UNITED STATES
SECURITIES AND EXCHANGE COMMISSSION
WASHINGTON, D.C. 20549
FORM 10-SB
[SECOND AMENDMENT]
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUER
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
ADVANCED PRODUCTS GROUP, INC
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[Name of Small Business Issuer in its charter]
Delaware 75-2035917
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[State or other jurisdiction [I.R.S. Employer Identification No.]
of incorporation or organization]
5221 Ocean Blvd., No. 257, Sarasota, Florida 34242
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[Address of Principal Offices] [Zip Code]
Issuer's Telephone number [941] 346-8347
Securities to be registered pursuant to Section 12(b) of the Act.
Title of each Class Name of each exchange on which registered
None N/A
Securities registered pursuant to Section 12(g) of the Act
Title of each Class Name of each exchange on which registered
APGP Common Stock NASD
ITEM 1. BUSINESS DESCRIPTION
Advanced Products Group, Inc is a development stage company engaged in the
development of an Internet - driven distribution system for manufacturers of
replacement auto parts and accessories, the "automotive aftermarket".
The Company sees an opportunity to revolutionize the distribution of
replacement auto parts and accessories by replacing the current cumbersome
distribution structure with an efficient and profitable "direct from the
factory" method easing the expense burden of the traditional chain store and
wholesale distribution channels on manufacturers, especially small and mid
sized manufacturers, resulting in increased profit for the manufacturer and
reduced cost for the consumer.
Data compiled by the Automotive Service Industry Association indicates
that parts and accessories make up sixty-eight percent (68%) of all dollars
spent in the automotive aftermarket. This represents $170 Billion Dollars
with an additional $120 Billion Dollars spent on labor, making this market
one of the largest segments of the US economy. The US vehicle population is
expected to exceed 220 million vehicles within the next five (5) years.
The core of the Company's business plan is to streamline the distribution
process by removing several layers within the normal distribution channel.
Manufacturers currently distribute through wholesalers, who then distribute
to retailers, who distribute to repair shops, which then charge the consumer
for the part and labor. Each step of the channel adds additional cost. A
part that has a manufacturing cost of $1.00, typically retails for as much as
$6.00 to the end user. By creating a pool of manufacturers selling directly
to the consumer, whether it is ultimately the repair shop, or vehicle owner,
management is confident the effect will be a significant increase in profit
for the manufacturer while resulting in a savings for the consumer.
In addition, the Company will have the opportunity to market and sell its
own heavy-duty cleaners as accessory items. Originally the Company had
formed to sell a licensed proprietary hand cleaner, under the trade name
Cra Z Soap Hand Cleaner. As described later in this document, the Company
has had to find a new tradename or this product. Management has also changed
its focus away from marketing of these products to the development of the
manufacturers web community. The shift in focus is also discussed in other
sections of this document.
(A) COMPANY HISTORY
On August 27, 1998 Mr. Ronald Weprin as the sole incorporator filed
Articles of Incorporation in the State of Nevada to organize Cra Z Soap,
Corporation. The purpose of forming this company was to market and sell
various cleaning products specifically targeted to the automotive aftermarket.
The formula for the hand cleaner was developed by Masters Marketing and
Development, Corp. a privately held corporation engaged in the
development of products ranging from air freshners to exercise equipment.
Richard Herman, and Ronald Weprin as principals of this company
jointly own the formula for the hand cleaner. Each owns 42.5% of Masters
Marketing, the balance (15%) is owned by a several of their family and friends.
Cra Z Soap, Corp. sought a license for this product because of its
superior performance characteristics. Mr. Weprin and Mr. Herman owned a
a combined 33% of this Nevada corportion, 18% and 15% respectively. The
balance of ownership is spread out among investors who are not principals nor
significant holders (greater than or equal to 5%) of Masters Marketing stock.
In order to raise the funds needed to nationally launch the hand cleaner
Cra Z Soap, Corp. through its consultants identified a non-operating public
shell, Advanced Technologies Group,Inc. (formerly Total Lifestyles Corportion,
Inc.), a Delaware Corporation. On August 28, 1998, Cra Z Soap, Corp. of
Nevada entered into a merger agreement with Advanced Technologies Group, Inc.
(formerly Total Lifestyles Corporation, Inc.) of Delaware. Total Lifestyles
Corporation, Inc. was originally formed in March of 1987, and a copy of the
Articles of Incorporation are included as an Exhibit to this Registration
Statement.
By this Agreement, the shareholders of Cra Z Soap, Corp, agreed to
tender 100% of their common voting stock for 1,100,000 common voting shares
and 310,000 Series Super A Preferred shares of Advanced Technologies Group,
Inc. These Series Super A Preferred shares had a voting preference of 20 votes
for each one share held, effectively giving the private company, Cra Z Soap,
Corp. voting control of the public company, Advanced Technologies Group,Inc.,
a "reverse merger". The name of the resulting company became Cra Z Products,
Inc.
Management believed that as a publically traded entity, Cra Z Products,
Inc. would be able to raise sufficient working capital to advertise its
products nationally. To that end, it entered into an agreement with
Telebrands, a large TV production company, for an infomercial in consideration
of 50,000 restricted shares of Cra Z Products' common stock. Telebrands agreed
to test the market to determine the likelyhood of success of any such
infomercial, due to the fact that at about this same time several other
similar competitive products were already being successfully advertised in this
manner, Telebrands came to the conclusion that the market was saturated making
it unlikely that the hand cleaner would succeed.
Telebrands's test of the market did reval that a powder of liquid
formulation of the soap would have a greater chance of success in relation to
the bar formula used by the Company. With this in mind, management entered
into an Agreement with STARCO to manufacture both a powder and liquid hand
cleaner. As part of this Agreement, the Company was also given the right to
retail under its name any of the one hundred plus cleaning products
manufactured by STARCO. The Company identified fifty (50) products consistent
with its purpose to sell cleaning products in the automotive aftermarket.
These products are in addition to the licensed proprietary formula
hand cleaner licensed by Masters.
At about the same time Masters notified the Company regarding a dispute
that had arisen between it and Southeast Automotive regarding the tradename
Cra Z Soap Hand Cleaner. Southeast reserved the Cra Z as part of a tradename
registration of Capitan Cra Z. Masters had marked the name Cra Z Soap
Hand Cleaner in Tennessee but failed to protect it nationally. In settlement
of the dispute, Masters received approximatiely $190,000 for the name and
inventory already branded Cra Z Soap Hand Cleaner. With the addition of
the STARCO products, management at Cra Z Products, Inc. had already determined
that a change in the product name was needed and therfore felt that the loss
of this tradename was insignificant. It elected not to pursue any rights it
might have had by virture of its License Agreement with Masters.
On March 12, 1999, the Board of Directors and shareholders of Cra Z
Products, Inc. met in Sarasota, Florida. The purpose of this meeting was to
propose a change in focus in the Company's primary business. The lost
opportunity for a TV blitz for the soap products made it clear that for
the Company to survive it needed to refocus its business plans.
To that end, the management had already begun to pursue a merger with
two privately held companies. It also decided to take advantage of Mr. Weprin
and Mr. D'Agata's sixty (60)plus years of experience in the auto parts and
auto accessories industry. On the recommendation of the Company's consultants
management designed a business plan that takes advantage not only of the
experience in the industry but of the burgeoning e-commerce industry as well
by designing a unique automotive web site aimed at removing as many steps
of the distribution chain as possible.
To better position the Company to complete the possible mergers and
to refocus its energies to its new business plan, the Board took the
following actions:
(1) Changed the name of the Company from Cra Z Products, Inc to Advanced
Products Group, Inc.
(2) Authorized 150,000 Shares of Series C Preferred Stock with a $10 face
value, a 6% coupon, a redemption value of $10 and conversion rights after 2
years of 2 common shares for each Series C Preferred Share.
(3) Requested and received of the Shareholders a vote to convert the Series
A Preferred Shares at the preferred ratio of 20 common for each one share of
Series A Preferred for all shareholders except Mr. Weprin and Mr. Herman, who
agreed to cancel their shares.
(4) Declared a stock split of 1 share for each 3 shares of common stock held
after the conversion of the Series A Preferred (a "reverse split").
(5) Edward da Parma was elected to the Board and named President and CEO of
the Company.
The mergers that were under consideration at the time of this meeting
never came to fruition and while the Series C Preferred Shares are
authorized, none are issued or outstanding.
At the time of the merger and up to the meeting of the Board on March 12,
1999 Mr. Weprin owned 4% of Advanced Products Group, Inc (formerly Cra Z
Products, Inc.) and Mr. Herman owned 3.88% of the Company. Their current
ownership in the Company is discussed later in this document.
(B) PRINCIPAL PRODUCTS
The Company's focus is principally to create an auto parts and
accessories manufacturers web community. It currently has at its web site
www.Go-Advanced.com a model of the auto parts site under construction. Once
completed the site will be www.Go-Autoparts.com. The Company plans to market
the hand cleaner and those cleaning products appropriate to the auto industry
on its web site as accessory items.
Growth of Internet sales is estimated to reach over $3.1 Trillion by the
year 2003 (Forrester Research, Inc). Yet while there is surely an increase
in the overall sales volume via the Internet, recent history shows that
traditional retailing via the Internet is risky. This risk and recent poor
showing of traditional retailers on the web actually create a window of
opportunity for the Company.
Traditional retailers have approached the Internet in the usual
distribution manner. That is, they have not attempted to reduce
intermediaries to bring the product to the end user, but only removed the
need for a sales clerk. In many respects retailers operate electronic
self-service stores. Manufacturers have spent years trimming operating costs
to satisfy the never ending pressure from retailers to lower prices, yet
manufacturers have the best opportunity to effectively use the Internet if
they by-pass the retailer and go directly to the various levels of end users.
In distributing their products in this manner they eliminate the wholesaler
and retailer, resulting in additional profit by reducing distribution costs,
which make up the bulk of product price.
Super stores and mega chains such as Wal-Mart, Toys-R-Us, and Staples
have revolutionized the way consumers shop. In actuality, these super chains
have reduced the competition among retailers by exerting pressure on the
manufacturer to produce to their requirements in terms of price and
warehousing. Typically these stores require drop shipment and do not
maintain warehouses for inventory purposes, but rather rely on the
manufacturer to build in either JIT (just in time) or to maintain an
inventory for the chain. While JIT can be an effective method of
manufacturing it is a system that will ever approach but never arrive in
terms of providing sufficient product on time to meet all demand. That
results in all manufacturers carrying inventory, and the associated expense
that goes with it. This same trend is taking over in the auto parts
industry, as Pep Boys, Auto Zone and NAPA emulate the Wal-Mart experience.
The fallout of this narrowing of the distribution channels is that the
manufacturers are forced to compete for fewer customers at the expense of
margins and future growth. Herein lies the Company's window of opportunity.
Management recently conducted a random survey of thirty-five (35) auto
parts manufacturers. The table below indicates their response:
SURVEY RESULTS
QUESTION: Over the last 5 years did gross margins increase or decrease?
RESPONSE: Only 20% report an increase in gross margins.
CONCLUSION:80% of all respondents have experienced an erosion of gross margins
as a result of an increasingly competitive environment.
Question: Do you own a web site?
Response: 65% own web sites
Conclusion:High awareness of the Inernet as a marketing tool.
Question: What percent of total business is transacted over the web?
Response: None transact business over the Internet
Conclusion:None have rationalized how to use the net to transact business
Question: What do think of APG's strategy?
Response: All have a strong interest in participation.
Conclusion:Manufacturers are looking for ways to grow customer base and margins.
The survey confirmed management's assessment of the state of the
industry at the manufacturing level. None of the manufacturers contacted had
a strategy designed to wrest control of the market from the large
distributor. The Company's plan is to provide portal type services to its
participants providing a direct link to the end user.
COMPETITION: Most Internet sites selling auto parts are owned by
traditional wholesalers and retailers. Their goal is to bring customers to
their virtual stores rather than to expedite the transaction. Pricing is
consistent with their retail store price, rarely resulting in a savings.
Those sites that do not follow the traditional retail model, typically
require the end user to leave an e-mail request to which there is a promise
to respond within a day or two. The end user is required to download an
entire catalog and then after selecting the appropriate part waits for an
confirmation and shipping information.
Regardless of the model, the seller maintains an inventory in the same
manner as a Super Store or neighborhood shop. If the part is not in stock it
needs to be ordered in quantity as part of the store's general reordering
process.
APG proposes a new model. Build a consortium of manufacturers selling
directly to the end user. The idea would be to gather a large number of
participating manufacturers using the Company's web site as a portal to their
products. Many may even manufacture the same product; the larger the
consortium, the greater the competition; and increased competition usually
means lower prices for the consumer. This axiom is true regardless of whom
the consumer is. The Company's definition of the end-user is very broad. For
example, the end user could range from traditional retailer, to a fleet
maintenance group, to the do-it-yourself motorist. Each end user would first
benefit from lower prices driven by greater competition to economies of scale
for consumers who need to purchase in volume.
APG has already identified and made plans to purchase software that is
unique in that it is a database of auto aftermarket parts and part numbers.
The cost to develop and obtain the rights to this software is between $75,000
and $100,000. The software allows an end-user to input make, model, year and
a description of the part. The consumer would then be given a list of
available parts and their manufacturers at which point the consumer can send
a part to the shopping cart either by manufacturer or price depending on the
users preference. APG would then arrange shipping and collect for the
purchase. The Company plans to charge 15% of the purchase price as a
transaction fee. This transaction cost is significantly less than the
distribution cost currently associated with bringing a product to the
consumer.
Since the end-user is buying directly from the manufacturer, who is
saving a substantial amount of distribution cost, the on-line buyer receives
a discounted price while the manufacturer holds or increases margin. The
Company is able to accept all forms of electronic payment so the transaction
completes immediately.
No web site has been successful without widespread media advertising.
Traditional retailers tie their web site advertising to their general
advertising. In many cases this is a significant amount of advertising,
however, the thrust of the advertisements is to bring the consumer to the
store, not the net. Management plans a four (4) year multi-media advertising
campaign to increase name recognition for the web site itself. Manufacturers
may purchase additional advertising at the site, creating another income stream
for the Company.
HAND CLEANER AND SOAP PRODUCTS: The hand cleaner market is extremely
competitive. The Company has found it most difficult to launch this product
into a market already saturated with comparable heavy-duty cleaners, such as
Go-Jo, Fast Orange, Zep etc. However, the heavy-duty hand cleaner lends
itself to sale as an automotive aftermarket product for mechanics and
do-it-yourselfers.
The proprietary formula licensed to the Company is now available in
powder and well as bar form. Both these forms can be easily added to the list
of accessory products to be sold on the Company's web site. Additionally,
through an Agreement with Starco, the Company has access to other cleaning
products as well such as a heavy-duty laundry detergent, degreaser and cement
cleaner. These products also fit well into the Company's planned web site.
The loss of the use of the name Cra Z Soap Hand Cleaner put the Company
in the position of having to find a new trade name for the soap products.
Management has yet to decide whether or not it will simply call the products
APG Heavy-Duty Hand Cleaner or if it will use the name BriteWay Heavy-Duty
Hand Cleaner. The Company has reserved the name BriteWay and is in the
process of marking it as a trademark in the eventuality it decides to use a
name other than the corporate name for the product.
The Company has resolved its quality control issues with Jaboneria, SA by
finding an alternate source of manufacturing for its proprietary soap
products. Starco is able to manufacture the powder formula, as well as the
liquid formula currently under development. COSCO a local manufacturer is
able to manufacture the bar soap. Our agreement with Starco is included as
an exhibit to this filing and sets out the manufacturing terms. COSCO will
work with the Company on a Purchase Order basis as the need, or if the need for
bar soap inventory arises.
CONSUMER BASE: The Company does not expect soap sales to be a
significant portion of its revenues. Although there is a wide consumer base
for cleaning products, the market is very competitive and the Company
anticipates difficulty in launching this product for some time, especially
since the product line has not been enthusiastically greeted by the
investment community.
Management believes the products will fit nicely into its auto accessory
web site because it is an attractive product to home and professional
mechanics. The Company is confident that the auto parts and accessory web
site will provide the bulk of revenues. Market statistics issued by the
Department of Transportation bear out the reasons this is true. According
DOT there were more than 205 million motor vehicles (excluding motorcycles)
on the road in 1998, a 5 million vehicle increase over 1997 and the numbers
continue to grow. More vehicles on the road obviously translate into a need
for replacement parts and accessories. Normal wear and tear, collision damage,
poor maintenance and design problems alone guarantee a wide consumer base for
this site. Additionally, the average age of cars on the road has increased
from 6.5 years in 1989 to 8.3 years in 1998. The aging of the car fleet also
bodes well for the replacement parts industry.
Relying on its combined 60 years of experience in the automotive
aftermarket, management is aware than only an estimated 30% of replacement
parts required by national fleets are purchased directly from the
manufacturer. More and more business such as FEDEX, UPS, Westinghouse, and
even the Post Office are purchasing more of their required materials on-line.
The Company believes that its site will be very attractive to this Business
to Business activity.
Companies with large fleets schedule maintenance to keep their fleets
operating at optimum performance, APG's web site is an ideal place to
schedule the purchase of required parts directly from the manufacturer. In
fact, the Company's system will allow such consumers to put out their
requests for the lowest bid price.
Collision repair shops abound in this market. The Auto Insurance
Industry directly impacts on this segment of the industry. Usually it is the
insurance company that determines to which shop a damaged car can be
repaired, and typically dictates the criteria for reimbursement. Management
views its web site as meeting two needs in this area, (i) the pursuit of
contractual arrangements with insurance companies as the parts vendor of
choice, and (ii) a single site for collision shops to bid out and find
required parts at a lower cost than the local traditional distributor.
LICENSES: The Company has a license granted by Masters Marketing and
Development, Inc, which was originally granted to Cra Z Soap Corp, of Nevada
and made a part of Advanced Products Group's assets with the merger between
Cra Z Soap Corp and Advanced Technologies Group, Inc. This license only
covers those products developed by Masters, which are based upon a
proprietary formula for a heavy-duty hand cleaner. Master's receives as
compensation for this license a franchise fee of $20,000 per month from
APG, until gross sales reach $2,000,000 at which time the franchise fee is 3%
of gross. The License Agreement is attached as an exhibit to this filing.
GOVERNMENT APPROVALS AND LICENSES: The Company does not require any
governmental licenses at this time.
EMPLOYEES: The Company has three (3) employees, two (2) of which are
full time.
RESEARCH AND DEVELOPMENT: Advanced Products Group, Inc does no
research and development. The cleaning products including the new
formulation from bar to powder and the liquid formulation that is under
development have been developed by Masters Marketing. The Company has no
prior R&D expenses.
ANNUAL REPORT: The Company will voluntarily provide its shareholders
with an annual report that will include audited financial statements. The
public may read and copy any materials the Company files with the SEC at the
SEC's Public Reference Room at 450 Fifth Street, NW, Washington D.C. 20549.
Information regarding the operation of the Public Reference Room may be
obtained by calling the SEC at 1-800-SEC-0330.
ITEM 2. MANAGEMENT'S DECISIONS AND ANALYSIS OR PLAN OF OPERATION
The Company is a development stage company. It has developed a
comprehensive marketing plan to launch its web site. This plan is dependent
on the Company's ability to raise sufficient working capital to accomplish
the goals of its business plan. All statements regarding the effectiveness
and revenues of the Company's plan are forward looking and actual results may
differ greatly.
The Company plans to rely on marketing and sales tactics that are proven
to develop brand recognition and aggressive consumer support. One or more of
the following strategies, as appropriate are planned:
Television Advertising Campaign
Radio and Print Media Campaign
Attendance at two major trade conventions yearly
Direct Mail Advertising
Celebrity Product Endorsement
PUBLIC RELATIONS: Advanced Products Group, Inc. has hired Daugherty,
Teagarden and Hanley, (DTH), a marketing and advertising firm headquartered in
Indianapolis, Indiana, with offices in Charlotte, North Carolina as well.
This firm is experienced in start up campaigns especially throughout the
Mid-West and Southeast. DTH provides a full range of services including TV
and radio production, print and the development of Internet web sites. The
Company's arrangement with DTH requires the payment of outside contractors.
The Company issued 32,000 restricted shares of common stock to DTH in
consideration of their services.
ADVERTISING: The Company originally entered into an Agreement with
Telebrands, Inc. to produce an infomercial for the purpose of marketing its
heavy-duty hand cleaner. In recent discussions with Telebrands, the Company
has come to learn that because of the success of several similar products,
the market is saturated and Telebrands is unsure of the success any such
infomercial may have. However, Telebrands management is very interested in
the Company's concept of creating a virtual community of manufacturers
by providing TV time and to produce TV advertising to promote the web site.
In consideration for Telebrands original interest the Company issued 50,000
shares of restricted stock to Telebrands.
EXHIBITIONS: The Company plans to demonstrate its web site and its
capabilities at various trade shows and exhibitions. These include
exhibitions in the automotive aftermarket and auto parts industries.
PROFESSIONAL RECOGNITION: The Company has and will continue to exploit
its combined 60 years of automotive aftermarket experience. Mr. Weprin and
Mr. D'Agta continue to meet regularly with leaders of this industry and with
members of the Internet consumer products industries in order to enhance and
gain professional recognition.
MARKETING AND SALES IMPLEMENTATION STRATEGY: The Company anticipates
that once it raises sufficient capital its plans to engage in the following
marketing and sales implementation strategy. There are three (3) major goals
to the Company's plans:
(1) Enroll domestic and offshore vendor partners (manufacturers).
(2) Develop a media advertising plan based on a minimum of 60% expense to
sales.
(3) Aggressively pursue Business to Business opportunities
ENROLL VENDOR PARTNERS, DOMESTIC AND OFFSHORE: For the Company's
Internet business to succeed it must create a virtual community of
manufacturers that will provide a wide assortment of parts, at a price that
the end user is willing to pay. To create this virtual community, the
Company with the assistance of DTH plans to develop convincing promotional
material emphasizing the Company's media advertising and its Business to
Business objectives.
The Company will schedule a series of strategically located presentations
throughout the United States and set a goal of enrolling 60 manufacturer
participants within the first six (6) months from launch and 400 by the end
of the second year of operations. The Company expects that these
presentations will be in conjunction with participation at key auto shows in
the US and abroad. At these shows the Company plans to participate by
setting up display booths where potential partners can interactively "play on
the Company's system.
The Company has established a strategic alliance with ECONOMY WAREHOUSE,
a domestically owned public warehousing facility located in Phoenix, Arizona,
with over 120,000 square feet of warehousing space. Management envisions
ECONOMY's role to be to provide offshore vendor partners a US based
warehousing and shipping center for purchases made over the Company's web site.
Management is confident that this alliance adds a competitive edge to its
Internet service by providing warehousing and shipping services to offshore
manufacturers who would like to sell in the US market. Often these
manufacturers produce at lower cost than their domestic counterparts, leaving
room to pass the savings on to the consumer.
MEDIA ADVERTISING: There appears to be a correlation between success of
a web site and the amount of media advertising. Good examples are Amazon,
E-Bay and Priceline. These sites typically dedicate about 30% of sales to
advertising. The Company plans to assign 60% of sales over the first two (2)
years of operations to media advertising to launch its site. Management
hopes to accomplish two (2) important goals with this activity, (i) develop a
consumer awareness campaign built around celebrity endorsement, and (ii) clearly
create the theme of Factory Direct Lower Prices, Greater Availability and
Guaranteed Satisfaction.
BUSINESS TO BUSINESS: There are two major business segments within the
Business to Business market, National Fleets and Collision Repair Shops.
(1) National Fleets: The Company plans to aggressively pursue national
fleet business such as car rental companies, and those businesses that rely on
vehicles in the delivery of their services, such as FEDEX, UPS, BELL etc.
The majority of parts purchased by these companies is purchased through
traditional distribution channels, and rarely direct from the manufacturers.
Consequently management believes the web site will provide a vehicle for
these companies to bid out their requirements in real time and quickly find
the lowest price, ultimately resulting in an increase to their bottom line.
Since most fleets service their vehicles on a regularly scheduled
maintenance program, they are ideal candidates for the Company's system.
Scheduled maintenance allows for planned purchases. Fleets will be able to
post the parts and quantities required on the web site, and in real time
receive a bid from participating manufacturers. Purchase agents will be able
not only to find the lowest price, but will be able to do so from their desk
in a single transaction.
(2) Collision Repair Shops: Anyone who has ever had a ding, dent or crash
knows that collision repair represent a high cost when it comes to auto
vehicles. Not only are the costs high, but also the selection of the repair
shop is often limited to the shop assigned by the insurance carrier,
eliminating competition. Insurance companies even go so far as to direct the
shop owners as to what constitutes an acceptable price for the repair.
Management plans to devote a significant portion of its energies in the
pursuit of contracts with insurance carriers. It hopes to make the web site
the principal point of purchase for collision repair.
MARKETING BUDGET: To accomplish these goals the Company has set a
projected budget:
<TABLE>
<CAPTION> MARKETING BUDGET (000) OMITTED
BUDGET ITEM MARKETING PROD DEV G&A
<S> <C> <C> <C>
YEAR 1 10,000 770 880
YEAR 2 15,000 1,496 1,710
YEAR 3 28,877 2,021 2,347
</TABLE>
The Company needs to raise the required capital to launch its proposed
marketing strategy. To adequately fund the business plan, the Company seeks
to raise $50 Million Dollars of equity capital through public and private
offerings of five million shares of its common stock at a price of $10.00 per
share. It plans to raise the capital in two (2) increments:
(1) $3 to $5 Million Dollars in equity or short-term debt to launch the
operation of the web site.
(2) Raise the balance in equity funding within one year of the launch.
The Company, with the help of GFC Communication Corp., is in the process
of developing a prospectus and marketing brochure designed for Internet
trading. Several of the Company's investment bankers are ready to take an
active role in raising sufficient capital as soon as the Company completes
its SEC Registration process.
USE OF PROCEEDS:
$26,000 to purchase auction capable software
$100,000 to purchase the license for the auto parts numbers software and
annual data base updates
$15,000 hardware purchases
$12,000 to complete the design of the web site including registration,
maintenance and hosting
$50,000 in legal and registration fees
$1,500,000 in working capital
$1,500,000 marketing and advertising
PLAN OF OPERATION FOR THE NEXT 12 MONTHS: The Company hopes to satisfy
its preliminary funding requirements as described above within 90 days of
clearing comments of this Registration Form. Immediately upon raising
sufficient funds, approximately $250,000, to finish the development of the
web site, the Company will begin to follow the marketing plan described herein.
The Company expects revenues in the amount of $11,000,000 dollars in the
first year. Ninety-one (91%) percent of these revenues are expected from its
Internet web site activities. The other nine (9%) will come primarily from
advertising space sold on the web site. Management expects minimal soap sales.
The bulk of the revenue is expected to come in participation fees from
vendor partners and from the 15% transaction fee. Management's assumption in
determining this revenue, assumes 200 manufacturers on board by the end of the
first year. It is anticipated that advertising and participation fees will
represent 40% of sales, and transaction fees the balance.
The Company expects to find a direct correlation between the increase in
the number of transactions and the amount of money spent in promotion and
advertising. Therefore, it is committed to spend 60% of sales revenue during
the first two years to assure the success of the site. Management also believes
that an added benefit of increased market awareness will also lead to a more
energetic and active market for the Company's securities making the raising of
capital less difficult.
Given the Company's current financial condition, a major part of the
operations of Company will be to organize and employ appropriate staff
including sales, marketing and administrative personnel. Two senior managers
of the Company have a combined 60 plus years of auto aftermarket experience.
In addition the Company will need appropriate levels of staff in the area of
software and hardware maintenance, as well as telephone customer service.
The number of employees required will depend on the level of revenues.
However, it can be expected that the Company will seek to increase its
current staff over the next twelve (12) months to include two (2) sales
persons, paid on commission with a base salary of $30,000, two (2) customer
service representatives, with a base salary of $25,000, one Chief Financial
Officer. The CFO and the current officers of the Company have agreed to
limit their salaries for the first two (2) years to $36,000 and a bonus if
warranted by operating success. The total fully burdened increase in wages
over the next 12 months is approximately $284,000.
There are no current plans to sell or purchase any plant, property or
equipment currently in use by the Company. As part of the Company's business
plan it will require significant purchases of computer equipment and software
as described earlier in this Registration Form.
CURRENT FINANCIAL CONDITION: The current financial condition of the
Company is precarious. The Company's filings of form 10QSB are current and
detail the financial condition of the Company. There is insufficient working
capital to meet the requirements of the Company and while its are minimal, they
are being by capital contribution of the officers.
The Company's current financial condition is due to a number of factors,
chief among them is insufficient funding from the inception to launch its soap
products, a saturated market for its soap products,the Company's inability to
capitalize on any window of opportunity for the soap products due to the loss
of the tradename, the inability to consummate two (2) mergers during the
period in which the Company shifted the focus away from the soap products, and
the failure of the Company to complete its Registration Statement with the SEC
in a timely fashion.
Management's shift in focus to an Internet auto parts virtual community
of manufacturers required additional research and took some time to adequately
define a product that was superior to other sites in existence. The Company
has not been able to raise sufficient working capital to date to complete the
web site development and launch its site.
The Company's efforts to raise this capital has been severely hampered by
the unusually long period of time it has taken to complete this Registration
Statement. The Company first file in October, 1999 and is currently only
completeing its second amendment. Three (3) months passed in each of the
prior filings before the Company even received comments. All of the Company's
investment bankers have indicated their interest in funding the web site, but
are not prepared to underwrite an offering until comments are cleared.
In an effort to bolster the Company's performance, management has been
actively seeking merger partners to bring added revenues and new products to
the mix. While there is currently some interest and negotiations are
progressing, the need to clear comments is an issue with our potential
partner.
While the Company has had some interest in the marketplace in regard to
its soap products, it has been unsuccessful in finding an appropriate pricing
policy to provide good levels of operational performance. The lack of a
recognizable tradename, and of funding to create one, severely hampers the
products' attractiveness to chain stores of any size. The products, however,
do lend themselves to sale of the Company's web site. The hand cleaner is
especially attractive to professional and do-it-yourself mechanics.
The Internet site is promising. The auto parts business is a $170
Billion Dollar industry. The Company needs to acquire a small portion of the
market to achieve its financial goals. The Company's approach to Internet
sales is unique in that it is not the traditional retail model. It seeks to
eliminate steps within the normal distribution chain with a respondent result
of increasing profit for the manufacturer while lowering prices for the end
user. The Company has sampled a significant number of manufacturers and found
interest in participating. Management is confident that building a vendor
community will be easily accomplished, once the site is completed and
manufacturers can interactively discover its benefits, especially in the area
of Business to Business sales.
Key to the success of the Internet site is advertising. The Company's
alliances with DTH and Telebrands gives it a viable advertising venue. The
uniqueness of the site is that it creates a new way to distribute product for
the manufacturer, and does not rely on traditional retail models. However,
nothing in the system prevents the Company from availing that model as well.
This is an especially exciting idea in the area of Business to Business,
because it affords fleet users an on-line real time opportunity to search and
find the best price for the parts required. Since the deal is directly with
the manufacturer costs will be lower. As more manufacturers are brought to
the site creating competition in a single arena, prices should remain low.
For the Company to succeed it will require the capital described earlier
in this document. it has current capital needs of a minimum of $250,000 to
complete the web site including hardware, software and the purchase of the
auto parts number data base. Management is unaware of any event for either
an infusion of income or loss that will arise that is unrelated to its
continuing operations. The Company's business is not seasonal.
ITEM 3. DESCRIPTION OF PROPERTY
(1) The Company does not own any property other than business machines,
computers, furniture and telephonic equipment. All of its equipment is in
good working order. The Company has moved its location to reduce office
expense. Its principal office is located at 5221 Ocean Ave No 257, Sarasota,
Florida 34242 and is rented.
(2) At the present time the Company has no investment policy with respect
to any real estate transactions. Pursuant to the By-laws the Board of Directors
has the sole discretion for any such investment without limitation. Any
change in this regard would require a vote of the Shareholders. While in
the absence of a policy, potential conflicts of interest may arise, the
Company has no short-term plans for the acquisition or lease of any real
property and such lease or acquisition would require the approval of the Board
of Directors.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN FINANCIAL OWNERS AND MANAGEMENT
<TABLE>
<CAPTION>
(A) SECURITY OWNERSHIP OF CERTAIN FINANCIAL OWNERS AND MANAGEMENT
TITLE AND CLASS NAME AND ADDRESS # SHARES % OWNERSHIP
<S> <C> <C> <C>
COMMON VOTING RICHARD HERMAN 135,000 4%
734 FRANKLIN AVE
GARDEN CITY, NY
AFFILIATION INDIVIDUAL
(B) SECURITY OWNERSHIP OF MANAGEMENT
COMMON VOTING RONALD WEPRIN 680,000 19.7%
420 BEACH RD # 403
SARASOTA, FL 34242
AFFILIATION VICE PRESIDENT AND SECRETARY
COMMON VOTING RUS D'AGATA 500,000 14.5%
503 ALBEE FARM RD 2B
VENICE, FL 34292
AFFILIATION VICE PRESIDENT and COO
COMMON VOTING EDWARD DA PARMA,JR 516,000 14.9%
2462 85TH STREET
BROOKLYN, NY 11214
AFFILIATION PRESIDENT and CEO
</TABLE>
(B) There are no arrangements that would change control of the Company.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
(A) The following are the Directors and Executive Officers of the Company:
Edward J. da Parma, Jr., age 50, President and CEO term of office 2 years
began serving March 12, 1999. Prior to Advanced Products Group, Inc. Mr.
da Parma served as the managing partner of Aim 4 Legal and Consulting, LLP
and has held various senior management positions with Farberware, Inc and
ACCO USA (formerly Swingline, Inc.). Mr. da Parma served as the Managing
Partner of Aim 4 Legal and Consulting from February 1993 until March 1999.
Aim 4 Legal and Consulting provided TQM management training, personnel
assessment, organizational development and legal representation in the area
of employment law to such clients as National Westminster Bank (now Fleet
Bank), Castlemere, Inc., Siemens, and others.
Ronald Weprin, age 57, Vice President and Secretary/ Treasurer, term of
office 2 years, began serving August 29, 1998. Prior to taking a leadership
position with APG, Mr. Weprin was a partner in Masters Marketing and
Development. Masters developed a proprietary formula for a heavy-duty hand
cleaner, which licensed Cra-Z Soap Inc, which in turn merged with Advanced
Technologies Group, Inc to give birth to what eventually became Advanced
Products Group, Inc. Mr. Weprin brings over 30 years of auto aftermarket
experience to the Company. He began his career in his family's auto parts
business, and later as VP for Marketing for Al Automotive. Mr. Weprin also
serves as a Director of the Company. Mr. Weprin joined Masters Marketing
and Development, Inc. in January of 1994 and remained an officer and director
of that company until September 1998 when he joined Cra Z Products, Inc.,
which subsequently changed its name to Advanced Products Group, Inc.
Prior to coming to Masters Marketing and Development, Inc., Mr. Weprin
was the principal owner of Tweeks Ltd. an auto parts and accessories
wholesaler in Indianapolis, Indiana.
Rus D'Agata, age 56, VP and COO, term of office 2 years began serving
on August 29,1998 . He enjoyed a successful career in the automotive
aftermarket working for the automotive divisions of Congoleum Corporation
and Al Automotive. He successfully led these divisions to increased sales
and profitability. In 1989, Mr. D'Agata formed his own consulting firm that
specialized in the oil and gas industry. Among the clients Mr. D'Agata's
firm provided management consulting to Shell, ARCO, Mobil and Superior Oil.
Mr. D'Agata left his consulting firm in February of 1994 to become Sales
Manager for Masters Marketing and Development, Inc. and remained in that
position until August of 1998.
(B) There are no key employees at this time other than those serving in the
official capacities above.
(C) There are no family relationships among any of the directors, executive
officers or any person nominated or chosen to be a director or executive
officer.
LEGAL PRECEEDINGS:
(1) There are no legal proceedings, pending or completed against the
Company, its directors, executive officers, or of any business that any such
person was a general partner or executive officer.
(2) None of the directors or executive officers has been convicted of any
criminal offense (excluding traffic violations and other minor offenses) nor
are any such proceedings pending in any court of competent jurisdiction.
(3) No executive officer or director has been the subject of any judgment
or decree by any court of competent jurisdiction revoking, suspending or
enjoining any such executive officer or director of the Company or otherwise
limiting in any way the participation of such person in the total involvement
of business, securities or banking activities.
(4) No executive officer or director has been found by any court of
competent jurisdiction to have violated a federal securities or commodities
law, including any such finding by the Commission or Commodity Futures
Trading Commission.
ITEM 6. EXECUTIVE COMPENSATION
<TABLE>
<CAPTION> EXECUTIVE COMPENSATION
------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
------------------------------------------------------------------------
PRINCIPAL DAPARMA WEPRIN D'AGATA
POSITION CEO SECRETARY/ VICE
TREAS PRES
<S> <C> <C> <C>
SALARY
1998 0 0 0
1999 0 0 0
BONUS
1998 0 0 0
1999 0 0 0
OTHER
CASH
1998 0 0 0
1999 0 0 0
RESTRICTED
STOCK
1998 0 0 0
1999 500,000 400,000 420,000
SECURITIES
UNDERLYING
LTIP ALL
1998 0 0 0
1999 0 0 0
OPTIONS
1998 0 0 0
1999 0 0 0
SAR'S
1998 0 0 0
1999 0 0 0
</TABLE>
The officers and directors of the Company have served without
compensation. Currently no arrangements, agreements, contracts or promises
exist for the purpose of providing compensation in any form to the Officers
and Directors named above other than the restricted shares above. Each of
the above with the exception of Mr. da Parma are employed full time and
expend all of their efforts and energies in the management of the Company.
Mr. da Parma continues to have responsibilities to Aim 4 Legal and
Consulting, LLP in solely in terms of management and organizational issues.
As such he devotes approximately 80% of his time to APG and 20% to Aim 4.
Mr. da Parma anticipates completing the transfer of his partnership
responsibilities by mid spring 2000 and will then devote 100% of his working
time to APG.
The officers and directors will begin to collect modest salaries, not to
exceed $36,000 per year as soon as interim funding is established. Other
compensation issues and increases will be dependent on operational results of
the cleaning and Internet site.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(A) Mr. Weprin is a major shareholder in Masters Marketing and Development,
Inc. However, as of January 1, 2000, he is no longer an officer or director
of that company. As a major shareholder of Masters, Mr. Weprin may receive
some indirect benefit from the License Agreement held by Advanced Products
Group, Inc.
(B) The Company has not issued, either directly or indirectly, anything of
value to any promoter, including shares, money, property, assets, contracts
or options of any kind.
ITEM 8. DESCRIPTION OF SECURITIES
(A) PART I - TYPE OF SECURITIES
(1) The Company shares are common equity shares with no dividend or
preemption rights and voting rights of one vote per share. Currently the
Company is not engaged in the public or private placement of its securities.
(2) The Company also has authorized a Series C Preferred share with a
coupon of 6%, a redemption value of $10.00, a face value of $10.00 with
voting rights of 2 votes per share and a conversion of 2 common shares for
each share after one year. There are no issued and outstanding shares of
Series C Preferred Stock.
(3) The Company has no debt securities.
(B) PART II - MARKET PRICE, RELATED STOCKHOLER MATTERS, TRADE VENUE
(1) Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder's Matters
(2) The Company's stock is being traded on the NASD OTC Bulletin Board
since September 28, 1999. The following represents the high and low prices
for each quarter therefrom:
<TABLE>
<CAPTION>
HIGH/LOW PERFORMANCE BY QUARTER:
QUARTER/YEAR 1998 1999 2000
---------------- ---- ---- ----
<S> <C> <C> <C> <C>
JANUARY/MARCH HIGH N/A 7 .02
LOW N/A 4.66 .01
APRIL/JUNE HIGH N/A *16.129
LOW N/A 13
JULY/SEPTEMBER HIGH N/A 15
LOW N/A 3.25
OCTOBER/DECEMBER HIGH 7 .01
LOW 5.25 .01
</TABLE>
* In April, 1999 the Company reduced the number of issued and outstanding
shares by declaring a split of one (1) share for each three (3) shares held
in the Company. The result was an increase in the price per share for the
quarter beginning April, 1999.
(1) There are approximately 700 shareholders of common voting stock, and no
holders of Series C Preferred shares.
(2) There have been no dividends declared on the common equities of the
Company. The stock is not restricted in any way as to limit the ability to pay
dividends on common equity now or in the future.
LEGAL PROCEEDINGS: There are no legal proceedings, judicial or
administrative, pending against the Company.
CHANGES IN DISAGREEMENTS WITH ACCOUNTANTS: There are no disagreements
between the Company's independent accountants nor has there been a change in
the independent account chosen by the Company.
RECENT SALES OF UNREGISTERED SECURITIES: On April 1, 1999 the Company
filed a Form D Notice of Sale of Securities Pursuant to Regulation D with the
Securities and Exchange Commission under Rule 504 of the Act. The securities
sold were common shares and the aggregate dollars sold was $418,545 to three
(3) accredited investors, Colonial National, Ltd., Hamilton, Ltd., and Castle
Pines, Inc. No officer, director or affiliate received any payment from these
funds. All proceeds have been used to pay indebtedness to others.
The Company received $85,000, which was used to reduce its accounts
payable. The "others" above refer to entities such as the Telephone Company,
utility companies, rent on its office space, shipping, postage, etc. None of
such entities are affiliates of the Company.
There are no other unregistered sales of any company securities during
the last year. The Company has been extant for one (1) year, The issuance of
1.1 million shares of common stock and 310,000 shares of Series A Super
Preferred Voting Shares to the former shareholders of Cra Z Soap Corp. by
Advanced Technologies Group, Inc., was in exchange for 100% ownership in Cra Z
Soap Corp. The ratio of the exchange to effect the merger was one (1) share
of Advanced Technologies Group for three (3) shares of Cra z Soap Corp.
INDEMNIFICATION OF DIRECTORS AND OFFICERS: There is nothing in the
Company charter, by-laws, contracts or other agreements or arrangements that
would insure or indemnify a controlling person, director or officer of the
Company as to his or her liability in that capacity. The Company is
incorporated under the laws of Delaware, which pursuant to its General
Business Law allows for the indemnification of Directors and Officers.
Section 145 of the General Business Law of Delaware allows for corporations
to indemnify any director, agent, officer or employee if said person has acted
in good faith. The Court of Chancery is the court of jurisdiction in matters
of indemnification. Subsection d of section 145 provides that
indemnification can be granted for a specific case provided that the person
has met the applicable good faith standard, said indemnification shall be
made by (a) a majority vote of the directors who are not a party to the case,
or (b) by a committee of such directors, or (c) in the absence of directors
by legal opinion of independent counsel, or (d) by the stockholders.
(C) PART III - FINANCIAL STATEMENTS
June 30, 1999 &
December 31, 1998
Independent Auditors Report
Board of Directors
Advanced Products Group, Inc.
(A Development Stage Company)
I have audited the accompanying balance sheets of Advanced Products Group,
Inc., as of June 30, 1999 and December 31, 1998 and the related statements of
operations, stockholders equity, and cash flows for the period accumulated
from August 27, 1998 (Inception) to June 30, 1999 and the period January 1,
1999 to June 30, 1999 and the period August 27, 1998 to December 31, 1998,in
conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatements. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and the
significantestimates made by management, as well as evaluating the overall
financial ststements presentation. I believe that my audit provides a
reasonable basis for my opinion.
In my opinion, the aforementioned financial statements present fairly in
all material respects, the financial position of Advanced Products Group, Inc.,
as of June 30, 1999 and December 31, 1998, and the results of its operations
and its cash flows for the accumulated from August 27, 1998 (Inception) to
June 30, 1999 and the period January 1, 1999 to June 30, 1999 and the period
August 27, 1998 to December 31, 1998, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note #5 to the
financial statements, the Company has an accumulated deficit and a negative
net worth at June 30, 1999 and December 31, 1998. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also discussed in Note #5.
The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Salt Lake City, Utah
August 30, 1999
Advanced Products Group, Inc.
(A Development Stage Company)
Balance Sheets
June 30 , 1999 and December 31, 1998
<TABLE>
<CAPTION> ASSETS
Assets June 30, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
Current Assets
--------------
Cash in Bank $ 710 $ 31,770
Accounts Receivable 127 8,357
Interest Receivable 2,215 -0-
Inventory -0- 1,343
Prepaid Expenses -0- 1,400
------------- -------------
Total Current Assets 3,052 42,870
------------- -------------
Other Assets
------------
License 1,332,000 1,332,000
Less Amortization (55,000) (22,200)
------------- -------------
Total Other Assets 1,277,000 1,309,800
------------- -------------
Total Assets 1,280,052 1,352,670
============= ============
</TABLE>
Advanced Products Group, Inc.
(A Development Stage Company)
Balance Sheets -Continued
June 30 , 1999 and December 31, 1998
<TABLE>
<CAPTION> LIABILITIES AND STOCKHOLDERS'EQUITY
Liabilities
& Stockholders' Equity June 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
Current Liabilities
-------------------
Accounts Payable 10,912 8,012
Accrued Expenses 5,980 221
Loans Payable -0- 60,970
License Fee Payable
- Current Portion 159,840 159,840
---------- ----------
Total Current Liabilities 176,732 229,043
---------- ----------
Long Term Liabilities
---------------------
License Fees Payable 1,135,672 1,158,168
--------- ---------
Total Long Term Liabilities 1,135,672 1,158,168
--------- ---------
Stockholders' Equity
--------------------
Preferred Stock; 1,000,000 Shares
Authorized at $0.001 Par Value No
Shares & 99,327 Shares Issued &
Outstanding Retroactively Restated -0- 100
Common Stock; 40,000,000 Shares
Authorized at $0.001 Par Value
3,060,590 Shares & 1,675,952 Shares
Issued & Outstanding Retroactively
Restated 3,061 1,675
Paid In Capital 551,273 34,584
Outstanding Notes Receivable
for Sale of Shares Issued (403,410) -0-
Accumulated in the Development
Stage (183,776) (70,900)
--------- ---------
Total Stockholders' Equity (32,852) (34,541)
--------- ---------
Total Liabilities & Stockholders'
Equity $ 1,279,552 $ 1,352,670
=========== ===========
</TABLE>
Advanced Products Group, Inc.
(A Development Stage Company)
Statements of Operations
Accumulated from August 27, 1998 (Inception) to June 30, 1999
and the Period January 1, 1999 to June 30, 1999
and the Period August 27, 1998 to December 31, 1998
<TABLE>
<CAPTION> STATEMENT OF OPERATIONS
June December
Accumulated 30, 1999 31, 1998
Revenues ----------- -------- --------
--------
<S> <C> <C> <C>
Sales $ 14,336 $ 5,830 $ 8,506
Cost of Sale 3,090 1,343 1,747
---------- --------- ---------
Gross Profit 11,246 4,487 6,759
---------- --------- ---------
Operating Expenses
------------------
Amortization 55,500 33,300 22,200
Interest 66,800 40,080 26,720
Travel 32,072 17,884 14,188
Telephone 12,844 9,551 3,293
Rent 5,262 4,562 700
Professional Fees 5,217 3,621 1,596
Advertising 8,760 1,267 7,493
General &
Administrative
Expenses 11,240 9,771 1,469
------- ------- -------
Total Operating
Expenses 197,695 120,036 77,659
Other Income
------------
Interest 2,673 2,673 -0-
------- ------- -------
Net Loss ($ 183,776) ($ 112,876) ($ 70,900)
=========== =========== ==========
Loss Per Share ($.05) ($.06)
Weighted Average
Shares Outstanding 2,364,502 1,036,900
</TABLE>
Advanced Products Group, Inc.
(A Development Stage Company)
Statement of Stockholders' Equity
From August 27, 1998 (Inception) to June 30, 1999
<TABLE>
<CAPTION> STATEMENT OF STOCKHOLDERS' EQUITY
Common Preferred Paid In Accumulated
Shares/Amount Shares/Amount Capital Deficit
<S> <C> <C> <C> <C>
Beginning
Balance
8/27/98
(Inception) -0- $-0- -0- $-0- $-0- $-0-
Shares held
by Shareholders
of Advanced
Technology
Group, Inc.
Retroactively
Restated 1,117,863 1,118 -0- -0- 2,236 -0-
Shares Issued to
Acquire Shares
Outstanding of
Cra-Z Soap, Corp.,
Retroactively
Restated 417,332 417 103,517 104 835 -0-
Shares Issued
to Convert
Series A
Preferred to
Common Shares
Retroactively
Restated 83,807 84 (4,190) (4) 247 -0-
Shares Issued
for Cash at
$15.00/Share
Retroactively
Restated 200 -0- -0- -0- 3,003 -0-
Shares issued
for Cash at
$3.00/Share
Retroactively
Restated 167 -0- -0- -0- 501 -0-
Shares Issued
for Cash at
$0.60/Share
Retroactively
Restated 25,000 25 -0- -0- 14,975 -0-
Shares Issued
for Cash at
$1.50/Share
Retroactively
Restated 6,667 7 -0- -0- 9,973 -0-
</TABLE>
Advanced Products Group, Inc.
(A Development Stage Company)
Statement of Stockholders' Equity -Continued-
From August 27, 1998 (Inception) to June 30, 1999
<TABLE>
<CAPTION> STATEMENT OF STOCKHOLDERS' EQUITY - CONTINUED -
Common Preferred Paid In Accumulated
Shares/Amount Shares/Amount Capital Deficit
<S> <C> <C> <C> <C>
Shares Issued
for Service
at $0.003/Share
Retroactively
Restated 24,583 24 -0- -0- 714 -0-
Shares Issued
for Service
at $6.00/Share
Retroactively
Restated 333 -0- -0- -0- 2,100 -0-
Net Loss for
Period Ended
12/31/98 (70,900)
-----------------------------------------------------------------------------
Balance,
12/31/98 1,675,952 1,675 99,327 100 34,584 (70,900)
=============================================================================
Shares Issued
to Convert
Series A
Preferred to
Common Shares
Retroactively
Restated 390,333 390 (19,516) (20) 20 -0-
Shares issued
for Services
at $8.00/Share
Retroactively
Restated 66 1 -0- -0- 581 -0-
Shares Issued
for Services
at $0.60/Share
Retroactively
Restated 8,333 8 -0- -0- 4,992 -0-
Shares Issued
for Services
at $0.003/Share
Retroactively
Restated 275,833 276 -0- -0- 552 -0-
Shares Issued
for Note
Receivable
on Option to
Acquire Common
Stock at
$0.001 for
$.003/Share
Retroactively
Restated 33,333 33 -0- -0- 67 -0-
</TABLE>
Advanced Products Group, Inc.
(A Development Stage Company)
Statement of Stockholders' Equity -Continued-
From August 27, 1998 (Inception) to June 30, 1999
<TABLE>
<CAPTION> STATEMENT OF STOCKHOLDERS' EQUITY - CONTINUED -
Common Preferred Paid In Accumulated
Shares/Amount Shares/Amount Capital Deficit
<S> <C> <C> <C> <C>
Shares Issued
for Notes
Receivable
at $0.75/Share
Retroactively
Restated 666,666 667 -0- -0- 499,333 -0-
Shares Issued
for Services at
$14.53/Share 74 1 -0- -0- 1,074 -0-
Shares Issued
for Cash at
$1.00/Share 10,000 10 -0- -0- 9,990 -0-
Series A
Preferred Shares
Returned
& Canceled -0- -0- (79,811) (80) 80 -0-
Loss for Period Ended
June 30, 1999 (112,876)
-----------------------------------------------------------------------------
Balance,
6/30/99 3,060,590 $3,061 -0- $ -0- $ 551,273 ($183,776)
=============================================================================
</TABLE>
Advanced Products Group, Inc.
(A Development Stage Company)
Statement of Cash Flows
Accumulated from August 27, 1998 (Inception) to June 30, 1999
and the Period January 1, 1999 to June 30, 1999
and the Period August 27, 1998 to December 31, 1998
<TABLE>
<CAPTION> STATMENT OF CASH FLOWS
June December
Accumulated 30, 1999 31, 1998
Cash flows
<S> <C> <C> <C>
Cash Flows from
Operating Activities
--------------------
Net Loss ($183,776) ($112,876) ($70,900)
Adjustment to
Reconcile Net Loss
to Cash
Amortization 55,500 33,300 22,200
Non Cash Expenses 10,750 2,873 7,877
Rounding -0- 2 (2)
Changes in Operating
Assets & Liabilities
(Increase) Decrease
in Accounts Receivable (127) 8,230 (8,357)
(Increase) Decrease in
Interest Receivable (2,215) (2,215) -0-
(Increase) Decrease
in Inventory -0- 1,343 (1,343)
(Increase) Decrease
in Prepaid Expenses -0- 1,400 (1,400)
Increase in
Accounts Payable 10,912 2,900 8,012
Increase in
Accrued Expenses 5,980 5,759 221
-----------------------------------------------------------------------
Net Cash by
Operating Activities (102,976) (59,284) (43,692)
Cash Flows from
Investing Activities -0- -0- -0-
-----------------------------------------------------------------------
Payments on License (36,488) (22,496) (13,992)
-----------------------------------------------------------------------
Cash Flows from
Financing Activities
----------------
Proceeds from Sale
of Common Stock 140,174 111,690 28,484
Increase in
Loan Payable -0- (60,970) 60,970
----------------------------------------------------------------------
Net Cash Provided
by Financing Activities 140,174 50,720 89,454
Increase (Decrease) in
Cash & Cash Equivalents 710 (31,060) 31,770
Cash & Cash Equivalents
at Beginning of Period -0- 31,770 -0-
----------------------------------------------------------------------
Cash & Cash Equivalents
at End of Period $ 710 $ 710 $ 31,770
=====================================================================
</TABLE>
Advanced Products Group, Inc.
(A Development Stage Company)
Notes to Financial Statements
NOTE #1 - Corporate History
Advanced Products Group, Inc., (the Company), is a market based company
selling soaps, hand cleaners and other related products. Originally formed
as a Nevada Corporation on August 27, 1998, using the name Cra-Z Soap Corp.
The Company filed Articles of Amendment on March 12, 1999, and changed its
name to Advanced Products Group, Inc.
Pursuant to an Agreement of Merger dated August 28, 1998, the Company
merged into Advanced Technologies Group, Inc., a Delaware Corporation
organized under the laws of the state of Delaware on March 25, 1987. The
Company is considered to be a development stage company.
NOTE #2 - Significant Accounting Policies
A. The Company uses the accrual method of accounting.
B. Revenues and directly related expenses are recognized in the period when
the goods are shipped to the customer.
C. The Company considers all short term, highly liquid investments that are
readily convertible, within three months, to known amounts as cash
equivalents. The Company currently has no cash equivalents.
D. Basic Earnings Per Shares are computed by dividing income available to
common stockholders by the weighted average number of common shares
outstanding during the period. Diluted Earnings Per Share shall be computed
by including contingently issuable shares with the weighted average shares
outstanding during the period. When inclusion of the contingently issuable
shares would have an antidilutive effect upon earnings per share no diluted
earnings per share shall be presented.
E. Consolidation Policies: The accompanying consolidated financial
statements include the accounts of the company and its majority - owned
subsidiary. Intercompany transactions and balances have been eliminated
in consolidation.
F. Depreciation: The cost of property and equipment is depreciated over the
estimated useful lives of the related assets. The cost of leasehold
improvements is amortized over the lesser of the length of the lease of the
related assets of the estimated lives of the assets. Depreciation and
amortization is computed on the straight line method.
NOTE #3 - Reverse Takeover and Recapitalization
Pursuant to an Agreement of Merger dated August 27, 1998, Cra-Z-Soap
Corp., a Nevada Corporation, (the legal acquiree) and Advanced Technologies
Group, Inc., a Delaware Corporation, (the legal acquirer) exchanged common
stock to give the shareholders of the legal acquiree control of the legal
acquirer.
Advanced Products Group, Inc.
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #3 - Reverse Takeover and Recapitalization -Continued-
Shareholders of the legal acquiree surrendered 100% of the outstanding
shares in exchange for 1,100,000Shares of Common Stock and 310,550 Series A
Super Preferred Voting Shares of the legal acquirer.
On April 30, 1999, Advanced Technologies Group, Inc., the legal
acquirer, filed a Certificate of Amendment with the Secretary of State of the
state of Delaware changing its name to Advanced Products Group, Inc.
The share exchange of a private operating Company, (Cra-Z- Soap Corp.)
into a non-operating public shell corporation (Advanced Technologies Group,
Inc.), with no assets or liabilities resulted in the shareholders of the
private company having actual operating control of the combined company after
the transaction, and the shareholders of the former public shell continuing
only as passive investors.
This transaction is considered to be a capital transaction in substance,
rather than a business combination. That is,the transaction is equivalent to
the issuance of stock by the private companyfor the net monetary assets of
the shell corporation, accompanied by a recapitalization. The accounting is
identical to that resulting from a reverse acquisition, except no goodwill or
other intangible is recorded.
APB No., 16, paragraph 70 states that, Presumptive evidence of the
acquiring corporation in combinations effected by an exchange of stock is
obtained by identifying the former common stockholder interest of a combined
company which either retains or receives the larger portion of the voting
rights of the combined corporation. That corporation should be treated as
the acquirer unless other evidence clearly indicates that another corporation
is the acquirer.
Staff accounting Bulletin Topic 2A affirms the above principle and gives
guidelines that the post reverse acquisition comparative historical financial
statements furnished for the legal acquirer should be those of the legal
acquiree.
In accordance with this guideline the outstanding shares of Cra-Z Soap
Products Corp., have been retroactively restated on the Balance Sheet, and
the Statement of Stockholders' Equity to give effect to the three shares for
one share exchange. The retroactively restated shares have been used in the
Computations for Earnings (Losses) Per Share to preserve comparability of
those figures.
Advanced Products Group, Inc.
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #4 - Income Taxes
The Company has adopted FASB 109 to account for income taxes. The
Company currently has no issues that create timing differences that would
mandate deferred tax expense. Net operating losses would create possible
tax assets in future years. Due to the uncertainty as to the utilization of
net operating loss carryforwards an evaluation allowance has been made to the
extent of any tax benefit that net operating losses may generate.
The Company has incurred losses that can be carried forward to offset
future earnings if conditions of the Internal revenue Codes are met. These
losses are as follows:
Year of Loss Amount Expiration Date
------------ ------ ---------------
1998 $ 101,226 2018
1999
---------------
Current Tax Asset Value of
Net Operating Loss Carryforwards
at Current Prevailing Federal Tax Rate $ 34,416
Evaluation Allowance (34,416)
--------------
Net Tax Asset $ -0-
--------------
Current Income Tax Expense -0-
Deferred Income Tax Benefit -0-
NOTE #5 - Going Concern
The accompanying financial statements of Advanced Products Group, Inc.,
have been prepared on a going concern basis, which contemplates profitable
operations and the satisfaction of liabilities in the normal course of
business. There are uncertainties that raise substantial doubt about the
ability of the Company to continue as a going concern. As shown in the
statements of operations the Company has not achieved profitable operations
and as of June 30, 1999, the Company has insufficient working capital.
Management has obtained an agreement with an investment banking concern
in New York to use a Private Placement Memorandum of 500,000 shares of common
stock at $2.00 per share to raise additional capital. This Agreement is
contingent upon the Company clearing comments in its current filing with the
Securities and Exchange Commission.
The Company is negotiating with other mergers with other privately held
companies that would bring assets,sales and marketing strategies to the
Company. These negotiations also are contingent upon the Company
completing its current registration process with the SEC.
In addition, negotiations continue with a major supermarket wholesaler
for the soap products.
Advanced Products Group, Inc.
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #6 - License Agreement
On August 27, 1998, Cra-Z Soap Corp., (the Licensor) entered into an
Agreement with Masters Marketing and Development, Inc., a Tennessee
Corporation (the Licensor). Pursuant to the Agreement the Licensor granted
to the Licensee property that is identified as all formulas, patents,
applications for patents, trade secrets, improvements, technology or
technological products, intellectual properties, know-how ideas, methods,
processes and concepts, and devices ("formulas"), whether now existing or
hereafter conceived , developed or acquired by Licensor relating to the
product known as Cra-Z Soap or any similar product or any application of the
formulas to any product or commercialization thereof.
A royalty of ten percent (10%) of the Adjusted Gross Sales price of any
Products sold by Licensee or its Affiliates for which Licensee receives
payment of Twenty Thousand Dollars U.S. ($20,000) (the "monthly minimum"),
whichever is greater ("Royalties"). "Adjusted Gross Sales Price" shall mean
the gross sales price of any Products sold less returns and reasonable actual
discounts or rebates. At such time as the total amount of Royalties paid
reaches a sum equal to or exceeding two million dollars U.S. ($2,000,000),
the percentage of Adjusted Gross Sales paid as royalty as defined above shall
change from ten percent (10%) to three percent (3%) with no monthly minimum.
The Company has capitalized the License Agreement at the present value
of $2,000,000 using a risk free rate of 5% over the term of 100 months,
(eight and one third years) that the Company is required to pay $20,000 per
month.
The present value of the license is $1,332,000. The discount factor of
$668,000 is considered to be the interest factor and is absorbed into the
operating expense as interest expense using the straight line method at
$6,680. The interest expense is recognized as expense each month without
respect to when the Company pays the required license fees. If the Company
fails to make the license payment timely then expense is recognized and the
license fees payable is increased.
The Company will amortize the license fee recognized as an asset over
the initial term of the license which is twenty years.
The Company will be required to make debt service payments and recognize
expenses pertaining to the license as follows;
Advanced Products Group, Inc.
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #6 - License Agreement -Continued-
<TABLE>
<CAPTION
License Agreement Debt Service Schedule
License Principal Interest Amortization
Year Payment Reduction Factor
<S> <C> <C> <C> <C>
1998 $ 80,000 $ 53,280 $ 26,720 $ 22,200
1999 240,000 159,840 80,160 66,600
2000 240,000 159,840 80,160 66,600
2001 240,000 159,840 80,160 66,600
2002 240,000 159,840 80,160 66,600
2003 240,000 159,840 80,160 66,600
Thereafter 720,000 479,520 240,480 1,644,800
------------------------------------------------------------------------
Total $ 2,000,000 1,332,000 668,000 2,000,000
========================================================================
</TABLE>
NOTE #7 - Stockholders' Equity
The Company is authorized to issue 40,000,000 shares of common stock
with a par value of $0.00 per share.
The Company is authorized to issued 1,000,000 Shares of Series A Super
Preferred Voting Shares.
Pursuant to the Agreement of Merger 103,517 Series A Super Preferred
Voting shares, retroactively restated have the following characteristics;
A. Voting Rights: The holder of each share of the Shares shall have the
right to cast twenty (20) votes per Share held on any and all matters
presented for shareholder consideration. Each holder of common shares may
cast one (1) vote per common share held on any and all matters presented for
shareholder consideration.
B. Preference: Holders of the Shares shall be preferred over holders of
common shares for payment of dividends or in any distribution to shareholders
resulting from liquidation of the issuer.
C. Face Value and Redemption Value: The Shares have a face value of
$1.00 each. The Shares may be redeemed by the issuer prior to any conversion
thereof any time after two (2) years from date of issuance for $1.00 each at
the option of the issuer.
D. Dividends: The Shares earn a non-cumulative dividend of three percent
(3%) annually based upon the Shares face value and redemption value.
Dividends shall be paid from earnings of the issuer, if any.
E. Conversion: The Shares may be converted into restricted common shares
any time commencing two (2) years after date of issuance. Each Series A
Preferred Voting Share may be converted into twenty (20) restricted common
shares. The holding periods of any restricted common shares issued as a
result of conversion for purposes of Rule 144, or any subsection thereof, as
promulgated by the Securities & Exchange Commission, shall commence upon the
date of issuance of any such Series converted.
Advanced Products Group, Inc.
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #7 - Stockholders' Equity -Continued-
F. Series C Preferred Shares; The Company offers a Series C Preferred
Share with a coupon of 6%, a redemption value of $10.00, a face value of
$10.00 with voting rights of 2 votes per share and a conversion of 2 common
shares for each share after one year from issue. There are no Series C
Preferred shares issued.
On March 12, 1999, at a Special Meeting, Shareholders authorized a one
for three split of the issued and outstanding shares of common and preferred
stock. Retroactive restatement has been made to the financial statements.
The remaining preferred shares outstanding were returned to the Company at no
cost and were canceled.
The Company issued 24,916 shares of common stock for services valued at
$2,838 in 1998 and 317,639 shares for services valued at $7,585 in 1999.
The Company issued shareholders of Advanced Technologies Group, Inc.,
options to acquire up to 666,667 post split shares of common stock at $0.75
per share. In 1999, the Shareholders exercised the options and the Company
issued 666,667 shares of common stock for Notes Receivable of $500,000. At
June 30, 1999, the Company had received $96,690 from one of the note holders.
NOTE #8 - Notes Receivable
The Company has three short term notes receivables as follows:
Note #1- From a Business Entity, Note of
$166,667 dated April 1, 1999 Due
March 31, 2000, Interest at .025% Per Annum $166,667
Note #2- From a Business Entity, Note of
166,667 dated April 1, 1999 Due
March 31, 2000, Interest at .025% per annum 166,667
Note #3- From a Business Entity, Note of
166,667 dated April 1, 1999 Due
March 31, 2000, Interest at 0.25% Per Annum 69,976
-------------
Total $403,310
==============
The Company issued 666,667 shares of common stock for the notes
receivable. Generally accepted accounting principle require that note
receivable for stock issued be offset against the equity increased from the
original sale.
Advanced Products Group, Inc.
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #9 - Deficit Accumulated in the Development Stage
Subsequent to the Agreement of Merger the surviving entity is considered to
be a development stage company. Deficits accumulated are as follows;
Period Amount
From August 27, 1998, (Inception) to December 31, 1998 $ 101,226
From January 1, 1999 to June 30, 1999 160,493
-----------
Total $ 261,719
===========
NOTE #10 - New Technical Pronouncements
In February 1997, SFAS No. 129, "Disclosure of Information about Capital
Structure" was issued effective for periods ending after December 31, 1997.
The Company has adopted the disclosure provisions of SFAS No. 129 effective
with the fiscal year ended December 31, 1998.
In June 1997, SFAS No. 130, "Reporting Comprehensive Income" was issued
effective for fiscal years beginning after December 31, 1997, with earlier
application permitted. The Company has elected to adopt SFAS No. 130
effective with the fiscal year ended December 31, 1998. Adoption of SFAS No
130 is not expected to have a material impact on the Company's financial
statements.
In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information" was issued for fiscal year beginning after December
31, 1997, with earlier application permitted. The Company has elected to
adopt SFAS No. 131, effective with the fiscal years ended December 31, 1998.
Adoption of SFAS No. 131 is not expected to have a material impact on the
Company's financial statements.
Signatures
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
Advanced Products Group, Inc.
-----------------------------------
(Registrant)
Date: February 9, 2000 By: /s/ Edward J. da Parma, Jr.
----------------------------------
Edward J. da Parma, Jr., President
PART IV INDEX OF EXHIBITS
EXHIBIT # DESCRIPTION
2 CORPORATE BY-LAWS
3 STOCK CERTIFICATE
3.a AMENDED ARTICLES OF INCORPORATION
3.b ARTICLES OF INCORPORATION [TOTAL LIFESTYLES
INC.]
6.a LICENSE AGREEMENT BETWEEN MASTERS
MARKETING AND CRA Z SOAP, INC.
ADDITIONAL EXHIBIBTS [EX-10 MATERIAL CONTRACTS]
A. MERGER AGREEMENT BETWEEN CRA Z SOAP, CORP
AND ADVANCED TECHNOLOGIES GROUP, INC.
B. FORM D
C. AGREEMENT BETWEEN STARCO AND CRAZ PRODUCTS
D. LETTER OF AGREEMENT TELEBRANDS
