As filed with the Securities and Exchange Commission on ______________________
Registration No. __________________
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
--------------------------
PRE-EFFECTIVE AMENDMENT NO. 5
to
FORM SB-2
Registration Statement Under The Securities Act of 1933
THE ADSONLY GROUP, INC.
(Name of small business issuer as specified in its charter)
California 7311-01 93-1026060
(State of Incorporation) (Primary Standard Industry (I.R.S. Employer
Classification Code Number) Identification No.)
2269 Chestnut Street
Suite 637
San Francisco, California 94123
(Address and telephone number of principal executive offices)
Donald F. Mintmire, Esquire
2710 Alt. 19 North, Suite 406
Palm Harbor, Florida 34683
(813) 771-1084
(Name, address and telephone number of Agent for Service)
-----------------------
Approximate date of commencement of proposed distribution of the
securities to the public: As soon as practicable after the
effective date of this Registration Statement.
-----------------------
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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Page 1 of --- Pages
Exhibit Index located on Page --
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Cross Reference Sheet for Registration Statement on Form SB-2
Form SB-2 Item Numbers and Headings Location
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Item 1 Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus....... Outside Front Cover Page
Item 2 Inside Front and Outside Back
Cover Pages of Prospectus...... Inside Front and Outside Back
Cover Pages
Item 3 Summary Information and
Risk Factors................... Prospectus Summary;
Risk Factors
Item 4 Use of Proceeds................ Use of Proceeds
Item 5 Determination of
Offering Price................. Risk Factors;
Description of Securities
Item 6 Dilution....................... Dilution
Item 7 Selling Security Holders....... Not Applicable
Item 8 Plan of Distribution........... Plan of Distribution
Item 9 Legal Proceedings.............. Business
Item 10 Directors and Executive
Officers....................... Management
Item 11 Security Ownership of
Certain Beneficial
Owners and Management.......... Principal Shareholders;
Certain Transactions
Item 12 Description of the Securities
to be Registered............... Outside Front Cover
Item 13 Interest of Named Experts
and Counsel.................... Not Applicable
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Item 14 Statement as to
Indemnification................ Indemnification
Item 15 Organization Within 5 Years.... Business; Risk Factors
Item 16 Description of Business........ Business
Item 17 Management's Plan of Operation. Business
Item 18 Description of Property........ Business
Item 19 Certain Relationships and
Related Transactions........... Certain Transactions
Item 20 Market for Common Equity
and Related Stockholder Matters Description of Securities;
Risk Factors
Item 21 Executive Compensation......... Management
Item 22 Financial Statements........... Financial Statements
Item 23 Changes in and Disagreements
With Accountants on
Accounting and Financial
Disclosure..................... Not Applicable
<PAGE>
PROSPECTUS
50,000 Shares of Common Stock Minimum
THE ADSONLY GROUP, INC.
The AdsOnly Group, Inc. (hereinafter also referred to as "AOG" and the
"Company") is offering 850,000 shares of its Common Stock subject to 50,000
share minimum, based on a "minimum/maximum best efforts", with no par value, at
$6.00 per share. Prior to this Offering there has been no market for the Common
Stock of the Company. For a description of the rights and privileges of the
Common Stock see "Description of Securities." Prior to this Offering, there has
been no public market for the Common Stock of the Company, and there can be no
assurance that any such market will develop. The Company intends to have its
Common Stock listed for quotation on the OTC Bulletin Board once the Offering
has been completed. The initial offering price of the Common Stock has been
arbitrarily determined by the Company and does not necessarily bear any
relationship to the Company's asset value, net worth, or other criteria of
established value
-----------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY INVOLVE A VERY HIGH DEGREE OF RISK. THEY
SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE
INVESTMENT (SEE "RISK FACTORS" ON PAGE 6 FOR SPECIAL RISKS CONCERNING THE
COMPANY).
Price to Public Underwriting Fees and Proceeds to
Commissions(1) Company(2)
Per Share $ 6.00 $ .78 $ 5.22
Total Minimum(2) $ 300,000.00 $ 39,000.00 $ 220,240.00 (3)
Total Maximum(2) $ 5,100,000.00 $ 663,000.00 $4,396,240.00 (3)
(1) AOG hereby offers to sell up to 850,000 shares of its Common Stock at $6.00
per share (hereinafter also referred to as the "shares" or the "securities").
This Offering is made on a "50,000 share minimum" basis for a period of up to,
and not to exceed, one year from the date of this Prospectus. Pending the sale
of the minimum of 50,000 shares of Common Stock offered hereby, all proceeds
from this Offering will be deposited in an escrow account with The Pacific Bank,
101 California Street, San Francisco, California 94111, in accordance with Rule
15c2-4 of the Exchange Act. If the minimum number of shares are not sold by the
completion of this Offering, the purchase price will be returned promptly to
investors without interest or deduction. Subject to the sale of the minimum
shares, AOG may use invested funds immediately. (see "Description of
Securities").
(2) The minimum proceeds from the sale of each share will be $5.22. Under the
terms of this Offering, $300,000 worth of the shares, (50,000 shares) must be
sold prior to AOG receiving or using any proceeds from this Offering. Should
only the minimum number of shares be sold, AOG will realize $261,000, less
expenses of issuance and distribution of $40,758.62, in proceeds based upon the
payment of a sales commission and non-accountable expense allowances to any
broker/dealer for selling the minimum number of shares offered hereby. Should
all of the shares offered hereby be sold, AOG will realize at least $4,437,000,
less expenses of issuance and distribution of $40,758.62, in proceeds from this
Offering based upon the payment of a sales commission and non-accountable
expense allowances to any broker/dealer (see "Plan of Distribution"). AOG,
through its Officers and Directors, will act as selling as selling agent for
this Offering, which is being made on a "self-underwritten" basis pursuant to,
and in compliance with, Rule 3a-4-1 of the Securities Exchange Act of 1934, as
amended (hereinafter referred to as the ("Exchange Act") (see "Description of
Securities"). The shares offered hereby may also be sold by selected
broker/dealers. Should these shares be sold by a broker/dealer, AOG will pay a
sales commission of up to 10 percent, and an additional non-accountable expense
allowance equal to up to 3 percent of the gross proceeds from the sale of
shares. Commission and non-accountable expenses allowance shall be paid after
the sale of the minimum number of shares offered hereby. In no event will AOG
pay a commission, sales fee, or expense to its Officers or Directors related to
this Offering. Should AOG sell any of the shares itself, it will pay no
commission and non-accountable expense allowance on such sales, and the net
proceeds available to AOG will increase accordingly (see "Use of Proceeds").
(3) This amount of net proceeds includes the payment of other expenses of
issuance and distribution.
THE ADSONLY GROUP INC. IS NOT A REPORTING COMPANY UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.
The date of Prospectus is , 1996
4
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and audited financial statements, including the notes thereto, which
appear elsewhere in this Prospectus and in the Registration Statement.
The Company
The AdsOnly Group, Inc. (hereinafter also referred to as "AOG" and the
"Company") was incorporated in the State of California on April 6, 1990 to
develop, market and sell its planned advertising franchises throughout the
United States. The Company is seeking the proceeds from at least the minimum
sale of shares offered hereby to establish its business operations. AOG is a
start-up company, has not yet commenced business operations and has realized
minimal revenue to date.
The AdsOnly Group was founded by a group of advertising agency
executives, including executives experienced with worldwide advertising agencies
such as Ogilvy & Mather and BBDO. Based on its experience in the advertising
industry, management believes that there is a significant opportunity to develop
market share by offering advertising services for companies with advertising
budgets in the $250,000 annual range, as well as larger businesses and divisions
of these businesses requesting "per-job", or project based advertising services.
In part due to the recent "down-sizing" that many have experienced, these major
advertisers are out-sourcing marketing services more than ever, and in many
instances will be unwilling to pay the costs of a full-service agency.
Historically, larger advertising agencies such as Ogilvy & Mather, J.
Walter Thompson, and BBDO concentrate their marketing efforts toward larger
advertising clients, often those clients with advertising budgets far exceeding
$1,000,000. As a result, management believes that a broad-based advertising
system which specializes in meeting the needs of mid-size companies with smaller
advertising budgets, as well as divisions of large companies, provides the
Company with a significant opportunity to develop and expand market share within
this target market. International groups of advertising agencies are organized
to service clients on an international basis and often focus on such clients as
Proctor & Gamble, Coca-Cola, Ford Motor Company, Exxon, etc. These
"full-service" advertising agencies have not traditionally attempted to capture
the business of mid-level advertisers using their top personnel, primarily due
to cost and price constraints.
AOG has completed and filed the documentation necessary for compliance
with the Federal Trade Commission in Washington. The Company has also prepared
documentation for the registration for sale of franchises in a number of states.
To the Company's knowledge there are no other companies offering advertising
franchises in the United States at this time. The Company plans to market its
advertising franchises to fill the niche of market share that exists between the
large full service national and small lower budget advertising agencies. AOG's
principal executive office is located at 2269 Chestnut Street, Suite 637, San
Francisco, California 94123, and its telephone number is (415) 457-7586.
The Securities Offered
The Company is offering to sell 850,000 shares of Common Stock for
$6.00 per share (see "Description of Securities"). Pending the sale of the
minimum of 50,000 shares of Common Stock offered hereby, all proceeds from this
Offering will be deposited in an escrow account with The Pacific Bank, 101
California Street, San Francisco, California 94111, in accordance with Rule
15c2-4 of the Exchange Act. If the minimum number of shares are not sold by the
completion of this Offering, the purchase price will be returned promptly to
investors without interest or deduction. Subject to the sale of the minimum
shares, AOG may use invested funds immediately. (see "Description of
Securities").
Use of Proceeds
So long as at least the minimum sale of shares offered hereby is
achieved, AOG intends to use the net proceeds from this Offering to develop its
advertising franchise business. Should AOG realize proceeds from this offering
in an amount exceeding $300,000, the Company will use such proceeds for the
further development and expansion of its business and for operating capital (see
"Use of Proceeds" and "Business").
5
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RISK FACTORS
An investment in the securities offered hereby involves a high and
substantial degree of risk. Prior to making an investment decision, a
prospective investor should carefully consider the risk factors listed below,
together with the other factors and financial data included herein, in relation
to his or her financial circumstances and the possible loss of his or her entire
investment.
This section of this Prospectus addresses the risks factors which
management believes present the most substantial risk to investors in this
Offering, and which constitute the greatest threat that an investment in the
shares may be lost in whole or in part, or not provide an adequate return on
investment.
Risks Related to the Company
Development Stage Company - Minimal Revenue From Operations
AOG is a development stage enterprise organized to sell advertising
franchises. AOG has not commenced business operations and has realized minimal
revenue as of the date of this Prospectus. The Company seeks to develop its
business through the sale of advertising franchises. There is no absolute
assurance that the Company will be able to develop its business by establishing
franchising operations on a continuous and profitable basis, if at all.
Prospective investors should be aware of the difficulties which could
be experienced by AOG in developing its business, especially in view of
competition from existing and more established advertising agencies which will
compete with AOG's prospective franchisees for advertising clients and revenues.
If AOG's plans prove unsuccessful, shareholders could lose all or a substantial
part of their respective investments. Management estimates that AOG must realize
at least $300,000 in gross proceeds from this Offering to commence planned
franchise sales operations.
Uncertainty of Significant Assumptions
AOG's plans for financing and implementing its planned business
operations and the projection of AOG's potential for profitability from its
intended operations are based solely on the experience, judgment, and
assumptions of management. The significant assumptions made by management with
respect to the potential for market acceptance and profitability for AOG and its
intended future franchisees are that an increasing number of small to mid-size
businesses, larger businesses, and divisions of these businesses will continue
to out-source marketing services, and will be unwilling to pay the high costs of
a full-service agency. Management also assumes that large nationally established
advertising agencies will not begin to seek the advertising accounts of
businesses which expend less than several million dollars annually for
advertising. Additionally, management assumes that existing advertising agencies
which are smaller in terms of size and revenues will respond positively to the
opportunity to join a franchise network of advertising agencies, especially in
light of AOG's intention to promote its franchise network on a national basis.
Management believes that the type of national exposure which AOG intends to
afford to its franchisees would otherwise be unavailable to them, considering
their traditionally smaller scope with their respective client bases and
revenues.
There can be no assurance with respect to the accuracy, certainty, or
validity of any of these significant assumptions, and should management be
incorrect in making any of these assumptions, the financial results experienced
by AOG could be severely adversely affected; and shareholders, including
investors in this Offering, could lose all or part of their respective
investments in AOG.
6
<PAGE>
No Historical Basis for Management's Opinion
All of AOG's Officers and Directors have advertising agency experience
but, none of these persons has been previously involved in the franchising
business. Additionally, the Company has no operating history. Accordingly, there
is no basis, other than the judgment of, and assumptions made by, AOG's
management, on which to estimate the volume of franchise sales and the amount of
revenues which AOG's planned operations may generate, or regarding other aspects
of the planned operations of AOG (see "Business - Background" and "Management").
Uncertainty of Adequacy of Financing
Although management believes that the net proceeds from the sale of at
least the minimum number of shares offered hereby will be sufficient to allow
AOG to develop its operations as more fully described in this Prospectus,
additional financing may be required to implement AOG's operating plans should
management's estimates prove incorrect. There is no assurance that any
additional financing will be available to AOG if and when required, and that
even if such financing is available, it will not materially dilute the ownership
of the then existing shareholders, including investors in the shares offered
hereby (see "Description of Securities", "Dilution" and "Use of Proceeds").
Uncertainty of Market Acceptance and Financial Results
Until AOG has established market acceptance for its advertising
franchise business and built up revenues, its financial results will be
unpredictable, making financial management more difficult. There is no assurance
that AOG will achieve the market share anticipated by management for its
franchising business (see "Business").
Dependence Upon Management - Reliance Upon the Efforts of a Few Individuals
AOG's success largely depends on the continued services of the
Company's Officers and Directors, and upon their ability to manage and conduct
AOG's operations. The loss of any of their services could adversely affect AOG's
prospects for success (see "Management" and "Business").
Anti-Takeover Provisions
Certain provisions of AOG's Bylaws may make it more difficult and time
consuming to acquire AOG, thereby reducing AOG's vulnerability to an unsolicited
proposal for takeover. Under the provisions of the Bylaws, the current Board of
Directors is authorized to take any action required to increase the authorized
issue of shares or the classes and types of capital stock and other securities
of the corporation including, common stock and preferred stock, without seeking
approval of the holders of shares of voting common stock or the holders of any
other securities of the Company. Additionally, the Board of Directors is
specifically empowered to authorize and issue corporate stock of various
amounts, classes and types, and also to authorize the sale or issuance of
warrants, options or other rights pursuant to such corporate stock for valid
purposes of the Company or its business or its expansion without first obtaining
approval of the shareholders. These provisions could have the effect of
depriving shareholders of the opportunity to sell shares at a premium over
prevailing market prices, which sometimes arises pursuant to takeover bids.
AOG's Bylaws also authorize the Board of Directors to oppose certain tender
offers on the basis of factors other than economic benefit to shareholders.
Competition
While management is unaware of any other company currently franchising
or seeking to franchise advertising agencies, there are numerous
well-established advertising agencies that will be competing directly with AOG's
intended franchises for advertising market share. To the extent that competitive
advertising agencies successfully capture advertising market share, it could
impede the establishment and development of AOG's franchise network and of
individual franchise locations.
7
<PAGE>
Franchising Operations
While the documents necessary to commence franchise registration in
thirty-two states (including California) have been completed, there is no
assurance that AOG will be able to obtain or maintain effective registration for
its intended franchise program in those states or in any other states. AOG's
Franchise Agreement includes non-competition language intended to prevent
franchisees from terminating their franchises and going into competition with
AOG without paying the franchise royalties and other fees required pursuant to
operating a AOG franchise location. While management believes that these
provisions will be enforceable, there is no absolute assurance should AOG
attempt to enforce the non-competition provisions of the Franchise Agreement
that AOG will prevail in any enforcement action.
Franchisees will also be required to maintain liability insurance to
insure against liabilities incurred pursuant to the operation of their
independently owned and operated franchise locations. AOG will sell franchise
locations to franchisees based upon the contractual obligation of franchisees to
maintain liability insurance coverage and in reliance upon franchisees'
compliance with this and other provisions of the Franchise Agreement.
While AOG intends to offer franchisees the exclusive right to specific
geographic areas pursuant to soliciting and selling advertising business under
the tradename, AdsOnly, there is no absolute assurance that AOG will not offer
certain franchise locations on a non-exclusive basis. AOG currently intends to
allow franchisees to operate under AOG's tradename, and while management
believes that this will promote name recognition and familiarity with AOG's
business for both AOG and for independently owned franchise locations, this also
increases the possibility that, should one of AOG's franchisees engage in
activity which resulted in negative publicity concerning its operations, this
negative publicity could also effect AOG and AOG's independently owned franchise
locations.
Risks Related to this Offering
Dilution and Possible Future Dilution
This Offering involves immediate substantial dilution from the public
Offering price. The book value of the Company's Common Stock offered hereby is
substantially less than the price at which the Company is offering the shares to
the public, and accordingly, investors in the shares offered hereby will sustain
an immediate substantial dilution of their investment (see "Dilution").
In the future, AOG's Board of Directors may authorize and issue
additional capital stock without obtaining shareholder approval. In as much as
AOG may issue additional shares of capital stock in order to provide for the
further capitalization of the Company or for other corporate purposes, there may
be further dilution of the shareholders' interests (see "Description of
Securities").
No Public Market and Illiquid Investment
Prior to this Offering, there has been no public market for the
Company's securities. There can be no assurance that a public market will
develop or be sustained (see "Description of Securities"). An investor in the
shares offered hereby may not be able to liquidate his or her investment should
he or she desire to do so. It is unlikely that a lending institution would
accept the shares as pledged collateral for loans unless a regular trading
market develops.
No Dividends and None Anticipated
AOG anticipates using the proceeds of this Offering, and earnings
received, to develop and market its advertising franchise business, for
operating capital and for corporate development and expansion activities. AOG
has not paid or declared any dividends nor, by reason of its present financial
status and its contemplated financial requirements, does it anticipate paying
any dividends upon the shares offered hereby for the foreseeable future.
8
<PAGE>
The future payment of dividends by AOG on its Common Stock, if any,
rests within the sole discretion of AOG's Board of Directors and will depend,
among other things, upon AOG's earnings, its capital requirements, and its
financial condition, as well as other relevant factors. While AOG may declare
dividends at some time in the future, no assurance can be given as to the timing
of such declaration of dividends, if any (see "Description of Securities" and
"Dividend Policy").
Possible Restrictions on the Resale of the Company's Common Stock
Any resale of the Company's Common Stock may be covered by a Securities
and Exchange Commission rule that imposes additional sales practice requirements
on broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally institutions with assets in excess
of $5 million or individuals with net worth in excess of $1 million or annual
income exceeding $200,000 or $300,000 jointly with their spouses).
For transactions covered by the rule, the broker-dealer must make a
special suitability determination for the purchaser and receive the purchaser's
written agreement to the transaction prior to the sale. Consequently, the rule
may affect the ability of purchasers in this Offering to resell their shares in
any secondary market that may develop.
Maximum and Minimum Shares Offered Hereby
AOG needs at least the minimum proceeds from this Offering to further
develop and expand its operations. Failure to sell at least the minimum number
of shares offered hereby may result in AOG's inability to further develop and
expand planned operations. Should only the minimum number of shares offered
hereby be sold, the purchase price for the shares will not be returned to
investors even in the event that the amount of proceeds proves insufficient to
allow the Company to further develop and expand its operations.
Shares Available for Resale
All of AOG's Common Shares presently outstanding are "restricted
securities." In the future these restricted securities may be sold in compliance
with Rule 144 adopted under the Securities Act of 1933, as amended. Rule 144
provides, in essence, that a person holding "restricted securities" for a period
of two years may sell an amount equal to 1 percent of the Company's outstanding
shares every three months. Non-affiliates may sell shares held for three years
without limitation.
Investors should be aware that the possibility of sales under Rule 144
may, in the future, have a depressive effect on the price of the Company's stock
in any market which may develop. The Bylaws permit the Directors to authorize
the issuance of additional classes and amounts of shares without shareholder
approval in order to provide the Board of Directors with the ability to issue
stock for proper purposes, including deterring takeover bids.
AOG's Bylaws provide that these provisions cannot be amended, altered,
repealed, or replaced without the assenting vote of a majority of the
shareholders. As the current shareholders of AOG will retain control of the
Company subsequent to this Offering, any such amendment, alteration, or repeal
of the Bylaws will remain at the discretion of the current shareholders for the
foreseeable future.
Determination of the Offering Price
The Offering price per share of the shares offered hereby was
determined arbitrarily by AOG, and bears no relationship to the asset or book
value of the Company. The Offering price is not based on net worth, earnings, or
other established investment criteria of value. Accordingly, there can be no
assurance that the shares offered hereby can be resold at the Offering price, if
at all.
9
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Because the Offering price was arbitrarily set by the Company at $6.00
per share, broker-dealers effecting sales of the Company's securities in this
Offering will not be constrained by the provisions of Rule 15c2-6 under the
Exchange Act and investors in this Offering will not be afforded the protection
of Rule 15c2-6 as determined appropriate by the Securities and Exchange
Commission to protect investors in "penny stocks" (see "Description of
Securities" and "Risk Factors - Possible Restrictions of the Resale of the
Company's Common Stock").
No Underwriter
As this is a self underwritten Offering made under the provisions of,
and in compliance with, Rule 3a4-1 of the Securities Exchange Act of 1934, there
is no underwriter for this Offering. Therefore, offerees will not have the
benefit of an underwriter's due diligence efforts, which would typically include
the underwriter being involved in the preparation of disclosure and the pricing
of the shares offered hereby, among others. As AOG has never engaged in the
public sale of its shares, it has no experience in the underwriting of any such
offering. Accordingly, there is no prior experience from which investors may
judge AOG's ability to consummate this Offering.
Need for Current Registration
The Company must have a current Registration Statement on file with the
Commission and with the securities commissions in certain states in which
investors reside. Accordingly, the Company will be required to file
post-effective amendments to its Registration Statement when subsequent events
require such amendments in order to continue the registration of the shares of
Common Stock. Although the Company intends to comply with this requirement,
there can be no assurance that the Company will be able to keep its Registration
Statement current should it file such post-effective amendments.
Control of the Company to Remain with Present Stockholders
Following the completion of this Offering, if the maximum number of
shares are sold, the present shareholders of AOG will own approximately 70.2
percent of the outstanding Common Stock of AOG. Should only the minimum number
of shares be sold, present shareholders of AOG will own approximately 97.6
percent of the outstanding Common Stock. Consequently, because of their
percentage of ownership, existing shareholders will be able to control AOG's
Board of Directors at least for the foreseeable future.
Authorization of Preferred Stock
AOG's Articles of Incorporation and Bylaws authorize the issuance of up
to 1,000,000 shares of undesignated Preferred Stock with such rights and
preferences as may be determined from time to time by the Board of Directors.
Accordingly, the Board of Directors may issue Preferred stock with dividend,
liquidation, conversion, and voting or other rights which could adversely affect
the voting power, dividend and liquidation preference, or other rights of the
holders of AOG's Common Stock, without first obtaining shareholder approval.
Although the Company does not currently intend to issue any shares of Preferred
Stock, there can be no assurance that AOG will not do so in the future.
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USE OF PROCEEDS
The net proceeds from this Offering will be at least $4,396,240 if all
of the shares are sold, or at least $220,240 only the minimum number of shares
are sold, after deducting sales commissions and non-accountable expense
allowances payable to any broker/dealers and other expenses of issuance and
distribution. Management estimates that the Offering proceeds will be applied
substantially as follows:
APPLICATION OF PROCEEDS IF MINIMUM IS SOLD IF MAXIMUM IS SOLD
Advertising & Public Relations 30,000 1,150,000
Equipment (2) 50,000 200,000
Travel and Entertainment 17,000 322,000
Salaries and Wages 75,740 966,740
Sales Commissions 27,000 663,000
Legal, Accounting & Trademark 4,000 195,000
UFOC Filing Fees(1) 2,000 45,000
Marketing and Promotional Materials 14,500 854,500
TOTAL $ 220,240 $4,396,240
(1) UFOC filing fees are paid to the Federal Trade Commission for initial
submission and the requirements to keep the registration current and updated.
This expense also covers legal and administrative costs along with the fee to
the FTC.
(2) Under the maximum proceeds to be used for equipment the first $50,000 will
be applied towards general office equipment and furniture and the remaining
$150,000 will be applied towards the purchase or leasing of the Company's
planned LAN/WAN computer system.
The foregoing represents AOG's best estimate of the allocation of the
net proceeds from this Offering based upon current plans and is subject to
reapportionment of the proceeds among the uses described above.
AOG intends to allocate net proceeds received by the Company in an
amount between the minimum and maximum amounts among the uses described above.
AOG believes that the net proceeds will be adequate to fund immediate plans,
including revenue producing operations, so long as at least the minimum sale of
shares is achieved (see "Business - Plan of Operation").
No portion of the proceeds will be paid to Officers or Directors or
their affiliates for expenses of this Offering. After attaining the minimum sale
of shares, pending application of the net proceeds, AOG may invest in
interest-bearing securities such as U.S. government securities, money market
funds or other cash investments, certificates of deposit, savings deposits or
short-term obligations of the United States, or the proceeds may be left in
checking accounts bearing no interest. AOG does not intend to become an
investment company under the Investment Company Act of 1940 and, therefore, may
be limited in the temporary investments that it can make with the proceeds from
this Offering.
11
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DILUTION
The price at which investors will purchase the shares of Common Stock
offered hereby is substantially higher than the price at which AOG's existing
shareholders acquired their shares. Prior to this Offering, the current
shareholders of the Company purchased 2,006,864 shares of Common Stock for
$279,005 or approximately $0.14 per share. Net tangible book value per share is
determined by dividing the tangible net worth of the Company (total assets less
total liabilities and intangible assets) by the number of outstanding shares of
Common Stock.
The following table sets forth the dilution which will be realized by
the investors in the shares offered hereby in the case that the sale of the
minimum number of shares offered hereby is attained, and in the case that the
sale of the maximum number of shares offered hereby is attained:
Minimum Maximum
Offering Price Per Share $6.00 $6.00
Net Tangible Book Value Per Share Before Offering 0.01* 0.01*
Net Tangible Book Value Per Share After Offering 0.12* 1.55*
Increase Per Share Attributable to Investors 0.11* 1.54*
Per Share Decrease to Investors After Offering 5.88* 4.45*
(* rounded to the nearest cent)
Dilution If All Shares Offered Hereby Are Sold
If all of the shares offered hereby are sold, AOG will have issued 2,856,864
shares of Common Stock. The total paid-in capital will be $4,675,246 allowing
for the payment of sales commissions and non-accountable expense allowances for
the sale of all of the shares. The total net tangible book value after the
completion of this Offering will be $4,421,041 and the net tangible book value
per share will be approximately $1.55 per share.
In this case, the current shareholders of AOG will own 2,006,864 shares or
approximately 70.2 percent of the Company and investors purchasing shares in
this Offering will own 850,000 shares or approximately 29.8 percent of the
Company, for which they will have paid $5,100,000 or $6.00 per share. The
current shareholders of AOG will hold stock with an approximate book value of
$3,105,653 for an approximate increase of $3,083,853 in value, and the investors
will hold stock with an approximate value of $1,315,388 approximate decrease of
$3,784,612.
Dilution If Only the Minimum Shares Offered Hereby Are Sold
If only the minimum number of shares offered hereby are sold, AOG will have
issued 2,056,864 shares of Common Stock. The total paid-in capital will be
$499,246 allowing for the payment of sales commissions and non-accountable
expense allowances for the sale of all of the shares. The total net tangible
book value will be $245,041 after the completion of this Offering, and the net
tangible book value per share will be approximately $0.12 per share.
In this case, the current shareholders of the Company will own 2,006,864
shares or approximately 97.6 percent of the Company, and investors purchasing
shares in this Offering will own approximately 2.4 percent of the Company or
50,000 shares, for which they will have paid $300,000 or $6.00 per share. The
current shareholders of the Company will hold stock with an approximate book
value of $239,084 for an approximate increase of $214,284 in value, and the
investors will hold stock with an approximate value of $5,957 for an approximate
decrease of $294,043.
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CAPITALIZATION
The following table sets forth, as of March 31, 1996, the capitalization of
the Company and the pro forma capitalization after giving effect to the
completion of this Offering
<TABLE>
<CAPTION>
As Adjusted
Actual Minimum
<S> <C> <C>
Long Term Notes Payable to Founders .......... $ 8,842 8,842
Shareholders' Equity:
Common Stock; No Par value; Authorized
5,000,000 Shares; Issued and Outstanding
- (Actual) 2,006,864; (As Adjusted - Minimum
2,056,864)
279,005 499,246
Preferred Stock; No Par Value; Authorized
1,000,000 Shares; None Issued and O tstanding 0 0
Deficit Accumulated During the Development
Stage ....................................... (254,205) (254,205)
Total Stockholders' Equity ................ 24,800 245,041
Total Capitalization ...................... $ 24,800 245,041
</TABLE>
SELECTED FINANCIAL INFORMATION
The following is selected financial data for the period ending March 31,
1996. The audited financial statements as of December 31, 1994 and 1995 and the
report of the independent Certified Public Accountant thereof are included
elsewhere in this Prospectus. The information set forth below is qualified by,
and should be read in conjunction with, the financial statements and related
notes thereto in their entirety appearing elsewhere in this Prospectus.
Historical loss per share amounts have been presented in the audited and interim
financial statements, but historical amounts for dividends per share have not
been presented as AOG has paid no dividends.
The AdsOnly Group, Inc.
(a development stage enterprise)
Summary Balance Sheet
March 31, 1996
ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY
Current Assets $35,315 Current Liabilities $3,127
Notes Payable 8,842
Fixed Assets 1,454
Other Assets 0
TOTAL LIABILITES 11,969
STOCKHOLDERS' EQUITY 24,800
TOTAL ASSETS $36,769 TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $36,769
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INDEMNIFICATION
AOG's Bylaws provide indemnification for Officers, Directors,
employees, or other agents of AOG to the fullest extent permitted under
California law if they act in good faith and in a manner believed to be in AOG's
interests or, as regards criminal proceedings, if they have no reasonable cause
to believe their conduct is unlawful.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to such Directors, Officers, or persons controlling
the registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Commission, such indemnification is contrary
to public policy as expressed in the Act and, therefore, is unenforceable.
DIVIDEND POLICY
AOG has paid no dividends to shareholders as of the date of this
Prospectus and does not anticipate paying any dividends on its Common Stock in
the foreseeable future. The shareholders of AOG's Common Stock are entitled to
receive any dividends which the Board of Directors may declare from time to time
out of funds legally available for that purpose, if any. Any such dividends
shall be distributed on a pro-rata basis. The future payment of dividends by
AOG, if any, rests within the discretion of the Board of Directors and will
depend, among other things, upon the Company's earnings, its capital
requirements, and its financial condition, as well as other relevant factors.
Management intends to reinvest earnings, if any, in the development and
expansion of the Company's business.
BUSINESS
Background
The AdsOnly Group, Inc. was incorporated in the State of California in
on April 6, 1990 by a group of advertising agency executives, including
executives experienced with large worldwide advertising agencies such as Ogilvy
& Mather and BBDO. The Company seeks to develop, market, and sell its
advertising franchise system throughout the United States. Based on its
experience in the advertising industry, management believes that there is a
significant opportunity to develop market share by offering advertising services
for companies with advertising budgets in the $250,000 annual range, while also
targeting divisions of larger companies and advertisers requesting "per-job", or
project based services.
Historically, larger advertising agencies such as Ogilvy & Mather, J.
Walter Thompson, and BBDO, concentrate marketing efforts toward larger
advertising clients, often those clients with advertising budgets exceeding
$1,000,000. As a result, management believes that a broad-based advertising
system which specializes in meeting the needs of mid-size companies with smaller
advertising budgets provides the company with a significant opportunity to
develop and expand market share within this target market.
AOG was founded by experienced advertising executives, whose cumulative
experience led them to conclude that large and mid-size agencies cannot serve
the smaller advertiser profitably and effectively. Large, international groups
of advertising agencies are organized to service clients on an international
basis and often focus on such clients as Procter & Gamble, Coca-Cola, Ford Motor
Company, Exxon, etc. These larger advertising agencies are
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unable to devote attention to the considerable number of smaller advertising
clients.
Based on their experience, management believes that "full service"
advertising agencies have not traditionally attempted to capture the business of
these advertisers, and management believes that even if existing full service
advertising agencies attempt to capture market share from these advertisers,
they will not be able to serve this type of advertiser using their top
advertising personnel, primarily due to cost and price constraints. This
situation could result in these agencies delegating creative and other decisions
to unseasoned junior staff who are not equipped to provide these advertisers
with the level of service and creative quality required to produce top quality
advertising campaigns.
Smaller, regional advertising agencies, which management defines as
advertising agencies which realize between $100,000 and $1,000,000 in gross
profit from operations, often serve smaller local and regional clients. However,
due to the constraints imposed by maintaining day-to-day operating and
client-based tasks, these smaller advertising agencies often lack the ability to
engage in any appreciable new business planning and self promotion.
As a result, when confronted with a prospective client with a sizeable
advertising budget, smaller agencies frequently experience difficulty in
securing these larger clients. Even if these smaller advertising agencies manage
to capture larger clients, their limited resources often make it difficult for
these smaller agencies to retain these clients on a long-term basis. In
addition, if the founders or principals of these smaller agencies leave, or sell
the firms, a number of advertising clients may follow the founders to their new
advertising agencies.
Based on budgetary constraints, advertisers with marketing budgets
under $250,000 must spend their advertising resources wisely and effectively.
Effective and affordable advertising and marketing are critical to smaller
advertisers, but most smaller advertisers cannot afford the fees which larger
advertising agencies would typically charge them. Large and mid-size advertising
firms are not able to focus on smaller advertising clients and so often provide
inferior service to clients while having to charge "top dollar" for these their
services.
An additional burden placed on both the small advertising agency and
the small advertiser is that many smaller advertising agencies lack any
appreciable level of name recognition. As a result, advertisers may be skeptical
regarding placing their advertising dollars in the hands of an unknown agency.
As smaller advertising agencies often operate within their own budget
constraints, these agencies frequently employ freelance personnel who typically
cannot offer the resources or experience which full-time advertising agency
employees typically can.
The AdsOnly Group was founded to be the first franchisor of advertising
agencies. Other than the public in general, one specific target market the
Company intends to market its franchises to is small "mom and pop" advertising
agencies run by fewer then ten people with backgrounds in the advertising
business including copywriting, art direction, direct mail, and account
management. This potential market is made up of individuals who are already in
the advertising business but do not have the knowledge, experience and support
of a "full-service" national firm behind them. The Company has patterned this
strategy after large real estate franchisers such as Prudential, ReMax, and
others who market their membership to existing "mom and pop" real estate
brokers.
These franchises are designed to target the rapidly growing advertising
niche which includes expanding local and regional businesses with advertising
budgets under $250,000, while also targeting larger advertisers and divisions of
larger companies requesting "per job" or project based advertising services.
Based on management's experience, due to the recent downsizing that many large
advertisers have experienced over the past several years, these major
advertisers are out-sourcing marketing services at a greater level than ever
before and, in many instances, are unwilling to pay the costs of a national
full-service advertising agency.
Plan of Operation
The AdsOnly Group is a start-up company offering advertising franchise
opportunities for sale on a national basis. The Company has been in an
organizational and development stage since 1990, during which time management
has incorporated the Company, filed for and completed franchise registration and
concentrated its efforts with the legal and logistical issues involved in
preparing to sell franchise offerings of a service-based enterprise.
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AOG is currently operating on a part-time basis until such time that
funding can be raised to allow the officers to devote full-time efforts in
advancing this enterprise. At this time, management is working without
compensation. AOG will not commence full-time operations until such time as at
least the minimum number of shares are sold and the proceeds of this offering
become available. The Company currently has eight part-time employees and no
full-time employees, however, once the Offering is completed all of the
part-time employees will become full-time employees. The Company also expects to
hire an additional three to twelve employees for its administrative staff in the
first year.
The Company has set aside $75,740 under the minimum Use of Proceeds of
the Offering for the payment of salaries to employees. Although this is a
significant amount of the minimum proceeds, the Company feels that this will be
sufficient to cover the salary expense of its employees for the first year of
operation while not negatively impacting the liquidity of the Company. AOG
currently has sufficient employees to operate the company for the first 12
months, however, if amounts greater than the minimum proceeds are raised
proportionally up to the maximum amount to be set aside for salaries of
$941,740, the Company will hire additional employees to expand its operations
and expansion, however not to the degree that the amount of employees are more
than can be supported for one year under the amount of proceeds raised and set
aside for salaries from the Offering. Any addition of employees and increased
operations would also be expected to accordingly allow the AOG to increase its
revenues and thus gain an even greater liquidity.
Should only the minimum sale of shares offered be sold management
believes that it would meet the Company's minimum cash requirements until such
time as AOG's operations begin generating revenues. Management believes it may
not be necessary to seek additional funding during the twelve-month period after
receipt of at least the minimum amount of proceeds which will be made become
available to AOG as the Company expects to be generating revenues prior to the
end of the 12th month of operation after funding.
AOG intends to secure additional operating and training facilities to
its main office in San Francisco. AOG intents to secure operating facilities in
the San Francisco area. Management anticipates that this base of operations will
demonstrate a real world example of "the virtual office" rather than a large
physical plant associated with past agencies. Should adequate funding be
available, AOG plans to employee additional key personnel to proceed with the
Company's franchise sales effort and commence with the design and development of
the communication network/computer system, necessary to organize the sales and
marketing effort, as well as future franchise communications.
AOG intends to contract with a leading public relations firm to begin
the process of promoting its franchise business and operations. Initially,
management intends to orchestrate an extensive awareness campaign to generate
interest and leads, on a market-by-market basis, just prior to conducting a
sales blitz in that area. As part of its marketing and public relations
strategy, management plans to solicit press coverage, personal interviews, trade
articles and industry related forums that will further promote the Company in
its operations. Management intends to target publications, trade journals, and
other communication vehicles geared to the advertising industry in conjunction
with its planned self-promotional advertising campaign.
In keeping with a technologically-based, information-sharing concept,
management feels that the implementation of computer systems and the training of
new franchisees in their use will be an important part of a successful approach
to the establishment of any communication based service industry such as
advertising. Therefore, as soon as capitalization allows, one of the Company's
first organizational plans will be to implement the use of a LAN/WAN computer
system to connect AOG's home office with its franchisees. The system AOG intends
to install will be a custom designed database/network utilizing the Apple
Computer platform. Management believes this system will allow for the
collection, archiving, and exchange of advertising ideas and products produced
and digitally stored within AOG's system database. It is this system which plans
to make available for its franchisees that is intended to offer the
communication, knowledge, and support that are often only available from a large
national advertising agency. This network, referred to by AOG as the "CET"
(Creative Exchange Technology) system, will also allow the Company to monitor
individual franchise sales and operational activities as well as reaction to
needs and demands in real-time, as needed. In addition, management believes this
ability to share ideas and information will be a distinct competitive advantage
and marketing tool to be used for AOG's franchisees seeking market-by-market
data, creative and other operational support.
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The interactive capabilities of the CET system will also allow for
digital creative exchanges, while allowing The AdsOnly Group and franchisees to:
communicate at will with text and graphics, retrieve text and graphics from an
advertisement database, allow remote brain-storming sessions, conduct on-line
research, as well as access existing mainstream on-line services.
Management intends, due to practical reasons and the size of its
potential national market, to concentrate its initial franchising efforts in the
California area markets. These first few franchises will then be able to serve
both as examples to new franchisees, as well as franchisee training centers and
beta test sites for franchised system development.
Management intends to complete production of AdsOnly marketing and
sales tools, which will include a franchise sales brochure with an interactive
computer disk and the AdsOnly Video(TM), targeted trade, direct mail and
specialized business-to-business advertising campaigns. The AdsOnly Video will
be produced by AOG on a quarterly basis for use as a communication and sales
tool. Parts of the video will be used to update franchisees of current events,
trends campaign, and issues concerning the AdsOnly franchise and the advertising
industry. The AdsOnly Video will be regularly updated for show as demo reels,
highlighting the best work for that quarter with case study examples. An initial
"working model" of this video will be produced for the purpose of introducing
prospective franchisees to the AOG concept and to be supplied as a leave behind
sales tool.
Simultaneously, AOG intends to complete the production of the AdsOnly
Franchise Business and Marketing Manual, which is currently in draft form. Items
outlined will include detailed education of the franchisee and their employees;
pre-opening activities; agency advertising and promotion; professional systems;
administrative systems; and professional support. Additionally, management
intends to re-create all existing franchise advertising and direct mail programs
in customizable electronics format for use within the CET system.
Management is currently developing specific training tools designed to
teach new franchisees the operational systems of the AdsOnly franchise package,
including the nut-and-bolts of opening, promoting and maintaining their AdsOnly
office, and running it profitably. This training will be conducted in both
classroom sessions prior to opening a franchise as well as through self-paced
computer based training that will also instruct the operators on how to use the
CET system. This coursework and corresponding instruction tools will be
copyright protected to protect investor interests in AOG. Management intends to
hold bi-annual training seminars held in conjunction with national sales
conferences that AdsOnly franchises will be obligated to attend or be
represented at. Future continuing education for franchisees is planned to be
implemented using on line programs developed by the Company.
AOG intends to form relationships between its management and their past
associations in the advertising industry by establishing strategic alliances
that can be used to benefit the organization as a whole. These strategic
alliance candidates include: The American Association of Advertising Agencies
("AAAA"), The National Ad Council, Direct Marketing Association ("DMA"), Media
Buying Services, and the National Association of Franchises.
As a result of these alliances, AOG hopes to be able to negotiate
blanket discounts, wholesale buying arrangements and group rates that can be
passed on throughout the AdsOnly network. Management believes that this ability
to leverage the Company's mass marketing approach will enable AOG to create a
stronger competitive advantage for the entire AOG organization allowing each
franchisee to offer prices and service that individual agencies would not be
able. While larger agencies are able to offer services in similar ways to larger
budget clients, AOG's ability to offer boutique style creative support with
competitive prices could position AdsOnly franchisees to compete for clients
against agencies of all sizes.
Management anticipates that by the end of the first year of operation,
AOG will have completed all franchise development, systems and operational
issues both at the corporate level and at the franchise level. AOG projects this
length of time to completely "field test" the AOG franchise concept, allow for
the sale and training of the first franchises, and modifications to the
operating systems for the organization.
While systems and communication tools are the tangible aspects of what
the AdsOnly franchise consists of, the Company feels that there is a significant
"intangible" benefit to the business AOG offers. For small local agencies, and
for that matter, people that would like to leave a large shop to "go it alone",
there is the isolation factor present in any single start-up business that can
impede an individual's ability to compete. Management believes that
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AdsOnly's ability to create and support a growing network of franchise agencies
around the country that will create an organizational network to supply the type
of support that can be extremely beneficial in the early stages of a business.
The ability of franchisees to network, share ideas, research industries and draw
on inside knowledge from within the AdsOnly organization and its database will
be able to allow the individual franchisees to have a much greater advantage as
far as competitiveness and support.
Franchising
In July of 1993, AOG began the preparation of its franchise
registration documents including a Uniform Franchise Offering Circular (UFOC)
for submission to the Federal Trade Commission which has now been completed. The
Company has also began preparing and submitting the required registration
materials to be allowed to sell franchises in approximately thirty states which
the Company has targeted to begin its marketing. The Company expects to be
registered with all the states that it has initially targeted within several
months after the completion of the offering.
AOG intends to sell franchises for an initial non-refundable franchise
fee of $19,500, for which AOG intends to provide a franchisee with assistance in
establishing the franchise location, assistance pursuant to operating the
franchise, legal and accounting work, and training expenses. AOG intends to
train each franchise owner in AOG's advertising business operating systems.
Franchisees will be required to pay AOG a monthly royalty fee equal to
five percent (5) of the monthly sales. Franchisees will also pay AOG a national
advertising fee equal to one and a half percent (1 1/2) of monthly gross sales.
These fees will be used to purchase regional advertising to benefit franchisees
as well as AOG.
Franchisees will be responsible for obtaining all zoning permits,
licensing and variances which may be required to open and operate a franchise
location. AOG will require all of its franchisees to sign strict confidentiality
and non-disclosure agreements pursuant to the trade secrets disclosed to
franchisees in order for them to operate franchise locations.
Competition
While management is unaware of any other company currently franchising
or seeking to franchise advertising agencies, there are numerous well
established and reputable advertising agencies who will be competing directly
with AOG's intended franchises for advertising revenues. To the extent that
competitive advertising agencies successfully capture advertising revenues, it
could impede the establishment and development of AOG's franchise network of
individual franchise locations.
Additionally, there is no assurance that in the future other companies
may not seek the same type of business opportunity which AOG intends to pursue
through the development and sale of competitive advertising franchises and a
competitive advertising franchise network which may then compete directly with
the company for market share and revenues.
Regulation of AOG's Business
The Federal Trade Commission regulates the offering and sale of
franchises under federal law. Additionally, individual states also regulate the
offering and sale of franchises to varying degrees. AOG will be required to
maintain current registration of its franchise offering within the states in
which the company offer franchises. Additionally, AOG may be required to
maintain current registration with the Federal Trade Commission pursuant to the
company's intended sale of franchises.
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Insurance
AOG will carry general liability business insurance. The Company will also
carry Workers' Compensation insurance. The Company intends to purchase
key-person insurance to protect the operation of the business and the interests
of investors should certain of the Company's key Officers die or be
incapacitated. The Company does not currently provide health, life, or any other
insurance to its Officers, Directors, or employees but anticipates that it may
provide such benefits at a later date.
AOG's Franchise Agreement prepared for the Company pursuant to its
intention to sell franchise locations to franchisees provides indemnification
for AOG relative to workers' compensation and all other business liability from
the operation of independently owned franchise locations. Management believes
that the applicable provisions of the Franchise Agreement will successfully
protect the Company from any liability pursuant to the operation of franchise
locations. AOG's Franchise Agreement also requires franchisees to maintain $1
million in liability insurance pursuant to the operation of their independently
owned franchise locations.
Litigation
To the knowledge of the Board of Directors and Officers of AOG, there
is no past, pending, contemplated, or threatened litigation or administrative
action, nor are there any unsatisfied judgments, nor have there been or are
there any proceedings in which AOG was or is a party which have had or may have
a material effect upon AOG's businesses, financial condition, or operations,
including any litigation or action involving AOG's Officers, Directors, or other
key personnel in their capacity as such.
MANAGEMENT
The Officers and Directors of the Company, with a brief description,
are as follows:
Name Age Position
Michael Hinshaw 33 Chairman, and Chief Executive Officer
Tracey F. Miner 37 President and Director
Henry L. Corona 49 Chief Financial Officer
Paul Holzapfel 61 Vice President, Sales and Marketing
Richard R. Beerman 47 Chief Information Officer and Secretary
Kimberly M. Young 35 Director
Michael Yale Reif 44 Director
Per Barnes 50 Director
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The following sets forth certain biographical information relating to
the Officers and Directors of AOG.
Michael Hinshaw, has served as the Vice President and Senior Art Director of
Triad, Inc. since April 1992, located in Larkspur, California, which is a
mid-size advertising and marketing communications firm. At Triad, Inc., Mr.
Hinshaw's responsibilities include all financial planning, new business
development, and direction of in-house staff, as well as outside vendors. He is
also involved in the development and implementation of strategic and market
planning, creative direction, and account management. The firm's clientele
include Wells Fargo Bank, Apple Computer, Harper Collins Interactive, Levolor,
and Novelle, Inc. From April 1989 to 1992, Michael served as the Chairman, Vice
President and Senior Art Director of Hinshaw, Young, & Partners, Inc. At this
mid-size advertising agency, he was responsible for overseeing all financial
planning, client relationships, and in-house staff management. He also developed
and implemented strategic and market planning for such clients as Wells Fargo
Bank, Hitachi Data Systems, and Sumitomo Bank. In 1988, Michael Hinshaw,
Kimberly M. Young, and Per Barnes founded AdsOnly, San Francisco, Inc., a
creative advertising agency in San Francisco. Mr. Hinshaw now serves as the
Chairman and CEO of AOG and in this capacity, he is responsible for overseeing
the development of AOG into a full franchise. This includes business planning
and forecasting, developing literature, computer accounting programs,
advertising and a business manual for franchisees. He is also in charge of
overseeing daily business activities and the registration of the franchise in
states where required. Mr. Hinshaw received both his Master and Bachelors
degrees from the Academy of Art College in San Francisco, California in June
1987.
Tracey F. Miner has been the Director of Business Meeting Services of Incentive
Dimensions, a communications and incentive firm located in San Francisco,
California from 1992 to the present. As Director, Business Meeting Services, his
responsibilities include establishing the bay area sales/marketing satellite
office, new sales, marketing services to corporate clients, management of local
free-lance/contract resources, maintaining and developing creative and strategic
plans, and operating towards fiscal profitability. From November 1990 to April
of 1992, Tracey worked as Regional Account Manager of Maritz Communications,
another communications and incentive firm. As Regional Account Manager, he was
responsible for establishing the production division of the company, creative
development of incentive related services, sales of production and creative
services, producing and directing large meetings and events, developing internal
marketing resources, and developing and maintaining strategic and creative
support to sales force. From 1989 to 1990, Mr. Miner was the National
Advertising Director of M & T Publishing. While there, he was responsible for
developing Technical Magazine Advertising Network, overseeing new business
strategies development, acting as department manager, developing structured
cooperative of multiple sales force, and overseeing fiscal management. Mr. Miner
attended the Rochester Institute of Technology where he majored in Advertising
and Design.
Henry L. Corona has served as President of Financesur, Inc. in Miami, Florida
since 1994 to present,. His services include advertising agency valuation and
compensation analysis, mergers and acquisitions consultation, and corporate
management analysis. He also offers media and advertising clients the benefits
of New Business Development training and Reengineering consultation. From 1989
to 1993, Henry was the Financial Director/Senior Consultant for Sanders
Consulting Group in Richmond, Virginia. While at Sanders Consulting Group he
provided services in mergers and acquisitions, valuation, financial and business
planning for companies whose primary assets are creative talent. Since joining
The Sanders Consulting Group in 1989, he has worked with a number of major
international advertising agency groups as well as numerous clients in the $30
to $300 million range throughout the United States, the UK, Europe, and South
America. In the past, Mr. Corona has worked directly for firms such as,
Lucasfilm Ltd., BBDO, Bo Gehring Associates and others. Mr. Corona received his
Bachelors degree in Economics from Grinnell College in Grinnell, Iowa. He also
received his Masters degree in Economics from the University of California in
Los Angeles. Mr. Corona also received an MBA degree in Finance from the
University of Southern California.
Paul Holzapfel serves as Vice President and Account Director for The Harwood
Company, a communications firm located in Oakland, California. Mr. Holzapfel is
responsible for supervising account teams, strategic planning, training, and
developing new account programs. From April 1982 through December 1992, Mr.
Holzapfel served as National Accounts Manager with Maritz, Inc., a
Communications & Performance Improvement company located in San Francisco. Mr.
Holzapfel developed and managed accounts for the western region of the United
States which
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included extensive traveling throughout the western region development and
implementation of communications and performance improvement plan for client
accounts. Additionally, Mr. Holzapfel served as Vice President, and Senior
Account Manager with Maritz. Mr. Holzapfel studied at Stockton College and
College of Pacific.
Richard R. Beerman currently serves as the Secretary and Chief Information
Officer for The AdsOnly Group, Inc. and is responsible for information
technology, architecture, and management. Since January of 1994, Mr. Beerman has
served as Manager of Special Projects for Miller Freeman Publishing, Inc. a
Publishing company located in San Francisco, California. His responsibilities
include management of network re-engineering for a six site United States WAN
using TI links and internet connectivity establishment. Mr. Beerman also
develops training literature for employee manuals. Additionally, Richard tests
and evaluates new servers, the research and development of graphical image BBS
from image capture to actual downloads using SUN and DES OS. From March 1990
through January of 1994, Mr. Beerman served as Director of Information Systems
for M&T Publishing, a publishing company located in San Mateo, California. His
responsibilities included managing all operations of M&T's Services Group, and
the design and outfit of the company's computer centers, as well as, develop
electronic mail system, corporate information system. Mr. Beerman served in the
United States Air Force as a Special Electronics Technician. He received his
Bachelors degree from California State University at Berkeley.
Per Barnes is co-founder of the concept and Director of The AdsOnly Group,
Inc. Since May 1990, Mr. Barnes has been the President of Ogilvy & Mather in
Oslo, Norway since 1990. As head of this agency, he is responsible for client
relations, new business, finances, reporting to the head office in the United
States, and overseeing departments for creative capabilities, service to
clients, production, and media. The agency's billing in 1993 was $12 million
with a gross profit of $2 million, an increase of 16 percent from 1992. Their
clientele includes such corporations as Ford and American Express. Per founded
and established the name and concept of AdsOnly name to become a creative only
agency. Along with Michael Hinshaw and Kimberly M. Young, he built up a "Beta"
office with a systematic approach to new business, promotions, internal
routines, creative, and client maintenance programs. From 1978 to 1982, he
worked as Creative Director of O & M New York and San Francisco. While there, he
worked closely with the Chairman and advertising genius, Hal Riney, on all
aspects of creating concepts, creative ideas, print ads, and television
commercials. From 1978 to 1981, he also worked as the President and Managing
Director of O & M Oslo, Norway. He was responsible for all aspects of the
everyday operations including overseeing creative production, client relations,
finances, new business development, and reporting back to the head office in the
United States.
Kimberly M. Young is co-founder of the concept of the Company and Director.
Ms. Young is also Owner and Creative Director of Young & Partners. As Owner of
this marketing communications firm, Ms. Young assists clients with market
strategy development as well as concept through production copy and design
services. Young & Partners' clientele includes such accounts as Apple Computer,
Hambracht & Quist, Oracle Corp., and Trident Capital, LP. This firm specializes
in the financial and high technology industries. From September 1987 to April of
1993, Kimberly served as the President and Copy Chief of Hinshaw, Young, &
Partners, Inc. She acted as Creative Director and Copy Chief specializing in
print advertising, direct mail, point of purchase (POP), and collateral
materials. In addition to creative work, she was involved in account management,
strategy development, and media planning. The clientele included such companies
as Apple Computer, Datalogic, Hitachi Data Systems, Wells Fargo Bank, The Wine
Group, and The Tom Peters Group. Ms. Young received her Bachelors degree from
Dartmouth College and her Masters degree from Stanford University.
Michael Yale Reif has been a Director of the Company since 1990. From August
1993 to the present Mr. Reif is a South American Distributor for Gise Creme
Glace, and owner of a flagship store in San Jose, Costa Rica. His
responsibilities include overseeing all aspects of obtaining and maintaining
distribution rights in Costa Rica, designing and developing plans for the
"flagship" store, overseeing all financial aspects, hiring and training
employees, obtaining advertising, and developing retail sales systems. Mr. Reif
founded an art dealership, Fine Art Hunters. He worked there from 1988 through
1992. He was responsible for acquisition and sales of fine art objects; research
to find re-sellable pieces; development of advertising for art magazines,
newspapers, and direct mail; overseeing all financial aspects of the company;
and developing new client relationships. Mr. Reif has also been director of
AdsOnly since its inception in 1988.
21
<PAGE>
Executive Compensation
To date the Company has paid no cash compensation to its management
which includes all officers as well as the CEO and President.
Future compensation of Officers will be determined by the Board of
Directors based upon the financial condition and performance of AOG, the
financial requirements of the Company, and upon the individual performance of
each Officer. The Board of Directors intends to ensure that the salaries paid to
AOG's Officers and employees are reasonable and prudent and are based upon both
the financial condition and performance of the Company.
As several of AOG's Officers are also Directors of the Company,
Officers' future compensation will not be determined through "arm's length"
negotiations, but by the Board of Directors on a case-by-case basis. The
Directors of AOG will serve in their capacities with the Company without
remuneration. The Company has no retirement, pension, profit sharing, or
insurance program for the benefit of its Officers, Directors, or employees, but
the Board of Directors may recommend one or more such programs for adoption at
such time as the Company is sufficiently developed to warrant such a program.
In the future, the Company may adopt an Incentive Stock Option Plan
under which tax qualified options may be granted or an Employee Stock Option
Plan (ESOP). These plans would be intended to help AOG attract and retain the
best available persons, to enhance the Company's growth, and to provide
employees with an additional incentive to contribute to the growth and success
of AOG. If implemented, any of these plans would be administered by a committee
appointed by the Board of Directors, which would determine which eligible
employees would receive options, the time at which any such options would be
granted, the option price, the time at which each option would be exercisable,
the exercise period, and interpretation and amendment of the rules relating to
any such plans.
THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
22
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth the ownership of AOG's Common Stock by the
beneficial owners of more than 5 percent or more of the Common Stock, and by the
Officers, Directors, and key personnel of AOG. Currently, there are a total of
twelve Common Stockholders. The following shares have been transferred to the
named individual as of the date of this Prospectus.
<TABLE>
<CAPTION>
Common Stock Percentage
prior to owned after
the offering the offering
Name Number Percentage Minimum Maximum
<S> <C> <C> <C> <C>
Per Barnes ................... 500,000 24.92% 24.31% 17.50%
c/o Ogilvy & Mather
Sorkedalsveien 10 A
0369 Oslo Norway
Michael Yale Reif ............ 375,000 18.69% 18.23% 13.13%
Dept. 40
1601 NW 97th Avenue
Unit C101
Miami, FL33172
Michael Hinshaw .............. 250,000 12.46% 12.15% 8.75%
315 Stuyvesant Drive
San Anselmo, CA 94960
Kimberly M. Young ............ 187,500 9.34% 9.12% 6.56%
1130 Hobart Street
Menlo Park, CA 94025
Per Dahl ..................... 150,000 7.47% 7.29% 5.25%
Dahl & Kompani Reklamebyra
Gange-Rolvsgate 1
Postboks 7653 Jukkebekk
0205 Oslo, Norway
Hansi Borkenhagen ............ 136,765 6.82% 6.65% 4.79%
c/o Jenssen & Borkenhagen/BBDO
Postboks 9538 Egertorvet
0128 Oslo 1, Norway
Fred Jenssen ................. 136,765 6.82% 6.65% 4.79%
c/o Jenssen & Borkenhagen/BBDO
Postboks 9538 Egertorvet
0128 Oslo 1, Norway
Tracey Miner ................. 62,500 3.11% 3.04% 2.19%
1969 Fair Ridge Court
Walnut Creek, CA 94596
Totals* ...................... 1,798,530 89.62% 87.44% 62.95%
</TABLE>
* figures do not add to totals due to rounding
23
<PAGE>
DESCRIPTION OF SECURITIES
Shares Offered
AOG hereby offers to sell and issue up to 850,000 shares of Common
Stock at $6.00 per share to investors in this self-underwritten Offering. The
shares will be sold and issued for cash. The shares offered hereby are not
callable. The Company has never paid any dividends to shareholders of its Common
Stock. It is the intention of the Board of Directors of AOG not to declare any
dividends until such time as AOG is fully established and profitable and has an
excess of retained earnings sufficient for anticipated corporate expansion and
development activities (see "Dividend Policy").
Minimum Sale of Securities
The minimum proceeds which AOG must realize from this Offering prior to
being able to use any of such proceeds is $300,000, prior to the payment of any
sales commissions or non-accountable expense allowances. AOG has opened a
designated escrow account with The Pacific Bank, 101 California Street, San
Francisco, California 94111, which all funds raised pursuant to this Offering
will be deposited and held until this minimum amount of proceeds has been
raised, in accordance with Rule 15c2-4 of the Exchange Act.
In the event AOG does not raise the minimum proceeds set forth herein
within one year from the effective date of this Offering, all funds received
pursuant to this Offering shall be returned to the investors. AOG does not
intend to pay any interest to investors on any funds received pursuant to this
Offering which are escrowed. Once the minimum amount of proceeds has been
raised, AOG will be free to use any funds received pursuant to this Offering,
subject to each investor's right of recision (see "Voidability of Sales").
Common Stock
AOG is authorized to issue 5,000,000 shares of Common Stock with no par
value. Shareholders of Common Stock are entitled to one vote per share on each
matter to be decided by the shareholders. The Common Stock has no redemption
provisions. No holder of Common Stock has any preemptive right to subscribe for
any securities of the Company. The shareholders of AOG's Common Stock are
entitled to receive any dividends which the Board of Directors may declare from
time to time out of funds legally available for that purpose, if any. Any such
dividends shall be distributed on a pro-rata basis. The outstanding shares of
Common Stock are fully paid and nonassessable.
There are no shares of Common Stock subject to issuance under stock
purchase or option plans, and there are no outstanding stock purchase
agreements, options, warrants, or rights. In the future, the Board of Directors
of AOG may propose employee stock options or warrants. AOG has not publically
sold securities of any kind since the Company's inception. Shares of Common
Stock have been issued to the Company's founding shareholders (see "Certain
Transactions").
Plan of Distribution
AOG, through its Officers and Directors, is offering to the public
850,000 shares of the Company's Common Stock, on a "best efforts",
"self-underwritten", "50,000 share minimum" basis, pursuant to, and in
compliance with, Rule 3a4-1 of the Exchange Act, at a purchase price of $6.00
per share. The Company will use its best efforts to find purchasers for the
shares offered hereby within a period of one year from the date of this
Prospectus.
Subsequent to the granting of an effective registration date by the
Commission, AOG may retain the services of an underwriter by filing a post
effective amendment using the "sticker" amendment format, and the shares offered
hereby may also be sold by selected broker/dealers. Should these shares be sold
by an underwriter or broker/dealer, AOG will pay commissions of up to 10
percent, and additional non-accountable expense allowances of up to 3 percent,
on the gross proceeds from the sale of shares after the sale of the minimum
number of shares offered and after each investor's three day rescission ends.
24
<PAGE>
The Company will only pay such commissions and non-accountable expense
allowances to broker/dealers who are members of the National Association of
Securities Dealers, Inc. (NASD). In no event will the Company pay any
commissions, sales fees. or expenses to its Officers or Directors. Should AOG
attempt to retain any such commissioned selling agents, there is no assurance
that AOG will be able to retain an underwriter or broker/dealers to participate
in the sale of the shares or that any such underwriter or broker/dealers will be
able to sell the shares even if retained by AOG.
Investment Procedures
No sale of the shares will be made by AOG to any prospective investor
who has not received a copy of this Prospectus at least 48 hours prior to the
confirmation of a sale of shares hereunder. Upon reaching a decision to invest
in the sharers offered hereby, prospective investors who intend to purchase
shares directly from the Company must deliver to AOG: (1) a completed
Subscription Agreement and (ii) a check in the appropriate amount. Prospective
investors who intend to purchase shares from a broker/dealer should make payment
directly to that broker/dealer. Regardless of whether prospective investors
offer to purchase shares from AOG or from a broker/dealer, all checks for the
purchase of shares should be made payable to "The AdsOnly Group, Inc. - Escrow
Account."
Acceptance of a prospective investor as an investor in the shares will
occur when AOG executes the Subscription Agreement or at the time such shares
are purchased from a broker/dealer. AOG will send an executed copy of the
Subscription Agreement to each investor who purchases shares from the Company
after acceptance by AOG, or will direct the Escrow Agreement to each investor
who purchases shares from the Company after acceptance by AOG, or will direct
the Escrow Agent to return the prospective investor's check promptly, should the
offer to invest not be accepted. If the prospective investor purchases shares
from a broker/dealer, a receipt for the purchase of shares will be delivered to
the investor by the broker/dealer.
Expenses and Commissions
All expenses associated with this Offering, except sales commissions
and non-accountable expense allowances, are payable by AOG regardless of whether
the Offering is consummated or not. Should commissioned selling agents be
retained, AOG anticipates paying a sales commission of up to 10 percent, and
additional non-accountable expense allowances equal to up to 3 percent of gross
proceeds from any shares sold by an underwriter or selected broker/dealers.
Transfer Agent
The transfer agent for the Common Stock of the Company is American
Securities Transfer, Denver, Colorado.
25
<PAGE>
LEGAL MATTERS
The validity of the Common Stock to which this Prospectus pertains has been
passed upon for the Company by William W. Washauer, Esquire, Citicorp Center,
Suite 2100, One Sansome Street, San Francisco, CA 94147. All other matters
pertaining to the Offering have been passed upon by Donald F. Mintmire, Esquire,
2710 Alt. 19 North, Suite 406, Palm Harbor, Florida 34683. Mr. Mintmire is also
a stockholder of the Company, beneficially owning 39,999 shares of common stock.
EXPERTS
The financial statements included in this Prospectus have been audited
by Durland & Company, CPAs, P.A., an independent certified public accounting
company, as indicated in their report with respect hereto, and are included
herein in reliance upon their authority as an expert in accounting and auditing.
AVAILABLE INFORMATION
AOG intends to send shareholders annual reports for each fiscal year
ending December 31, containing financial statements audited by AOG's independent
Certified Public Accountant, and to provide reports containing unaudited
financial information for the first three quarters of each fiscal year. After
this Offering, AOG will be subject to the reporting requirements of the
Securities Exchange Act of 1934 and will file reports, proxy statements, and
other information with the Commission.
REGISTRATION STATEMENT
AOG has filed a Registration Statement on Form SB-2 with the Securities
and Exchange Commission, Washington, D.C. 20549 with respect to the shares of
Common Stock offered hereby. This Prospectus, which constitutes an integral part
of the Registration Statement, does not contain all of the information set forth
in the Registration Statement, certain portions of which have been omitted in
accordance with the rules and regulations promulgated by the Commission. For
further information with respect to AOG and the shares of Common Stock,
reference is hereby made to the Registration Statement.
The Registration Statement, including all exhibits and schedules
thereto, may be inspected and copied at the public reference facilities
maintained by the Commission at its principal office located at 450 Fifth
Street, N.W., Washington, D.C. 20549. Copies of such material can be obtained
from the Public Reference Section of the Commission, Washington, D.C. 20549 at
the prescribed rates.
26
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountant ........... F-2
Balance Sheets .............................................. F-3
Statements of Operations .................................... F-4
Statements of Stockholders' Equity .......................... F-5
Statements of Cash Flows .................................... F-6
Notes to Financial Statements ............................... F-7
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO: The Board of Directors and Stockholders
The AdsOnly Group, Inc.
(A Development Stage Enterprise)
San Francisco, California
We have audited the accompanying balance sheets of The AdsOnly Group, Inc., a
development stage enterprise, (the "Company") as of December 31, 1995 and the
related statements of operations, stockholders' equity and cash flows for the
two years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit 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 significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December 31,
1995 and the results of its operations and its cash flows for the two years then
ended in conformity with generally accepted accounting principles.
/S/Durland & Company, CPAs, P.A.
Durland & Company, CPAs, P.A.
Palm Beach, Florida
March 25, 1996
F-2
<PAGE>
<TABLE>
<CAPTION>
The AdsOnly Group, Inc.
(A Development Stage Enterprise)
Balance Sheets
December 31, 1995 and March 31, 1996
1995 1996
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash ...................................................... $ 47,698 35,293
Federal income tax receivable ............................. 22 22
Total Current Assets ................................... 47,720 35,315
FIXED ASSETS
Computer equipment ........................................ 1,983 1,983
Less: accumulated depreciation ............................ (430) (529)
Total Fixed Assets ..................................... 1,553 1,454
OTHER ASSETS
Deferred income tax asset (note 4) ........................ 0 0
Total Other Assets ..................................... 0 0
Total Assets ............................................... $ 49,273 36,769
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable .......................................... $ 1,816 1,816
State sales tax payable ................................... 511 511
State franchise tax payable ............................... 800 800
Total Current Liabilities .............................. 3,127 3,127
LONG-TERM LIABILITIES
Notes payable (note 1a) ................................... 8,842 8,842
Total Long-Term Liabilities ............................ 8,842 8,842
Total Liabilities .......................................... 11,969 11,969
STOCKHOLDERS' EQUITY
Common stock, no par value, Authorized 5,000,000 shares;
issued and outstanding 2,006,864 shares (note 5) ......... 279,005 279,005
Preferred stock, no par value, Authorized 1,000,000 shares;
issued and outstanding 0 (none) shares (note 5) .......... 0 0
Deficit accumulated during the development stage .......... (241,701) (254,205)
Total Stockholders' Equity ................................. 37,304 24,800
Total Liabilities and Stockholders' Equity ................. $ 49,273 36,769
</TABLE>
The accompanying notes are an integral part of the
financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
The AdsOnly Group, Inc.
(A Development Stage Enterprise)
Statements of Operations
3 Months 3 Months Period from
Year Ended Year Ended Ended Ended April 6, 1990
December 31, December 31, March 31, March 31, (Inception) to
1994 1995 1995 1996 March 31, 1996
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
REVENUE
Sales ..................... $ 6,813 0 0 0 6,813
Interest .................. 0 0 0 0 413
Total revenue ......... 6,813 0 0 0 7,226
COST OF SALES
Cost of sales ............. 6,823 0 0 0 6,823
Gross profit/(loss) ....... (10) 0 0 0 403
EXPENSES
Bank charges .............. 15 22 0 0 493
Concept development cost .. 0 0 0 0 120,000
Contract labor ............ 18,150 14,243 4,500 6,000 50,243
Depreciation .............. 33 397 99 99 529
Dues and subscriptions .... 36 400 0 0 507
Franchise offering
document preparation .... 0 0 0 0 5,955
California franchise
filing fee .............. 0 1,087 369 1,260 3,697
Internet site fee ......... 0 0 0 2,450 2,450
Licenses and taxes ........ 1,000 1,000 0 0 6,234
Office expenses ........... 1,891 4,071 775 863 10,026
Postage ................... 1,156 565 166 40 2,215
Printing .................. 325 2 0 0 2,188
Professional services ..... 251 14,366 1,764 0 45,406
Travel and entertainment .. 270 250 0 1,792 4,289
Miscellaneous ............. 376 0 0 0 376
Total expenses .......... 23,503 36,403 7,673 12,504 254,608
Net loss before tax benefit (23,513) (36,403) (7,673) (12,504) (254,205)
Income tax benefit (note 4) 0 0 0 0 0
Net loss .................. $ 23,513) (36,403) (7,673) (12,504) (254,205)
Net loss per share ........ $ (0.02) (0.02) (0.01) (0.01) (0.13)
Weighted average number of
shares outstanding ... 2,006,864 2,006,864 2,006,864 2,006,864 2,006,864
</TABLE>
The accompanying notes are an integral part of the
financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
The AdsOnly Group, Inc.
(A Development Stage Enterprise)
Statement of Stockholders' Equity
Total
Common Preferred Accumulated Stockholders'
Stock Stock Deficit Equity
<S> <C> <C> <C> <C>
INCEPTION, April 6, 1990 ................... $ 0 0 0 0
Capital investment:
A) ................................ 123,900 0 0 123,900
Net loss ................................... 0 0 (126,490) (126,490)
BALANCE, November 30, 1990 ................. 123,900 0 (126,490) (2,590)
Net loss ................................... 0 0 (6,891) (6,891)
BALANCE, November 30, 1991 ................. 123,900 0 (133,381) (9,481)
Net loss ................................... 0 0 (2,921) (2,921)
BALANCE, November 30, 1992 ................. 123,900 0 (136,302) (12,402)
Capital investment:
B) ................................ 29,970 0 0 29,970
C) ................................ 150 0 0 150
Net loss ................................... 0 0 (45,483) (45,483)
BALANCE, December 31, 1993 ................. 154,020 0 (181,785) (27,765)
Capital investment:
D) ................................ 50,000 0 0 50,000
Net loss ................................... 0 0 (23,513) (23,513)
BALANCE, December 31, 1994 ................. 204,020 0 (205,298) (1,278)
Capital investment:
E) ................................ 50,000 0 0 50,000
F) ................................ 24,985 0 0 24,985
Net loss ................................... 0 0 (36,403) (36,403)
BALANCE, December 31, 1995 ................. 279,005 0 (241,701) 37,304
Net loss ................................... 0 0 (12,504) (12,504)
BALANCE, March 31, 1995 (unaudited)......... $ 279,005 0 (254,205) 24,800
<FN>
A) April 11, 1990; 1,550,000 shares of common *, $3,900 in cash and $120,000 in concept development expenditures.
B) May 27, 1993; 273,530 shares of common *; $29,970 in cash.
C) November 1, 1993; 150,000 shares of common; $150 in cash.
D) February 2, 1994: 33,334 shares of common; $50,000 in cash.
E) May 26, 1995; 0 shares of common; $50,000 in cash contributed by existing stockholders.
F) June 1, 1995; 0 shares of common; $24,985 in cash contributed by existing stockholders.
* Restated to reflect increase in authorized and stock split effective September
24, 1993.
</FN>
</TABLE>
The accompanying notes are an integral part of the
financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
The AdsOnly Group, Inc.
(A Development Stage Enterprise)
Statements of Cash Flows
3 Months 3 Months Period from
Year Ended Year Ended Ended Ended April 6, 1990
December 31, December 31, March 31, March 31, (Inception) to
1994 1995 1995 1996 March 31, 1996
(Unaudited)(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM DEVELOPMENT ACTIVITIES:
Net loss ........................................ $(23,513) (36,403) (7,673) (12,504) (254,205)
Adjustments to reconcile net loss to
net cash used by development activities:
Stock issued for concept development costs 0 0 0 0 120,000
Depreciation .............................. 33 397 99 99 529
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable ...... (17,100) 102 1,750 0 1,816
Increase (decrease) in taxes payable ......... 511 0 (800) 0 1,311
(Increase) in receivables .................... 0 0 0 0 (22)
Net cash used by development activities ......... (40,069) (35,904) (6,624) (12,405) (130,571)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets ........................ (1,983) 0 0 0 (1,983)
Net cash used by investing activities ........... (1,983) 0 0 0 (1,983)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash contributed by existing stockholders ....... 0 74,985 0 0 74,985
Common stock issued for cash .................... 50,000 0 0 0 84,020
Notes payable issued for cash ................... 0 0 0 0 8,842
Net cash provided by financing activities ....... 50,000 74,985 0 0 167,847
Net increase (decrease) in cash ................. 7,948 39,081 (6,624) (12,405) 35,293
CASH, beginning of period ....................... 669 8,617 8,617 47,698 0
CASH, end of period ............................. $ 8,617 47,698 1,993 35,293 35,293
Supplemental disclosure of cash flow information:
Interest paid in cash ........................... $ 0 0 0 0 0
Non-cash transactions:
Stock issued for intangible asset ......... $ 0 0 0 0 120,000
</TABLE>
The accompanying notes are an integral part of the
financial statements.
F-6
<PAGE>
The AdsOnly Group, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements
(1) Summary of Significant Accounting Policies
The Company The AdsOnly Group, Inc. is a development stage enterprise
which conducts business from its headquarters in San Francisco,
California. The Company was incorporated on April 6, 1990 by the State
of California. The financial statements have been prepared in
conformity with generally accepted accounting principles. In preparing
the financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities
as of the dates of the statements of financial condition and revenues
and expenses for the years then ended. Actual results could differ
significantly from those estimates. The financial statements for the
three months ended March 31, 1995 and 1996 include all adjustments
which in the opinion of management are necessary for fair
presentation. The following summarize the more significant accounting
and reporting policies and practices of the Company:
a) Notes payable The Company issued notes payable to two principal
stockholders in exchange for cash. These notes carry no stated interest
rate nor any stated maturity date.
b) Concept development At inception the Company exchanged common stock
for $120,000 of concept development costs previously expended by two
individuals previously unrelated to the founders or the Company. The
Company chose to immediately expense these costs.
c) Net loss per share Net loss per share is computed by dividing the net
loss by the weighted average number of shares outstanding during the
period.
d) Fixed assets Fixed assets are recorded at cost. Depreciation is
computed by the straight-line method over the estimated useful lives of
the assets, generally five or seven years. Expenditures for maintenance
and repairs are charged to operations as incurred.
(2) Franchise Offering Document Expenses The franchise offering document
expenses pertain exclusively to the development of the Uniform
Franchise Offering Circular (UFOC), which represents the bulk of the
Company's near-term future marketing efforts and revenues. SFAS 2
requires that all internally generated development costs be charged to
expense when incurred. Accordingly, the Company has charged to expense
the costs to develop the UFOC as incurred.
On July 13, 1993 the Company entered into an agreement with Franchises
That Sell of Cherry Hill, NJ to complete the Uniform Franchise Offering
Circular (UFOC) which will allow the Company to sell franchises in 32
states. On November 23, 1993 the Company terminated the agreement with
Franchises That Sell.
(3) Franchise Revenues The Company has not as yet received any franchise
fee revenues, but it expects to record such revenue in accordance with
SFAS 45.
(4) Income Taxes The Company recorded the franchise offering document
expenses as expenses in the period when incurred for financial
statement purposes, per note 2 above. The Company recorded the concept
development costs immediately as well, as discussed in note 1b above.
However, for income tax purposes, these expenses were recorded as an
intangible asset to be amortized over future years. The primary purpose
of this treatment for tax purposes is to retain the tax benefit of the
development costs. California tax law does not recognize operating loss
carry-forwards as the Federal tax code does. Therefore, by
capitializing and amortizing these costs, the tax benefit of these
expenses is retained for state tax purposes rather than being lost
forever, as immediate expensing would cause. This treatment will
require a longer time before the tax benefit of the costs is realized,
but will increase the tax benefit realized over time.
F-7
<PAGE>
The AdsOnly Group, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements, Continued
(4) Income Taxes, continued SFAS 109 requires companies to take into
account changes in tax rates when valuing the deferred income tax
amounts carried on their Balance Sheets (the "Liability Method"). SFAS
109 also requires that deferred income taxes be provided for all
temporary differences between financial statement income and taxable
income. Deferred income tax liabilities are provided on elements of
income which are recognized for financial accounting purposes in
periods different than such items are recognized for income tax
purposes. Deferred income tax benefits are provided on elements of
expense which are recognized for financial accounting purposes in
periods different than such items are recognized for income tax
purposes. SFAS 109 is not expected to have any material effect on the
financial statements. At March 31, 1996 the Company has a net operating
loss carry-forward for income tax purposes of approximately $254,205,
expiring as follows: $126,490 in 2005, $6,891 in 2006, $2,921 in 2007,
$45,483 in 2008, $23,513 in 2009, $36,403 in 2010 and $12,504 in 2011.
The amount recorded as deferred income tax asset as of March 31, 1996,
$101,700, represents the amount of tax benefits of loss carry-forwards.
The Company has established a $101,700 valuation allowance, as the
Company has no history of profitable operations.
(5) Stockholders' Equity The Company had authorized 500,000 shares of no
par value common stock. On September 24, 1993 the board of directors
approved increasing the authorized shares of common stock from 500,000
to 3,000,000. The board of directors also approved a stock split of 5
shares for 1 for stockholders of record at midnight September 24, 1993.
This stock split has been given retroactive treatment in the financial
statement footnotes as presented. On April 11, 1990 the Company issued
687,500 shares to the founders in exchange for $3,900 in cash and
862,500 shares to two previously unrelated individuals in exchange for
$120,000 of concept development costs, which the Company immediately
expensed. On May 27, 1993 the Company issued 273,530 shares of common
stock for $30,000 in cash. The Company completed this transaction to
provide sufficient funds for the Company to begin advertising for
franchisees. However, it was necessary to expend a significant portion
of these funds to complete the Uniform Franchise Offering Circular
(UFOC).
On September 24, 1993 the board of directors approved the authorization
for the Company to be able to issue up to 1,000,000 shares of no par
preferred stock. On November 1, 1993 the Company issued 150,000 shares
of common stock for $150 cash. On February 2, 1994 the Company issued
33,334 shares of common stock in exchange for $50,000 cash, or $1.50
per share. On June 23, 1994 the board of directors approved increasing
the authorized shares of common stock from 3,000,000 to 5,000,000. On
May 26,1995 and June 1, 1995, the Company received $50,000 and $24,985
in cash, respectively, as additional contributed capital from existing
stockholders.
(6) Common Stock Public Offering On September 24, 1993 the Board of
Directors authorized the Company to sell up to 850,000 shares of the
Company's common stock in a "self-underwritten" public offering
pursuant to a Registration Statement on Form SB-2 under the Securities
Act of 1933. This offering is being made with a 50,000 share minimum,
and is effective for one year from the date which the Securities and
Exchange Commission (SEC) grants the registration an effective date, if
the SEC grants such effectiveness. The stock included in this offering
is priced at $6.00 per share. This offering price was determined in a
completely arbitrary manner and bears no relation to any recognized
standard of value. The minimum required to be sold by the Company
before it has access to the funds is $300,000 at the offering price,
with a net proceeds to the Company of $261,000 after sales commissions
and non-accountables, assuming all 50,000 shares are sold through an
NASD broker/dealer. (No sales commissions and non-accountables will be
paid to any officer or director under any circumstances). The maximum
proceeds of this offering are $5,100,000, or $4,447,000 net of sales
commissions and non-accountables, assuming all 850,000 shares are sold
through NASD broker/dealers.
F-8
<PAGE>
No person has been authorized to give any information or to make any
representations not made in this Prospectus in connection with the Offering made
hereby. If given and made, such information or representations must not be
relied upon as being authorized by the Company. This Prospectus does not
constitute an offer to sell, or solicitation of an offer to buy, any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such an offer or solicitation is such jurisdiction. Neither the
delivery of this Prospectus nor any sale made hereunder shall create any
implication that there has been no change in the affairs of the Company since
the date hereof or that the information contained herein is correct as of any
time subsequent to the date as of which such information is furnished.
--------------------------
TABLE OF CONTENTS
PAGE
Prospectus Summary................................5
Risk Factors......................................6
Use of Proceeds..................................11
Dilution.........................................12
Capitalization...................................13
Selected Financial Information...................13
Indemnification..................................14
Dividend Policy..................................14
Business.........................................14
Management.......................................19
Principal Shareholders...........................23
Description of Securities........................24
Legal Matters....................................26
Experts..........................................26
Available Information............................26
Registration Statement...........................26
Financial Statements............................F-1
Until _________________________ (90 days after the effective date of the
Registration Statement) all dealer effecting transactions in the securities
offered hereby whether or not participating in the distribution, may be required
to deliver a Prospectus. This is in addition to the obligation of dealers to
deliver a Prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
50,000 Shares Minimum
The AdsOnly Group, Inc.
COMMON STOCK
--------------------
PROSPECTUS
--------------------
The AdsOnly Group, Inc.
2269 Chestnut Street
Suite 637
San Francisco, CA 94123
(415) 457-7586
June 12, 1996
27
<PAGE>
Part II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The Bylaws of the Company provide for the indemnification of Directors
and Officers against certain liabilities to the maximum extent permissible under
the California law. Officers and Directors of the Company are indemnified
generally against expenses actually and reasonably incurred in connection with
proceedings, whether civil or criminal, provided that it is determined that they
acted in good faith and in a manner reasonably believed to be in the best
interests of the Company, and in any criminal matter had reasonable cause to
believe that their conduct was not unlawful.
Item 25. Other Expenses of Issuance and Distribution
The expenses of this offering are estimated to be a set forth below,
and all such expenses will be paid by the Company:
Legal Fees..................................................$12,000.00
Blue Sky Expenses and other Filing Fees......................10,000.00*
Accounting Fees..............................................10,000.00
Printing and Engraving........................................5,000.00*
Miscellaneous.................................................2,000.00*
Registration Fee..............................................1,758.62
TOTAL $40,758.62
* Estimated
Item 26. Recent Sales of Unregistered Securities
On May 27, 1993 the Company sold 273,530 shares of common stock for
$29,970 to Per Barnes a stockholder and Director of the Company. On November 1,
1993 the Company sold 150,000 shares of common stock for $150.00 to the
Company's former and current counsel and legal support staff as a group. Then on
February 2, 1994 the Company sold 33,334 shares of common stock for $50,000 to
Hansi Borkenhagen and Fred Jenssen, both of whom had preexisting personal and
business relationships with certain principals of the Company.
There were no underwriters' discounts or commissions involved in the
above transactions. These securities were not registered under the Securities
Act of 1933, as amended. The transactions described above were made based on
exemptions from registration under Section 4(2) of the Act as transactions by an
issuer not involving a public offering since these sales were made as
unsolicited sales, to stockholders and the Company's counsel. All of the
certificates representing the foregoing securities contain restrictive legends
thereon.
28
<PAGE>
Item 27. Exhibits
Exhibit No. Page No.
- -------------------------------------------------------------------------------
(3.1) Articles of Incorporation of Registrant as Filed
With the Secretary of the State of California (1)
(3.2) Amendment of the Articles of Incorporation of
Registrant as filed with the State of California (1)
(3.3) Amendment of the Articles of Incorporation of
Registrant as filed with the State of California (1)
(3.4) Bylaws of Registrant (1)
(4.1) Specimen of Common Stock Certificate of the Registrant (1)
(5.1) Opinion of Counsel as to Legality of Securities Being Registered (1)
(10.1) Escrow Agreement (1)
(10.2) Franchise Documents of the Registrant (1)
(10.5) Form of Subscriptions Documents for the Offering
of the Registrant (1)
(24.1) Consents of experts and Counsel
(1) Included in previous filings of this Offering
29
<PAGE>
Item 28. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration Statement or any material change to such
information in the Registration Statement; and
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment, other then "sticker"
amendments to add an underwriter or broker-dealer for the distribution
of this offering, shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed the initial bona fide offering
thereof.
(3) Insofar as indemnification for liabilities arising under the Securities
At of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
30
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the City of Newport Beach, State of California.
The AdsOnly Group, Inc.
By: /S/Michael C. Hinshaw
Michael C. Hinshaw, Chief Executive Officer and Chairman of the Board of
Directors
In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
Signatures Capacities Date
/S/Michael C. Hinshaw
Michael C. Hinshaw Chairman of the Board and Chief June 10, 1996
Executive Officer
/S/Tracey F. Miner
Tracey F. Miner President, Treasurer and Director June 10, 1996
/S/Henry L. Corona
Henry L. Corona Chief Financial Officer June 10,1996
/S/Richard R. Beerman
Richard R. Beerman Secretary and Chief Information Officer June 10, 1996
/S/Kimberly Young
Kimberly Young Director June 10, 1996
31
<PAGE>
THE ADSONLY GROUP, INC.
SUBSCRIPTION DOCUMENTS
****************************
1. Instructions to Investors
2. Subscription Agreement
32
<PAGE>
THE ADSONLY GROUP, INC.
INSTRUCTION TO INVESTORS
In order to invest in the securities:
(1) Complete and sign the Subscription Agreement.
(2) Enclose a check in the appropriate amount for the shares you
desire to purchase. The check should be payable to:
"The AdsOnly Group, Inc. - Escrow Account"
(3) Trustees and other persons acting in a representative capacity
must provide a copy of their trust agreement, power of
attorney or other instrument granting the power and authority
to invest.
(4) Mail or deliver the above items to:
Mr. Michael Hinshaw
The AdsOnly Group, Inc.
2269 Chestnut Street
Suite 637
San Francisco, California 94123
(5) You should receive an executed Subscription Agreement within
ten days. If you have not received this material by this
time please notify The AdsOnly Group, Inc. at the above
address.
33
<PAGE>
THE ADSONLY GROUP, INC.
SUBSCRIPTION AGREEMENT
The AdsOnly Group, Inc. hereby warrants that by executing this Subscription
Agreement that the Subscriber does not in any way waive any of their rights
under the Federal Securities Laws.
To: Mr. Michael Hinshaw
President
The AdsOnly Group, Inc.
2269 Chestnut Street, Suite 637
San Francisco, CA 94123
Dear Mr. Hinshaw:
I have read and understand the Prospectus of The AdsOnly Group, Inc.
dated XXXXXXX, 1996. I am tendering this Subscription Agreement, together with a
check made payable in United States currency to "The AdsOnly Group, Inc. -
Escrow Account" in the amount of $____________________ for _________ shares of
stock at $6.00 per share.
I acknowledge that acceptance of this subscription is at the sole
discretion of The AdsOnly Group Inc.
Sincerely,
Signature of Investor
Printed or Typed Name
Street Address
City / State / Zip Code
Telephone Numbers -
Home / Work
Date
34
<PAGE>
Exhibit 24.1(a)
WILLIAM W. WASHAUER
Attorney at Law
Of Counsel To:
Dooley, Johnson, Pardini, Stumbos & Pollioni
Citicorp Center, Suite 2100
One Sansome Street
P.O. Box 472019
San Francisco, California 94147
Telephone: (415) 951-4636
Facsimile: (415) 474-4166
June 10, 1996
via facisimile and first class mail
Board of Directors
AdsOnly Group, Inc.
2269 Chestnut Street, Suite 637
San Francisco, CA 94123
Re: AdsOnly Group, Inc. (the "Company")
Registration Statement on Form SB-2
Ladies and Gentlemen:
I hereby consent to the use of my name as an expert under the heading "Legal
Matters" in the prospectus included in the Registration Statement on Form SB-2
being filed with the Securities and Exchange Commission by the Company
Very truly yours,
/s/ William W. Washauer
William W. Washauer
WWW/wfw1
cc: Craig Kahle (Via fax and Mail)
David Reitz (Via Fax and Mail)
<PAGE>
Exhibit 24.1(b)
DURLAND & COMPANY
Certified Public Accountants
340 Royal Palm Way, Suite 201
Palm Beach, FL 33480
(407) 822 9995 Fax (407) 822 9942
The Board of Directors
The AdsOnly Group, Inc.
(A Development Stage Enterprise)
San Francisco, California
Gentlemen:
We hereby consent to the use of our report dated March 25, 1996 on the financial
statements of the company and of the reference to our firm under the caption
"Experts" in the prospectus included in the Registration Statement on Form SB-2
being submitted to the Securities and Exchange Commission by the company.
/s/ Durland & Company, CPAs, P.A.
Durland & Company, CPAs, P.A.
Palm Beach, Florida
June 11, 1996
<PAGE>
Exhibit 24.1(c)
MINTMIRE & ASSOCIATES
ATTORNEYS AT LAW
2710 ALT. 19 NORTH
SUITE 406
PALM HARBOR, FLORIDA 34683
TEL: (813) 771-1084
FAX: (813) 771-1206
June 11, 1996
Board of Directors
The AdsOnly Group, Incorporated
2269 Chestnut Street
Suite 637
San Francisco, CA 94123
Dear Sirs:
I hereby consent to the use of my name as an expert under the heading
"Legal Matters" in the prospectus included in the Registration Statement on Form
SB-2 being filed with the Securities and Exchange Commission by The AdsOnly
Group, Incorporated.
Sincerely,
/s/Donald F. Mintmire
Donald F. Mintmire
DFM:ir
<PAGE>
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First Quarter 1996
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