shall vest on the one year anniversary of Mr. Ryan’s employment with us and the remaining 75% shall thereafter vest pro rata on a monthly basis until the fourth anniversary of Mr. Ryan’s employment with us. We also agreed to reimburse Mr. Ryan for all reasonable and necessary out-of-pocket business expenses, including those related to maintaining accounting licenses, and to entitle Mr. Ryan to participate in all Company employee benefit plans and programs on a basis no less favorable than provided to similarly situated Company executives. Mr. Ryan is also entitled to vacation days in accordance with Company practice and to be covered by our company’s directors and officers insurance policies. The employment agreement contains customary confidentiality provisions and covenants prohibiting Mr. Ryan from competing with us or from soliciting any of our employees, consultants or customers within the United States for a period ending two years after his employment termination. Mr. Ryan may, however, purchase or own, as a passive investor, less than five percent (5%) of the stock of a publicly traded corporation engaged in a competitive business. The initial term of the employment agreement is for one year with one-year automatic extensions, unless either party provides 90 days’ prior written notice of its intention not to extend the term for an additional year. The employment agreement may be terminated by either party at any time for any reason, with at least 30 days advance written notice. If Mr. Ryan’s employment is terminated for “cause,” as defined in his employment agreement, Mr. Ryan shall be entitled to be paid accrued amounts due him. If Mr. Ryan’s employment is terminated by us without cause, Mr. Ryan shall be entitled to receive, in addition to any accrued amounts, one times his then base salary amount for an additional twelve (12) months following his termination, assuming certain post-employment conditions are met.

On January 1, 2020, we entered into an employment agreement with Derrick Husmann, pursuant to which Mr. Husmann will serve as vice president, operations of our company. We agreed to pay Mr. Husmann an annual base salary of $110,000. Mr. Husmann’s base salary will be reviewed at least annually by our board of directors and may be increased by the board of directors in its discretion. In addition, we agreed to grant Mr. Husmann an award of 125,007 shares of our restricted common stock of which 25% shall vest on the one year anniversary of Mr. Husmann’s employment with us and the remaining 75% shall thereafter vest pro rata on a monthly basis until the fourth anniversary of Mr. Husmann’s employment with us. We also agreed to reimburse Mr. Husmann for all reasonable and necessary out-of-pocket business expenses and to entitle Mr. Husmann to participate in all Company employee benefit plans and programs on a basis no less favorable than provided to similarly situated Company executives. Mr. Husmann is also entitled to vacation days in accordance with Company practice and to be covered by the Company’s directors and officers insurance policies. The employment agreement contains customary confidentiality provisions and covenants prohibiting Mr. Husmann from competing with us or from soliciting any of our employees, consultants or customers within the United States for a period ending two years after his employment termination. Mr. Husmann may, however, purchase or own, as a passive investor, less than five percent (5%) of the stock of a publicly traded corporation engaged in a competitive business. The initial term of the employment agreement is for one year with one-year automatic extensions, unless either party provides 90 days’ prior written notice of its intention not to extend the term for an additional year. The employment agreement may be terminated by either party at any time for any reason, with at least 30 days advance written notice. If Mr. Husmann’s employment is terminated for “cause,” as defined in his employment agreement, Mr. Husmann shall be entitled to be paid accrued amounts due him. If Mr. Husmann’s employment is terminated by us without cause, Mr. Husmann shall be entitled to receive, in addition to any accrued amounts, an amount equal to 50% his then base salary amount for an additional six (6) months following his termination, assuming certain post-employment conditions are met.

Director Compensation

Our non-employee directors do not currently receive any compensation for their service, but we may adopt a compensation plan for our directors at a future time.

Management Services Agreement

Effective February 1, 2020, we have entered into a management services agreement with Littlebanc, a Florida limited liability company whose managing member is Michael Margolies, one of our directors and our controlling stockholder. Pursuant to the terms of this management services agreement, Littlebanc will perform the following services for the benefit of our company and our subsidiaries and affiliates, subject to the oversight and supervision of our board of directors:

We will pay Littlebanc an annual management fee, to be paid on a quarterly basis, in an amount equal to the greater of: (i) $150,000; and (ii) 5.00% of the consolidated EBITDA of our company and our subsidiaries and affiliates for the most recently completed fiscal quarter. If we do not timely pay Littlebanc its management fee when due, we will be required to pay interest at the annual rate of 8% per year on any unpaid fee amounts. Additionally, we will reimburse Littlebanc for all costs and expenses it or its affiliates incur in connection with performing their services under the agreement. We have also awarded Littlebanc a restricted stock grant under our 2020 plan in the amount of 1,250,065 shares of our common stock, of which 25% shall vest on the one year anniversary of the effective date of the management services agreement and the remaining 75% shall thereafter vest pro rata on a monthly basis until the fourth anniversary of the effective date of the management services agreement. Our agreement with Littlebanc will remain effective until (i) it is either terminated by Littlebanc at any time upon 90 days’ prior written notice to us or (ii) we terminate the agreement at any time if a majority of our board of directors and the holders of a majority of our then outstanding common stock vote to terminate the agreement, neither Michael Margolies nor his designated successor is the managing member of Littlebanc, or there is a final court finding that Littlebanc has materially breached the terms of the agreement or acted with gross negligence, willful misconduct, bad faith, reckless disregard for its duties or fraudulently. We have agreed to indemnify Littlebanc and maintain adequate insurance to support any indemnity obligations, and we will not hold Littlebanc liable for any errors of judgment, mistakes of law or losses suffered by us unless Littlebanc has acted with gross negligence, willful misconduct, bad faith, reckless disregard for its duties or fraudulently.

Outstanding Options 

As of the date hereof, under our 2020 equity incentive plan we have issued restricted stock awards for an aggregate of 891,325 shares of our common stock to our executive officers. We have also issued to Littlebanc a restricted stock award for 1,250,065 shares of our common stock under the terms of our management services agreement with Littlebanc.

Our 2020 Equity Incentive Plan

On February 3, 2020, our board of directors and our stockholders approved the Remembrance Group, Inc. 2020 Equity Incentive Plan, or our 2020 plan. The Plan is a stock-based compensation plan that provides for discretionary grants of stock options, stock awards and stock unit awards to key employees, non-employee directors and consultants. The purpose of our 2020 plan is to attract, motivate, and retain directors, employees, and others in a position to affect the financial and operational performance of our company and to recognize contributions made to our company by these persons and to provide them with additional incentive to achieve the objectives of our company. The following is a summary of our 2020 plan.

Administration. Our 2020 plan will be administered by our board of directors, unless we establish a committee of the board of directors for this purpose (we refer to the body administering our 2020 plan as the administrator). The administrator will have full authority to select the individuals who will receive awards under our 2020 plan, determine the form and amount of each of the awards to be granted and establish the terms and conditions of awards.

Number of Shares of Common Stock. The number of shares of the common stock that may be issued under our 2020 plan is 2,500,131. Shares issuable under our 2020 plan may be authorized but unissued shares or treasury shares. If there is a lapse, forfeiture, expiration, termination or cancellation of any award made under our 2020 plan for any reason, the shares subject to the award will again be available for issuance. Any shares subject to an award that are delivered to us by a participant, or withheld by us on behalf of a participant, as payment for an award or payment of withholding taxes due in connection with an award will not again be available for issuance, and all such shares will count toward the number of shares issued under our 2020 plan. The number of shares of common stock issuable under our 2020 plan is subject to adjustment, in the event of any reorganization, recapitalization, stock split, stock distribution, merger, consolidation, split-up, spin-off, combination, subdivision, consolidation or exchange of shares, any change in the capital structure of our company or any similar corporate transaction. In each case, the administrator has the discretion to make adjustments it deems necessary to preserve the intended benefits under our 2020 plan. No award granted under our 2020 plan may be transferred, except by will, the laws of descent and distribution.

Eligibility. All employees designated as key employees, including consultants, for purposes of our 2020 plan and all non-employee directors are eligible to receive awards under our 2020 plan.

Awards to Participants. The Plan provides for discretionary awards of stock options, stock awards and stock unit awards to participants. Each award made under our 2020 plan will be evidenced by a written award agreement specifying the terms and conditions of the award as determined by the administrator in its sole discretion, consistent with the terms of our 2020 plan.

Stock Options. The administrator has the discretion to grant non-qualified stock options or incentive stock options to participants and to set the terms and conditions applicable to the options, including the type of option, the number of shares subject to the option and the vesting schedule; provided that the exercise price of each stock option will be the fair market value (as defined in the 2020 Plan) of the common stock on the date on which the option is granted, except that the exercise price per share under a non-qualified stock option may be less than 100% of the fair market value of such shares on the date such option is granted provided that, and only if, the board of directors approves a lower price after consideration of the application of Section 409A of the internal revenue code, each option will expire no later than ten years from the date of grant and no dividend equivalents may be paid with respect to stock options. It is intended that stock options qualify as “performance-based compensation” under Section 162(m) of the internal revenue code and thus be fully deductible by us for federal income tax purposes, to the extent permitted by law.

In addition, an incentive stock option granted to a key employee is subject to the following rules: (i) the aggregate fair market value (determined at the time the option is granted) of the shares of common stock with respect to which incentive stock options are exercisable for the first time by a key employee during any calendar year (under all incentive stock option plans of our company and its subsidiaries) cannot exceed $100,000, and if this limitation is exceeded, that portion of the incentive stock option that does not exceed the applicable dollar limit will be an incentive stock option and the remainder will be a non-qualified stock option; (ii) if an incentive stock option is granted to a key employee who owns stock possessing more than 10% of the total combined voting power of all class of stock of our company, the exercise price of the incentive stock option will be 110% of the fair market value of the common stock on the date of grant and the incentive stock option will expire no later than five years from the date of grant; and (iii) no incentive stock option can be granted after ten years from the date our 2020 plan was adopted.

Stock Awards. The administrator has the discretion to grant stock awards to participants. Stock awards will consist of shares of common stock granted without any consideration from the participant or shares sold to the participant for appropriate consideration as determined by the Board. The number of shares awarded to each participant, and the restrictions, terms and conditions of the award, will be at the discretion of the administrator. Subject to the restrictions, a participant will be a shareholder with respect to the shares awarded to him or her and will have the rights of a shareholder with respect to the shares, including the right to vote the shares and receive dividends on the shares; provided that dividends otherwise payable on any performance-based stock award will be held by us and will be paid to the holder of the stock award only to the extent the restrictions on such stock award lapse, and the administrator in its discretion can accumulate and hold such amounts payable on any other stock awards until the restrictions on the stock award lapse.

Stock Units. The administrator has the discretion to grant stock unit awards to participants. Each stock unit entitles the participant to receive, on a specified date or event set forth in the award agreement, one share of common stock or cash equal to the fair market value of one share on such date or event, as provided in the award agreement. The number of stock units awarded to each participant, and the terms and conditions of the award, will be at the discretion of the administrator. Unless otherwise specified in the award agreement, a participant will not be a shareholder with respect to the stock units awarded to him prior to the date they are settled in shares of common stock. The award agreement may provide that until the restrictions on the stock units lapse, the participant will be paid an amount equal to the dividends that would have been paid had the stock units been actual shares; provided that dividend equivalents otherwise payable on any performance-based stock units will be held by us and paid only to the extent the restrictions lapse, and the administrator in its discretion can accumulate and hold such amounts payable on any other stock units until the restrictions on the stock units lapse.

Payment for Stock Options and Withholding Taxes. The administrator may make one or more of the following methods available for payment of any award, including the exercise price of a stock option, and for payment of the minimum required tax obligation associated with an award: (i) cash; (ii) cash received from a broker-dealer to whom the holder has submitted an exercise notice together with irrevocable instructions to deliver promptly to us the amount of sales proceeds from the sale of the shares subject to the award to pay the exercise price or withholding tax; (iii) by directing us to withhold shares of common stock otherwise issuable in connection with the award having a fair market value equal to the amount required to be withheld; and (iv) by delivery of previously acquired shares of common stock that are acceptable to the administrator and that have an aggregate fair market value on the date of exercise equal to the exercise price or withholding tax, or certification of ownership by attestation of such previously acquired shares.

Provisions Relating to a “Change in Control” of our Company. Notwithstanding any other provision of our 2020 plan or any award agreement, in the event of a “Change in Control” of our company, the administrator has the discretion to provide that all outstanding awards will become fully exercisable, all restrictions applicable to all awards will terminate or lapse, and performance goals applicable to any stock awards will be deemed satisfied at the highest target level. In addition, upon such Change in Control, the administrator has sole discretion to provide for the purchase of any outstanding stock option for cash equal to the difference between the exercise price and the then fair market value of the common stock subject to the option had the option been currently exercisable, make such adjustment to any award then outstanding as the administrator deems appropriate to reflect such Change in Control and cause any such award then outstanding to be assumed by the acquiring or surviving corporation after such Change in Control.

Effect of Termination of Employment; Company Repurchase Right. The right to exercise an option (to the extent that it is vested) following termination of a participant’s employment or service with our company will expire thirty (30) days following the termination of employment or service, except (i) to the extent any longer period is permitted under the rules of section 422 of the internal revenue code with respect to a participant’s death or disability, and (ii) if a participant’s employment or service with our company is terminated for cause, as that term is defined in our 2020 plan, then, immediately upon the termination of the participant’s employment or service with us, all vested and unvested awards granted to participant shall be immediately forfeited and automatically terminate. With respect to an award of our restricted common stock, upon a death or disability, all of the shares of restricted common stock subject to an award shall become immediately vested. Upon the termination of a participant’s employment or service with our company for any reason, we will have the right, but not the obligation, until the first anniversary of the termination of the participant’s employment or service to repurchase some or all of the vested shares and/or the vested options from the participant, the participant’s estate (in the case of the participant’s death), or any permitted transferee of such vested shares and/or vested options. When exercising this right, we shall pay the participant an amount per share equal to the lesser of (i) the price per share paid by the participant for such shares and (ii) the lesser of the fair market value of the shares as of the date of termination of the participant’s employment with us and the date we exercise the repurchase right.

Amendment of Award Agreements; Amendment and Termination of our 2020 plan; Term of our 2020 plan. The administrator may amend any award agreement at any time, provided that no amendment may adversely affect the right of any participant under any agreement in any material way without the written consent of the participant, unless such amendment is required by applicable law, regulation or stock exchange rule.

The Board may terminate, suspend or amend our 2020 plan, in whole or in part, from time to time, without the approval of the shareholders, unless such approval is required by applicable law, regulation or stock exchange rule, and provided that no amendment may adversely affect the right of any participant under any outstanding award in any material way without the written consent of the participant, unless such amendment is required by applicable law, regulation or rule of any stock exchange on which the shares are listed.

Notwithstanding the foregoing, neither our 2020 plan nor any outstanding award agreement can be amended in a way that results in the repricing of a stock option. Repricing is broadly defined to include reducing the exercise price of a stock option or cancelling a stock option in exchange for cash, other stock options with a lower exercise price or other stock awards. (This prohibition on repricing without shareholder approval does not apply in case of an equitable adjustment to the awards to reflect changes in the capital structure of our company or similar events.)

No awards may be granted under our 2020 plan on or after the tenth anniversary of the effective date of our 2020 plan.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information regarding beneficial ownership of our common as of April 24, 2020 by (i) each of our executive officers and directors; (ii) all of our executive officers and directors as a group; and (iii) each person who is known by us to beneficially own more than 5% of our common stock. Unless otherwise specified, the address of each of the persons set forth below is in care of our company, 365 5th Ave, Ste 201, Naples, FL 34102.

We do not currently have any arrangements which if consummated would result in a change of control of our company.  

TRANSACTIONS WITH RELATED PERSONS

The following includes a summary of transactions since the beginning of our 2018 fiscal year, or any currently proposed transaction, in which we were or are to be a participant and the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest (other than compensation described under “Executive Compensation”). We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s-length transactions.

Certain shareholders of and investors in our company provide professional services to our company on terms that have not been bargained for at arms’ length and that have not been put on the market for competitive bidding. If an investor chooses to invest in the series A preferred stock, the investor should be prepared to entrust our company to handle these potential conflicts of interest in a fair and ethical manner without further oversight by the investors or any other independent party. For example, our company has contracted and may contract with entities, such as Littlebanc or with its employees or contractors, to provide various consulting or other professional services to our company or its affiliates. Shareholders of and investors in our company are affiliated with these firms and may personally benefit from these arrangements. In evaluating whether to invest in the series A preferred stock, an investor should consider the fact that the financial interests between the entities may be significant and are in addition to the interests of our company, and thus the interests of the parties and that of the investor may not always be aligned.

Effective February 1, 2020, we have entered into a management services agreement with Littlebanc, a Florida limited liability company whose managing member is Michael Margolies. Mr. Margolies is also a director of our company and the controlling stockholder. Pursuant to the terms of this management services agreement, we will pay Littlebanc an annual management fee, to be paid on a quarterly basis, in an amount equal to the greater of: (i) $150,000; and (ii) 5.00% of the consolidated EBITDA of our company and our subsidiaries and affiliates for the most recently completed fiscal quarter. Additionally, Littlebanc will be reimbursed for all costs and expenses it or its affiliates incur in connection with performing their services under the agreement. We have also awarded Littlebanc a restricted stock grant under our 2020 plan in the amount of 1,250,065 shares of our common stock, of which 25% shall vest on the one year anniversary of the effective date of the management services agreement and the remaining 75% shall thereafter vest pro rata on a monthly basis until the fourth anniversary of the effective date of the management services agreement.

DESCRIPTION OF SECURITIES

General

The following description summarizes important terms of the classes of our capital stock. This summary does not purport to be complete and is qualified in its entirety by the provisions of our certificate of incorporation and our bylaws which have been filed as exhibits to the offering statement of which this offering circular is a part.

Our authorized capital stock consists of 20,000,000 shares of common stock, par value $0.0001 per share. Immediately prior to the initial closing of this offering, we plan to file with the Secretary of State of the State of Delaware an amended and restated certificate of incorporation which will include a designation of the preferences, rights and limitations of our series A preferred stock being sold in this offering. A description of the series A preferred stock is set forth below.

As of April 24, 2020, there were 9,850,522 shares of our common stock issued and outstanding.

Convertible Notes

In March and October 2019, the Company issued $1,100,000 and $500,000, respectively, of unsecured subordinated convertible notes, or the Notes, pursuant to certain convertible note purchase agreements, or the Note Purchase Agreements. Interest will accrue on the principal balance of each of the Notes at a simple rate of 12% per annum.  The principal and unpaid accrued interest on each of the Notes will be due and payable on or after the date that is 24 months following the date of the initial closing of the sale of the Notes, or the Maturity Date, by the Company at its election or upon demand by the holders of a majority-in-interest of  the aggregate principal amount of the Notes, or the Requisite Noteholders.

The Notes are subject to conversion (i) automatically, into equity securities issued in the Company’s next equity financing, or the Next Equity Financing, yielding gross proceeds of at least $5,000,000 in a single transaction or a series of related transactions (which, for the avoidance of doubt, shall exclude the aggregate principal amount of the Notes); (ii) at the Purchaser’s option, in the event of (a) a sale by the Company of all or substantially all of its assets, (b) a merger of the Company with or into another entity (if after such merger the holders of a majority of the Company’s voting security immediately prior to the transaction do not hold a majority of the voting securities of the successor entity), or (c) the transfer of more than 50% of the Company’s voting securities to a person or group, each a Corporate Transaction Conversion; and (iii) at the Requisite Noteholders’ option, on or after the Maturity Date while such Notes remains outstanding, into the Company’s common stock, a Maturity Conversion.

In the event of a Next Equity Financing, the outstanding principal and accrued interest of the Notes will automatically convert into a number of unregistered units of equity securities, equal to the outstanding principal and accrued interest of the Notes at such closing date divided by the applicable conversion price, or the Conversion Price. The Conversion Price is determined as the lesser of (a) the price that is 40% less than the lowest price per unit of the securities sold in the Next Equity Financing and (b) the quotient resulting from dividing $3,000,000, or the Valuation Cap, by the Company’s fully diluted capitalization immediately prior to closing of the Next Equity Financing. With respect to a Corporate Transaction Conversion, the Notes would be convertible at a conversion price equal to the quotient resulting from dividing the Valuation Cap by the Company’s fully diluted capitalization immediately prior to the closing of the Corporate Transition. With respect to a Maturity Conversion, the Notes would be convertible at a conversion price equal to the quotient resulting from dividing the Valuation Cap by the Company’s fully diluted capitalization immediately prior to the Maturity Conversion.

The Company may prepay the principal or accrued interest of the notes at any time before any of the conversion events as defined above.

Common Stock

Holders of our common stock are entitled to one vote for each share on all matters voted upon by our stockholders, including the election of directors, and do not have cumulative voting rights.  Subject to the rights of holders of any then outstanding shares of our Preferred Stock, our common stockholders are entitled to any dividends that may be declared by our board.  Holders of our common stock are entitled to share ratably in our net assets upon our dissolution or liquidation after payment or provision for all liabilities and any preferential liquidation rights of our Preferred Stock then outstanding.  Holders of our common stock have no preemptive rights to purchase shares of our stock.  The shares of our common stock are not subject to any redemption provisions.   The rights, preferences and privileges of holders of our common stock will be subject to those of the holders of any shares of our Preferred Stock currently outstanding or that we may issue in the future.

Preferred Stock

Prior to the initial closing of this offering, we will file an amended and restated certificate of incorporation with the Delaware Secretary of State that will authorize the board of directors to issue, from time to time, without stockholder approval, up to 5,000,000 shares of preferred stock. Our board may, from time to time, authorize the issuance of one or more classes or series of preferred stock without stockholder approval. Subject to the provisions of our certificate of incorporation and limitations prescribed by law, our board is authorized to adopt resolutions to issue shares, establish the number of shares, change the number of shares constituting any series, and provide or change the voting powers, designations, preferences and relative rights, qualifications, limitations or restrictions on shares of our preferred stock, including dividend rights, terms of redemption, conversion rights and liquidation preferences, in each case without any action or vote by our stockholders.

One of the effects of undesignated Preferred stock may be to enable our board to discourage an attempt to obtain control of our company by means of a tender offer, proxy contest, merger or otherwise. The issuance of preferred stock may adversely affect the rights of our common stockholders by, among other things: restricting dividends on the common stock; diluting the voting power of the common stock; impairing the liquidation rights of the common stock; or delaying or preventing a change in control without further action by the stockholders.

Series A Preferred Stock

The amended and restated certificate of incorporation that we will file with the Delaware Secretary of State prior to the initial closing of this offering will establish our series A preferred stock. Of the 5,000,000 shares of preferred stock to be authorized, we will designate a total of 1,200,000 shares of preferred stock as “Series A Cumulative Redeemable Preferred Stock,” or the series A preferred stock. Our series A preferred stock will have the following voting powers, designations, preferences and relative rights, qualifications, limitations or restrictions:

Ranking. The series A preferred stock will rank, as to dividend rights and rights upon our liquidation, dissolution, or winding up, senior to our common stock. The terms of the series A preferred stock will not limit our ability to (i) incur indebtedness or (ii) issue additional equity securities that are equal or junior in rank to the shares of our series A preferred stock as to distribution rights and rights upon our liquidation, dissolution or winding up.

Dividend Rate and Payment Dates. Dividends on the series A preferred stock being offered will be cumulative and payable quarterly in arrears to all holders of record on the applicable record date. Holders of our series A preferred stock will be entitled to receive cumulative dividends in the amount of $0.175 per share each quarter, which is equivalent to the annual rate of 7% of the $10.00 original per share purchase price; provided that upon an event of default (generally defined as our failure to pay dividends when due or to redeem shares when requested by a holder), such amount shall be increased to $0.25 per quarter, which is equivalent to the annual rate of 10% of the $10.00 original per share purchase price. Dividends on shares of our series A preferred stock will continue to accrue even if any of our agreements prohibit the current payment of dividends or we do not have earnings.

Liquidation Preference. The liquidation preference for each share of our series A preferred stock will be $15.00, or 150% of the original per share purchase price. Upon a liquidation, dissolution or winding up of our company, holders of shares of our series A preferred stock will be entitled to receive the liquidation preference with respect to their shares plus an amount equal to any accrued but unpaid dividends (whether or not declared) to, but not including, the date of payment with respect to such shares.

Company Call and Stockholder Put Options. Commencing immediately after the initial closing of this offering and continuing indefinitely thereafter, we shall have a right to call for redemption all or any portion of the outstanding shares of our series A preferred stock at a call price equal to 150% of the original issue price of our series A preferred stock. Commencing on the fifth anniversary of the initial closing of this offering, each holder of shares of our series A preferred stock shall have a right to put all (but not less than all) of the shares of series A preferred stock held by such holder back to us at a put price equal to 150% of the original issue purchase price of such shares.

Further Issuances. The shares of our series A preferred stock have no maturity date, and we will not be required to redeem shares of our series A preferred stock at any time except as otherwise described above under the caption “Company Call and Stockholder Put Options.” Accordingly, the shares of our series A preferred stock will remain outstanding indefinitely, unless we decide, at our option, to exercise our call right or, the holder of the series A preferred stock exercises his put right.

Voting Rights. We may not authorize or issue any class or series of equity securities ranking senior to the series A preferred stock as to dividends or distributions upon liquidation (including securities convertible into or exchangeable for any such senior securities) or amend our certificate of incorporation (whether by merger, consolidation, or otherwise) to materially and adversely change the terms of the series A preferred stock without the affirmative vote of at least two-thirds of the votes entitled to be cast on such matter by holders of our outstanding shares of series A preferred stock, voting together as a class. Otherwise, holders of the shares of our series A preferred stock will not have any voting rights.

No Conversion Right. The series A preferred stock will not be convertible into shares of our common stock.

Warrants 

Warrants Outstanding

As of April 24, 2020, there are outstanding warrants to purchase an aggregate of 150,000 shares of our common stock at an average exercise price of $0.01 per share. These warrants were issued to a strategic consultant and expire on April 6, 2021.

Anti-takeover Provisions

Delaware has enacted the following legislation that may deter or frustrate takeovers of Delaware corporations, such as our company:

Section 203 of the Delaware General Corporation Law. Section 203 provides, with some exceptions, that a Delaware corporation may not engage in any of a broad range of business combinations with a person or affiliate, or associate of the person, who is an “interested stockholder” for a period of three years from the date that the person became an interested stockholder unless: (i) the transaction resulting in a person becoming an interested stockholder, or the business combination, is approved by the board of directors of the corporation before the person becomes an interested stockholder; (ii) the interested stockholder acquires 85% or more of the outstanding voting stock of the corporation in the same transaction that makes it an interested stockholder, excluding shares owned by persons who are both officers and directors of the corporation, and shares held by some employee stock ownership plans; or (iii) on or after the date the person becomes an interested stockholder, the business combination is approved by the corporation’s board of directors and by the holders of at least 66 2/3% of the corporation’s outstanding voting stock at an annual or special meeting, excluding shares owned by the interested stockholder. An “interested stockholder” is defined as any person that is (a) the owner of 15% or more of the outstanding voting stock of the corporation or (b) an affiliate or associate of the corporation and was the owner of 15% or more of the outstanding voting stock of the corporation at any time within the three-year period immediately prior to the date on which it is sought to be determined whether the person is an interested stockholder.

In the amended and restated certificate of incorporation that we will file with the Delaware Secretary of State prior to the initial closing of this offering, we will indicate that we are opting not to be governed by or subject to Section 203 of the Delaware General Corporation Law.

Authorized but Unissued Stock

The authorized but unissued shares of our common stock are available for future issuance without shareholder approval. These additional shares may be used for a variety of corporate purposes, including future public offering to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued shares of common stock may enable our Board to issue shares of stock to persons friendly to existing management, which may deter or frustrate a takeover of our company.

Transfer Agent and Registrar

The transfer agent and registrar for our capital stock is Colonial Stock Transfer Company, Inc. with an address of 66 Exchange Place, Suite 100, Salt Lake City, Utah 84111. Their phone number is 801-355-5740.

UNDERWRITING

Engagement Agreement with Digital Offering

We are currently party to an engagement agreement with Digital Offering LLC, who we refer to as the underwriter. The underwriter has agreed to act as our managing broker-dealer for the offering. The underwriter has made no commitment to purchase all or any part of the shares of series A preferred stock being offered but has agreed to use its best efforts to sell such shares in the offering.

The term of the engagement agreement began on February 13, 2020 and will continue until the earlier to occur of: (i) the final closing and termination of this offering and (ii) ten (10) business days after either party gives the other written notice of termination.

The engagement agreement provides that the underwriter may ask other FINRA member broker-dealers that are registered with the SEC to participate as soliciting dealers for this offering. We refer to these other broker-dealers as soliciting dealers. Upon appointment of any such soliciting dealer, the underwriter is permitted to re-allow all or part of its fees and expense allowance as described below. Such soliciting dealer is also automatically entitled to receive the benefits of our engagement agreement with the underwriter, including the indemnification rights arising under the engagement agreement upon their execution of a soliciting dealer agreement with the underwriter that confirms that such soliciting dealer is so entitled. We will not be responsible for paying any placement agency fees, commissions or expense reimbursements to any soliciting dealers retained by the underwriter.

None of the soliciting dealers are purchasing any of the shares of series A preferred stock in this offering and are not required to sell any specific number or dollar amount of shares of series A preferred stock, but will instead arrange for the sale of securities to investors on a “best efforts” basis, meaning that they need only use their best efforts to sell the securities.

Underwriter Compensation

Cash Commission

We will pay the underwriter concurrently with each closing of the offering a cash placement fee equal to 7% of the gross proceeds of such closing.

Underwriter Warrants

On the date of each closing of the offering, we will issue to the underwriter warrants to purchase a number of shares of the series A preferred stock equal to the quotient of two percent (2%) of the of the dollar amount of shares sold at such closing divided by the price per share paid by investors for the shares sold at such closing. The underwriter warrants will be exercisable for five years from the effective date of the closing in which they were issued at an exercise price equal to the offering price of the shares in this offering. The underwriter’s warrants will provide for customary demand and “piggyback” registration rights. The underwriter’s warrants will provide for adjustment in the number and exercise price of such warrants (and the shares of series A preferred stock underlying such warrants) in the event of recapitalization, merger or other fundamental transaction. The underwriter’s warrants and the shares of series A preferred stock issuable upon the exercise of the underwriter’s warrants have been deemed compensation by FINRA and are therefore subject to FINRA Rule 5110(g)(1). In accordance with FINRA Rule 5110(g)(1), none of such securities may be sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of such securities by any person for a period of 180 days immediately following the qualification date of the Form 1-A of which this offering circular is a part or commencement of sales of the offering pursuant to which the underwriter’s warrants are being issued, except the transfer of any security: 

In addition, in accordance with FINRA Rule 5110(f)(2)(G), the Underwriter’s warrants may not contain certain terms.

Underwriter Expenses

We will be responsible for paying or reimbursing the underwriter for all of its reasonable documented out-of-pocket expenses related to the offering including, without limitation, the underwriter’s legal expenses, cost of background checks and independent third party due diligence reports on our company, travel expenses, photocopying, and courier services subject to a cap of $30,000.

Retainer Amount

Upon entering into the engagement agreement with the underwriter, we paid the underwriter a $15,000 retainer, which was used by the underwriter for the payment of the legal and other expenses described above. The retainer amount will be set off against and credited toward the expenses described above. Any unused portion of the retainer amount will be returned to us if the offering is terminated for any reason.

Right to Bid

We agreed with the underwriter that if, but only if, the offering generates gross proceeds to us of $12 million that we will provide the underwriter with the right to bid for six months from the date of the consummation of the offering to act as financial advisor or to act as joint financial advisor on at least equal economic terms on any offering of debt or equity securities. Any engagement of the underwriter in a future offering would be on terms mutually agreed upon.

Company Expenses

We are responsible for all our own costs and expenses relating to the offering, including, without limitation:

We estimate the expenses of this offering payable by us, not including commissions, will be approximately $190,000 if the maximum amount is raised in this offering, which includes the underwriter expense reimbursement of up to $30,000 and one-half of the $120,000 processing fee payable to the clearing broker, or $60,000, but excludes any commissions attributable to the sale of shares of our series A preferred stock in the offering.

Purchase of Securities by Our Officers and Directors

Our officers and directors and affiliates of our officers and directors are permitted to purchase shares in the offering. Any such purchases shall be conducted in compliance with the applicable provisions of Regulation M. 

Pricing of the Offering

Prior to the offering, our capital stock was not eligible for quotation in a public market. The offering price for our series A preferred stock was determined by negotiation between us and the underwriter. The principal factors considered in determining the terms of our shares of series A preferred stock and the offering price include:

Indemnification and Control

We have agreed to indemnify the underwriter and soliciting dealers against liabilities relating to the offering arising under the Securities Act and the Exchange Act, liabilities arising from breaches of some or all of the representations and warranties contained in our engagement agreement with the underwriter or agreements with soliciting dealers, and to contribute to payments that the soliciting dealers may be required to make for these liabilities.

The underwriter and the soliciting dealers and their respective affiliates are engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. The underwriter and the soliciting dealers and their respective affiliates may in the future perform various financial advisory and investment banking services for us, for which they received or will receive customary fees and expenses.

Our Relationship with the Underwriter and Soliciting Dealers

In the ordinary course of their various business activities, the underwriter and soliciting dealers and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments of our company. The underwriter and soliciting dealers and their respective affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or instruments, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

Offering Period and Expiration Date

This offering will start on or after the date that the offering statement is qualified by the SEC and will terminate at the earlier of: (1) the date at which the maximum amount of offered shares of series A preferred stock have been sold, (2) the date which is 180 days after this offering is qualified by the SEC, subject to an extension of up to an additional 180 days at the discretion of our company and the underwriter, or (3) the date on which this offering is earlier terminated by us in our sole discretion. We refer to the duration of this offering as described above as the offering period.

Investment Procedures

Subscription Procedures for Cambria Capital, My IPO and Cambria Capital’s Clearing Firm

Cambria Capital is an SEC registered broker-dealer and member of FINRA and SIPC. Cambria Capital has been appointed by us and Digital Offering, our managing broker-dealer, as a soliciting dealer for this offering. Cambria Capital operates the My IPO platform as a separate unincorporated business division. Cambria Capital’s clearing firm, who we refer to as the Clearing Firm, is an SEC registered broker-dealer and member of FINRA and SIPC and is authorized to act as a clearing broker-dealer. Cambria Capital and its My IPO division clear through the Clearing Firm as do other broker-dealers who may participate in this offering. We refer to such other broker-dealers that clear through the Clearing Firm and who may participate in this offering as Other Broker-Dealers.

Prospective investors investing through Cambria Capital, My IPO or Other Broker-Dealers will acquire shares of our series A preferred stock through book-entry order by opening an account with Cambria Capital, My IPO, or an Other Broker-Dealer, or by utilizing an existing Cambria Capital account, My IPO account or account with an Other Broker-Dealer. In each such case, the account will be an account owned by the investor and held at the Clearing Firm, as the clearing firm for the exclusive benefit of such investor. The investor will also be required to complete and submit a subscription agreement. Subscriptions for shares of series A preferred stock acquired through an account at Cambria Capital, My IPO or an Other Broker-Dealer are all processed online.

Our transfer agent is Colonial Stock Transfer Company, Inc. Our transfer agent will record and maintain records of the shares of series A preferred stock issued of record by us, including shares issued of record to the Depositary Trust Corporation, which we refer to as the DTC, or its nominee, Cede & Co., for the benefit of broker-dealers, including the Clearing Firm. The Clearing Firm, as the clearing firm, will maintain the individual shareholder beneficial records for accounts at Cambria Capital, My IPO or Other Broker-Dealers.

The process for investing through Cambria Capital, My IPO or through Other Broker-Dealers will work in the following manner. The Clearing Firm will enter into a custody agreement with us pursuant to which we will issue uncertificated securities to be held at the Clearing Firm, and the shares of series A preferred stock held at the Clearing Firm will be reflected as an omnibus position on our records and the transfer agent’s records in the name of the Clearing Firm, for the exclusive benefit of customers. We will open a brokerage account with the Clearing Firm and the Clearing Firm will hold the shares of series A preferred stock to be sold in the offering in book-entry form in our company’s Clearing Firm account. When the shares of series A preferred stock are sold, the Clearing Firm maintains a record of each investor’s ownership interest in those securities. Under an SEC no-action letter provided to the Clearing Firm in January 2015, the Clearing Firm is allowed to treat the issuer as a good control location pursuant to Exchange Act Rule 15c3-3(c)(7) under these circumstances. The customer’s funds will not be transferred into a separate account awaiting the initial closing, or any other closing, but will remain in the customer’s account at the Clearing Firm pending instructions to release funds to us if and when we determine to have a closing. The customer will authorize Digital Offering, through its signing of the subscription agreement to release its subscription funds to us from its account at the Clearing Firm. We intend to apply for DTC eligibility of our shares and if our shares gain DTC eligibility then the shares held in the Clearing Firm accounts will be included in the position of DTC or its nominee, Cede & Co., on the records of our transfer agent. 

In order to subscribe to purchase the shares of series A preferred stock through Cambria Capital, My IPO or through an Other Broker-Dealer, a prospective investor must electronically complete and execute a subscription agreement and provide payment using the procedures indicated below. When submitting the subscription request through Cambria Capital, My IPO or an Other Broker-Dealer, a prospective investor is required to agree to various terms and conditions by checking boxes and to review and electronically sign any necessary documents. We will not accept any subscription agreements prior to the SEC’s qualification of this offering.

The funds that will be used by an investor purchasing through Cambria Capital, My IPO or an Other Broker-Dealer that clears through the Clearing Firm to purchase the securities are deposited by the investor at the time of the investor’s execution of the subscription agreement into a brokerage account at the Clearing Firm, which will be owned by the investor. The funds for the investor's account held at the Clearing Firm can be provided by check, wire, Automated Clearing House, or ACH, push, ACH pull, direct deposit, Automated Customer Account Transfer Service, or ACATS, or non-ACATS transfer. Under an SEC no-action letter provided to the Clearing Firm in July 2015, the funds will remain in the customer’s account after they are deposited and until we determine to have a closing, the prospective investor’s offer is cancelled, or this offering is withdrawn or expired.

We will notify the Clearing Firm when we wish to conduct a closing. The Clearing Firm executes the closing by transferring each investor’s funds from their Cambria Capital, My IPO or Other Broker-Dealer accounts to our Clearing Firm account and transferring the correct number of book-entry shares to each investor’s account from our Clearing Firm account. The shares are then reflected in the investor’s online account and shown on the investor’s Cambria Capital, My IPO or Other Broker-Dealer account statements. Cambria Capital, My IPO and Other Broker-Dealers will also send trade confirmations individually to the investors. 

Other Procedures for Subscribing

Investors not purchasing through Cambria Capital, My IPO or an Other Broker-Dealer that clears through the Clearing Firm must complete and execute a subscription agreement for a specific number of shares and pay for the shares at the time of the subscription. Subscription agreements may be submitted in paper form, or electronically, if electronic subscription agreements and signature are made available to you by your broker-dealer or registered investment advisor. Generally, when submitting a subscription agreement electronically, a prospective investor will be required to agree to various terms and conditions by checking boxes and to review and electronically sign any necessary documents. You may pay the purchase price for your shares by: (i) check or (ii) wire transfer in accordance with the instructions contained in your subscription agreement. All checks should be made payable to Wilmington Trust, National Association as Escrow Agent for “Remembrance Group, Inc.” Completed subscription agreements will be sent by your broker-dealer or registered investment advisor, as applicable, to Digital Offering at the address set forth in the subscription agreement. Subscription payments should be delivered directly to the escrow agent. If you send your subscription payment to your broker or registered investment advisor, then your broker or registered investment advisor will immediately forward your subscription payment to the escrow agent. Subscriptions will be effective only upon our acceptance, and we reserve the right to reject any subscription in whole or in part.

You may not subscribe to this offering prior to the date this offering is qualified by the SEC, which we will refer to as the qualification date. Before the qualification date, you may only make non-binding indications of your interest to purchase securities in the offering. For any subscription agreements received after the qualification date, we have the right to review and accept or reject the subscription in whole or in part, for any reason or for no reason. If rejected, we will return all funds to the rejected investor within ten business days. If accepted, the funds will remain in the escrow account until we determine to have an initial closing of the offering and the funds in escrow will then be transferred into our general account.

Following the initial closing of this offering, we expect to have several subsequent closings of this offering until the maximum offering amount is raised or the offering is terminated. We expect to have closings on a monthly basis and expect that we will accept all funds subscribed for each month subject to our working capital and other needs consistent with the use of proceeds described in this offering circular.  Investors should expect to wait approximately one month and no longer than forty-five days before we accept their subscriptions and they receive the securities subscribed for.  An investor’s subscription is binding and irrevocable and investors will not have the right to withdraw their subscription or receive a return of funds prior to the next closing unless we reject the investor’s subscription. You will receive a confirmation of your purchase promptly following the closing in which you participate.

Right to Reject Subscriptions

After we receive your complete, executed subscription agreement (a form of which is attached to the offering statement as Exhibit 4.1 and the funds required under the subscription agreement have been transferred to the escrow account, we have the right to review and accept or reject your subscription in whole or in part, for any reason or for no reason. We will return all monies from rejected subscriptions immediately to you, without interest or deduction.

Acceptance of Subscriptions

Upon our acceptance of a subscription agreement, we will countersign the subscription agreement and issue the shares subscribed at closing. Once you submit the subscription agreement and it is accepted, you may not revoke or change your subscription or request your subscription funds. All accepted subscription agreements are irrevocable.

Investment Amount Limitations

Generally, no sale may be made to you in this offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income or net worth. Different rules apply to accredited investors and non-natural persons. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov.

As a Tier 2, Regulation A offering, investors must comply with the 10% limitation to investment in the offering. The only investor in this offering exempt from this limitation is an “Accredited Investor” as defined under Rule 501 of Regulation D. If you meet one of the following tests you should qualify as an Accredited Investor:

NOTE: For the purposes of calculating your Net Worth, it is defined as the difference between total assets and total liabilities. This calculation must exclude the value of your primary residence and may exclude any indebtedness secured by your primary residence (up to an amount equal to the value of your primary residence). In the case of fiduciary accounts, net worth and/or income suitability requirements may be satisfied by the beneficiary of the account or by the fiduciary, if the fiduciary directly or indirectly provides funds for the purchase of the shares.

Offer Restrictions Outside the United States

Other than in the United States, no action has been taken by us or the underwriter that would permit a public offering of the securities offered by this offering circular in any jurisdiction where action for that purpose is required. The securities offered by this offering circular may not be offered or sold, directly or indirectly, nor may this offering circular or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this offering circular comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this offering circular. This offering circular does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this offering circular in any jurisdiction in which such an offer or a solicitation is unlawful.

LEGAL MATTERS

The validity of the shares of series A preferred stock covered by this offering circular will be passed upon by Bevilacqua PLLC.

EXPERTS

The consolidated financial statements of our company for the years ended December 31, 2019 and 2018 included in this offering circular have been audited by Somerset CPAs, P.C., an independent registered public accounting firm, as stated in this report appearing herein. Such financial statements have been so included in reliance upon the report of such firm given upon its authority as an expert in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC an offering statement on Form 1-A under the Securities Act with respect to the securities offered in this offering. This offering circular does not contain all the information set forth in the offering statement. For further information with respect to the securities offered in this offering and our company, we refer you to the offering statement and to the attached exhibits. With respect to each such document filed as an exhibit to the offering statement, we refer you to the exhibit for a more complete description of the matters involved.

You may inspect our offering statement and the attached exhibits and schedules without charge at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You can also request copies of those documents, upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms.

Our SEC filings, including the offering statement and the exhibits filed with the offering statement, are also available from the SEC’s website at www.sec.gov, which contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. Additionally, we will make these filings available, free of charge, on our website at https://www.Remembrancefuneralgroup.com as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the SEC. The information on our website, other than these filings, is not, and should not be, considered part of this prospectus and is not incorporated by reference into this document.

PF MANAGEMENT SERVICES, LLC

(now known as Remembrance Group, Inc.)

Consolidated Financial Statements

Years Ended December 31, 2019 and 2018

PF MANAGEMENT SERVICES, LLC

(now known as Remembrance Group, Inc.)

TABLE OF CONTENTS

Report of Independent Registered Public Accounting Firm

To the Members

PF Management Services, LLC

Naples, Florida

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of PF MANAGEMENT SERVICES, LLC, its wholly-owned subsidiary and affiliates (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of operations, members’ equity and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of their operations and their cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the auditing standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the Company’s auditor since 2019.

/s/ Somerset CPA’s, P.C.

Indianapolis, Indiana

March 5, 2020

PF MANAGEMENT SERVICES, LLC

(now known as Remembrance Group, Inc.)

Consolidated Balance Sheets

December 31, 2019 and 2018

See accompanying notes.

PF MANAGEMENT SERVICES, LLC

(now known as Remembrance Group, Inc.)

Consolidated Statements of Operations

For the Years Ended December 31, 2019 and 2018

See accompanying notes.

PF MANAGEMENT SERVICES, LLC

(now known as Remembrance Group, Inc.)

Consolidated Statements of Equity

For the Years Ended December 31, 2019 and 2018

See accompanying notes.

PF MANAGEMENT SERVICES, LLC

(now known as Remembrance Group, Inc.)

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2019 and 2018

See accompanying notes.

PF MANAGEMENT SERVICES, LLC

(now known as Remembrance Group, Inc.)

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

Note 1 - Nature of Operations and Summary of Significant Accounting Policies:

PF Management Services, LLC, now known as Remembrance Group, Inc. (the “Company”) is a provider of death care services and products, with funeral service locations operating in the United States. Our funeral operations consist of Funeral Service locations, Funeral Service/Cemetery combination locations, Crematories, and other related businesses, which enables us to provide services to every consumer regardless of their preferences when death occurs. We sell Funeral/Cemetery property merchandise and services at the time of need and on a pre-need basis.

Our funeral service locations provide all professional services relating to Funerals and Cremations, including the use of funeral facilities and motor vehicles, arranging and directing services, removal, preparation, Cremations, memorialization, and catering. Funeral merchandise, including burial and Cremation caskets and related accessories, urns and other Cremation receptacles, outer burial containers, flowers, online and video tributes, memorial stationery products, memorial tributes, Cremation memorialization products, and other ancillary merchandise is sold at our Funeral service locations.

Principles of Consolidation and Basis of Presentation

The Company has a wholly-owned subsidiary which operates one Funeral service location. The Company also operates seven Funeral service locations which are consolidated into our financial statements due to the entities being either majority owned by the Company or are consolidated because we are the primary beneficiary of the affiliated entities. Two of these Funeral service locations are majority owned by the Company and the other five Funeral service locations  are either separately owned entities or the Company owns a minority interest. The Company also manages two unaffiliated Funeral service locations under long-term contracts and other agreements in which we do not control and does not require to be consolidated. As a result, the Company did not consolidate the assets and liabilities related to these Funeral service locations. Under the long-term contract and other agreements associated with these Funeral service locations, which are subject to certain termination provisions, the Company is the exclusive operator of these Funeral service locations and earns revenues related to sales of services and merchandise. Upon termination of these agreements, the Company will retain certain benefits related to the contractual agreement. The Company has also recognized the existing customer contract-related performance obligations that it assumed as part of these agreements.

Our consolidated financial statements include the accounts of the Company and all subsidiaries in which we hold a controlling financial interest. The subsidiaries are consolidated because they are controlled by us. Control over a subsidiary exists because we possess the power to direct the activities that most significantly impact the subsidiary’s economic performance. The power to direct those activities arises either through us owning a majority voting interest in the subsidiary, or, alternatively, through legal or contractual rights or obligations of us whose terms implicitly or explicitly convey that power. Intercompany balances and transactions have been eliminated in consolidation.

Our consolidated financial statements also include the accounts of the Funeral service trusts in which we have a variable interest and are the primary beneficiary. We have retained the specialized industry accounting principles when consolidating the trusts. Our trusts are variable interest entities, for which we have determined that we are the primary beneficiary as we absorb a majority of the losses and returns associated with these trusts. Although we consolidate the trusts, it does not change the legal relationships among the trusts, us, or our customers. The customers are the legal beneficiaries of these trusts; therefore, their interests in these trusts represent a liability to us.

PF MANAGEMENT SERVICES, LLC

(now known as Remembrance Group, Inc.)

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

Use of Estimates in the Preparation of Financial Statements

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. As a result, actual results could differ from these estimates.

Cash and Cash Equivalents

For purposes of the consolidated statements of cash flows, the Company considers all highly liquid investments that are purchased within three months or less of an instrument’s maturity date to be cash equivalents.

Revenue Recognition

The Company’s revenues are derived from contracts with customers through sale and delivery of death care products and services. Primary sources of revenue are derived from Funeral Home operations generated both at the time of death (“at-need”) and prior to the time of death (“pre-need”), classified on the Consolidated Statements of Operations as Service Revenue and Property and Merchandise Revenue and investment income which includes income earned on assets maintained in service trusts related to sales of Funeral Home services occurring prior to the time of death and required to be maintained in the trust by state law as well as interest earned on pre-need installment contracts. Investment income is presented within Other revenue on the Consolidated Statements of Operations.

Revenue is recognized when control of the merchandise or services is transferred to the customer. Our performance obligations include the delivery of Funeral and Cemetery property, merchandise and services. Control transfers when merchandise is delivered, or services are performed. Sales taxes collected are recognized on a net basis in our consolidated financial statements. On our at-need contracts, we generally deliver the merchandise and perform the services at the time of need.

We also sell price-guaranteed pre-need contracts through various programs providing for future merchandise and services at prices prevailing when the agreements are signed. Revenue associated with sales of pre-need contracts is deferred until control of the merchandise or the services is transferred to the customer, which is upon delivery of the merchandise or as services are performed, generally at the time of need. Revenue is recognized at the time of delivery when control of the memorialization merchandise is transferred.

All personalized marker merchandise is sold on an at-need contract, when delivery is made with manufacturer fulfillment, we will:

We recognize revenue during the period in which it was sold. There is no general right of return for delivered items. Costs related to delivery or performance of merchandise and services are charged to expense when merchandise is delivered, or services are performed.

PF MANAGEMENT SERVICES, LLC

(now known as Remembrance Group, Inc.)

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

Total consideration received for price-guaranteed pre-need and for at-need contracts with customers represents the stated amount of the contract excluding any amounts collected on behalf of third parties, such as sales taxes. Additionally, pursuant to state or provincial law, all or a portion of the proceeds from merchandise or services sold on a pre-need basis may be required to be deposited into trust funds and earnings on these trust funds, which are specifically identifiable for each performance obligation, are also included in total consideration.

The total consideration received for contracts with customers is allocated to each performance obligation based on relative selling price. Relative selling prices are determined by either the amount we sell the performance obligation for on a stand-alone basis or our best estimate of the amount we would sell it for based on an adjusted market assessment approach that is consistent with our historical pricing practices.

Payment on at-need contracts is generally due at the time the merchandise is delivered or the services are performed. For pre-need contracts, payment generally occurs prior to our fulfillment of the performance obligations. Our pre-need contracts may also have extended payment terms. We do not accrue interest on pre-need receivables if they are not paid in accordance with the contractual payment terms given the nature of our merchandise and services, the nature of our contracts with customers, and the timing of the delivery of our services. We do not consider pre-need receivables to be past due until the merchandise or services are required to be delivered at which time the pre-need receivable is paid or reclassified as a trade receivable with payment terms of less than thirty days. For unfulfilled performance obligations on cancelable pre-need contracts, our Consolidated Balance Sheet reflects the net contract liability, which represents the amount we have collected from customers, in deferred revenue, net.

Pursuant to state or provincial law, all or a portion of the proceeds from services sold on a pre-need basis may be required to be deposited into trust funds. When we receive payments from the customer, we deposit the amount required by law into the service trusts and reclassify the corresponding amount from deferred revenue, net into deferred receipts held in trust. Amounts are withdrawn from the service trusts when we fulfill the performance obligations. Earnings on these trust funds, which are specifically identifiable for each performance obligation, are also included in total consideration. We defer these investment earnings related to the service trusts until the associated services are performed.

If a pre-need contract is canceled prior to delivery, state or provincial law determines the amount of the refund owed to the customer, if any, including the amount of the attributed investment earnings. Upon cancellation, we receive the amount of principal deposited to the trust and previously undistributed net investment earnings and, where required, issue a refund to the customer. In addition, we are entitled to retain, in certain jurisdictions, a portion of collected customer payments when a customer cancels a pre-need contract. We recognized these retained funds, if any, and the attributed investment earnings (net of any investment earnings payable to the customer) as revenue in the Consolidated Statement of Operations. In certain jurisdictions, we may be obligated to fund any shortfall if the amount refundable to the customer exceeds the funds in trust.

Accounts Receivable and Allowance for Doubtful Accounts

Our trade receivables primarily consist of amounts due for funeral services already performed. We provide various allowances and cancellation reserves for our receivables. These allowances are based on an analysis of historical trends of collection and cancellation activity. At-need receivables are considered past due after thirty days. Collections are generally managed by the locations or third party agencies acting on behalf of the locations, until a receivable is one hundred eighty days delinquent at which time it is fully reserved and sent to a collection agency. These estimates are impacted by a number of factors, including changes in the economy, and demographic or competitive changes in our areas of operation.

PF MANAGEMENT SERVICES, LLC

(now known as Remembrance Group, Inc.)

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

Inventories

Funeral merchandise items are stated at the lower of average cost or net realizable value. Inventory costs and Cemetery property are relieved using specific identification in fulfillment of performance obligations on our contracts.

Property and Equipment, Net

Property and equipment are stated at cost or, upon acquisition of a business, at the fair value of the assets acquired and depreciated on a straight-line basis. Maintenance and repairs are charged to expense, whereas renewals and major replacements that extend the assets useful lives are capitalized. Depreciation is recognized ratably over the estimated useful lives of the various classes of assets. Buildings and improvements are depreciated over a period ranging from seven to forty years, equipment is depreciated over a period from three to seven years, and leasehold improvements are depreciated over the shorter of the lease term or the life of the asset. When property or equipment is sold or retired, the cost and related accumulated depreciation are removed from the Consolidated Balance Sheet; resulting gains and losses are included in the Consolidated Statement of Operations in the period of sale or disposal.

Leases

We have lease arrangements related to real estate for our funeral service locations that are classified as finance leases at December 31, 2019 and 2018. Lease terms related to real estate generally range from seven to forty years with options to renew at varying terms. We consider reasonably assured renewal options and fixed escalation provisions in our calculation. For more information related to leases, see Note 6.

Fair Value of Measurements

We measure the available-for-sale securities held by our funeral services trusts at fair value on a recurring basis. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We utilize a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

An asset’s or liability’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

PF MANAGEMENT SERVICES, LLC

(now known as Remembrance Group, Inc.)

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

Fixed income commingled funds and money market funds are measured at net asset value. Fixed income commingled funds and money market funds are redeemable for net asset value with two weeks’ notice and immediately, respectively.

We assess our investments in fixed income instruments for other-than-temporary declines in fair value on a quarterly basis. Prior to our adoption of the new guidance on financial instruments discussed below in “Recently Issued Accounting Pronouncements”, we also assessed our investments in equity instruments for other-than temporary declines in fair value on a quarterly basis. Impairment charges resulting from these assessments are recognized as investment losses in Other income (expense), net. These investment losses, if any, are offset by the corresponding reclassification in Other income (expense), net, related to Deferred receipts held in trust. For the years ended December 31, 2019 and 2018, we did not record an impairment charge for other-than-temporary declines in fair value related to certain investments.

Insurance-Funded Pre-Need Contracts

Where permitted by state or provincial law, we may sell a life insurance or annuity policy from third-party insurance companies, for which we earn a commission as general sales agent for the insurance company. These general agency commissions are based on a percentage per contract sold and are recognized as funeral revenue when the insurance purchase transaction between the pre-need purchaser and third-party insurance provider is completed. All selling costs incurred pursuant to the sale of insurance-funded pre-need contracts are expensed as incurred. Pre-need funeral contracts to be funded at maturity by third-party insurance policies totaled approximately $13,884,000 and $14,140,000 on a consolidated basis at December 31, 2019 and 2018, respectively, however these policies are not recorded as an asset or liability on the consolidated balance sheet.

We do not reflect the unfulfilled insurance-funded pre-need contract amounts in our Consolidated Balance Sheet. The policy amount of the insurance contract between the customer and the third-party insurance company generally equals the amount of the pre-need contract. Where jurisdictions allow, the policyholder may have made a revocable commitment to assign the proceeds from the policy to us at the time of need. The proceeds of the life insurance policies or annuity contracts will be reflected in funeral service and merchandise revenue as we perform these funerals.

Deferred Revenues

Revenues from the sale of services and merchandise as well as any investment income is deferred until such time that the services are performed and the merchandise is delivered. In addition to amounts deferred on new contracts, investment income, deferred revenues include deferred revenues from pre-need sales that were entered into by entities prior to the Company’s acquisition of those entities or the assets of those entities. The Company provides for a profit margin for these deferred revenues to account for the projected future costs of delivering products and providing services on pre-need contracts that the Company acquired through acquisition. These revenues and their associated costs are recognized when the related merchandise is delivered or services are performed and are presented on a gross basis on the Consolidated Statements of Operations.

PF MANAGEMENT SERVICES, LLC

(now known as Remembrance Group, Inc.)

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

Income Taxes

The Company is not subject to U.S. federal and most state income taxes for the years ended December 31, 2019 and 2018. For these years the members of the Company are liable for income tax in regard to their distributive share of the Company’s taxable income. Such taxable income may vary substantially from net income reported in the accompanying consolidated financial statements. The Company’s corporate subsidiaries and consolidated affiliates are also not subject to U.S. federal and most state income taxes. The members of the affiliated consolidated companies are liable for income tax in regard to their distributive share of the Company’s taxable income. As discussed more fully in Note 10 – Subsequent Events on January 31, 2020 the Company elected to convert its organizational status from a Delaware limited liability company to a Delaware corporation.

Accounting principles generally accepted in the United States of America require the Company to examine its tax positions for uncertain positions. Management is not aware of any tax positions that are more likely than not to change in the next 12 months or that would not sustain an examination by applicable taxing authorities. The Company’s policy is to recognize penalties and interest as incurred in its Consolidated Statement of Operations. The Company’s federal and various state income tax returns for 2017 through 2019 are subject to examination by the applicable tax authorities, generally for three years after the later of the original or extended due date.

Recently Issued Accounting Pronouncements

In June 2016 and November 2018, the FASB amended “Financial Instruments” to provide financial statement users with more decision-useful information about the expected credit losses on debt instruments and other commitments to extend credit held by a reporting entity at each reporting date. This amendment replaces the incurred loss impairment methodology in the current standard with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to support credit loss estimates. The new guidance is effective for us on January 1, 2023, and we are still evaluating the impact of adoption on our consolidated results of operations, consolidated financial position and cash flows.

In February 2016, the FASB issued Accounting Standards Update 2016-02, “Leases”. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard also requires a lessor to classify leases as either sales-type, finance or operating. A lease will be treated as a sale if it transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee. If risks and rewards are conveyed without the transfer of control, the lease is treated as financing. If the lessor doesn’t convey risks and rewards or control, an operating lease results. The new standard is effective for fiscal years beginning after a deferred one year period to January 1, 2021, including interim periods within those fiscal years. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.

PF MANAGEMENT SERVICES, LLC

(now known as Remembrance Group, Inc.)

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

The Company adopted the new guidance on January 1, 2019 using the full retrospective transition method. The full retrospective transition method includes a number of optional practical expedients and accounting policy elections.

Our current lease portfolio is composed of real estate. Upon adoption of this standard, we recognized a right-of-use asset and liability related to lease arrangements which were originally recorded as capital leases. The adoption of the new standard did not significantly impact our consolidated financial position due to the recognition of the right-of-use asset and liability for our leases as the leases were originally recorded as capital leases. The adoption did not have a material impact to our consolidated results of operations or cash flows.

In August 2018, the FASB amended “Fair Value Measurements” to modify the disclosure requirements. The amendment removes requirements to disclose (1) the amount of and reasons for transfers between levels 1 and 2 of the fair value hierarchy, (2) our policy for timing of transfers between levels, and (3) the valuation processes used in level 3 measurements. It clarifies that, for investments measured at net asset value, disclosure of liquidation timing is only required if the investee has communicated the timing either to us or publicly. It also clarifies that the narrative disclosure of the effect of changes in level 3 inputs should be based on changes that could occur at the reporting date. The amendment adds a requirement to disclose the range and weighted average of significant unobservable inputs used in level 3 measurements. The amended guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years and is not expected to have an impact on our consolidated results of operations, consolidated financial position, and cash flows.

Note 2 - Accounts Receivable, Net of Allowance:

Accounts receivable, net, consisted of the following at December 31, 2019 and 2018:

PF MANAGEMENT SERVICES, LLC

(now known as Remembrance Group, Inc.)

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

Note 3 - Preneed Receivables, Net and Trust Investments:

At December 31, 2019 and 2018, the Company’s service trusts consisted of the investment in debt and equity marketable securities and cash equivalents, both directly as well as through mutual and investment funds.

All of these investments are carried at fair value. All of these investments subject to the fair value hierarchy are considered either Level 1 or Level 2 assets pursuant to the three-level hierarchy described in Note 1. There were no Level 3 assets.

The service trusts are variable interest entities of which the Company is deemed the primary beneficiary. The assets held in the trusts are required to be used to provide the services to which they relate. If the value of these services falls below the cost of providing such services, the Company may be required to fund this shortfall.

A reconciliation of the Company’s trust activities for the years ended December 31, 2019 and 2018 is presented below:

The components of Preneed receivables, net and trust investments in our Consolidated Balance Sheets at December 31, 2019 and 2018 was as follows:

PF MANAGEMENT SERVICES, LLC

(now known as Remembrance Group, Inc.)

Notes to Consolidated Financial Statements

December 31, 2019 and 2018

The market value associated with the assets held in the trusts as of December 31, 2019 and 2018 were as follows:

Assets at Fair Value as of December 31, 2019