KANSAS CITY, Mo., May 13, 2014 /PRNewswire/ -- Dear APT Group,
Inc. Shareholders:
We certainly have had an interesting introduction into becoming
a public company. We have received numerous inquiries over
the last several weeks from current and potential investors.
This shareholder update is our attempt to answer these inquiries
since many revolve around similar issues. At the same time,
it is important that we also update you on our ongoing business
initiatives including current and new product launches.
We are APT Group, Inc., serving the world as a propulsion
technology company that manufactures and distributes advanced
environmentally friendly transportation, utility and
recreational powersport products.
We planned to issue a quarterly shareholder update addressing
these inquiries after our corporate name and ticker symbol were
changed, but we decided to release this interim update containing
additional background information immediately.
APT Group, Inc., Historical Overview
From 2008 to 2013, APT invested over $20M in the development of technology, an
emissions testing laboratory, and the acquisition of an 18 acre
campus of land and buildings. We developed a corporate
infrastructure of customer service, sales & warranty, product
development, engineering, sales, marketing, supply chain and
quality control departments. In addition to these expenses
and investments, APT recruited the management team and staff needed
to drive a high revenue growth business.
In efforts to minimize the sale of equity in the early stages of
the company, we raised over 60% of the needed capital through debt
financing to fund operations, acquisitions and patented technology
development. While this debt was necessary to build the
company, the weight on our balance sheet and the associated
interest costs inhibited our continued growth. Our transition
to a public company provides us with the tools necessary to improve
our balance sheet and the growth capital to drive the company
towards profitability.
We Have Three Business Initiatives for APT Group, Inc. in
2014
First Initiative – Launch higher margin,
technologically advanced products:
1) MotoVox® is preparing to launch its MotoVox® Pro line.
The new specialty line will feature upgraded designs and
proprietary technology that will result in higher margins for both
APT and its dealer partners. Standard MotoVox® products were
initially targeted to mass merchants with market entry price
points. We achieved shelf space in some of the world's
largest retailers and quickly brought the Motovox® brand to
consumers across the country. The expansion of
the line to include 2015 MotoVox® Pro brings new products to the
consumer that initiates the transition to the performance advantage
vs. price advantage. MotoVox® Pro will
significantly expand distribution through specialty dealers and
direct sales channels.
2) MotoVox® Pro will unveil a 150cc ON-ROAD production
motorcycle that achieves 100-150 miles per gallon. This
motorcycle features our patented SmartCarb® technology and is
unique in five important ways:
- Design
- Performance
- Fuel Efficiency
- Automatic Altitude Compensation
- Ultra Low Emissions
We believe this new motorcycle will be the cleanest and most
fuel-efficient on-road production vehicle of its kind, setting a
new standard that will make a significant impact on the motorsport
industry. As the demand for low cost, environmentally
friendly transportation products grows while emissions standards
become more and more restrictive, our new motorcycle is expected to
be a record success for MotoVox® Pro. The company has already
received pre-production order commitments from USA and International buyers.
3) MotoVox® will unveil its new 105cc industrial engine.
The engine was co-developed by APT Group and Chongqing Lifan
Industry (Group) Co., Ltd., one of the world's largest engine
manufacturers. The engine is an evolution of the
existing 79cc industrial engine currently used in certain MotoVox®
products. This design provides 1/3 more power and features
key design improvements. The 105cc industrial engine is
expected to increase sales of existing products and will create a
new product category for MotoVox®. APT Group possesses the
exclusive global distribution rights for this product for small
engine vehicles and global industrial engine applications such as
lawn & garden products. The 105 is planned for market
introduction in Q3 2014.
Additional Products and Technology
APT will announce exciting new technologies and technologically
advanced products throughout the year as we execute our strategic
plan.
SmartCarb®
After an investment of over $4M
and nearly four years of development, SmartCarb® is ready for
primetime. The small engine industry is desperate to find
ways to meet current and future emission regulations without
compromising the product's performance or raising manufacturing
costs by using expensive catalytic converters.
SmartCarb® is our solution to costly and complicated fuel injection
systems that most small engines cannot use. SmartCarb®
compensates for altitude, allows for exceptional gains in
performance and fuel economy, and is cost effective and
simple. The opportunities are seemingly endless as the small
engine market exceeds $19 billion in
annual revenue.
Much of 2012 and 2013 were focused on sponsoring racing teams to
utilize the equipment. In our industry, the most effective
way to market technology is to first introduce it to the racing
world and let them tell the story. We sponsored many pro
riders and they told the story over and over again, increasing
SmartCarb's® exposure that led to impressive demands for the
product.
SmartCarb® began as a billet product. In 2013, we moved to
investment casting. Our final move to die casting in 2014
will allow for mass production and will lower the cost even further
to the consumer.
This year, we are selling SmartCarbs® to the after-market as APT
continues to negotiate OEM contracts. This product is an
exclusive technology to the MotoVox® brand within its product
categories.
We have enjoyed a number of SmartCarb® testing successes.
It is also the first fuel system of its kind to atomize diesel,
which has attracted the interest of developers of Unmanned Aerial
Vehicles (UAV). We are also celebrating multiple Pro and
ProAM national and international competition wins in Gran Prix,
Moto-cross and Enduros with SmartCarb®.
Stay tuned for more updates on our plans for the SmartCarb® as
timing and non-disclosure agreements allow.
Sonic Flow CSI Engine
Industries continue to scour the globe in search of the most
efficient and powerful ultra low emission, high power density,
light weight power plants. We strongly believe the
Sonic Flow CSI Engine is the best future technology to meet these
demands due to its multiple fuel capabilities and various geometry
and cylinder configuration platforms. Stay tuned for
important announcements in Q3 2014.
Second Initiative – The sale of "non-revenue"
producing assets: APT is reviewing an attractive offer for the
sale of certain non-core corporate assets that do not produce
revenue and are not vital to operations or the company's long term
business plan. We anticipate the transaction to be completed
in early Q3. A portion of the sale proceeds are earmarked to
fund the growth capital needs for 2014. The balance is
targeted for the direct retirement of debt instead of selling
equity, which will result in improvements to the balance sheet,
cash flow and operating expenses.
Third Initiative – Restructure and improve the balance
sheet. APT is actively:
(a) strengthening the current balance sheet via conversion of
seasoned debt to equity, with the added benefit of improved cash
flow
(b) positioning the company for access to lower cost production
financing directly from suppliers, resulting in large cost savings
to the company
The reduction of debt is one of multiple strategies that will
push APT into profitability in 2015. Our goal is double
digit EBITDA by 2016. These management decisions have already
begun to be effective.
The expected key impacts of the restructured balance sheet
are:
- Over $700,000 to $900,000 annual
savings in interest expenses
- A stronger balance sheet with improved performance ratios
Annual Summaries:
2011-2012 MARKET ENTRY AND RAPID GROWTH – Sales $6.5M 2011 and $10.7M 2012
The company entered revenue with the MotoVox® line beginning in
2011 with key accounts (Sears, K-Mart) and achieved $5.9M of revenue within a 7 month period.
In 2012, we were able to accelerate revenue to reach nearly
$11M in annual product sales.
This 40% year-on-year growth was led by expansion into distribution
via mass retailers such as Costco, PepBoys, Alco and select
regional retailers. Entering sales with mass retailers in the
company's first year of sales is a significant reflection on the
confidence in our product's quality, customer support, and
attractiveness to consumers.
2013 RETAILER RE-ORDERS, COMPLETING PRODUCT DEVELOPMENT AND
EMISSIONS LAB, AND EXPAND PRODUCT RANGE
Revenue goals for 2013 were not met as planned. Low cost
debt was an advantage for APT Group, however product demand and the
production financing capital required to meet that demand grew
beyond our primary lender's capacity. This required a
subordination agreement with a receivable lender. The
subordination took months to complete causing us to miss much of
our spring 2013 business. Shortly after the subordination
agreement was signed, the new receivable lender capped the
production capital line. Due to these challenges, we made the
decision to fast track our plans to take the company public.
We believed the public markets were going to be the most economical
and effective answer to facilitate rapid growth. We carefully
analyzed multiple paths to public markets. After a year of an
arduous process, we determined that a reverse merger would be the
most effective path to meet the company's immediate need for growth
capital.
2014 RETAILER RE-ORDERS, NEW PRODUCT RELEASES, SIGNIFICANT
TECHNOLOGICAL ADVANCES, EMISSIONS LAB REVENUE, OFFICIAL LAUNCH OF
THE SMARTCARB TO THE OEM MARKET, RESTRUCTURING BALANCE SHEET, SALE
OF NON REVENUE PRODUCING ASSETS
In 2014, we remain focused on expanding sales with our current
and new mass retailers, launching international sales, and
initiating OEM sales of the SmartCarb® fuel system technology
line. We project that overall gross margins will continue to
improve. APT is currently engaged in conversations with
numerous national and regional retailers in both the US and
international markets while continuing to build specialty channel
and varied international opportunities.
ADDITIONAL ITEMS OF INTEREST
Share Structure
Common Shares
We have 20,000,000,000 authorized common shares and 500,000,000
authorized preferred shares.
At the signing of the Share Exchange Agreement on March 27, 2014, there were 897,071,625 issued and
outstanding common shares of FROZ. As of May 9, 2014, we have 4,425,633,898 common shares
issued and outstanding. Of that number, 2,735,501,971 common
shares were issued to the legacy investors and employees of APT,
all of which are restricted for 6 months from the issuance
date.
Preferred Shares
We have four classes of preferred shares: A, B, C & E.
There are no shares of Class A Preferred Stock issued or
outstanding.
Old FROZ management retained 500,000 shares of Preferred B Stock
in accordance with the terms of the Share Exchange
Agreement.
On May 9, 2014, we announced the
creation of two new classes of convertible preferred stock, Class C
and Class E, for exclusive issuance to the legacy investors and
employees of APT. We authorized and issued 19,738,646 Class C
Preferred Shares and 22,155,729 Class E Preferred shares
exclusively to the people who worked tirelessly for years to
develop our products and to get them on store shelves. Class
C is restricted for 18 months from the issuance date and Class E is
restricted for 12 months from the issuance date.
Equity Partners
The company began operations in 2007 with angel capital
investment and then financed production with working capital
loans. We also utilized account receivable factoring
companies that were expensive, placed limits on orders, and made it
hard for us to manage our own cash flow. After reviewing
several options and interviewing multiple firms, we selected
Ironridge as our partner to remove those liabilities from our
balance sheet so that we will be able to accept as many orders as
we can produce. It was a strategic decision that was in the
best long-term interests of the company.
Name Change and Ticker Symbol Change
There are several steps in the process and each of those steps
has a particular order. We have been working with our counsel
to draft the 14C Information Statement for issuance to our
shareholders of record. The shareholder record date for the
14C is May 9, 2014. Once the
SEC approves our 14C, which should be within two weeks from now, we
will mail the Information Statement to our shareholders of
record. The SEC requires that we wait an additional 10 days
after mailing to officially change the name. We have already
reserved our new name with the Delaware Secretary of State. The actual
name change is simple and takes about a day.
FINRA requires that our name be changed before we can request a
symbol change. We have completed our application, but FINRA
will not process the application until after the name
change.
We look forward to announcing our new name and ticker symbol to
our shareholders soon.
COMPLIANCE & REPORTING
APT management is committed to following federal regulatory and
reporting guidelines as required. The company has retained various
advisors to help guide us in this area. We will issue news
when, and only when, the company has valid news that does not
reveal information that would give an advantage to our competitors.
The executive management team at APT will manage this process
ethically and responsibly. Each quarter, management will
issue a general shareholder update. Throughout the quarter,
management may also share pertinent information with our
shareholders.
The above strategies will accelerate growth, create sustained
profitability, improve our margins, and ensure our regulatory
compliance. This allows management the ability to focus on
the task at hand - managing an exciting and growing consumer
oriented business. Thank you for your attention and continued
support.
About APT Group, Inc.
APT Group, Inc. (OTC BB: FROZ)
is a Missouri registered
corporation headquartered in Kansas
City and is the holding company for the MotoVox® motorsport
product line, SmartCarb® patented fuel system, and the Sonic Flow
small engine technology lines (http://www.motovox.com/ and
http://www.powerapt.com/).
MotoVox® has become the fastest growing brand of small engine
price-point power sport products in the world, with nearly 100,000
power sport products sold to date earning nearly $25 million in less than three years of
commerce.
Forward-Looking Statements
Some statements made in
this press release are forward-looking statements, which are made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. We use words such as "anticipate,"
"believe," "expect,'' "future," "intend," "plan," and similar
expressions to identify forward-looking statements. These
statements including those related to the growth of the industry
and the Company's performance, are only predictions and are subject
to certain risks, uncertainties and assumptions. Additional risks
are identified and described in the Company's public filings with
the Securities and Exchange Commission. Statements made herein are
as of the date of this press release and should not be relied upon
as of any subsequent date. The Company's past performance is not
necessarily indicative of its future performance. The Company does
not undertake, and the Company specifically disclaims any
obligation to update any forward-looking statements to reflect
occurrences, developments, events, or circumstances after the date
of such statement.
Contact
William Maher, SVP
APT Group, Inc.
InvRel@motovox.com
Paul Knopick
E & E Communications
940.262.3584
pknopick@eandecommunications.com
SOURCE APT Group, Inc.