Item
1. Description of Business
Overview
The
Tradeshow Marketing Company, Ltd. was incorporated on December 3, 2003 under
the
laws of the State of Nevada. Tradeshow is a product development and consumer
specialty retail company that markets and sells proprietary and private label
products for the home and office environments. The Company was formed to market
specialty products at trade shows, mall-based specialty product shops and
kiosks. The Company sells popular “as seen on TV” products, which are
currently or have been advertised on TV. The products that the Company sells
are
functional have a broad appeal and retail at affordable price
points.
Business
Generally
The
Company is a marketing and direct sales company focused on the development
and
distribution of a wide range of products for the home and office environments.
The Company’s merchandise categories include specialty household, beauty and
fitness, home and garden and small ticket electronics products. For the past
twenty years, Tradeshow’s demonstration professionals and management have worked
in the direct sales industry marketing a variety of products directly to
consumers at trade shows, malls (kiosks), fairs and exhibitions throughout
Canada and the United States.
Our
professional sales staff has engaged in product demonstration, sales and
marketing for trade shows, as well as training and consulting on “direct sell”
retail and wholesale strategies for companies seeking to market their products
directly to consumers. The venues that the Company uses for trade show
demonstrations includes trade shows and annual exhibitions such as home, garden,
boat and auto shows, as well as provincial, state and county fairs.
Prior
to
the formation of the Company, the two founding principals of the
Company, Bruce Kirk and Marion Huff worked in the direct sales industry as
a
partnership under the name “Kirk-Huff Marketing”.
Kirk-Huff Marketing
was an
unincorporated entity operating as an unregistered partnership.
Management
plans to place emphasis on and to allocate financial and human resources to
the
development of our direct sales business. The Company plans to increase the
amount of direct sales business that it presently transacts. The acquisition
of
two mall-based retail stores in Phoenix, Arizona, exemplifies our commitment
to
the growth of our product sales strategy (see “Current and Proposed Operations”,
Sandstrom On TV Retail Stores, below).
Market
Overview
Venues
for the demonstration of direct sales include mall-based retail stores, kiosks
and sales demonstrations at trade shows. There is an added advantage that arises
from the Company’s tradeshow demonstration activity, as consumers who see
products demonstrated and branded at these shows may make subsequent and
additional product purchases from the Company’s mall based stores in Phoenix,
Arizona, and the Company’s e-commerce website. The contents of this site are not
incorporated into this filing. Further, the Company’s references to the URLs for
these are intended to be inactive textual references only.
Tradeshow
earns revenue directly from the sale of products that it sources from a number
of different suppliers. To date, the Company has generated sales at trade shows,
malls and other high traffic consumer venues, such as public fairs and
exhibitions, as well as our e-commerce website.
Direct
Sales at Tradeshows.
Over
the
past 20 years Tradeshow’s principals have appeared consistently, year after
year, in trade shows, malls, fairs and exhibitions in cities throughout Canada
and the United States, including trade shows in the following cities: Canada:
Vancouver, Abbotsford, Victoria, Nanaimo, Calgary, Edmonton, Regina, Saskatoon,
Winnipeg, Toronto: United States: Puyallup, WA, Tacoma, WA, Pomona, CA, Phoenix,
AZ. The Company has consistently generated revenue by attending trade shows,
malls, fairs and exhibitions in these markets and locales.
Management
believes that Tradeshow enjoys two distinct competitive advantages. The first
advantage is ability to penetrate local and national markets at the trade show
level proving saleability of products and generating exposure for its brand.
The
second competitive advantage that Tradeshow is able to take advantage of relates
to marketing, some of the innovative and contemporary products that Tradeshow
offers at its retail store locations are already advertised and
branded “as seen on TV” through television infomercial advertising.
Many
of
the items that the Company features in its stores and at trade shows, malls
(kiosks) fairs and exhibitions may be categorized as “as seen on TV” because
they are currently advertised or have been advertised on TV. Examples of
suppliers and the products that we sell include:
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Ontel
Products: “as seen on TV” products that include the Swivel Sweeper, Glass
Wizard and AB Master;
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American
Direct (TriStar): product supplied includes the Lateral Thigh Trainer
and
Jack Lalanne’s Power Juicer;
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Cava
Industries: supplies the Cold Heat Soldering Tool and Smart Spin
containers;
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ITW
Space Bags: supplies Space Bags for
storage;
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Orange
Glow International: suppliers of cleaning products OxiClean, Orange
Glo,
and Kaboom, among others;
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Overbreak:
supplies toys that
include Hover Disc, Hover Copter and Rainbow Art.
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When
possible and advantageous, Tradeshow works to secure territorial exclusivity
for
products that it sells. Notably, the absence of product exclusivity has not
impaired past business performance because the Company merchandises and sells
a
broad selection of popular and contemporary products from multiple suppliers
and
wholesalers, thereby ensuring its ability to remain competitive. On occasion,
suppliers will approach the Company to demonstrate and sell their products
on
their behalf.
Tradeshow
also intends to sell its own private label products. In part, the Company plans
to source products upon which they can affix their own label and market as
a
private label brand. Management believes that private label merchandise will
strengthen the Company’s ability to brand and, hence, compete against retail
competitors.
The
Company also plans to increase the number of sales channels - that it employs.
In doing so, the Company will continue to utilize the same successful direct
sales strategy it has used, in the past, to develop these new sales channels.
Tradeshow plans to develop these new sales channels, to increase sales in busy
metropolitan markets within Canada and the continental United States (with
a
continued focus on those markets in Western Canada, Washington State California
and Arizona, which the Company currently serves) with the intent to brand and
sell the same type of products that it currently sells at tradeshow venues
the
Company also intends to offer franchised retail stores, increase internet sales
and wholesale business
Our
e-commerce website allows the Company to (1) target a broader customer base
with
lower price items; (2) promote sales and increase product branding through
Internet advertising; (3) cross sell products featured in other sales
channels.
Current
and Proposed Operations
Sandstrom
OnTV Retail Stores— A Current Operation.
Tradeshow
owns and operates two retail stores in Phoenix, Arizona called “As
Seen On TV”. The two stores are located in the Arrowhead Mall and the Paradise
Valley Mall in Phoenix. The store in the Arrowhead Mall has been operating
as
“As Seen On TV” since 1997 and the store in the Paradise Valley Mall as “As Seen
On TV” since 1999.
The
two stores that were acquired are
“turnkey” and fully operational as both retail businesses are staffed (4
full-time employees) and open for business during regular mall hours. The
approximate square footage for the Arrowhead Mall is 574 square feet and the
Paradise Valley Mall is 536 square feet.
Tradeshow
recently negotiated
new leases for both store locations. The leases are issued in the
name of the company’s wholly owned subsidiary, Sandstrom On TV The Arrowhead
Mall lease expires Dec 2009 (in the Company’s 2010 fiscal year) and
Paradise Valley Mall lease expires Dec 2011 (in the Company’s 2012 fiscal
year).
Name
Change: Following the acquisition of the stores, Tradeshow changed the name
of
the two Phoenix stores to “Sandstrom On TV”. The Company’s Sandstrom OnTV stores
feature the same unique and diverse mix of innovative consumer products that
the
Company demonstrates and sells at tradeshows.
www.ontvco.com
Tradeshow’s e-Commerce Website —A Current Operation.
The
Company has launched an e-Commerce website located at www.ontvco.com. The
Company’s e-Commerce website features a mix of the consumer products that the
Company sells at its trade show demonstrations and the products that the Company
features in its land based retail stores. The e-Commerce website allows the
Company to target a broader customer base and to complement our marketing and
branding initiatives in the aforementioned cities where the Company operates
stores and has attended trade shows, malls, fairs and exhibitions
Our
e-Commerce website implements a
broad array of scalable site management, search, customer interaction and
distribution services systems that are intended to be used to display products,
process customer orders and payments. These proposed services and systems use
a
combination of commercially available, licensed technologies, which have been
customized and integrated to provide the platform for the online store. The
Company has brought on Seattle based Internet Technologies specialist Luniel
de
Beer as the Company’s Chief Technical Officer .The Company obtains consulting,
programming, service and support in respect of the development and hosting
of
its computer hardware and managing of its online stores.
Management
believes that the breadth
and depth of its online store’s product selection, together with the flexibility
of the e-Commerce model will enable the Company to develop a significant,
additional sales and marketing channel that will benefit the Company’s overall
retail strategy. Unlike store-based retail formats, the Company’s online store
is expected to provide it with significant flexibility with regard to the
organization and presentation of product selection. To encourage purchases,
management intends to feature exclusive online promotions, on a rotating basis,
and to continually update merchandise recommendations. Management intends to
actively create and maintain pages that are designed to highlight certain
products and brands, including merchandising strategies that emphasize featured
products, product bundling and special promotions.
Tradeshow’s
online store is intended to provide convenient and useful services that enhance
the shopping experience. The Company intends to strive to make its customers’
experience informative, efficient and intuitive by constantly updating and
improving its store format and features. The Company’s online store intends to
incorporate “point and click” options, supported by technical enhancements
including easy-to-use search capabilities. These features are intended to make
shopping at the store entertaining and informative and encourage purchases
and
repeat visits.
Sandstrom
OnTV Corporate Stores and The Sandstrom Franchise Strategy- A Current
Operation
On
March
15, 2007 the Company organized the Sandstrom OnTV Company (Sandstrom) as a
wholly-own subsidiary. Sandstrom was organized to sell unit
franchises to operate retail stores under the tradename “Sandstrom
OnTV.”
The
acquisition of the two Sandstrom OnTV stores in Phoenix, AZ, marked the
beginning of Tradeshow’s plan to (1) operate corporate stores and (2) to offer a
franchised retail business on a ‘stand-alone” basis or as a bundle of franchised
stores that are exclusive to a specific region. The Company’s two Sandstrom OnTV
stores will serve as the model for its franchise retail offering.
Sandstrom
store expansion plans: Desired locations for franchise stores include malls
and
highly visible,
highly trafficked street
addresses. Based on managements’ experience in the direct selling industry,
extensive product and franchising knowledge, management believes that it can
successfully implement a franchise expansion strategy for the Company’s store
concept and sell franchise rights to its stores.
To
implement our franchise concept and strategy, the company engaged Norm Friend,
a
franchising expert, to create an area franchising development strategy for
the
Company’s Sandstrom stores. Mr. Friend has written several books on franchising
and wrote the Company’s manuals for franchise offerings. The manuals and the
franchise plan were completed and submitted to the Company November 3, 2005.
Further on February 7, 2007 the Company announced Timothy J. McCarthy as Vice
President of Franchise Development to move forward the progression of franchise
development and sales.
About
Franchising
Franchising
is a popular and growing business model because it is an assembly of business
relationships that allow people to share brand identification, a proven method
of doing business and a successful marketing and distribution system. The
advantage of franchising is that the franchisee’s assets are put into a proven
business, allowing the franchisee to quickly start up their business, to develop
a customer base faster, and to potentially experience profitability with less
risk.
With
a
franchise business come pros and cons. The pros of the franchise are: (1) the
business model is a based on a formula that can be demonstrated, (2) owner
transition and training is available, and (3) it is possible to review past
records and company history. The cons of franchises are: (1) purchase financing
may be difficult to find and obtain; (2) there can be significant contractual
obligations that may be difficult to meet; (3) it may be difficult to find
the
right franchise opportunity. See “Description of Business-Franchising
Regulation” also see “Risk Factors.”
Private
Label Brands – A Current Operation.
As
a
product development and consumer specialty retail company, our mandate is to
develop proprietary and private label products that have mass appeal at popular
price points. Initially, Tradeshow intends to market products that are readily
available via the supply channels that it has used since the Company’s
inception; the very same supply channels that management has developed over
the
past twenty years. Tradeshow intends to source products that it can affix
“Sandstrom” labels to and distribute under the Sandstrom name, the brand name of
the Company’s retail stores in Phoenix, AZ, to ensure better quality and higher
profits for the Company.
Our
philosophy is to sell products that are quality-manufactured to our
specifications. To execute our planned strategy, we will engage the services
of
industry experts who can source and supply products that Tradeshow can market
as
“private label”, that is, products to which the Company can affix its own brand
labels. The Company plans to utilize said “experts” to advise the Company about
how to obtain the best combination of price and quality for the proposed private
label branded products. The Company is currently investigating and qualifying
the manufacturing details for a number of private label products that it intends
to sell in the coming months.
The
Company believes that addition of private label brands is a direct way to
improve product offerings and increase bottom line revenues. Management believes
that many organizations with business plans that are similar to the Company’s
disregarded this important and potentially profitable strategy of the
merchandising and direct sell process. Management believes that private label
merchandise offers greater pricing power, which can be diminished by lower
sales
margins typically available from highly popular and competitively priced
products.
On
June
1
st
, 2006,
the
Company announced the launch of its Smart Heat Sauna product a private label
product.On August 30
th
, 2006
the company
announced the launch of its Infinity Flashlight product another private label
product. Both products are sold in the companies stores and on its
website.
Marketing
Plan
The
Company’s product categories include specialty household, beauty and fitness,
home and garden, and electronics products. These products are generally small
ticket items, have universal appeal, are innovative and are desired by the
target audience. Price points for our products typically start in the $50 range.
Tradeshow’s average target demographic is in the $50,000 - $100,000 annual
income range.
Since
inception, Tradeshow has established a prominence in Western Canada, and a
foothold in the US Pacific Northwest, California and Arizona, expanding its
market reach via trade show demonstrations. In each of these markets, Tradeshow
plans to market proprietary and private label products through the Company’s
current and proposed sales channels. Tradeshow plans to source its own private
label brands for distribution to improve product quality and to potentially
generate higher profits for the Company.
Our
marketing strategy is designed to help us to continue to establish our business
in Western Canada, Washington State, California and Arizona, and to help us
grow
our consulting and marketing initiatives through the participation of
businesses, large and small, which are based in these regional
markets.
Part
of
Tradeshow’s strategy is to manage low cost, effective sales channels that can
distribute product as efficiently as possible through the regional trade show
marketplace, through its franchise stores, internet sales and via Direct
Response Television, (infomercials). This will be accomplished through
establishing skilled executive managers to head up these channels and manage
them effectively..
In
conjunction with our Retail Stores, attendance at trade shows and fairs, we
increasingly employ the Internet to establish the Company’s brand,, increase
sales, create greater awareness of our line of products and consulting services.
Management’s objective is to grow the Company’s market position and expand its
customer base through superior merchandising, targeted marketing and strong
relationships with leading manufacturers, distributors and suppliers. We plan
to
increasingly use the Internet in the development and expansion of the Company’s
business operations.
Our
financially prudent, management intends to constantly expand brand name product
offerings to create a brand driven destination for quality, unique products.
Management believes that by offering a broader selection of private label,
brand
name products the Company may be better positioned to increase sales, encourage
repeat purchases and expand its customer base.
Management
will focus the Company’s branding campaign on selection, convenience, value,
trust, service and brand products according to these features by employing
targeted marketing created in house and through the efforts of Public Relations
firms via media exposure resulting from Direct Response Television,
(Infomercials), magazine ads, Internet mail and direct mail. Management will
also seek to provide leading manufacturers and distributors with a powerful
new
distribution channel that is consistent with their brand identity via the direct
sales channel at trade shows , through its web site and in its franchise
stores.
Tradeshow’s
goal is to be the retailer of choice for leading manufacturers, distributors
and
suppliers. The Company strives to create, maintain and strengthen relationships
with manufacturers and suppliers as it continues to increase the number of
products that it offers. To this end, management continues to add new product
categories, increase product selection, add new customers, promote repeat
purchases and develop new sales opportunities. In addition, management continues
to pursue new market opportunities by establishing strategic alliances via
the
acquisition of complementary businesses, products and technologies, in order
to
grow and strengthen their business.
Marketing
Strategies
Management
will continue to develop its targeted marketing and promotion strategy to build
brand recognition in the US, increase customer traffic, promotion of new
products, encourage repeat purchases and build strong customer loyalty. The
Company’s marketing and promotional activities target customer demographics that
are more likely to buy product its retail stores. These strategies include
both
offline (advertising in traditional media) and online (Internet based)
advertising.
Management
intends to establish agreements for targeted banner advertisements with major
Internet content and service providers for the promotion of trade show
activities and the Company’s e-Commerce website. We also intend to optimize our
e-Commerce website with the latest search engine optimization (SEO) strategies
to ensure top keyword positioning in popular search engines.
Also
known as pay for performance or search advertising, pay per click advertising
enables advertisers’ adverts to appear on a search engine’s “results pages”. The
position of the adverts is decided on a bidding system with advertisers paying
more to be positioned at the top of the page. The higher the bid per key word,
the higher the ranking the Company can get on a page, which allows users to
view
product from our site more frequently. Payment is then made at this rate every
time someone clicks on the link in the advert, when it takes them through to
the
advertiser’s website. In other words, you only pay if a person clicks on a link
or banner and lands on your site.
Management
plans to use direct marketing via the Internet to promote new customers
acquisitions, product demonstrations and sales. Management will strive to
deliver meaningful offers to customers via e-mail. In addition, management
intends to publish an opt-in online newsletter delivered by e-mail to
subscribers in which will highlight new product developments, special
promotions, sales items and product promotions.
The
Company proposes to brand its name worldwide using an innovative email
technique. Viral marketing describes any strategy that encourages individuals
to
pass on a marketing message to others, creating the potential for exponential
growth in the message’s exposure and influence. This strategy takes advantage of
rapid multiplication to explode the message to thousands and possibly
millions.
Tradeshow
proposes to use affiliate partner marketing programs to attract traffic to
its
website. An affiliate is a person or entity that places a banner or text link
on
their site directing visitors to the Tradeshow website. As a visitor
clicks-through, a cookie (a small text file containing the referring affiliate’s
identification number assigned by Tradeshow) will be placed on the visitor’s
browser. If the visitor purchases product or services from Tradeshow’s website,
the ordering system and affiliate’s software work together to attach the
referring affiliate’s identification number held in the cookie to the sale, and
uses that information to credit the affiliate with the proper commission for
the
referral.
The
Company employs offline advertising to promote both brand and specific
merchandising opportunities. The Company’s plan is to continue to utilize cost
effective forms of traditional offline advertising, including magazine
advertising, television advertising and direct mail drops, to build brand
recognition.
Editorial
articles in magazines and newspapers that cater to the specialty retail consumer
home, garden, boat and auto shows, state and county fairs, and annual
exhibitions, can expose the Company to a wider audience. The Company plans
to use print media for advertising in local communities where target
demographics are appropriate and demand for the type of products that the
Company sells is strong.
The
Company plans to use targeted mail lists and direct mail drops to advertise
its
services and products.
Competitive
Business Conditions and Competitors
The
direct sales market is new, rapidly
evolving and intensely competitive. Management expects to face stiff competition
in every product category. Barriers to entry are minimal and current and new
competitors, who may have greater expertise and greater resources, can start
competitive business operations at a relatively low
cost.
Management
potentially will compete with a variety of competitors, including the
following:
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Traditional
retailers of proprietary and private label products for the home
and
office environments, who may compete with both an online and offline
presence;
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Manufacturers
of proprietary and private label products for the home and office
environments that decide to sell directly to end-customers, either
through
physical retail outlets or through an online
store;
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Other
online retailers proprietary and private label products for the home
and
office environments, including online service providers that feature
shopping services; and
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The
catalog, direct mail and multi-level marketing retailers of proprietary
and private label products for the home and office
environments.
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There
are two public companies that
have built large and profitable companies in a market niche that is similar
to
Tradeshow’s. Tradeshow’s two leading competitors are Brookstone Inc. and Sharper
Image.
Brookstone
Inc.
Brookstone, Inc. (formerly BKST: NASDAQ) is a retailer that
operates over 275 Brookstone brand stores nationwide and in Puerto Rico. Stores
are typically located in high-traffic regional shopping malls, lifestyle centers
and airports. The Company also operates three stores under the Gardeners Eden
brand, and a Direct-Marketing business that consists of three catalog titles
--
Brookstone, Hard-to-Find-Tools and Gardeners Eden.
The
Sharper Image.
Sharper Image (SHRP: NASDAQ) is a specialty retailer with
over 180 Sharper Image specialty stores throughout the United States. The
Company’s principal selling channels include; stores, a monthly catalog and its
primary Website. The Company also sells its products through its own
online auction Website and an online Outlet store to help manage refurbished
and
close out inventory. The Company also has business-to-business sales teams
for
marketing its products for corporate incentive and reward programs.
Management
believes that the following are the principal competitive factors in the
Company’s proposed market: brand recognition; selection; convenience; order
delivery performance; customer service; site features, content; price and
quality.
Many
potential competitors can devote substantially more resources to business
development than can the Company. In addition, larger, well-established and
well-financed entities may acquire, invest in or form joint ventures with other
competitors.
Certain
of the Company’s competitors may be able to secure products from vendors on more
favorable terms, fulfill customer orders more efficiently and adopt more
aggressive pricing or inventory availability policies than can the
Company.
Given
the
fact that the Company has a limited operating history, many of the Company’s
competitors have significantly greater experience in the retail of proprietary
and private label products for the home and office environments.
The
Company’s online competitors are particularly able to use the Internet as a
marketing medium to reach significant numbers of potential customers. Finally,
new technologies and the expansion of existing technologies, such as price
comparison programs that select specific titles from a variety of websites
may
direct customers to competitor sites.
Principal
Suppliers
Tradeshow
features over 150 products that it sources from a long list of suppliers and
wholesalers. Tradeshow does not rely solely on one supplier or wholesaler to
source our products. Rather, the Company sources product from many different
suppliers. Our strategy is to purchase our products from many different name
brand suppliers who manufacturer or contract out the manufacture of their own
products to ensure quality and a wide variety of product choice. Examples of
suppliers and the product that we sell include:
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Ø
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Ontel
Products: “As Seen On TV” products that include the Swivel Sweeper, Glass
Wizard and AB Master;
|
|
Ø
|
American
Direct (TriStar): product supplied includes the Lateral Thigh Trainer
and
Jack Lalanne’s Power Juicer;
|
|
Ø
|
Cava
Industries: supplies the Cold Heat Soldering Tool and Smart Spin
containers;
|
|
Ø
|
ITW
Space Bags: supplies Space Bags for
storage;
|
|
Ø
|
Orange
Glow International: suppliers of cleaning products OxiClean, Orange
Glo,
and Kaboom, among others;
|
|
Ø
|
Overbreak:
supplies toys that include Hover Disc, Hover Copter and Rainbow
Art.
|
Tradeshow
has a history of selling products from these suppliers. Our objective is to
continue to acquire products that are both contemporary and popular, via our
network of wholesalers and exclusive distributors, and resell them at
competitive prices with the intent to generate a profit.
The
Company obtains its products from brand suppliers, and a network of
distributors, manufacturers, brokers and wholesalers. Management’s efforts are
ongoing to expand the number of direct relationships with manufacturers,
suppliers, brokers, distributors and wholesalers in all relevant product
categories. The Company does not have written agreements in place with any
distributors that guarantee a discount or pricing preference.
Although
we source and buy product from more than one supplier, we still rely on a finite
number of suppliers to make the products that we sell available to us, at our
request and on relatively short notice. As such, our supply chain is potentially
subject to disruptions, which could cause a cessation in our business. Delays
and disruptions due to supply problems could impair our ability to satisfy
customers, generate revenue and conduct our business.
Moreover,
we do not have exclusive rights for the products that we sell and so we face
competition across all categories and are potentially vulnerable to supply
shortages that could result therefrom. Our inability to hold sole or exclusive
distribution rights for our products could potentially lead to supply shortages
of the products that we sell and could impair our ability to satisfy our
customers, generate revenue and conduct our business.
Tradeshow
does not directly manufacture any of the products that the Company sells.
Because we generate our revenue from the sales of goods via direct sell
marketing, we do not need to purchase raw materials for the manufacture of
the
products we sell. As such, we depend on our suppliers to stock the products
that
we sell.
Customers
As
a
specialty product branding and retail company, Tradeshow does not depend on
one
or a few major customers to sustain or grow its business. Tradeshow sells
products to a growing and diversified range of clientele. As such,
Tradeshow is not sensitive to the loss of a few customers or any one specific
customer; yet, the Company continually strives to establish strong customer
relations and complete client satisfaction. As a part of its long-term business
strategy, the Company plans to execute a comprehensive marketing and sales
strategy so that it may continue to add to build its client base and grow
revenues. (see “Marketing Strategy” above).
We
acknowledge that our success is substantially dependent on the establishment
of
new customers and the growth of our customer base. Accordingly, we recognize
that our ability to attract new customers will depend on a variety of factors,
including the quality and affordability of the products and services we offer,
as well as our ability to effectively market our products and services. If
we
fail to increase our customer base and generate repeat and expanded business
from our current customers, our business and operating results would be
seriously harmed.
Trademarks,
Copyrights, Patents
All
source materials on Tradeshow’s planned Internet e-commerce website will be
copyrighted content. Unauthorized use of the content found on Trade Show’s
website is prohibited.
The
Company recognizes that the legal protection afforded by a copyright or
registered trademark is limited. Despite our efforts to protect our proprietary
rights, unauthorized parties may attempt to copy aspects of our products or
to
obtain and use our proprietary information. Litigation may be necessary to
enforce our intellectual property rights, to protect our trade secrets and
to
determine the validity and scope of the proprietary rights of others. Such
litigation could result in substantial costs and diversion of resources and
could significantly harm our business and operating results.
Management
has engaged trademark, copyright and patent experts and attorneys regarding
products it intends to develop, but is not certain how its business may be
affected by the application of existing laws governing issues such as property
ownership, copyrights, trademarks and other intellectual property issues of
its
Internet operations. The vast majority of these laws were adopted prior to
the
advent of the Internet. As a result, they do not contemplate or address the
unique issues of the Internet and related technologies. Changes in laws that
are
intended to address these issues could create uncertainty in the Internet market
place. This uncertainty could reduce demand for the Company’s services or its
cost of doing business may increase as a result of litigation costs or increased
service delivery costs. (See additional “Risk Factors” factors
below)
Governmental
Approval
At
present, Tradeshow does not need to obtain governmental approval to market
and
sell products, including the Company’s plan to sell products at tradeshows, mall
and over the Internet. Trade show marketing and sales, and e-Commerce and
Internet retail is not a government regulated industry, but is subject to the
laws and regulations generally applicable to businesses and directly applicable
to offline and online commerce. Notably, Tradeshow promotes best practices
and
ethical business conduct in relation to the Company’s corporate culture and its
day-to-day operations.
The
Company initiates sales via its e-Commerce Internet site, and as Internet use
for commerce gains popularity, it is possible that a number of laws and
regulations may be adopted with respect to the Internet, which may cover issues
such as user privacy, freedom of expression, pricing, content and quality of
products and services, taxation, advertising, intellectual property rights
and
information security. Furthermore, the growth of online commerce may prompt
calls for more stringent consumer protection laws.
Management
does not contemplate providing personal information regarding the Company’s
customers to third parties. However, the adoption of additional consumer
protection laws could create uncertainty in Web usage and reduce the demand
for
the Company’s products and services.
Management
is not certain how its business may be affected by the application of existing
laws governing issues such as property ownership, copyrights, encryption and
other intellectual property issues, taxation, libel and export or import
matters. The vast majority of these laws were adopted prior to the advent of
the
Internet. As a result, they do not contemplate or address the unique issues
of
the Internet and related technologies. Changes in laws that are intended to
address these issues could create uncertainty in the Internet market place.
This
uncertainty could reduce demand for the Company’s services or its cost of doing
business may increase as a result of litigation costs or increased service
delivery costs.
In
addition, because the Company’s services are intended to be made available over
the Internet in multiple states and foreign countries, other jurisdictions
may
claim that the Company is required to qualify to do business in that state
or
foreign country. The Company’s failure to qualify in a jurisdiction where it is
required to do so could subject it to taxes and penalties. It could also hamper
the Company’s ability to enforce contracts in these jurisdictions. The
application of laws or regulations from jurisdictions whose laws do not
currently apply to the business could have a material adverse effect on the
business, results of operations and financial condition.
Governmental
Approval-Franchising
The
Company intends to expand franchise arrangements to expand its operations and
revenue base. The Company’s future growth may be dependent upon new franchisees
and the manner in which they operate and develop their Sandstrom locations
to
promote and develop the Company’s concept and its reputation for quality and
value. To date, the Company has not sold any franchises. There can be no
assurance that this franchisee or additional franchisees will have the business
abilities or access to financial resources necessary to open Sandstrom locations
or operate such locations in their franchise areas in a manner consistent with
the Company’s concepts and standards. In addition, because the Company believes
that a potential franchisee’s total estimated investment relating to a Sandstrom
location is generally low, the Company may be more likely to attract franchisees
with limited franchise experience and limited financial resources.
As
a
result of its franchising activity, the Company is be subject to Federal Trade
Commission ("FTC") regulation and various state laws that govern the offer,
sale
and termination of, and refusal to renew, franchises. Several state laws also
regulate substantive aspects of the franchisor-franchisee relationship. The
FTC
requires the Company to furnish prospective franchisees a franchise offering
circular containing prescribed information. A number of states in which the
Company might consider franchising also regulate the sale of franchises and
require registration of the franchise offering circular with state authorities.
Substantive state laws that regulate the franchisor-franchisee relationship
presently exist in substantial number of states, and bills have been introduced
in Congress from time to time which would provide for federal regulation of
the
franchisor-franchisee relationship in certain respects. The state laws often
limit, among other things, the duration and scope of non-competition provisions
and the ability of a franchisor to terminate or refuse to renew a
franchise.
Business
Development Costs
Management
intends to recoup business development costs over the normal course of future
business activity.
Compliance
with Environmental Laws
Tradeshow
is not impacted by the costs and effects of compliance with environmental laws,
other than the laws and regulations generally applicable to businesses.
Tradeshow operates with a high level of respect for and promotes the protection
of the environment, and is not aware of circumstances that would create any
significant financial responsibility for environmental matters.
Employees
We
do not
expect significant changes in the number of people we employ over the next
twelve months. The Company currently has 7 full-time employees who work in
the
Company’s office in Scottsdale Arizona and two retail stores in
Phoenix, Arizona, and 4 full-time consultants. The Company plans to hire
additional staff, on an as needed basis, in the event that the Company acquires
additional corporate owned retail stores. However, in the event that we do
not
acquire additional corporate stores, then we will not be hiring additional
employees. The Company plans to hire individuals on a consultancy basis to
oversee the Company’s Sandstrom franchise operations, on an as needed basis,
provided the level of sales of franchises warrants the hire of consultants.
Franchisees will be responsible for the hire of their own sales
staff.
We
file
electronically with the Securities and Exchange Commission our annual reports
on
Form 10-KSB, quarterly reports on Form 10-QSB, and current reports on Form
8-K,
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934.
You may obtain a free copy of our reports and amendments to those reports on
the
day of filing with the SEC by going to
http://www.sec.gov
.
Copies
of this, and all future
reporting materials filed with the SEC may be obtained at the SEC’s Public at
100 F Street, N.E., Washington, D.C. 20549 and/or obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
In
addition, the Company intends to be an electronic filer and as such, all
items
filed by the Company are available through an Internet site maintained by
the
SEC which contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC, which
site
is available at
http://www.sec.gov
.
The contents of these are not
incorporated into this filing. Further, the Company’s references to the URLs for
these are intended to be inactive textual references
only.
Risk
Factors
The
Company has a limited operating history upon which to base an evaluation of
the
business and prospects. Our business and prospects must be considered in light
of the risks, expenses and difficulties frequently encountered by companies
in
an early stage of development, particularly companies in new and rapidly
evolving markets, including online commerce. As a result of our limited
operating history, it is difficult to accurately forecast net sales and
management has limited historical financial data upon which to base planned
operating expenses. Management based our current and future expense levels
on
operating plans and estimates of future net sales. Sales and operating results
are difficult to forecast because they generally depend on the volume and timing
of the orders received, which is uncertain. As a result, management may be
unable to adjust its spending in a timely manner to compensate for any
unexpected revenue shortfall. This inability could cause potential losses from
operations for a given period to be greater than expected.
FUTURE
LOSSES AND NEGATIVE CASH FLOW MAY OCCUR, WHICH MAY LIMIT OR DELAY THE ABILITY
TO
BECOME PROFITABLE.
Since
incorporation, the Company has expended resources on technology, website
development, hiring of personnel and startup costs. Because the Company expects
to incur additional costs and expenses related to: brand development, marketing
and other promotional activities; the expansion of fulfillment operations,
which
includes supply procurement, order receipt, packaging and shipment; the
continued development of the website, systems and staff; the expansion of
product offerings and website content; and development of relationships with
strategic business partners. The Company’s ability to be profitable depends on
its ability to generate sufficient net sales while maintaining reasonable
expense levels. The Company cannot be certain that it will be able to sustain
net sales at the level required to achieve profitability on a quarterly or
annual basis in the future.
FLUCTUATIONS
IN NET SALES CAN CAUSE QUARTERLY RESULTS TO FLUCTUATE AND COULD CAUSE ANNUAL
RESULTS TO BE BELOW EXPECTATIONS.
A
number
of factors will cause gross margins to fluctuate in future periods, including
the combinations of products sold, marketing and supply decisions, inbound
and
outbound shipping and handling costs, the level of product returns and the
level
of discount pricing and promotional coupon usage. Any change in one or more
of
these factors could reduce gross margins in future periods. Management expects
to experience fluctuations in net sales that will cause quarterly fluctuations
in operating results. Due to the fact that the Company has a limited operating
history, it is always difficult to predict the future sales patterns. If net
sales are below expectations during any given quarter, annual operating results
could be below the expectations of securities analysts and investors. In the
event this occurs, the trading price of the common stock may decline
significantly.
INABILITY
TO OBTAIN SUFFICIENT QUANTITIES OF KEY PRODUCTS, NET SALES COULD
DECREASE.
If
the
Company is not able to offer its customers a sufficient supply and selection
of
products in a timely manner, it could lose customers and net sales could be
below expectations. Success depends on the ability to purchase products in
sufficient quantities at competitive prices. As is common in the industry,
the
Company expects not to have long-term or exclusive arrangements with any
manufacturer, distributor or broker that guarantee the availability of products
for resale. From time to time, the Company may have trouble obtaining sufficient
allocations of key products. In addition, key suppliers may have established
and
may expand their own retailing efforts, which may impact the ability to get
sufficient product allocations from suppliers. Therefore, there is no
predictable or guaranteed supply of products.
OUR
ABILITY TO COMPETE SUCCESSFULLY AGAINST CURRENT AND FUTURE
COMPETITORS.
The
tradeshow industry is new, rapidly evolving and intensely competitive.
Management expects competition to intensify in the future because barriers
to
entry are low, and current and new competitors can enter the market at a
relatively low cost and with little difficulty. Increased competition is likely
to result in price pressure, reduced gross margins and loss of market share,
any
of which could seriously harm net sales and operating results. The Company
potentially competes with a variety of other companies, including: traditional
retailers, which may compete with both an online and offline
presence.
Many
of
the competitors have longer operating histories, larger customer or user bases,
greater brand recognition and significantly greater financial, marketing and
other resources than does the Company. Many of these current and potential
competitors can devote substantially more resources to marketing, merchandising
and systems development than can the Company. In addition, larger,
well-established and well-financed entities may acquire, invest in or form
joint
ventures with our competitors.
INABILITY
TO BUILD AWARENESS OF THE COMPANY’S BRAND MAY PROHIBIT THE COMPANY FROM
COMPETING EFFECTIVELY AGAINST COMPETITORS WHO HAVE GREATER NAME RECOGNITION
AND
SALES COULD BE ADVERSELY AFFECTED.
If
the
Company is unable to economically achieve or promote and maintain its brand,
its
business, results of operations and financial condition could suffer. Management
believes that the importance of brand recognition will increase as more
companies engage in commerce over the Internet. Development and awareness of
our
brand will depend largely on the Company’s success in increasing its customer
base. If the leading brands do not perceive the Company as an effective
marketing and sales channel for their merchandise, or consumers do not perceive
the Company as offering a desirable way to purchase merchandise, the Company
may
be unsuccessful in promoting and maintaining its brand. Furthermore, in order
to
attract and retain customers and to promote and maintain its brand in response
to competitive pressures, management plans to gradually increase the Company’s
marketing and advertising budgets and otherwise to increase substantially its
financial commitment to creating and maintaining brand loyalty among vendors
and
consumers.
INTELLECTUAL
PROPERTY CLAIMS AGAINST THE COMPANY CAN BE COSTLY AND COULD IMPAIR
BUSINESS.
Other
parties may assert infringement or unfair competition claims against the Company
in the event the Company unintentionally sells a product that is a “knock off”
(an unauthorized copy or imitation of a product) or manufactures a private
label
product, and unintentionally infringes on the intellectual property of another
company, organization or individual. Management cannot predict whether we will
do so, or whether any future assertions or prosecutions will harm the business.
If the Company is forced to defend against any infringement claims, whether
they
are with or without merit or are determined in the Company’s favor, then the
Company may face costly litigation, diversion of technical and management
personnel, or product shipment delays. Further, the outcome of a dispute may
be
that management would need to enter into royalty or licensing agreements.
Royalty or licensing agreements, if required, may be unavailable on terms
acceptable to management, or may just be unavailable.
Our
policy is to ensure that all of the products that we sell are original and
do
not infringe on a copyright or a trademark. We will not knowingly sell an
unauthorized copy or imitation of a product. Despite our efforts and diligence,
there is a possibility that we may unknowingly, unwittingly and unintentionally
feature and sell a product that infringes on a copyright or patent. Management
cannot predict whether we will do so, or whether any future assertions or
prosecutions will harm the business.
IF
THE PROTECTION OF PROPOSED TRADEMARKS AND PROPRIETARY RIGHTS IS INADEQUATE,
BRAND AND REPUTATION COULD BE IMPAIRED AND CUSTOMERS COULD BE
LOST.
The
Company intends to take steps to protect proprietary rights, which steps may
be
inadequate. Management regards copyrights, service marks, trademarks, trade
dress, trade secrets and similar intellectual property as critical to its
success. The Company intends to rely heavily on trademark and copyright law,
trade secret protection and confidentiality or license agreements with our
employees, customers, partners and others to protect proprietary rights.
Effective trademark, service mark, copyright and trade secret protection may
not
be available in every country in which the Company intends to sell its products
and services online. Furthermore, the relationship between regulations governing
domain names and laws protecting trademarks and similar proprietary rights
is
unclear. Therefore, the Company may be unable to prevent third parties from
acquiring domain names that are similar to, infringe upon or otherwise decrease
the value of intended trademarks and other proprietary
rights.
THE
LOSS OF THE SERVICES OF ONE OR MORE OF OUR KEY PERSONNEL, OR A FAILURE TO
ATTRACT, ASSIMILATE AND RETAIN OTHER HIGHLY QUALIFIED PERSONNEL IN THE FUTURE,
COULD DISRUPT OPERATIONS AND RESULT IN LOSS OF NET
SALES.
The
Company’s future performance will depend on the continued services of its
management and key personnel and the ability to attract additional management
and key personnel. The loss of the services of one or more of the key personnel
could seriously interrupt business. Management depends on the continued services
and performance of the senior management and other key personnel. The future
success also depends upon the continued service of the executive officers and
other key sales, marketing and support personnel.
OUR
DEPENDENCE ON INCREASING USE OF THE INTERNET AND ON THE GROWTH OF ONLINE
COMMERCE.
The
Company’s future revenues substantially depend upon the increased acceptance and
use of the Internet and other online services as a medium of commerce. Rapid
growth in the use of the Internet and online commerce is a recent phenomenon.
As
a result, acceptance and use may not continue to develop at historical rates
and
a sufficiently broad base of customers may not adopt, and/or continue to use,
the Internet and online services as a medium of commerce. Demand and market
acceptance for recently introduced services and products over the Internet
are
subject to a high level of uncertainty and there exist few proven services
and
products.
In
addition, the Internet may not be accepted as a viable long-term commercial
marketplace for a number of reasons, including potentially inadequate
development of the necessary network infrastructure or delayed development
of
enabling technologies and performance improvements. If the Internet continues
to
experience significant expansion in the number of users, frequency of use or
bandwidth requirements, the infrastructure for the Internet may be unable to
support the demands placed upon it. In addition, the Internet could lose its
viability as a commercial medium due to delays in the development or adoption
of
new standards and protocols required to handle increased levels of Internet
activity, or due to increased governmental regulation. Changes in, or
insufficient availability of, telecommunications services to support the
Internet also could result in slower response times and adversely affect usage
of the Internet generally.
The
Company’s business, financial condition and results of operations would be
seriously harmed if: use of the Internet and other online services does not
continue to increase or increases more slowly than expected; the infrastructure
for the Internet and the Company’s systems infrastructure does not effectively
support expansion that may occur; the Internet and other online services do
continue to be a viable commercial marketplace; or traffic to the website
decreases or fails to increase as expected or if management spends more than
was
expected to attract visitors to the website.
REQUIREMENTS
TO CHANGE THE MANNER IN WHICH THE COMPANY CONDUCTS BUSINESS IF GOVERNMENT
REGULATION INCREASES.
The
adoption or modification of laws or regulations relating to the Internet could
adversely affect the manner in which the Company proposes to conduct its
business. In addition, the growth and development of the market for online
commerce may lead to more stringent consumer protection laws, both in the United
States and abroad, that may impose additional burdens on the Company. Laws
and
regulations directly applicable to communications or commerce over the Internet
are becoming more prevalent. The United States Congress has enacted Internet
laws regarding children’s privacy, copyrights, taxation and the transmission of
sexually explicit material. The European Union recently enacted its own privacy
regulations. Laws regulating the Internet, however, remain largely unsettled,
even in areas where there has been some legislative action. It may take years
to
determine whether and how existing laws such as those governing intellectual
property, privacy, libel, and taxation apply to the Internet.
In
order
to comply with new laws regulating online commerce, the Company may need to
modify the manner in which it proposes to do business, which may result in
additional expenses. For instance, new laws may require that the Company modify
or change the way it represents and/or advertises products on its e-commerce
web
site to comply with the applicable new laws. The Company may need to spend
time
and money revising the process by which it intends to fulfill customer orders
to
ensure that each shipment complies with the applicable new laws. The Company
may
need to hire additional personnel to monitor compliance with the applicable
new
laws. The Company may also need to modify its software to further protect
customers’ personal information.
GOVERNMENT
REGULATION WITH REGARDS TO THE COMPANY'S FRANCHISE PLANS MANY HAVE AN ADVERSE
EFFECT ON THE BUSINESS OF THE COMPANY.
The
sale
of franchises is regulated by various state laws, as well as by the Federal
Trade Commission (the “FTC”). The FTC requires that franchisors make extensive
disclosure to prospective franchisees, although it does not require registration
of offers to prospective franchisees. A number of states require registration
and disclosure in connection with franchise offers and sales. In addition,
several states have “franchise relationship laws” that limit the ability of
franchisors to terminate franchise agreements or to withhold consent to the
renewal or transfer of these agreements. While the Company’s franchising
operations currently are not materially adversely affected by such regulations,
the Company cannot predict the effect any future legislation or regulation
may
have on its business operations or financial condition.
LIABILITY
FOR THE INTERNET CONTENT THAT IS PUBLISHED.
As
a
publisher of online content, the Company faces potential liability for
defamation, negligence, copyright, patent or trademark infringement, or other
claims based on the nature and content of materials that it publishes or
distributes. If the Company faces liability, then its reputation and its
business may suffer. In the past, plaintiffs have brought these types of claims
and sometimes successfully litigated them against online companies. In addition,
the Company could be exposed to liability with respect to the unauthorized
duplication of content. Although the Company intends to carry general liability
insurance, such insurance may not cover claims of these types. The Company
cannot be certain that it will be able to obtain insurance to cover the claims
on reasonable terms or that it will be adequate to indemnify the management
or
the Company for all liability that may be imposed. Any imposition of liability
that is not covered by our insurance or is in excess of insurance coverage
could
harm the business. in the event the Company unintentionally uses a registered
name or other copyrighted or trademarked material, such as the unauthorized
or
unintentional duplication of content.
INABILITY
TO MEET FUTURE CAPITAL REQUIREMENTS.
The
Company cannot be certain that additional financing will be available on
favorable terms when required, or at all. If the Company raises additional
funds
through the issuance of equity, equity-related or debt securities, the
securities may have rights, preferences or privileges senior to those of the
rights of the common stock and those stockholders may experience additional
dilution. Management currently anticipates that the private financing done
to
date, together with expected revenues, will be sufficient to meet anticipated
needs for working capital and capital expenditures through at least the next
12
months. After that, the Company may need to raise additional
funds.
THE
COMMON STOCK PRICE MAY BE VOLATILE, WHICH COULD RESULT IN SUBSTANTIAL LOSSES
FOR
INDIVIDUAL STOCKHOLDERS.
The
market price for the Company’s common stock is likely to be highly volatile and
subject to wide fluctuations in response to factors including the following,
some of which are beyond the Company’s control: actual or anticipated variations
in the quarterly operating results; announcements of technological innovations
or new products or services by the Company or its competitors; changes in
financial estimates by securities analysts; conditions or trends in the Internet
and/or online commerce industries; changes in the economic performance and/or
market valuations of other online commerce or retail companies; announcements
by
management or competitors of significant acquisitions, strategic partnerships,
joint ventures or capital commitments; additions or departures of key personnel;
and potential litigation.
In
addition, the stock market has from time to time experienced extreme price
and
volume fluctuations. These broad market fluctuations may adversely affect the
market price of the Company’s common stock.
DUE
TO STOCK PRICE VOLATILITY, THE COMPANY COULD FACE A SECURITIES CLASS ACTION
LAWSUIT.
In
the
past, following periods of volatility in the market price of their stock, many
companies have been the subject of securities class action litigation. If the
Company was sued in a securities class action, it could result in substantial
costs and a diversion of management’s attention and resources and would cause
the stock price to fall.
The
decision to pay dividends, if any, will be at the discretion of the Company’s
Board of Directors.
YOU
MAY HAVE TO LOOK TO PRICE APPRECIATION ALONE FOR ANY RETURN ON YOUR
INVESTMENT.
Some
investors favor companies that pay dividends, particularly in general downturns
in the stock market. We have not declared or paid any cash dividends on
our common stock. We currently intend to retain any future earnings for
funding growth, and we have no immediate plans at this time to pay a dividend.
Because we may not pay dividends, your return on this investment likely depends
on your selling our stock at a profit.