As filed with the Securities and Exchange Commission on August 19, 2002
Registration No. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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RUB A DUB SOAP, INC.
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(Name of small business issuer in its charter)
Colorado 2840 84-1609495
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(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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13279 West Ohio Avenue
Lakewood, Colorado 80228; (303) 949-5834
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(Address and telephone number of principal executive offices)
13279 West Ohio Avenue
Lakewood, Colorado 80228
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(Address of principal place of business or intended principal place of business)
Ms. Lisa R. Powell
13279 West Ohio Avenue
Lakewood, Colorado 80228; (303) 949-5834
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(Name, address and telephone number of agent for service)
Please send copies of all correspondence to:
PATRICIA CUDD, ESQ.
Cudd & Associates
12441 West 49th Avenue, Suite #1-A
Wheat Ridge, Colorado 80033
Telephone: (303) 861-7273
Approximate date of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] __________________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________________________
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________________________
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Title of Each Dollar Maximum Maximum Amount of
Class of Securities Amount to Offering Price Aggregate Registration
to Be Registered Be Registered Per Share* Offering Price* Fee
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Common Stock,
$.001 par value $200,000 $.25 $200,000 $18.40
TOTAL $200,000 $18.40
*Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o).
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 that specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
2
PART I - Narrative Information Required in Prospectus
Item 2. Significant Parties.
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List the full names and business and residential addresses, as applicable,
for the following persons:
(1) The issuer's directors:
Lisa R. Powell Residence/Business Address:
13279 West Ohio Avenue
Lakewood, Colorado 80228
(2) The issuer's officers:
Lisa R. Powell, President, Residence/Business Address:
Secretary and Treasurer 13279 West Ohio Avenue
Lakewood, Colorado 80228
(3) The issuer's general partners:
The issuer is a corporation and, accordingly, has no general partners.
(4) Record owners of 5 per cent or more of any class of the issuer's
equity securities:
The following individual, whose address is set forth in Items 1.(a) and (b)
above, is the owner of record of five per cent or more of the outstanding shares
of common stock of Rub A Dub Soap, Inc.
Shares Owned Per Cent of Class
Name of Record Owner of Record* Before Offering
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Lisa R. Powell 3,000,000 83.7%
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*Based upon 3,583,000 shares of our common stock issued and outstanding as
of the date of this prospectus.
(5) Beneficial owners of 5 per cent or more of any class of the issuer's
equity securities:
See the response to Item 2.,(4) above.
(6) Promoters of the issuer:
Ms. Lisa R. Powell may be deemed to be a "promoter" of Rub A Dub Soap, as
that term is defined in the Securities Act of 1933.
(7) Affiliates of the issuer:
Ms. Lisa R. Powell is an affiliate of Rub A Dub Soap.
(8) Counsel to the issuer with respect to the proposed offering:
Patricia Cudd, Esq.
Cudd & Associates
12441 West 49th Avenue, Suite #1-A
Wheat Ridge, Colorado 80033
(9) Each underwriter with respect to the proposed offering:
Not applicable. There is no underwriter(s) with respect to the proposed
offering.
(10) The underwriter's directors:
Not applicable.
(11) The underwriter's officers:
Not applicable.
(12) The underwriter's general partners:
Not applicable.
(13) Counsel to the underwriter:
Not applicable.
Item 3. Relationship with Issuer of Experts Named in Offering Statement.
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Patricia Cudd, Esq., record and beneficial owner of 135,000 shares,
representing approximately 3.8% of the outstanding shares, of our common stock,
is the sole proprietor of Cudd & Associates, the law firm that has acted as our
legal counsel in connection with this proposed offering. We have no parents or
subsidiaries.
Item 4. Selling Security Holders.
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Not applicable. None of our shareholders is offering any shares of common
stock in the offering.
2
Item 5. Changes in and Disagreements with Accountants.
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Not applicable. We had no independent accountant prior to the retention of
Comiskey & Company, P.C., 789 Sherman Street, Suite #440, Denver, Colorado
80203, in May 2002. There has been no change in our independent accountant
during the period commencing with the retention of Comiskey & Company, P.C.,
through the date of this report.
Item 6. Disclosure of Commission Position on Indemnification for Securities Act
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Liabilities.
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Under Colorado law and pursuant to our Articles of Incorporation, we may
indemnify our officers and directors for various expenses and damages resulting
from their acting in these capacities. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to our
officers or directors pursuant to those provisions, we have been informed by our
counsel that, in the opinion of the U.S. Securities and Exchange Commission, the
indemnification is against public policy as expressed in the Securities Act of
1933, and is therefore unenforceable.
3
Rub A Dub Soap, Inc.
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(Exact name of Company as set forth in Charter)
Type of securities offered: Shares of common stock, $.001 par value per share
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Maximum number of securities offered: 800,000 shares of common stock
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Minimum number of securities offered: 100,000 shares of common stock
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Price per security: $.25 per share
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Total proceeds: If maximum sold: $200,000 If minimum sold: $25,000
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(See Questions 9 and 10)
Is a commissioned selling agent selling the securities in this offering?
[ ] Yes [X] No
If yes, what per cent is commission of price to public? -0-% Not applicable.
Is there other compensation to selling agent(s)? [ ] Yes [X] No Not
applicable
Is there a finder's fee or similar payment to any person? [ ] Yes [X] No (See
Question No. 22)
Is there an escrow of proceeds until minimum is obtained? [ ] Yes [X] No (See
Question No. 26)
Is this offering limited to members of a special group, such as employees of the
Company or individuals?
[ ] Yes [X] No (See
Question No. 25)
Is transfer of the securities restricted? [ ] Yes [X] No (See
Question No. 25)
INVESTMENT IN SMALL BUSINESSES INVOLVES A HIGH DEGREE OF RISK, AND
INVESTORS SHOULD NOT INVEST ANY FUNDS IN THIS OFFERING UNLESS THEY CAN AFFORD TO
LOSE THEIR ENTIRE INVESTMENT. SEE QUESTION NO. 2 FOR THE RISK FACTORS THAT
MANAGEMENT BELIEVES PRESENT THE MOST SUBSTANTIAL RISKS TO AN INVESTOR IN THIS
OFFERING.
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS
AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED OR APPROVED BY
ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE,
THESE AUTHORITIES HAVE NOT PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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THE U.S. SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS
OF ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON
THE ACCURACY OR COMPLETENESS OF ANY PROSPECTUS OR SELLING LITERATURE.
This Company:
[ ] Has never conducted operations.
[X] Is in the development stage.
[X] Is currently conducting operations.
[ ] Has shown a profit in the last fiscal year.
[ ] Other (Specify):
(Check at least one, as appropriate)
This offering has been registered for offer and sale in the following states:
None.
State State File No. Effective Date
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Colorado
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TABLE OF CONTENTS
Page
The Company 8
Risk Factors 8
Business and Properties 18
Offering Price Factors 33
Use of Proceeds 37
Capitalization 40
Description of Securities 41
Plan of Distribution 43
Dividends, Distributions and Redemptions 45
Officers and Key Personnel of the Company 45
Directors of the Company 46
Principal Stockholders 48
Management Relationships, Transactions and Remuneration 49
Litigation 52
Federal Tax Aspects 52
Miscellaneous Factors 52
Financial Statements 53
Management's Discussion and Analysis of Certain Relevant Factors 53
THIS PROSPECTUS CONTAINS ALL OF THE REPRESENTATIONS BY THE COMPANY
CONCERNING THIS OFFERING, AND NO PERSON SHALL MAKE DIFFERENT OR BROADER
STATEMENTS THAN THOSE CONTAINED HEREIN. INVESTORS ARE CAUTIONED NOT TO RELY UPON
ANY INFORMATION NOT EXPRESSLY SET FORTH IN THIS PROSPECTUS.
6
This Prospectus, together with Financial Statements and other Attachments,
consists of a total 67 pages.
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THE COMPANY
1. Exact corporate name: Rub A Dub Soap, Inc.
State and date of incorporation: Colorado; September 28, 2001.
Street address of principal office: 13279 West Ohio Avenue, Lakewood,
Colorado 80228.
Company telephone number: (303) 949-5834.
Company e-mail address: service@rubadubsoaps.com
Fiscal year: December 31.
Person(s) to contact at Company with respect to offering: Ms. Lisa R.
Powell.
Telephone number (if different from above): Not applicable. Same as above.
RISK FACTORS
2. List in the order of importance the factors that the Company considers
to be the most substantial risks to an investor in this offering in view of all
facts and circumstances or that otherwise make the offering one of high risk or
speculative (i.e., those factors that constitute the greatest threat that the
investment will be lost in whole or in part, or not provide an adequate return).
Risk Factors Related to Our Business
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We are a development-stage company with limited prior business operations
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and we may not be able to establish ourselves as a going concern. We are an
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online retailer of handmade, natural, herbal soaps and gift baskets in the early
development stage. The likelihood of our success must be considered in light of
our stage of development. We have only limited operating history on which you
can base an evaluation of our business and prospects. Our efforts, since
inception, have been allocated primarily to the following:
o Organizational activities;
o Developing a business plan;
o Obtaining interim funding;
o Increasing our inventory of natural, vegetable-based soaps and gift
baskets; and
o Establishing and enhancing our web site on the Internet.
8
In order to establish ourselves as a significant competitor in the retail
market for natural products, we are dependent upon the anticipated proceeds of
this offering, the receipt of additional funds from other sources to continue
business operations and/or the achievement of profitable operations. You should
be aware of the increased risks, uncertainties, difficulties and expenses we
face as an online retailer with limited operating history in a new and rapidly
evolving market. If we are unable to raise additional funds or achieve
profitability or if we encounter unexpected difficulties and expenses, then our
business strategy may not be successful.
We have realized very limited revenues and no earnings, and we may not be
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able to achieve profitable operations in the future. We only began selling
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handmade, natural, herbal soaps and gift baskets online in January 2002 and have
yet to realize meaningful revenues. We realized revenues of $971, and a net loss
of $(93,848), for the period from inception (September 28, 2001) to May 31,
2002. We may not be able to achieve profitable operations in the future from the
online sale of handmade, natural soaps and gift baskets and, if sufficient
demand exists, other natural products such as soap molds and soap making
equipment. Our ability to increase the level of our revenues will be dependent
on a number of factors, including the following:
o Our ability to keep our web site operational;
o Our ability to expand our inventory of soaps and gift baskets and, if
demand warrants, develop an inventory of other natural products;
o The success of brand building and marketing campaigns, including our
test marketing trial with Stacy's Hallmark in Denver, Colorado;
o The continued increase in the use of the Internet and the growth of
electronic commerce;
o Consumer confidence in the security of transactions on our web site;
o Our ability to upgrade and develop our systems and infrastructure to
accommodate growth;
o The availability and reasonable cost of advertising in traditional
media and on other web sites; and
o Favorable general economic conditions specific to the Internet and
electronic commerce industries.
Our success in the business of selling handmade, vegetable-based soaps is
dependent upon our achieving profitable operations or obtaining additional
financing to enable us to fully implement our business plan. If we are unable to
obtain additional debt and/or equity financing from this or other securities
offerings or otherwise, then we will not be able to continue as a going concern
unless we realize meaningful revenues. During the development stage of our
operations, the revenues generated from operations can be expected to be
insufficient to cover expenses.
9
We expect significant increases in our costs and expenses to result in a
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loss for at least the next year. We cannot be certain that we will obtain enough
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customer traffic on our web site or a high enough volume of purchases online
and/or from wholesale customers, trade shows and/or individually-hosted parties
to generate sufficient revenues and achieve profitability. We intend to increase
our costs and expenses substantially as we:
o Purchase manufacturing and office equipment and soap ingredients;
o Increase our sales and marketing activities online; to prospective
wholesale customers; and via trade shows and direct sales from
individually-hosted parties;
o Increase our general and administrative functions to support our
growing operations;
o Increase our inventory to include other types of soaps and gift
baskets;
o Expand our product line to include other natural products such as soap
molds and soap making equipment; and
o Further develop our Internet web site.
We may find that these efforts will be more expensive than we currently
anticipate or that these efforts may not result in proportional increases in our
revenues, which would further increase our losses. Accordingly, we believe that
we may incur an operating and net loss for at least the next year, and possibly
longer, and that the rate at which we incur these losses may increase.
We have limited assets and working capital and minimal shareholders' equity
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and, if our financial condition does not improve, we will cease operations and
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our shareholders will lose their entire investment. As of May 31, 2002, we had
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total assets of $27,793, including $15,722 in cash and cash equivalents, $1,787
in inventory, accounts receivable of $95 and furniture and equipment (less
accumulated depreciation) of $10,189. Our working capital and total
stockholders' equity as of May 31, 2002, were $15,978 and $25,802, respectively.
Accordingly, we have only very limited assets, including working capital, and
financial resources. Ms. Lisa R. Powell, our sole executive officer and director
and principal shareholder, received 3,000,000 shares of our common stock in
exchange for consideration valued at $3,050. In addition, we issued 370,000
shares of common stock to three shareholders for $370 in cash and an additional
213,000 shares of common stock to twenty shareholders for $42,600 in cash. After
this offering, which, if completed, will yield net proceeds of a minimum of
$19,300 and a maximum of $194,300, our working capital may be dissipated by
current liabilities. Our financial condition may not improve. We believe that
the proceeds of this offering, together with revenues from operations, will be
sufficient to implement our business plan on a limited scale over the next year.
However, we do not expect to continue in operation, without an infusion of
capital, after the expiration of one year from the closing of this offering. In
order to obtain additional equity financing, we may be required to dilute the
interest of existing shareholders or forego a substantial interest in our
revenues, if any. See "Certain Transactions" for a more detailed description of
our capitalization and financial condition.
10
Because we will need to raise additional funds and these funds may not be
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available to us when we need them, we may need to change our business plan, sell
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or merge our business or face bankruptcy. Based on our current projections, we
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will need to raise funds after the expiration of one year from the closing of
this offering through the issuance of equity, equity-related or debt securities
in addition to the funds we are raising in this offering. We will need to raise
additional capital sooner than one year after the closing of this offering if we
are unable to sell at least the minimum number of shares of common stock being
offered or if we receive the minimum proceeds and our sales are lower than
expected. Additional capital may not be available to us on favorable terms when
required, or at all. If this additional financing is not available to us, we may
need to dramatically change our business plan, sell or merge our business or
face bankruptcy. In addition, our issuance of equity or equity-related
securities will dilute the ownership interest of existing shareholders and our
issuance of debt securities could increase the risk or perceived risk of our
company. Any of these actions could cause our stock price to fall. Apart from
our requirements for capital in addition to the anticipated proceeds of this
offering, prospective investors should be aware of the possibility that we will
not raise any funds in this offering.
The use of our soaps and/or other natural products by purchasers may
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subject us to substantial liability and the $1,000,000 limit of our product
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liability insurance policy may not be enough to insulate us from liability. We
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may be subject to substantial liability for loss, damages or injury to
purchasers caused by the use of our handmade, natural, herbal soaps and/or other
natural products that we may market in the future, on or in the human body.
Currently, the limit of our insurance policy covering product liability claims
is $1,000,000. No proceeds of this offering have been allocated to purchase any
additional product liability insurance coverage. If any product liability claims
were to be filed and were to be successful, we may not have adequate insurance
coverage or sufficient resources to pay those claims. If we paid any claims from
our working capital, our liquidity and future results of operations would be
adversely affected. We have no current plans to increase the limits of our
product liability insurance policy. In any event, any additional coverage we
obtain may not cover our liability or damages may exceed the limits of the
additional coverage, if any.
We may not succeed in establishing the Rub A Dub Soap brand, which would
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adversely affect customer acceptance and our revenues. The market for natural
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products, such as handmade, vegetable-based soaps, is competitive in nature. We
may lose the opportunity to build a critical mass of customers if we do not
establish our brand quickly. Promoting and positioning our brand will depend
largely on the success of our marketing efforts and our ability to provide
consistent, high quality customer experiences. To promote our brand, we will
incur substantial expense in our advertising efforts, initially, via mailings of
brochures together with advertising on web sites that we believe our customers
are likely to visit; our participation in test marketing trials with Stacy's
Hallmark and, possibly, other retailers; and our attendance at industry trade
shows. We will also incur substantial expense in our efforts to enter into
strategic alliances with online and more traditional companies that we believe
will promote our brand and drive customers to our web site. Ultimately, we will
also need to expend funds to attract and train customer service personnel and to
develop content to help build our brand and attract customers to our web site.
We will incur additional losses if these brand promotion activities do not yield
increased revenues.
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We depend on our ability to build and maintain relationships with our
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suppliers to obtain sufficient quantities of quality merchandise on acceptable
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commercial terms. Our business strategy depends on providing a large selection
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of quality, handmade, natural, vegetable-based soaps and/or other natural
products that, in turn, depends on our ability to build or maintain
relationships with our current suppliers and other suppliers. Our arrangements
with these suppliers and potential arrangements or contracts with other
suppliers do not guarantee the availability of merchandise, establish guaranteed
prices or provide for the continuation of particular pricing practices. Our
current suppliers may not continue to supply us on current terms or at all, and
we may not be able to establish new suppliers to ensure delivery of products in
a timely manner or on terms acceptable to us. If the quality of products
supplied to us falls below our customers' expectations, we may lose customers.
We are also subject to the risks our suppliers face, including employee strikes
and inclement weather. Our failure to deliver a large selection of quality,
natural, herbal soaps and/or other products to our customers in a timely and
accurate manner and at acceptable prices would harm our reputation, the Rub A
Dub Soap brand and our results of operations.
Our systems and operations, and those of our suppliers and shippers, are
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vulnerable to natural disasters and other unexpected problems, which could
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reduce customer satisfaction and harm our sales. Substantially all of our
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computer and communications hardware is located at our facility in Lakewood,
Colorado, and our systems infrastructure is hosted at a facility in Wheat Ridge,
Colorado. Our systems and operations are vulnerable to damage or interruption
from fire, flood, power loss, telecommunications failure and similar events. In
addition, our servers are vulnerable to computer viruses, physical or electronic
break-ins and similar disruptions, which could lead to interruptions, delays,
loss of data or the inability to accept and fulfill customer orders. We do not
currently have fully redundant systems or a formal disaster recovery plan and do
not carry business interruption insurance to compensate for losses that may
occur. Our suppliers also face these risks. We also depend on the efficient
operation of Internet connections from customers to our systems. These
connections, in turn, depend on the efficient operation of web browsers,
Internet service providers and Internet backbone service providers, all of which
have had periodic operational problems or experienced outages. Any system
delays, failure or loss of data, whatever the cause, could reduce customer
satisfaction with our applications and services and harm our sales.
We face the risk of systems interruptions and capacity constraints on our
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web site, possibly resulting in losses of revenue, erosion of customer trust and
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adverse publicity. The availability, reliability and satisfactory performance of
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our web site, network infrastructure and transaction processing systems are
critical to our reputation and our ability to attract and retain customers and
to maintain adequate customer service. Any future systems interruption that
results in the unavailability of our web site or reduced order fulfillment could
result in negative publicity and reduce the volume of products sold and the
attractiveness of our web site, which could negatively affect our revenues. We
may experience temporary system interruptions in the future for a variety of
reasons, including power failures, software bugs, viruses and an overwhelming
number of visitors trying to reach our web site during sales or promotions. We
may not be able to correct a problem in a timely manner because of our
dependence on outside consultants for the implementation of certain aspects of
our system. Because some of the reasons for a systems interruption may be
outside our control, we also may not be able to remedy the problem quickly or at
12
all. To the extent that customer traffic grows substantially, we will need to
expand the capacity of our systems to accommodate a larger number of visitors.
Any inability to scale our systems may cause unanticipated system disruptions,
slower response times, degradation in levels of customer service, impaired
quality and speed of order fulfillment or delays in reporting accurate financial
information. We are not certain that we will be able to project the rate or
timing of increases, if any, in the use of our web site accurately or in a
timely manner to permit us to effectively upgrade and expand our
transaction-processing systems or to integrate smoothly any newly developed or
purchased modules with our existing systems.
Because our sole executive officer and director is our only employee,
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devotes only 20% of her time to our business and is not bound by an employment
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agreement, we may not be able to achieve profitability or maintain our
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operations with the limited time commitment of this individual and we may
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realize serious harm if she leaves. Ms. Lisa R. Powell, our
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President/Secretary/Treasurer and a director of Rub A Dub Soap, is our only
employee. For the foreseeable future, we have no plans to employ any other
personnel. Ms. Powell devotes approximately 20% of her time and effort to our
business and affairs currently. We may not be able to achieve profitability or
maintain our operations with the limited time commitment of our sole executive
officer and director. We face the additional risk that Ms. Powell could leave
with little or no prior notice because she is not bound by an employment
agreement. If we lost the services of Ms. Powell, our business could be
seriously harmed. We do not have a "key person" life insurance policy covering
Ms. Powell.
We must enter into strategic relationships to help promote our web site
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and, if we fail to develop, maintain or enhance these relationships, we may not
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be able to attract and retain customers, build our Rub A Dub Soap brand and
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enhance our sales and marketing capabilities. We believe that our ability to
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attract customers, facilitate broad market acceptance of our products and the
Rub A Dub brand and enhance our sales and marketing capabilities depends on our
ability to develop and maintain strategic relationships with other natural
product and related web sites and portals that can drive customer traffic to our
web site. If we are unsuccessful in developing or maintaining these
relationships, or if the relationships do not assist us in attracting or
retaining customers, it may be difficult to grow our business.
We may be unable to achieve profitability with our single product line and
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the limited number of products we are able to produce with the limited proceeds
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of this offering. Our product line is presently limited to handmade, natural,
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vegetable-based soaps, including thirteen types of soaps and four styles of gift
baskets. Further, while we have allocated $1,750 (7%) of the minimum net
proceeds, and $32,500 (16.25%) of the maximum net proceeds, anticipated to be
received from this offering for the development of new products, possibly soap
molds and soap cutting equipment, this funding is limited and will only permit
us to develop one or two additional products to a limited extent. No funds have
been allocated for market research to determine if there is demand sufficient to
warrant the addition of soap making equipment to our product line or for the
purchase of this equipment. We may be unable to achieve profitable operations
with our current single product line together with the possible addition of soap
making equipment.
13
The success of our business depends on attracting and retaining a large
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number of potential customers. As a development-stage company that recently
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established our Internet site featuring handmade, natural, vegetable-based soaps
and gift baskets, we lack recognition in the market. Our success depends on
attracting a large number of potential customers who traditionally shop in
retail stores and specialty shops, and persuading them to shop on our web site.
Our success is also dependent on ensuring that these customers remain our loyal,
long-term customers. In addition to persuading customers to purchase our
products on the Internet, our customers may not accept our online solution over
those offered by our competitors. If we fail to persuade customers to shop
online or our competitors are more successful in achieving sales, then our
revenues will suffer. Furthermore, we may be required to incur significantly
higher and more sustained advertising and promotional expenditures than we
currently anticipate to attract online shoppers to our web site and to convert
these shoppers to purchasing customers. As a result, we may not be able to
achieve profitability when we expect, or at all.
Competition from traditional and online retailers may result in price
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reductions and decreased demand for our products. The market for natural
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products has become increasingly competitive. Competition is expected to
intensify in the future, which may result in price reductions, fewer customer
orders, reduced gross margins and loss of market share. We currently or
potentially compete with a variety of companies located both inside and outside
the United States that retail soaps, gift baskets and/or other natural products.
Many of our current and potential traditional store-based competitors have
longer operating histories, larger customer or user bases, greater brand
recognition and significantly greater financial, marketing and other resources
than we do. These companies include grocery stores, organic or natural food
stores and small specialty shops. Many of these current and potential
competitors can devote substantially more resources to web site and systems
development than we can. In addition, larger, more well-established and financed
entities may acquire, invest in or form joint ventures with online competitors
as the use of the Internet and other online services increases.
We may be unable to adequately protect or enforce our intellectual property
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rights. We rely on a combination of trademark, trade secret and copyright law to
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protect our intellectual property. These laws afford only limited protection.
Despite our efforts to protect our proprietary rights, unauthorized persons may
attempt to copy aspects of our web site, including the look and feel of our web
site, products that we sell, product organization, product information and sales
mechanics or to obtain and use information that we regard as proprietary, such
as the technology used to operate our web site and our content. We have not
filed an application to secure registration for our trademark, "Rub A Dub Soap,"
in the United States or any other country. Any encroachment upon our proprietary
information, the unauthorized use of our trademark, the use of a similar name by
a competing company or a lawsuit initiated against us for our infringement upon
another company's proprietary information or improper use of their trademark,
may affect our ability to create brand name recognition, cause customer
confusion and/or have a detrimental effect on our business.
Litigation or proceedings before the U.S. Patent and Trademark Office may
be necessary in the future to enforce our intellectual property rights, to
protect our trade secrets and domain name and to determine the validity and
scope of the proprietary rights of others. Any litigation or adverse proceeding
could result in substantial costs and diversion of resources and could seriously
14
harm our business and operating results. Finally, if we sell products
internationally, the laws of many countries do not protect our proprietary
rights to as great an extent as do the laws of the United States.
Third parties may also claim infringement by us with respect to past,
current or future technologies. We expect that participants in our markets will
be increasingly subject to infringement claims as the number of services and
competitors in our industry segment grows. Any claim, whether meritorious or
not, could be time-consuming, result in costly litigation, cause service upgrade
delays or require us to enter into royalty or licensing agreements. These
royalty or licensing agreements might not be available on terms acceptable to us
or at all.
Risk Factors Related to This Offering
- -------------------------------------
Because of the absence of escrow arrangements for the minimum offering
---------------------------------------------------------------------------
proceeds, the funds paid for shares of common stock will not be insulated from
- --------------------------------------------------------------------------------
our creditors, if any. Until such time as subscriptions for at least 100,000
- ------------------------
shares of common stock have been received and accepted by Rub A Dub Soap, all
proceeds from the offering will be held in our money market account at Citywide
Banks, N.A., Wheat Ridge, Colorado. Customarily, entities such as Rub A Dub
Soap, which are seeking to raise equity funding, provide for the escrow or other
impoundment of the proceeds to be received from the minimum number of securities
being offered. No such escrow or impound arrangements have been made for the
minimum proceeds anticipated to by received by us from this offering. Thus,
subscribers for the minimum number of shares of common stock being offered by
this memorandum are subject to additional risks in that the funds paid for the
shares will not be insulated from our creditors, if any.
There is no public market for our common stock and, if a public market
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fails to develop or be sustained, then investors may be unable to sell, and
- --------------------------------------------------------------------------------
therefore lose their investments in, the shares of common stock. There is no
- -------------------------------------------------------------------
public market for our common stock and there is no assurance that a public
market will develop as a result of this offering or, if developed, that it will
be sustained. Many brokerage firms may not effect transactions in the securities
and many lending institutions may not permit their use as collateral for loans.
The common stock will be traded, if at all, in the "pink sheets" maintained by
members of the National Association of Securities Dealers, Inc., and possibly on
the electronic Bulletin Board. We will not satisfy the requirements either for
being quoted on the National Association of Securities Dealers' Automated
Quotations System or for listing on any national securities exchange.
Accordingly, until we qualify for NASDAQ or listing on an exchange, any trading
market that may develop for the common stock is not expected to qualify as an
"established trading market" as that term is defined in Securities and Exchange
Commission regulations, and is expected to be substantially illiquid.
Because the offering will not be underwritten, investors in the shares of
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common stock being offered will not be afforded the protections of certain of
- --------------------------------------------------------------------------------
the NASD conduct rules and our management may not be successful in raising even
- --------------------------------------------------------------------------------
the minimum amount of funds. This offering is self-underwritten and,
- --------------------------------
accordingly, is not being conducted by a broker-dealer that is a member of, and
subject to the Conduct Rules regarding securities distributions promulgated by,
15
the National Association of Securities Dealers, Inc. Accordingly, investors in
the shares of common stock being offered by this memorandum will not be afforded
the protections of certain of the NASD Conduct Rules that regulate activities,
such as communications with the public, transactions with customers, permissible
commissions, the manner of distribution of securities and the maintenance of
records, among other things, of broker-dealers that are members of the NASD.
Despite her best efforts, Ms. Lisa R. Powell, our sole executive officer and
director may not be capable of selling at least 100,000 shares of common stock
within the offering period, or any shares in excess of 100,000. Ms. Powell has
not previously participated in selling an offering of securities for any issuer.
If we are unable to sell at least 100,000 shares of common stock within the
offering period, then the offering will terminate and we will be obligated to
refund all funds to the subscribers in full, without deduction for offering
expenses. The fact that the offering may not be registered in any states other
than the State of Colorado may also make it difficult for our management to find
purchasers for the shares.
The offering price of our common stock is arbitrary and was not determined
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based on a market price; therefore, it should not be considered to bear any
- --------------------------------------------------------------------------------
relationship to our assets, book value or net worth and should not be considered
- --------------------------------------------------------------------------------
to be an indication of our value. Because there is no public market for our
- -----------------------------------
common stock, the offering price was not determined based on a market price. The
factors considered in determining the offering price of the common stock include
our future prospects, the likely trading price for the common stock if a public
market develops and management's opinion of the implicit value of the company.
Accordingly, we have arbitrarily established the offering price of the common
stock and it should not be considered to bear any relationship to our assets,
book value or net worth and should not be considered to be an indication of our
value.
Because our sole management member will continue to control Rub A Dub Soap,
---------------------------------------------------------------------------
she will be able to determine the outcome of all matters requiring approval of
- --------------------------------------------------------------------------------
our shareholders. Ms. Lisa R. Powell, our President/Secretary/Treasurer and
- ------------------
owner of 3,000,000 shares of our outstanding common stock, is a parent and
controlling person of Rub A Dub Soap because of her position and share
ownership. Even following the completion of this offering, Ms. Powell will own
approximately 69% to approximately 82% of our outstanding shares of common
stock. Therefore, our sole management member will be able to determine the
outcome of all matters requiring approval by our shareholders, including the
election of directors and the approval of mergers or other business combination
transactions. See "Principal Shareholders" for a description of management's
share ownership and "Management" for background on Ms. Powell.
Our stock price will fluctuate after this offering, which may result in
---------------------------------------------------------------------------
substantial losses for investors. The offering price for the shares of common
- -----------------------------------
stock being offered by this prospectus was arbitrarily selected and the trading
price will fluctuate after this offering once trading commences, if ever. The
fluctuation of the stock price could result in substantial losses for investors.
The market price of our common stock may fluctuate significantly in response to
a number of factors, some of which will be beyond our control. These factors
include:
o Quarterly variations in operating results;
16
o Announcements by us or our competitors of new product and service
offerings, significant contracts, acquisitions or strategic relationships;
o Publicity about our company, our products and services or our
competitors;
o Additions or departures of key personnel;
o Any future sales of our common stock; and
o Stock market price and volume fluctuations of publicly-traded
companies in general.
The trading prices of many public companies have been especially volatile and
many are at or near historical lows. Investors may be unable to resell their
shares of common stock at or above the offering price.
New shareholders will incur substantial dilution of approximately $.18 to
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$.19 per share as a result of this offering. The current shareholders of Rub A
- --------------------------------------------
Dub Soap have acquired their shares of common stock at an average cost of $.01
per share, which is substantially less than the price of $.25 per share to be
paid by the investors in this offering. Accordingly, the offering price is
substantially higher than the book value per share of our outstanding common
stock. As a result, an investor who acquires shares of common stock in this
offering will incur immediate substantial dilution of approximately $.18 per
share, in the event of the minimum offering, and approximately $.19 per share,
in the event of the maximum offering. See "Dilution" for a more detailed
description of how new shareholders will incur dilution.
The proceeds of this offering may be inadequate and, in that event, if we
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are unable to generate revenue or obtain additional capital, our business may
- --------------------------------------------------------------------------------
fail. The minimum and maximum net proceeds of this offering are $25,000 and
- -----
$200,000, respectively, and, therefore, are sufficient to conduct only a limited
amount of activity. If the proceeds of this offering are insufficient to enable
us to continue operations until we are able to generate revenue or obtain
additional capital on acceptable terms, our business may fail. Particularly if
only the minimum number of shares of common stock being offered hereby is sold,
our continued operation will be dependent on our ability to generate operating
revenue or procure additional financing. We may not be able to generate any
revenue or obtain any additional financing on favorable terms.
Sales of substantial amounts of our shares may depress our stock price. A
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total of 800,000 shares being offered by Rub A Dub Soap in this offering will be
available for resale immediately after the effectiveness of this offering. The
balance of 3,583,000 shares of common stock held by our current shareholders,
including an aggregate of 3,000,000 shares held by our sole executive officer,
become eligible for resale pursuant to Rule 144 commencing in September 2001.
Sales of a substantial number of shares of our common stock could cause our
stock price to fall. In addition, the sale of these shares could impair our
ability to raise capital through the sale of additional stock. After this
offering, we will have 4,383,000 shares of common stock outstanding, including
800,000 shares that we are selling in this offering that may be resold
immediately in the public market. The remaining 3,583,000 shares will be
eligible for resale in the public market pursuant to Rule 144 commencing in
September 2001.
17
There is no guarantee that we will be able to raise the necessary funds in
---------------------------------------------------------------------------
this offering or that additional funds will be available to us when we need them
- --------------------------------------------------------------------------------
and, if financing is unavailable, we may need to dramatically change our
- --------------------------------------------------------------------------------
business plan, sell or merge our business or face bankruptcy. Based on our
- ------------------------------------------------------------------
current projections, we will need to raise funds after the expiration of one
year from the closing of this offering through the issuance of equity,
equity-related or debt securities in addition to the funds we are raising in
this offering. However, there is no guarantee that we will be able to raise the
funds in this offering that are necessary to maintain our business for the
following year. We cannot be certain that additional capital will be available
to us on favorable terms when required, or at all. If this additional financing
is not available to us, we may need to dramatically change our business plan,
sell or merge our business or face bankruptcy. In addition, our issuance of
equity or equity-related securities will dilute the ownership interest of
existing shareholders and our issuance of debt securities could increase the
risk or perceived risk of our company. Any of these actions could cause our
stock price to fall.
Note: In addition to the above risks, businesses are often subject to risks not
foreseen or fully appreciated by management. In reviewing this Prospectus
potential investors should keep in mind other possible risks that could be
important.
BUSINESS AND PROPERTIES
3. With respect to the business of the Company and its properties:
(a) Describe in detail what business the Company does and proposes to do,
including what product or goods are or will be produced or services that are or
will be rendered.
General
- -------
We were organized as a Colorado corporation on September 28, 2001, and are
in the early stage of development. In January 2002, we commenced operations in
the online retailing of handmade, natural, vegetable-based soaps and gift
baskets. As a small online retailer of soaps, we are dedicated to serving the
natural product enthusiast with a wide variety of handmade, natural, herbal
soaps and gift baskets featured on our web site located at
http://www.rubadubsoaps.com, expert information and superior customer service.
- ---------------------------
Information set forth on our web site does not constitute part of this
prospectus. We have very limited sales and a net loss from operations for the
period from our inception through the date of this prospectus. As of May 31,
2002, we had realized $971 in revenues and a net loss of $(93,848).
Our objective is to become a leading online retailer of handmade, natural,
herbal soaps, gift baskets and other natural products, such as essential oils
and herbs. Key elements of our strategy include the following:
o Offering the broadest possible selection of handmade, natural, herbal
soaps, gift baskets and/or other natural products available to our customers at
competitive prices;
18
o Delivering superior customer service and promoting repeat purchases
through continuous enhancement of our technology, web site functionality and
inventory;
o Developing relationships with other companies that can help grow our
business.
Ms. Lisa R. Powell, our sole executive officer, director and controlling
shareholder, has in excess of five years of experience in producing natural,
vegetable-based soaps by hand and practicing aromatherapy as a hobby. Her gift
baskets of soaps have been highly regarded for the past two years. She has taken
numerous courses in aromatherapy and herbology at Red Rocks Community College,
Lakewood, Colorado.
Products
- --------
Our soaps are handmade, and fragrance is added, with all natural
ingredients, including:
o All natural ingredients;
o Pure Aromatherapy-Grade Essential Oils;
o Natural glycerin; and
o Natural colorants.
Commercially-made soaps differ from our soaps in that they typically contain
animal fat instead of vegetable oils because it is much less expensive and more
stable in high temperatures. However, tallow or lard can clog the skin's pores
while the vegetable oils used in our soaps enable the skin to retain its natural
moisture and still breathe. Commercial soaps also typically contain synthetic
ingredients since the synthetic ingredients are more stable during the
manufacturing process. The biggest difference, however, between commercial soaps
and our soaps is the ingredient of natural glycerin, a skin softener, in our
soaps. In the manufacture of many commercial soaps, glycerin is extracted from
the soap and sold separately in other products. In the cold process method of
making soap that we employ, the soap retains the natural glycerin created during
the saponification process. Our soaps never contain any of the following
ingredients:
o Alcohol;
o Petroleum products;
o Harsh detergents;
o Artificial ingredients;
o Artificial colorants;
o Petroleum products;
19
o Synthetic fragrances;
o Preservatives; or
o Animal fats.
The cost of producing an average bar of soap, including each of the
above-described four types of bars, is approximately $2.00. These soaps are
presently available for sale on our web site at a price of either $2.95 or $3.95
per bar. Each bar may be purchased in multiple units or a single unit. The cost
of shipping is added to the price of each purchaser's order. In addition to
soaps, gift baskets prepared using a number of soaps selected by the purchaser
from the variety of the soaps available on our web site from time to time, are
available for purchase. The price of each gift basket includes the total of the
unit prices of each bar of soap included in the basket plus an amount equivalent
to two times the wholesale price we paid for the basket. In the future, we
intend to produce soaps in larger batches and custom label the bars. Also, we
propose to add soap molds, soap cutting equipment and/or other natural products
to our inventory if we determine that sufficient demand exists for these
products.
Thirteen types of soaps and four styles of gift baskets, each of which is
wrapped in cellophane and tied with wraffia, are currently available for sale on
our web site, including the following:
Soaps
- -----
o Almond Milk Soap - Almond essential oil gives the soap a delightfully
sweet smell; ground almonds provide a mild exfoliant; and milk is added as a
soothing moisturizer.
o Citrus Bar - Citrus and spice is blended in this bar to make it tangy
and refreshing.
o Hippie Bar - Known for it anti-depressant and calming qualities,
patchouli essential oil gives this soap a distinct and earthy fragrance.
o Honey Bar - This is a gentle bar made with olive oil and infused with
calendula, chamomile and comfrey leaf. Honey is used as an ingredient because it
acts as a skin conditioner and emollient.
o Honey Oatmeal Bar - This bar is very gentle and contains bits of
oatmeal for exfoliation. Honey is used to soften the skin and give it a mild
fragrance.
o Kitchen Soap - Coffee grounds are used in this soap to help remove
odors. Cinnamon and almond essential oils are added.
o Lavender Mint Bar - A creamy bar made of lavender essential oil, known
for its relaxing and uplifting qualities, with a hint of peppermint essential
oil, which awakens the senses. Both lavender essential oil, because of its
gentle and widely therapeutic effects, and peppermint essential oil are widely
used in aromatherapy.
20
o Lavender Oatmeal Soap - The most popular bar, it has a terrific scent
because it is made from lavender essential oil. Oatmeal is added to this soap
for mild exfoliation and lavender flowers are added for texture.
o Rise and Shine Bar - This smooth cream bar combines peppermint
essential oil, with its refreshing, "wake me up" scent, and rosemary, which
lifts the spirits and is said to be naturally antiseptic and antibacterial.
o Scrub A Dub Bar - Cornmeal is added to this lemongrass, cedarwood and
pine-scented bar because it acts as a luffa. The soap is suitable for men and
women.
o Spicy Bar - This soap is a favorite of men. Clove essential oil acts
as a deodorant, while the spices of cinnamon and nutmeg in this bar provide
exfoliation.
o Tangerine Grapefruit Bar - This bar has a beautiful, natural orange
tint from the tangerine essential oil favored by citrus lovers.
o Tea Tree Bar - The tea tree ingredient in this soap is frequently used
to treat many skin problems such as acne and rashes because of the antibacterial
properties for which it is known.
Gift Baskets
- ------------
o Guest Sampler Basket - This basket contains six miniature bars of
soap.
o Medium Gift Basket - This gift basket includes three bars of soap and
one 4.5 ounce fizzing bath bomb made with bath salt and pure essential oil.
o Large Gift Basket - This gift basket includes five bars of soap and
three 4.5 ounce fizzing bath bombs.
o Extra Large Gift Basket - The same basket that is used for our large
gift basket is packed with eight bars of soap and four 4.5 ounce fizzing bath
bombs.
Online Retailing
- ----------------
We strive to provide customers with a convenient shopping experience by
providing an organized, logical and customer-friendly Internet site designed in
an attractive manner so as to capture and maintain the interest of most
visitors. The web site includes a high-resolution photograph of each type of
soap or gift basket together with a picture and a description of the ingredients
and process employed in its production. Payment arrangements can be made using
credit cards. We have implemented security measures, including but not limited
to layering, locking and encryption, in order to secure, to our best ability as
of the date of this prospectus, the commercial transactions conducted on our web
site. Detailed instructions are available on our site to enable the purchaser to
consummate the purchase transaction with as much ease and simplicity as is
possible.
21
We attract and retain customers by emphasizing the following key factors:
Extensive Product Selection. We provide consumers with a wide variety of
-----------------------------
handmade, natural, vegetable-based soaps, with delivery direct to their door or
the third party recipient of a gift. We offer a broad selection of soaps and
gift baskets that we expect, within two years from the date of this prospectus,
to transcend the limited selection, if any, of grocery stores, natural product
specialty shops and others. However, our ability to provide a selection of
natural, herbal soaps and gift baskets that exceeds the selection offered by the
aforementioned sellers is limited by the fact that we have minimal assets and
substantial net losses. Our online business model enables us to aggregate a
diverse product selection that is not generally found in a single retail outlet
and dynamically change our product mix to meet consumer needs and interests.
Expert Information. Accompanying each type of soap or gift basket featured
------------------
on the web site is a detailed description of the soap type(s); the quantity
available, the ingredients, the distinctive attributes and price; a photograph;
and any other relevant information. We tightly integrate broad product selection
with highly relevant content, providing consumers with the information they need
to make informed purchase decisions.
Superior Shopping Experience. We believe that we provide an intuitive,
------------------------------
easy-to-use web site, offering extensive product selection supported by tightly
integrated, relevant resource information. Each product presentation is
supported by a high-resolution photograph of the soap or gift basket available
for sale on our web site.
Money-Back and Other Guarantees. We provide each customer with a thirty-day
-------------------------------
guarantee permitting the return of the unused product if the customer is not
satisfied. We guarantee that each bar of soap is handmade and comprised of
natural materials.
Wholesale Sales
- ---------------
We are in the third month of a four-month test marketing trial with Stacy's
Hallmark, owner of eleven Hallmark card stores, including eight stores located
in the Denver, Colorado, area and three stores located in Phoenix, Arizona. The
trial is being conducted in four Denver area stores. At the end of the
four-month trial period, Stacy's Hallmark will determine whether to conduct a
full marketing campaign and promotion of our handmade, natural, vegetable-based
soaps and gift baskets in all eleven stores. Further, if the full marketing
campaign conducted by Stacy's Hallmark is successful, we anticipate that we may
receive an order(s) for soaps and/or gift baskets from Hallmark Inc. to be sold
in company-owned Hallmark card stores. However, we do not expect Hallmark Inc.
to be interested in our products unless the test marketing trial in four Stacy's
Hallmark stores through September 2002 is successful and, in addition, Stacy's
Hallmark undertakes the full marketing campaign and promotion in all eleven
stores and the results of the campaign are favorable.
Trade Shows and Direct Sales
- ----------------------------
Depending upon the availability of funding from this offering, we intend to
display our soaps, gift baskets and any new products, such as soap molds and
22
soap cutting equipment, at natural product trade shows held in various large
cities in the United States. In the event of the minimum offering, we intend to
attend one or two such industry trade shows and, in the event of the maximum
offering, approximately five such shows. We also have plans to generate direct
sales at parties hosted by individuals who receive product as compensation.
Although no such parties have yet been held, we anticipate that the host of the
party would receive compensation in the form of soaps and/or gift baskets
equivalent in value to 10% of the gross product sales generated at the party.
Fulfillment and Distribution
- ----------------------------
We currently fulfill all customer orders from our facilities in Lakewood,
Colorado. We make our soaps by hand from ingredients, primarily herbs and
natural fruits, received from our suppliers. We also receive baskets from our
suppliers that we use to produce gift baskets. Our sole executive officer and
director makes soaps and prepares gift baskets to fill customer orders. We
presently manually update product availability on our web site. We pack the
items on location at our offices and then deliver them to UPS, the United States
Postal Service or other shipping company for distribution to consumers anywhere
in the United States. We are committed to shipping accurate orders, efficiently
and effectively. Generally, the delivery time is within ten business days from
the date of the receipt of the order. We charge each customer in advance for the
shipping costs associated with the order. Our management brings to Rub A Dub
Soap her determination in fulfillment and distribution. We intend to obtain
office and/or warehouse space as the need for more production and product
availability grows.
Customer Service
- ----------------
The typical shopping experience begins with the search for products that
meet specific needs, including the ordering process and extends through product
delivery and post-purchase support. We believe that the ability to accurately
fulfill orders, ship products quickly to a customer's door or efficiently handle
customer inquiries is as important to customer satisfaction as product
selection. In this connection, we believe that a high level of customer service
and support is critical to retaining and expanding our customer base. No portion
of the proceeds of this offering has been allocated for the employment of any
customer support personnel. Accordingly, we expect to be dependent upon the
proceeds, if any, to be received from future equity and/or debt financing for
this purpose. Accordingly, while we will not have the financial resources as a
result of this offering to employ any customer service personnel, we intend to
develop our own in-house customer service operation in the future. Our sole
management member is available via e-mail, generally, from 8:00 a.m. to 5:00
p.m., Mountain Time, Monday to Friday, and can also be reached by voicemail.
Presently, we provide by e-mail order and shipping confirmation (with tracking
numbers), notification of customers regarding out-of-stock situations and, for
those orders, frequent updating of customers on order status.
We are dedicated to customer satisfaction. We deliver on this commitment in
a number of ways, including:
o Product guarantee, including a thirty-day refund if the shipment is
not satisfactory;
23
o Customer service guarantee of a one-business day response time for all
inquiries;
o Privacy guarantee to use personal information exclusively to process
orders and not to sell, trade or rent the information to other companies; and
o Security guarantee ensuring protection of personal information and
compensation to consumers for the amount of their liability, up to $50, in the
unlikely event of unauthorized interception and use of their credit card.
Technology and Network Operations
- ---------------------------------
We have implemented services and systems for site management, searching and
customer interaction. Our system has been custom-designed and written for
performance, reliability and scalability using software applications for:
o Displaying soaps, gift baskets and other products in an organized,
logical and customer-friendly way;
o Accepting, verifying, organizing and managing customer orders;
o Notifying and updating customers of order status; and
o Managing shipment of products.
These systems and services employ a combination of our own proprietary
technologies and commercially available, licensed technologies. Our proprietary
technologies are embodied in software that is exclusively owned and implemented
by Rub A Dub Soap. We have a non-exclusive license to use a shopping cart
commerce application, which has been customized for us. This commerce
application is integrated with our custom software, enabling a fully automated
order fulfillment process. We realize many benefits from the integration of
these systems, including:
o Tracking customer orders through the entire supply chain in real-time;
o Making rapid changes to processes such as a change in shipping policy;
and
o Efficiently expanding our infrastructure.
Our operating system is FreeBSD Unix and our software platform and
architecture is integrated with Apache/1.3.12 Ben-SSL/1.41 (Unix) mod_perl/1.24
web software and database software PostGreSQL 7.1.1. Our production system is
located at 12441 West 49th Avenue, Suite #8, Wheat Ridge, Colorado 80033, with
power backup and high-speed Internet connection. We address the goals of
performance, reliability and scalability. Our objective is to have fast download
times and make use of caching and load balancing at the web server and
application level for optimal performance. We outsource development work to
outside consultants. Our web site is up and running twenty-four hours a day,
24
seven days a week. We anticipate that we will continue to devote significant
resources to product development in the future as we add new features and
functionality to our web site.
(b) Describe how these products or services are to be produced or rendered
and how and when the Company intends to carry out its activities. If the Company
plans to offer a new product(s), state the present stage of development,
including whether or not a working prototype(s) is in existence. Indicate if
completion of development of the product would require a material amount of the
resources of the Company, and the estimated amount. If the Company is or is
expected to be dependent upon one or a limited number of suppliers for essential
raw materials, energy or other items, describe. Describe any major existing
supply contracts.
See the response to Item 3.(a) hereinabove. We produce each bar of soap by
hand using a minimal amount of fresh, natural ingredients, primarily natural
fruits and herbs, and basic utensils. We spend at least six weeks in the
production and curing of a batch of soaps. We believe that our soap is
especially effective in revitalizing and freshening the skin because of our
usage of only fresh ingredients. We choose our suppliers based upon the quality
and price of the merchandise available. We believe that, because of the
increasing popularity of natural products, we will have no difficulty in
obtaining quality supplies of fruits and herbs, primarily, at attractive prices
from a variety of suppliers.
Currently, our products are limited to the thirteen types of handmade,
natural, herbal soaps and four styles of gift baskets described above. In the
future, we propose to add new products, such as soap molds and soap cutting
equipment, to our product line if we determine that sufficient demand exists for
these products. We have allocated the sums of $1,750 (7%) of the minimum net
proceeds and $32,500 (16.25%) of the maximum net proceeds expected, without
assurance, to be received from this offering for new product development.
However, because the funds anticipated to be received from this offering are
limited, especially in the event of the minimum offering, the number of new
products that we will be able to develop with these funds will also be limited.
We intend to expand our activities with the proceeds, if any, available
from this offering and/or otherwise. Our current plans include the development
of new products, such as soap molds and soap cutting equipment; increased
marketing to wholesalers, via trade shows and direct sales generated from
individually-hosted parties and in other new markets; and the enhancement and
improvement of our Internet web site. We have allocated the sums of $40,000
(20%), $32,500 (16.25%) and $15,000 (7.5%) of the maximum proceeds of this
offering for marketing, new product development and enhancement of the web site,
respectively. Depending upon the availability of capital, we also have plans to
attend trade shows held annually throughout the United States.
(c) Describe the industry in which the Company is selling or expects to
sell its products or services and, where applicable, any recognized trends
within that industry. Describe that part of the industry and the geographic area
in which the business competes or will compete.
See the response to item 3.(a) hereinabove with regard to the limitation of
our business to the marketing, sale and distribution of handmade, natural,
25
vegetable-based soaps using recipes developed by our sole executive officer and
director, and gift baskets. We presently market our products online. Our
Internet web site enables us to market our products throughout the world,
although our primary target market continues to be the United States. The
Internet has become an increasingly significant medium for commerce in many
industries. Our success depends upon the widespread acceptance and use of the
Internet as an effective medium of business and communication by our target
customers. While we cannot be certain, we expect rapid growth in the use of and
interest in the Internet to continue, although the rate of growth may not be at
historical rates. We occupy a small niche within the sizable industry of the
manufacture, marketing and distribution of natural products. We believe that our
business may not be profitable for the next several years during which expenses
related to our expansion may cause us to continue to incur a loss from
operations. The market for natural products of all types, including the natural,
handmade, vegetable-based soaps and gift baskets that we offer, has increased
dramatically in recent years. While we believe, we cannot be certain, that this
recognized industry trend will continue in the future.
Indicate whether competition is or is expected to be by price, service, or other
basis. Indicate (by attached table if appropriate) the current or anticipated
prices or price ranges for the Company's products or services, or the formula
for determining prices, and how these prices compare with those of competitors'
products or services, including a description of any variations in product or
service features. Name the principal competitors that the Company has or expects
to have in its area of competition. Indicate the relative size and financial and
market strengths of the company's competitors in the area of competition in
which the Company is or will be operating. State why the Company believes it can
effectively compete with these and other companies in its area of competition.
We expect to compete on the basis of our reputation among customers as a
quality provider of products that are "100% money-back guaranteed" and, to a
lesser extent, on the basis of price. The market for natural and handmade soaps
has grown substantially in the past five years. Competition is expected to
intensify in the future, which may result in price reductions, fewer customer
orders, reduced gross margins and loss of market share. We currently or
potentially compete with a variety of companies located both inside and outside
the United States that retail soaps, gift baskets, herbs, essential oils and/or
other natural products. Many of our current and potential traditional
store-based competitors have longer operating histories, larger customer or user
bases, greater brand recognition and significantly greater financial, marketing
and other resources than we do. These companies include grocery stores, organic
or natural food stores and small specialty shops. Many of these current and
potential competitors can devote substantially more resources to web site and
systems development than we can. In addition, larger, more well-established and
financed entities may acquire, invest in or form joint ventures with online
competitors as the use of the Internet and other online services increases.
We are aware of a limited number of other companies that are presently
retailing natural soaps and/or other natural products online. We believe that
there will be an increasing number of online retailers of natural products of
the types being offered by us and, in the instance of certain soaps, identical
to the soaps we offer. Some of our competitors may be able to secure ingredients
from suppliers on more favorable terms, fulfill customer orders more efficiently
and adopt more aggressive pricing or inventory availability policies than we
26
can. Traditional store-based retailers also enable customers to see and feel
products in a manner that is not possible over the Internet.
We believe that the following are principal competitive factors in our
market:
o Web site recognition;
o Inventory selection;
o Streamlined shopping experience;
o Reliability and speed of order shipment;
o Customer service;
o Speed and accessibility of web site;
o Convenience; and
o Price.
While we expect to compete on the basis of our reputation among customers
as a quality provider of products and, to a lesser extent, on the basis of
price, we are not certain that this strategy will be successful. Ultimately, we
seek to exceed the more limited selections of natural, herbal soaps and gift
baskets, if any, offered by grocery stores, organic or natural food stores and
natural product specialty shops. We believe that we will be able to exceed the
selections of soaps of these traditional stores because we will not be limited
with respect to display and storage area. We hope, to the extent practicable, to
minimize our weaknesses, including, among others, our undercapitalization, cash
shortage, limitations with respect to personnel, technological, financial and
other resources and lack of a customer base and market recognition, through our
focus on the Internet; which eliminates the need for a retail facility and a
sizeable marketing staff. However, our opportunity to obtain wholesale and other
larger customers may also be limited by our financial resources and other
assets.
Our soaps are presently available for sale on our web site at a price of
either $2.95 or $3.95 per bar. The price of each of our gift baskets includes
the total of the unit prices of each bar of soap included in the basket plus an
amount equivalent to two times the wholesale price we paid for the basket. The
cost of shipping is added to the price of each purchaser's order. Generally, we
believe that our soaps and gift baskets are priced lower than soaps and gift
baskets of similar quality available from our competitors.
Note: Because this Prospectus focuses primarily on details concerning the
Company rather than the industry in which the Company operates or will operate,
potential investors may wish to conduct their own separate investigation of the
company's industry to obtain broader insight in assessing the Company's
prospects.
27
(d) Describe specifically the marketing strategies the Company is
employing or will employ in penetrating its market or in developing a new
market. Set forth in response to Question 4 below the timing and size of the
results of this effort which will be necessary in order for the company to be
profitable. Indicate how and by whom its products or services are or will be
marketed (such as by advertising, personal contact by sales representatives,
etc.), how its marketing structure operates or will operate and the basis of its
marketing approach, including any market studies. Name any customers that
account for, or based upon existing orders will account for, a major portion
(20% or more) of the Company's sales. Describe any major existing sales
contracts.
We have allocated the sums of $4,000 (16%) of the minimum proceeds, and
$45,000 (22.5%) of the maximum proceeds, of this offering for marketing. Our
marketing strategy is designed to meet or exceed customer expectations, drive
repeat purchases and build enduring brand equity. In order to implement this
strategy, we intend to implement an integrated marketing campaign that includes
the following:
o Advertising;
o Participation in test marketing trials with Stacy's Hallmark and,
possibly, other retailers of soaps and other natural products;
o Attendance at industry trade shows; and
o Direct sales generated at parties hosted by individuals who receive
product as compensation.
We have initiated our proposed integrated marketing campaign with regard to the
first two methods described above. However, the proposed campaign is in the
design stage insofar as the last two methods above-described and we have not yet
taken any steps toward their implementation. We are dependent upon the
anticipated proceeds of this offering for funding with which to attend trade
shows featuring soaps and other natural products. In the future, depending upon
the availability of funding, we intend to target businesses, in addition to
consumers, as potential customers as part of our marketing strategy.
Advertising. We will design our advertising to build brand equity, create
-----------
awareness and generate initial purchases of soaps and gift baskets sold on our
web site and otherwise. Depending on the availability of funds, we intend to use
a mix of advertising methods, including:
o Word of mouth referrals by satisfied customers, friends and relatives
and recipients of our products as gifts;
o Online banners, text links and e-mail newsletters; and
o Mailings of brochures to, among others, prior customers and recipients
of our products.
28
Test Marketing Trial with Stacy's Hallmark and, Possibly, Other Retailers.
--------------------------------------------------------------------------
We are currently participating with our handmade, natural, vegetable-based soaps
and gift baskets in a 120-day test marketing trial with Stacy's Hallmark, owner
of eleven Hallmark card stores located in the Denver, Colorado, area and
Phoenix, Arizona. We have filled Stacy's Hallmark's initial order for soaps and
gift baskets that are presently available in four of the Denver, Colorado, area
Hallmark card stores. If the results of the trial are favorable at the end of
September 2002, Stacy's Hallmark has verbally indicated, without assurance, that
it will conduct a full marketing promotion and campaign featuring our products
in all eleven Colorado and Arizona stores. Further, if the full marketing
campaign conducted by Stacy's Hallmark is successful, we anticipate that we may
receive an order(s) for soaps and/or gift baskets from Hallmark Inc. to be sold
in company-owned Hallmark card stores. However, we do not expect Hallmark Inc.
to be interested in our products unless the test marketing trial in four Stacy's
Hallmark stores through September 2002 is successful and, in addition, Stacy's
Hallmark undertakes the full marketing promotion and campaign in all eleven
stores and the results of the campaign are favorable.
Attendance at Industry Trade Shows. Depending upon the availability of
-----------------------------------
funding from this offering, we intend to display our soaps, gift baskets and any
new products, such as soap molds and soap cutting equipment, at natural product
trade shows held in various large cities in the United States. In the event of
the minimum offering, we anticipate attending one or two such industry trade
shows and, in the event of the maximum offering, approximately five such shows.
Direct sales generated at parties hosted by individuals who receive product
---------------------------------------------------------------------------
as compensation. We have plans to generate direct sales at parties hosted by
- ----------------
individuals who receive product as compensation. Although no such parties have
yet been held, we anticipate that the host of the party would receive
compensation in the form of soaps and/or gift baskets equivalent in value to 10%
of the gross product sales generated at the party.
We expect that we may incur losses for the next several years as a result
of the expansion of our operations. In order for us to operate profitably, the
funds we expend for hosting, maintenance, expansion, enhancement and otherwise
in connection with our web site will be required to be offset by the revenues
realized from online sales. The test marketing trial in which we are
participating with Stacy's Hallmark, Denver, Colorado, will not conclude until
September 2002. The results of the trial may not be favorable. Stacy's Hallmark
will not conduct a full marketing and promotional campaign in all eleven of its
stores if the trial is unsuccessful and we will not obtain sales contracts with
company-owned Hallmark stores. Further, we have not yet attended any industry
trade shows or conducted any individually-hosted parties to generate direct
product sales. Accordingly, we have no basis upon which to predict the volume of
sales, if any, that can be expected from these events. We have conducted no
marketing studies. None of our customers accounts for, or based upon existing
orders will account for, a major portion (20% or more) of our sales. We have no
existing sales contracts.
(e) State the backlog of written firm orders for products and/or services
as of a recent date (within the last 90 days) and compare it with the backlog of
a year ago from that date.
We have no backlog of written firm orders for our handmade, natural,
vegetable-based soaps and gift baskets.
29
Explain the reason for significant variations between the two figures, if any.
Indicate what types and amounts of orders are included in the backlog figures.
State the typical orders. If the Company's sales are seasonal or cyclical,
explain.
Not applicable. See the response to this Item above. The company
experiences increased sales on holidays and, in particular, Mother's Day.
(f) State the number of the Company's present employees and the number of
employees it anticipates it will have within the next 12 months. Also, indicate
the number by type of employee (i.e., clerical, operation, administrative, etc.)
the Company will use, whether or not any of them are subject to collective
bargaining agreements, and the expiration date(s) of any collective bargaining
agreement(s). If the Company's employees are on strike, or have been in the past
three years, or are threatening to strike, describe the dispute. Indicate any
supplemental benefits or incentive arrangements the company has or will have
with its employees.
Ms. Lisa R. Powell, our sole executive officer and director, is our only
employee currently. We do not anticipate the employment of any additional
individuals within the next twelve months. We have no plans to adopt any
supplemental benefits or incentive arrangements at the present time.
(g) Describe generally the principal properties (such as real estate,
plant and equipment, patents, etc.) that the Company owns, indicating also what
properties it leases and a summary of the terms under those leases, including
the amount of payments, expiration dates and the terms of any renewal options.
Indicate what properties the Company intends to acquire in the immediate future,
the cost of such acquisitions and the sources of financing it expects to use in
obtaining these properties, whether by purchase, lease or otherwise.
We presently own no real property. We maintain our offices at the residence
of Ms. Lisa R. Powell, the President/Secretary/Treasurer, the sole director and
an 83.7% shareholder of Rub A Dub Soap, located at 13279 West Ohio Avenue,
Lakewood, Colorado 80228. We have made arrangements with Ms. Powell to use her
residence free of charge until the completion of this offering. We have
allocated the amount of $1,800 of the proceeds of this offering to pay rent to
Ms. Powell during the period of one year following the closing of this offering
at the rate of $150 per month. These arrangements are verbal and we have no
lease with Ms. Powell to rent premises at her residence for the one-year period
following the closing of the offering. The space we currently occupy is expected
to be adequate to meet our foreseeable future needs if we realize the minimum
proceeds of this offering. In the event of the maximum offering, we have
allocated the sum of $12,000 for the rental of office space in the Denver,
Colorado, area from an unaffiliated third party at the rate of approximately
$1,000 per month. We have allocated no portion of the proceeds of this offering
for the purchase of any real property.
As of May 31, 2002, we had personal property valued, at historical cost, at
a total of $11,976, including inventory ($1,787) and furniture and equipment
($10,189). We have allocated the sums of $1,250 (minimum) and $15,000 (maximum)
out of the offering proceeds for the purchase of manufacturing and office
equipment and the sums of $1,060 (minimum) and $15,000 (maximum) for the
purchase of soap ingredients, including aromatherapy-grade essential oils,
30
coconut, olive and palm oils, herbs, grains, milk and honey, and packaging
materials, including handmade paper, cellophane and wraffia.
(h) Indicate the extent to which the Company's operations depend or are
expected to depend upon patents, copyrights, trade secrets, know-how or other
proprietary information and the steps undertaken to secure and protect this
intellectual property, including any use of confidentiality agreements,
covenants-not-to-compete and the like. Summarize the principal terms and
expiration dates of any significant license agreements. Indicate the amounts
expended by the Company for research and development during the last fiscal
year, the amount expected to be spent this year and what percentage of revenues
research and development expenditures were for the last fiscal year.
We rely on a combination of trademark, trade secret and copyright law to
protect our intellectual property. These laws afford only limited protection.
Despite our efforts to protect our proprietary rights, unauthorized persons may
attempt to copy aspects of our web site, including the look and feel of our web
site, photographic prints that we sell, product organization, product
information and sales mechanics or to obtain and use information that we regard
as proprietary, such as the technology used to operate our web site and our
content. We have not filed an application to secure registration for our
trademark, "Rub A Dub Soap," in the United States or any other country. Any
encroachment upon our proprietary information, the unauthorized use of our
trademark, the use of a similar name by a competing company or a lawsuit
initiated against us for our infringement upon another company's proprietary
information or improper use of their trademark, may affect our ability to create
brand name recognition, cause customer confusion and/or have a detrimental
effect on our business.
Litigation or proceedings before the U.S. Patent and Trademark Office may
be necessary in the future to enforce our intellectual property rights, to
protect our trade secrets and domain name and to determine the validity and
scope of the proprietary rights of others. Any litigation or adverse proceeding
could result in substantial costs and diversion of resources and could seriously
harm our business and operating results. Finally, if we sell photographic
reproductions internationally, the laws of many countries do not protect our
proprietary rights to as great an extent as do the laws of the United States.
We have expended no funds for research and development during our last
fiscal year ended December 31, 2001, and we do not expect to incur any research
and development expenditures this year.
(i) If the Company's business, products, or properties are subject to
material regulation (including environmental regulation) by federal, state, or
local governmental agencies, indicate the nature and extent of regulation and
its effects or potential effects upon the Company.
We are not currently subject to direct federal, state or local regulation
other than regulations applicable to businesses generally or directly applicable
to retailing or electronic commerce. However, as the Internet becomes
increasingly popular, it is possible that a number of laws and regulations may
be adopted with respect to the Internet. These laws may cover issues such as
user privacy, freedom of expression, pricing, content and quality of products
31
and services, taxation, advertising, intellectual property rights and security
of information. Furthermore, the growth of electronic commerce may prompt demand
for more stringent consumer protection laws. Several states have proposed
legislation to limit the uses of personal user information gathered online or
require online services to establish privacy policies. The Federal Trade
Commission has also initiated action against at least one online service
regarding the manner in which personal information is collected from users and
provided to third persons and has proposed regulations restricting the
collection and use of information from minors online. We do not currently
provide individual personal information regarding our users to third persons and
we currently do not identify registered users by age. However, the adoption of
additional privacy or consumer protection laws could create uncertainty in usage
of the Internet and reduce the demand for our products and services or require
us to redesign our web site.
We are not certain how our 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, obscenity,
qualification to do business and personal privacy. 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 intended to address these issues could create
uncertainty in the Internet marketplace. This uncertainty could reduce demand
for our products, increase the cost of doing business as a result of litigation
costs and/or increase product delivery costs.
(j) State the names of any subsidiaries of the Company, their business
purposes and ownership, and indicate which are included in the Financial
Statements attached hereto. If not included, or if included but not
consolidated, please explain.
Not applicable. We have no subsidiaries.
(k) Summarize the material events in the development of the Company
(including any material mergers or acquisitions) during the past five years, or
for whatever lesser period the Company has been in existence. Discuss any
pending or anticipated mergers, acquisitions, spin-offs or recapitalizations. If
the Company has recently undergone a stock split, stock dividend or
recapitalization in anticipation of this offering, describe (and adjust
historical per share figures elsewhere in this Prospectus accordingly).
There have been no material events, such as mergers, acquisitions,
spin-offs, recapitalizations, stock splits or stock dividends, in our
development since our inception on September 28, 2001.
4.(a) If the Company was not profitable during its last fiscal year,
list below in chronological order the events which in management's opinion must
or should occur, or the milestones which in management's opinion the Company
must or should reach, in order for the Company to become profitable, and
indicate the expected manner of occurrence or the expected method by which the
Company will achieve the milestones.
In order to become fully operational and profitable, we must increase our
inventory of handmade, natural, vegetable-based soaps and gift baskets;
32
thoroughly market the "Rub A Dub Soap" brand name and our products; attend trade
shows; develop a full line of new products, including, initially, soap molds and
soap making equipment; and enhance our web site. We are currently in the process
of increasing our soap and gift basket inventory. We will pursue the other steps
with the funds raised in this offering of common stock, if any. However, funding
for the completion of these milestones is dependent upon the receipt of capital
from equity and/or debt financing in addition to that anticipated from this
offering and/or the realization of profits from operations. Because of this, we
are unable to anticipate the timing of the milestones from when we begin
offering the shares of common stock after effectiveness of the registration
statement of which this prospectus is a part. Further, because we have only
commenced the first milestone listed above, we are not yet able to determine the
costs associated with each milestone.
(b) State the probable consequences to the Company of delays in achieving
each of the events or milestones within the above time schedule, and
particularly the effect of any delays upon the Company's liquidity in view of
the Company's then anticipated level of operating costs. (See Questions No. 11
and 12)
The probable consequences to us of delays in achieving each of the
milestones listed in Item 4.(a) immediately above is that we will likely
continue to incur operating and net losses during the period of the delays, and
the rate at which we incur these losses may increase. Any delays are expected to
have an adverse effect on our liquidity because we intend to increase our costs
and expenses substantially as we purchase soap ingredients, soap making utensils
and software and computer supplies; increase our sales and marketing activities;
increase our general and administrative functions to support our growing
operations; and further develop our Internet web site. In the event that we are
unable to implement our business plan and/or continue as a going concern because
of the realization of continuing losses, we may need to dramatically change in
our business plan, sell or merge our business or face bankruptcy.
Note: After reviewing the nature and timing of each event or milestone,
potential investors should reflect upon whether achievement of each within the
estimated time frame is realistic and should assess the consequences of delays
or failure of achievement in making an investment decision.
OFFERING PRICE FACTORS
If the securities offered are common stock, or are exercisable for or
convertible into common stock, the following factors may be relevant to the
price at which the securities are being offered.
5. What were net, after-tax earnings for the last fiscal year? (If
losses, show in parenthesis.)
Total $(93,848) ($(.03) per share) for the period from September 28, 2001
(inception) to May 31, 2002.
33
6. If the Company had profits, show offering price as a multiple of
earnings. Adjust to reflect for any stock splits or recapitalizations, and use
conversion or exercise price in lieu of offering price, if applicable.
Offering Price Per Share =
------------------------------------------ -------------------------
Net After-Tax Earnings Last Year Per Share (price/earnings multiple)
Not applicable. We had a loss for the period from September 28, 2001
(inception) to May 31, 2002.
7.(a) What is the net tangible book value of the Company? (If deficit,
show in parenthesis.) For this purpose, net tangible book value means total
assets (exclusive of copyrights, patents, goodwill, research and development
costs and similar intangible items) minus total liabilities.
$25,802 ($.007 per share)
If the net tangible book value per share is substantially less than this
offering (or exercise or conversion) price per share, explain the reasons for
the variation.
The difference between the price per share of common stock being offered
hereby and the net tangible book value per share is primarily attributable to
the fact that the initial four shareholders of Rub A Dub Soap, including Ms.
Lisa R. Powell, our sole executive officer and director, acquired their
aggregate 3,370,000 shares, representing 94.1% of our outstanding shares, of
common stock at a cost of approximately $.001 per share, which is substantially
less than the price of $.20 per share to be paid by the investors in this
offering. If this offering is successful and we succeed in expanding our
business as described in Item 3.(b) above and in achieving the milestones
described in Item 4.(a) above, we expect that our sales, revenues, assets,
shareholders' equity and net tangible book value will increase; our liquidity
may improve; and we may achieve profitability. In that event, the net tangible
book value per share of Rub A Dub Soap's common stock may be substantially
equivalent to or in excess of the price of $.25 per share paid by investors in
this offering. Further, we believe, but cannot assure, that if a public trading
market develops for Rub A Dub Soap's common stock, the bid price for the common
stock will reflect the company's future prospects and will likely be in excess
of $.25.
(b) State the dates on which the Company sold or otherwise issued
securities during the last 12 months, the amount of such securities sold, the
number of persons to whom they were sold, and relationship of such persons to
the Company at the time of sale, the price at which they were sold and, if not
sold for cash, a concise description of the consideration. (Exclude bank debt.)
34
Date Relationship Number Price
Of Sale Name of Shareholder of Shareholder of Shares Per Share Consideration
- -------- ------------------- --------------- ---------- --------- -------------
9/28/01 Lisa R. Powell President, Secre- 3,000,000 $.001 (1)
tary, Treasurer
and Director
11/29/01 Bruce A. Capra None 135,000 $.001 $135.00(3)
12/10/01 Derek J. Jones(2) None 135,000 $.001 $135.00(3)
1/2/02 Paul J. Zueger None 100,000 $.015 $2,500.00(4)
1/31/02 Paul J. Zueger None 25,000 $.20 $5,000.00
1/24/02 Aylin Cankardes None 20,000 $.20 $4,000.00
1/16/02 Bruce Granger None 5,000 $.20 $1,000.00
1/21/02 Joan Granger None 5,000 $.20 $1,000.00
1/21/02 Albert Guida None 500 $.20 $100.00
1/18/02 Michael Legler None 25,000 $.20 $5,000.00
1/25/02 Karen Lucht None 25,000 $.20 $5,000.00
1/21/02 Margolis Trust None 15,000 $.20 $3,000.00
1/21/02 Barry Meyer None 10,000 $.20 $2,000.00
1/21/02 Jodi Meyer None 5,000 $.20 $1,000.00
1/17/02 Darlene Nelson None 15,000 $.20 $3,000.00
1/22/02 Lynn Ohmstede None 5,000 $.20 $1,000.00
2/12/02 Michael Robinson None 250 $.20 $50.00
2/12/02 Tracy Robinson None 250 $.20 $50.00
1/30/02 James Scheel None 500 $.20 $100.00
1/22/02 Mark Shaner None 1,250 $.20 $250.00
1/22/02 Christopher Townson None 250 $.20 $50.00
35
1/23/02 Robin Kolsky Yaeger None 5,000 $.20 $1,000.00
1/22/02 Douglas Zueger None 25,000 $.20 $5,000.00
1/21/02 Paul Chris Zueger None 25,000 $.20 $5,000.00
- ------------------
(1) Includes assets comprised of web site software, soap making supplies
and utensils, books, furniture, soap recipes and a customer list valued at a
total of $3,050.
(2) Patricia Cudd, Esq., Rub A Dub's legal counsel, purchased the shares
on June 14, 2002.
(3) Does not include the value of $26,865 in services in excess of cash
paid, recorded for financial statement purposes.
(4) Does not include the value of $19,900 in services in excess of cash
paid, recorded for financial statement purposes.
8.(a) What percentage of the outstanding shares of the Company will the
investors in this offering have? (Assume exercise of outstanding options,
warrants or rights and conversion of convertible securities, if the respective
exercise or conversion prices are at or less than the offering price. Also
assume exercise of any options, warrants or rights and conversions of any
convertible securities offered in this offering.)
If the maximum is sold: 18.3%
If the minimum is sold: 2.7%
(b) What post-offering value is management implicitly attributing to the
entire Company by establishing the price per security set forth on the cover
page (or exercise or conversion price if common stock is not offered)? (Total
outstanding shares after offering times offering price, or exercise or
conversion price if common stock is not offered.)
If the maximum is sold: $1,095,750*
If the minimum is sold: $920,750*
*These values assume that the Company's capital structure would be changed
to reflect any conversions of outstanding convertible securities and any use of
outstanding securities as payment in the exercise of outstanding options,
warrants or rights included in the calculation. The type and amount of
convertible or other securities thus eliminated would be: not applicable. These
values also assume an increase in cash in the Company by the amount of any cash
payments that would be made upon cash exercise of options, warrants or rights
included in the calculations. The amount of such cash would be: $-0-. Not
applicable.
We have no outstanding convertible securities, including options, warrants
or other rights.
(For above purposes, assume outstanding options are exercised in determining
"shares" if the exercise prices are at or less than the offering price. All
convertible securities, including outstanding convertible securities, shall be
assumed converted and any options, warrants or rights in this offering shall be
assumed exercised.)
36
Note: After reviewing the above, potential investors should consider whether or
not the offering price (or exercise or conversion price, if applicable) for the
securities is appropriate at the present stage of the Company's development.
USE OF PROCEEDS
9.(a) The following table sets forth the use of the proceeds from this
offering:
If Minimum If Maximum
Sold Sold
Amount Per Cent Amount Per Cent
---------- -------- ---------- --------
Total Proceeds $25,000 100.00% $200,000 100.00%
------- ------- -------- -------
Less: Offering Expenses
Commissions & Finders Fees -0- 0.00% -0- 0.00%
Legal & Accounting(1) 4,000 16.00% 4,000 2.00%
Copying & Advertising 1,500 6.00% 1,500 .75%
Other (Specify):
Blue Sky Filing Fees 200 .80% 200 .20%
--- --- --- ----
Net Proceeds from Offering 19,300 77.20% 194,300 97.15%
Use of Net Proceeds
Management Salary(2) 6,000 24.00% 25,000 12.50%
Marketing 3,000 16.00% 40,000 20.00%
New Product Development 1,750 7.00% 32,500 16.25%
Office Rent 1,800(3) 7.20% 12,000(4) 6.00%
Administrative expenses 2,440 5.76% 5,440 2.72%
Manufacturing and Office
Equipment 1,750 7.00% 35,000 17.50%
Soap Ingredients and Packaging 1,560 6.24% 15,000 7.50%
Professional Fees 1,000 4.00% 5,000 2.50%
Working Capital -0- 0.00% 9,360 4.68%
Enhancement of Web Site -0- 0.00% 15,000 7.50%
--- ----- ------ -----
Total Use of Net Proceeds $19,300 77.20% $194,300 97.15%
- ------------------
(1) The total legal fees for this offering will be $10,000, which amount
has been paid heretofore with funding from other sources.
(2) Represents the salary of Ms. Lisa R. Powell, our
President/Secretary/Treasurer and the sole director, and an 83.7% shareholder,
of Rub A Dub Soap, for a period of one year from the date of the closing of this
offering.
37
(3) Payable to Ms. Powell for the maintenance of our offices at her
residence for a period of one year from the date of the closing of this
offering.
(4) Payable to an unaffiliated third party for office space in the Denver,
Colorado, area to be rented at the rate of approximately $1,000 per month.
(b) If there is no minimum amount of proceeds that must be raised before
the Company may use the proceeds of the offering, describe the order of priority
in which the proceeds set forth above in the column "If Maximum Sold" will be
used.
Not applicable. We must raise a minimum of at least $25,000 from the sale
of shares of common stock before we may use the proceeds of the offering.
Note: After reviewing the portion of the offering allocated to the payment of
offering expenses, and to the immediate payment to management and promoters of
any fees, reimbursements, past salaries or similar payments, a potential
investor should consider whether the remaining portion of his investment, which
would be that part available for future development of the Company's business
and operations, would be adequate.
10.(a) If material amounts of funds from sources other than this
offering are to be used in conjunction with the proceeds from this offering,
state the amounts and sources of such other funds, and whether funds are firm or
contingent. If contingent, explain.
Not applicable. No material amounts of funds from sources other than this
offering are to be used in conjunction with the proceeds from this offering.
(b) If any material part of the proceeds is to be used to discharge
indebtedness, describe the terms of such indebtedness, including interest rates.
If the indebtedness to be discharged was incurred within the current or previous
fiscal year, describe the use of proceeds of such indebtedness.
Not applicable. No part of the proceeds is to be used to discharge
indebtedness.
(c) If any material amount of proceeds is to be used to acquire assets,
other than in the ordinary course of business, briefly describe and state the
cost of the assets and other material terms of the acquisitions. If the assets
are to be acquired from officers, directors, employees or principal stockholders
of the Company or their associates, give the names of the persons from whom the
assets are to be acquired and set forth the cost to the Company, the method
followed in determining the cost, and any profit to such persons.
We will acquire assets with a total of $3,310 of the minimum proceeds, and
$50,000 of the maximum proceeds, of the offering. The amounts of $1,750
(minimum) and $35,000 (maximum) have been allocated for the acquisition of
manufacturing and office equipment and the sums of $1,560 (minimum) and $15,000
(maximum) have been allocated for the purchase of soap ingredients and packaging
materials. The assets will be purchased for cash. We will not acquire any of
38
these assets from Ms. Lisa R. Powell, our sole officer, director, employee and
principal stockholder, or her associates.
(d) If any amount of the proceeds is to be used to reimburse any officer,
director, employee or stockholder for services already rendered, assets
previously transferred, or monies loaned or advanced, or otherwise, explain:
Not applicable. No amount of the proceeds is to be used to reimburse any
officer, director, employee or shareholder for services already rendered, assets
previously transferred, monies loaned or advanced or otherwise.
11. Indicate whether the Company is having or anticipates having within
the next 12 months any cash flow or liquidity problems and whether or not it is
in default or in breach of any note, loan, lease or other indebtedness or
financing arrangement requiring the Company to make payments. Indicate if a
significant amount of the Company's trade payables have not been paid within the
stated trade term. State whether the Company is subject to any unsatisfied
judgments, liens or settlement obligations and the amounts thereof. Indicate the
Company's plans to resolve any such problems.
We are not having and do not anticipate having within the next twelve
months any cash flow or liquidity problems. However, in the next twelve months,
we intend to increase our costs and expenses substantially as we increase our
sales and marketing activities and attend trade shows; develop new products;
acquire manufacturing and office equipment and additional soap ingredients;
increase our general and administrative functions to support our growing
operations; and, in the event of the maximum offering, further develop our
Internet web site. The additional revenues that we expect to generate may not be
sufficient to offset these costs and expenses and enable us to operate
profitably. Further, our efforts to grow our business may be more expensive than
we currently anticipate or these efforts may not result in proportional
increases in our revenues. As a result, we believe that we may incur an
operating and net loss for at least the next year, and possibly longer, and that
the rate at which we incur these losses may increase.
We are not a party to or the maker of any note, loan, lease or other
indebtedness or financing arrangement requiring us to make payments. Our trade
payables have been paid within the stated trade term. We are not subject to any
unsatisfied judgments, liens or settlement obligations.
12. Indicate whether proceeds from this offering will satisfy the
Company's cash requirements for the next 12 months, and whether it will be
necessary to raise additional funds. State the source of additional funds, if
known.
Management anticipates, without assurance, that the proceeds from this
offering will satisfy our cash requirements for the next twelve months and that
it will not be necessary to raise additional funds. If we receive the maximum
proceeds of this offering, we will have net proceeds of $194,300 available for
administrative expenses, marketing and trade shows, new product development, the
purchase of equipment and supplies, working capital and the enhancement of our
web site. We will only have net proceeds of $19,300 available for these
39
purposes, not including web site enhancement and working capital, if we realize
the minimum offering proceeds. Accordingly, we expect the scale of our
operations to be directly related to the amount of funding available to us from
this offering. That is, we will operate on a significantly smaller scale if we
are only successful in raising the minimum, as compared to the maximum,
proceeds. Also, as discussed in Item 11. above, in the event that our costs and
expenses increase dramatically as we seek to grow our business, we may continue
to realize operating and net losses for the next year or longer, and we may
incur these losses at an increasingly rapid rate.
CAPITALIZATION
13. Indicate the capitalization of the Company as of the most recent
balance sheet date (adjusted to reflect any subsequent stock splits, stock
dividends, recapitalizations or refinancings) and as adjusted to reflect the
sale of the minimum and maximum amount of securities in this offering and the
use of the net proceeds therefrom:
Amount Outstanding
As of: As Adjusted
5/31/02 Minimum Maximum
------- ------- -------
Debt:
Short-term debt (average interest rate __%) $-0- $-0- $-0-
Long-term debt (average interest rate __%) $365 $365 $365
Total debt $365 $365 $365
Stockholders' equity (deficit):
Preferred stock - par or state value (by
class of preferred in order of preferences) $-0- $-0- $-0-
Common stock - par or stated value $3,583 $4,683 $4,383
Additional paid in capital $116,067 $139,050 $314,750
Retained earnings (deficit) $(93,848) $(93,848) $(93,848)
Total stockholders equity $25,802 $49,885 $225,285
Total capitalization $26,167 $50,250 $225,650
Number of preferred shares authorized to be outstanding: 10,000,000 shares.
Par or stated value, if any: $.01.
Number of common shares authorized: 100,000,000 shares. Par or stated value
per share, if any: $.001.
Number of common shares reserved to meet conversion requirements or for the
issuance upon exercise of options, warrants or rights: -0- shares. Not
applicable.
40
DESCRIPTION OF SECURITIES
14. The securities being offered hereby are:
[X] Common stock
[ ] Preferred or preference stock
[ ] Notes or debentures
[ ] Units of two or more types of securities composed of:
[ ] Other:
15. These securities have:
Yes No
[ ] [X] Cumulative voting rights
[ ] [X] Other special voting rights
[ ] [X] Preemptive rights to purchase in new issues of shares
[ ] [X] Preference as to dividends or interest
[ ] [X] Preference upon liquidation
[ ] [X] Other special rights or preferences (specify):
Explain: not applicable.
16. Are the securities convertible? [ ] Yes [X] No
If so, state conversion price or formula.
Date when conversion becomes effective: - / - / - Not applicable.
Date when conversion expires: - / - / - Not applicable.
17.(a) If securities are notes or other types of debt securities:
(1) What is the interest rate? -0-% Not applicable.
If interest rate is variable or multiple rates, describe: not applicable.
(2) What is the maturity date: - / - / - Not applicable.
If serial maturity dates, describe: not applicable.
(3) Is there a mandatory sinking fund? [ ] Yes [X] No Not applicable.
Describe: not applicable.
(4) Is there a trust indenture? [ ] Yes [X] No Not applicable.
Name, address and telephone number of trustee. Not applicable.
(5) Are the securities callable or subject to redemption? [ ] Yes [X]
No Not applicable.
Describe, including redemption prices: not applicable.
(6) Are the securities collateralized by real or personal property?
[ ] Yes [X] No Describe: not applicable.
41
(7) If these securities are subordinated in right of payment of
interest or principal, explain the terms of such subordination. Not applicable.
How much currently outstanding indebtedness of the Company is senior to the
securities in right of payment of interest or principal? $-0- Not applicable.
How much indebtedness shares in right of payment on an equivalent (pari
passu) basis? $-0- Not applicable.
How much indebtedness is junior (subordinated) to the securities? $-0- Not
applicable.
(b) If notes or other types of debt securities are being offered and the
Company had earnings during its last fiscal year, show the ratio of earnings to
fixed charges on an actual and pro forma basis for that fiscal year. "Earnings"
means pretax income from continuing operations plus fixed charges and
capitalized interest. "Fixed charges" means interest (including capitalized
interest), amortization of debt discount, premium and expense, preferred stock
dividend requirements of majority owned subsidiary, and such portion of rental
expense as can be demonstrated to be representative of the interest factor in
the particular case. The pro forma ratio of earnings to fixed charges should
include incremental interest expense as a result of the offering of the notes or
other debt securities.
Not applicable. Shares of common stock, not notes or other types of debt
securities, are being offered.
Note: Care should be exercised in interpreting the significance of the ratio of
earnings to fixed charges as a measure of the "coverage" of debt service, as the
existence of earnings does not necessarily mean that the Company's liquidity at
any given time will permit payment of debt service requirements to be timely
made. See Questions No. 11. and 12. See also the Financial Statements and
especially the Statement of Cash Flows.
18. If securities are preference or preferred stock: not applicable.
Are unpaid dividends cumulative? [ ] Yes [X] No
Are securities callable? [ ] Yes [X] No
Explain: Not applicable.
Note: Attach to this Prospectus copies or a summary of the charter, bylaw or
contractual provision or document that gives rise to the rights of holders of
preferred or preference stock, notes or other securities being offered.
We are offering shares of common stock, not preferred or preference stock,
notes or other securities having rights superior to the rights of shareholders
of common stock.
19. If securities are capital stock of any type, indicate restrictions on
dividends under loan or other financing arrangements or otherwise:
42
Not applicable. There are no restrictions on dividends under loan or other
financing arrangements or otherwise.
20. Current amount of assets available for payment of dividends (if
deficit must be first made up, show deficit in parenthesis): $(93,848)
It is highly unlikely that we will pay dividends on the common stock in the
foreseeable future.
PLAN OF DISTRIBUTION
21. The selling agents (that is, the persons selling the securities as
agent for the Company for a commission or other compensation) in this offering
are:
Not applicable. There are no selling agents in this offering.
22. Describe any compensation to selling agents or finders, including
cash, securities, contracts or other consideration, in addition to the cash
commission set forth as a per cent of the offering price on the cover page of
this Prospectus. Also indicate whether the Company will indemnify the selling
agents or finders against liabilities under the securities laws. ("Finders" are
persons who for compensation act as intermediaries in obtaining selling agents
or otherwise making introductions in furtherance of this offering.)
Not applicable. We will not utilize the services of selling agents or
finders and, accordingly, no selling commissions or other compensation will be
paid with respect to sales of common stock in this offering.
23. Describe any material relationships between any of the selling agents
or finders and the Company or its management.
Not applicable. See the responses to Items 21. and 22. above.
Note: After reviewing the amount of compensation to the selling agents or
finders for selling the securities, and the nature of any relationship between
the selling agents or finders and the Company, a potential investor should
assess the extent to which it may be inappropriate to rely upon any
recommendation by the selling agents or finders to buy the securities.
24. If this offering is not made through selling agents, the names of
persons at the Company through which this offering is being made:
Name: Ms. Lisa R. Powell
Address: 13279 West Ohio Avenue
Lakewood, Colorado 80228
Telephone No.: (303) 949-5834
43
25. If this offering is limited to a special group, such as employees of
the Company, or is limited to a certain number of individuals (as required to
qualify under Subchapter S of the Internal Revenue Code) or is subject to any
other limitations, describe the limitations and any restrictions on resale that
apply:
There are no limitations on the types of persons who may invest.
Will the certificates bear a legend notifying holders of such restrictions?
[ ] Yes [X] No Not applicable.
26.(a) Name, address and telephone number of independent bank or
savings and loan association or other similar depository institution acting as
escrow agent if proceeds are escrowed until minimum proceeds are raised:
Not applicable. Proceeds will not be escrowed until minimum proceeds are
raised.
(b) Date at which funds will be returned by escrow agent if minimum
proceeds are not raised:
See the response to Item 26.(a) above regarding the fact that the minimum
proceeds of the offering will not be escrowed. However, if we do not receive
subscriptions for at least 100,000 shares of common stock within ninety days
from the date of this prospectus (unless extended for up to an additional ninety
days by us in our sole discretion), we will refund the funds promptly to
subscribers, without deduction or interest.
Will interest on proceeds during escrow period be paid to investors?
[ ] Yes [X] No
27. Explain the nature of any resale restrictions on presently outstanding
shares, and when those restrictions will terminate, if this can be determined:
Of the 3,583,000 shares of common stock of Rub A Dub Soap presently
outstanding, (i) 3,000,000 shares of common stock are owned by Ms. Lisa R.
Powell, our sole executive officer and director; (ii) 370,000 shares are owned
by three shareholders, including Messrs. Bruce A. Capra and Paul J. Zueger and
Patricia Cudd, Esq., sole proprietor of Cudd & Associates, our legal counsel in
connection with this offering; and (iii) 213,000 shares are owned by twenty
shareholders, including Mr. Zueger. The shares of common stock described in (i)
and (ii) of the previous sentence are "restricted securities" because of their
issuance and sale in reliance upon the exemptions from registration provided
under Section 4(2) of the Securities Act of 1933 and Section 11-51-308(1)(p) of
the Colorado Securities Act and the shares described in (iii) of the previous
sentence are "restricted securities" because of their issuance and sale in
reliance upon the exemptions from registration provided under Rule 504 of
Regulation D under Section 3(b) of the Securities Act of 1933 and Section
11-51-308(1)(p) of the Colorado Securities Act. As such, these shares of common
stock are subject to the resale restrictions under Rule 144 of Section 4(1)
under the Securities Act. Rule 144 of the Securities Act provides, in essence,
that holders of restricted securities for a period of one year after the
acquisition of the securities from us or an affiliate of ours, may, every three
months, sell to a market maker or in ordinary brokerage transactions an amount
44
equal to one per cent of our then outstanding securities. Nonaffiliates of Rub A
Dub Soap who hold restricted securities for a period of two years may sell their
securities without regard to volume limitations or other restriction.
Accordingly, the aggregate 3,000,000 shares of common stock owned by Ms. Powell
will become available for resale under Rule 144 commencing September 28, 2002;
135,000 shares owned by each of Mr. Capra and Ms. Cudd become available for
resale under Rule 144 commencing November 29 and December 10, 2002,
respectively; 100,000 shares and 25,000 shares owned by Mr. Zueger will become
available for resale under Rule 144 on January 2 and January 31, 2002,
respectively; and the balance of 188,000 shares of common stock owned by
nineteen shareholders will become available for resale under Rule 144 on various
dates during the period commencing on January 16 through February 12, 2002. In
each instance, the date on which the shares of common stock become available for
resale under Rule 144 is a period of one year from the date of purchase of the
shares from Rub A Dub Soap. Following the expiration of two years from the date
of purchase, these shareholders may sell their securities without regard to
volume limitations or other restriction if they are not then affiliates of Rub A
Dub Soap and have not been affiliates for the preceding three months. Sales of
these shares of common stock under Rule 144 may have a depressive effect on the
market price of our common stock, should a public market develop for the stock.
Transfers and resales of the shares of common stock will be subject, in addition
to the federal securities laws, to the "Blue Sky" laws of each state in which
the transfer or resale occurs.
Note: Equity investors should be aware that unless the Company is able to
complete a further public offering or the Company is able to be sold for cash or
merged with a public company that their investment in the Company may be
illiquid indefinitely.
DIVIDENDS, DISTRIBUTIONS AND REDEMPTIONS
28. If the Company has within the last five years paid dividends, made
distributions upon its stock or redeemed any securities, explain how much and
when:
Not applicable. We have not, since our inception on September 28, 2001,
paid dividends, made distributions upon our stock or redeemed any securities.
OFFICERS AND KEY PERSONNEL OF THE COMPANY
29. Chief executive officer: Title: President
Name: Ms. Lisa R. Powell Age: 29
Office Street Address: Telephone No.: (303) 949-5834
13279 West Ohio Avenue, Lakewood, Colorado 80228
Name of employers, titles and dates of positions held during past five years
with an indication of job responsibilities.
45
Lisa R. Powell has served as the President, the Secretary and the Treasurer
--------------
of Rub a Dub Soap since its inception on September 28, 2001. Ms. Powell has been
making natural, vegetable-based soaps by hand and practicing aromatherapy as a
hobby since May 1996. Since December 1998, she has been employed by Muller
Engineering Corporation, Denver, Colorado, as a design engineer. From June 1993
through December 1998, Ms. Powell was employed as a water drainage engineer by
the U.S. National Park Service. She is a licensed civil engineer specializing in
roadway design.
Education (degrees, schools, and dates):
Ms. Powell received a Bachelor of Science degree in civil engineering from
the University of Colorado, Boulder, Colorado, in 1996.
Also a director of the Company [X] Yes [ ]
Indicate amount of time to be spent on Company matters if less than full time:
Not applicable. Ms. Powell will spend 20% of her time and effort on Rub A Dub
Soap's matters.
30. Chief operating officer:
See the response to Item 29. above.
31. Chief financial officer: Title: Secretary/Treasurer
See the response to Item 29. above.
32. Other key personnel: None.
DIRECTORS OF THE COMPANY
33. Number of directors: one. If directors are not elected annually, or
are elected under a voting trust or other arrangement, explain:
Not applicable. Directors are elected annually.
34. Information concerning outside or other directors (i.e., those not
described above):
Not applicable. We have no outside directors or directors other than Ms.
Lisa R. Powell.
35.(a) Have any of the officers or directors ever worked for or
managed a company (including a separate subsidiary or division of a larger
enterprise) in the same business as the Company:
[ ] Yes [X] No Explain:
46
(b) If any of the officers, directors or other key personnel have ever
worked for or managed a company in the same business or industry as the Company
or in a related business or industry, describe what precautions, if any
(including the obtaining of releases or consents from prior employers), have
been taken to preclude claims by prior employers for conversion or theft of
trade secrets, know-how or other proprietary information.
Not applicable. Ms. Lisa R. Powell, our sole executive officer, director
and key employee, has never worked for or managed a company in our business of
retailing handmade, natural, vegetable-based soaps and gift baskets online or in
a related business or industry.
(c) If the Company has never conducted operations or is otherwise in the
development stage, indicate whether any of the officers or directors has ever
managed any other company in the start-up or development stage and describe the
circumstances, including relevant dates.
Not applicable. Ms. Lisa R. Powell, our sole executive officer and
director, has never managed any other company in the start-up or development
stage.
(d) If any of the Company's key personnel are not employees but are
consultants or other independent contractors, state the details of their
engagement by the Company.
Not applicable. Ms. Lisa R. Powell, our sole executive officer and
director, is an employee although she has received no cash or other remuneration
from us, except that we issued 3,000,000 shares of common stock to her in
consideration for her assignment to us of certain assets, including web site
software, soap making supplies and utensils, books, furniture, soap recipes and
a customer list valued at a total of $3,050. The sums of $6,000 of the minimum
proceeds, and $25,000 of the maximum proceeds, anticipated to be received from
this offering have been allocated for a salary of $6,000 and $25,000 per annum
in the event of the minimum and the maximum offerings, respectively, payable to
Ms. Powell during the period of one year from the closing of this offering.
(e) If the Company has key man life insurance policies on any of its
officers, directors or key personnel, explain, including the names of the
persons insured, the amount of insurance, whether the insurance proceeds are
payable to the Company and whether there are arrangements that require the
proceeds to be used to redeem securities or pay benefits to the estate of the
insured person or a surviving spouse.
Not applicable. We have no key man life insurance policy on Ms. Lisa R.
Powell, our sole executive officer, director and key employee.
36. If a petition under the Bankruptcy Act or any State insolvency law was
filed by or against the Company or its officers, directors or other key
personnel or a receiver, fiscal agent or similar officer was appointed by a
court for the business or property of any such persons, or any partnership in
which any of such persons was a general partner at or within the past five
years, or any corporation or business association of which any such person was
47
an executive officer at or within the past five years, set forth below the name
of such persons, and the nature and date of such actions.
Not applicable. No petition under the Bankruptcy Act or any State
insolvency law has been filed by or against Rub A Dub Soap or Ms. Lisa R.
Powell, our sole executive officer, director and key employee, and no receiver,
fiscal agent or similar officer has been appointed by a court for the business
or property of Rub A Dub Soap or Ms. Powell, or any partnership in which Ms.
Powell was a general partner at or within the past five years, or any
corporation or business association of which Ms. Powell was an executive officer
at or within the past five years.
Note: After reviewing the information concerning the background of the Company's
officers, directors and other key personnel, potential investors should consider
whether or not these persons have adequate background and experience to develop
and operate this Company and to make it successful. In this regard, the
experience and ability of management are often considered the most significant
factors in the success of a business.
PRINCIPAL STOCKHOLDERS
37. Principal owners of the Company (those who beneficially own directly
or indirectly 20% or more of the common and preferred stock presently
outstanding) starting with the largest common stockholder. Include separately
all common stock issuable upon conversion of convertible securities (identifying
them by asterisk) and show average price per share as if conversion has
occurred. Indicate by footnote if the price paid was for a consideration other
than cash and the nature of any such consideration.
No. of Shares
Shares of Average No. of Shares After Offering if
Common Stock Price Per Share Now Held % of Total(1) All Securities Sold % of Total
------------ --------------- --------------- ------------- ------------------- ----------
Name:
Lisa R. Powell $.001(2) 3,000,000 83.7% 3,000,000 68.5%(3)
(maximum)
81.5%(4)
(minimum)
Office Street
Address:
13279 West Ohio Avenue
Lakewood, Colorado 80228
Telephone No.
(303) 949-5834
- ------------------
48
(1) Based upon 3,583,000 shares of our common stock issued and outstanding
as of the date of this prospectus.
(2) Represents consideration comprised of certain assets assigned to us by
Ms. Powell, including web site software, soap making supplies and utensils,
books, furniture, soap recipes and a customer list, valued at a total of $3,050.
(3) Based upon 4,383,000 shares of our common stock to be issued and
outstanding if the maximum 800,000 shares of common stock are sold.
(4) Based upon 3,683,000 shares of our common stock to be issued and
outstanding if the minimum 100,000 shares of common stock are sold.
38. Number of shares beneficially owned by officers and directors as a
group:
Before offering: 3,000,000 shares of common stock (83.7% of total outstanding)
After offering: a) Assuming minimum securities sold: 3,000,000 shares of common
stock (81.5% of total outstanding)
b) Assuming maximum securities sold: 3,000,000 shares of
common stock (68.5% of total outstanding)
(Assume all options exercised and all convertible securities converted.)
MANAGEMENT RELATIONSHIPS, TRANSACTIONS AND REMUNERATION
39.(a) If any of the officers, directors, key personnel or principal
stockholders are related by blood or marriage, please describe.
Not applicable. Ms. Lisa R. Powell is our sole executive officer, director,
key employee and principal shareholder.
(b) If the Company has made loans to or is doing business with any of its
officers, directors, key personnel or 20% stockholders, or any of their
relatives (or any entity controlled directly or indirectly by any such persons)
within the last two years, or proposes to do so within the future, explain.
(This includes sales or lease of goods, property or services to or from the
Company, employment or stock purchase contracts, etc.) State the principal terms
of any significant loans, agreements, leases, financing or other arrangements.
We borrowed the sum of $365 from Ms. Lisa R. Powell, the President, the
Secretary, the Treasurer, a director and an 83.7% shareholder of Rub A Dub Soap,
during the period from our inception on September 28, 2001, through May 31,
2002. This amount is shown as "shareholder loan" at March 31, 2002, in the
accompanying audited Financial Statements of Rub A Dub Soap.
On September 28, 2002, we issued 3,000,000 shares of common stock to Ms.
Powell in consideration for her assignment to us of certain assets, including
49
web site software, soap making supplies and utensils, books, furniture, soap
recipes and a customer list valued at a total of $3,050.
We have a verbal arrangement with Ms. Powell to rent space at her residence
located at 13279 West Ohio Avenue, Lakewood, Colorado 80228, at the rate of $150
per month commencing with the date of the closing of this offering. We have
allocated the sum of $1,800 out of the minimum proceeds of this offering to pay
rent for these facilities for a period of one year from the closing date of the
offering. Ms. Powell has provided us with these facilities rent-free since the
date of our organization on September 28, 2002. In the event of the maximum
offering, we anticipate that we will rent office space from an unaffiliated
third party at a rate of approximately $1,000 per month.
Except as described above, we have not made loans to or done business with
Ms. Powell, or any of her relatives (or any entity controlled directly or
indirectly by Ms. Powell) since our inception on September 28, 2002, and have no
plans to do so in the future.
(c) If any of the Company's officers, directors, key personnel or 20%
stockholders has guaranteed or co-signed any of the company's bank debt or other
obligations, including any indebtedness to be retired from the proceeds of this
offering, explain and state the amounts involved.
Not applicable. We have no bank debt or other obligations except the
indebtedness to Ms. Powell, our sole executive officer and director, which is to
be retired from the proceeds of this offering, described in Item 39.(b)
immediately above.
40.(a) List all remuneration by the Company to officers, directors and
key personnel for the last fiscal year:
Name-Officer, Director and Key Employee Cash Other
- --------------------------------------- ---- --------------------------------
Lisa R. Powell, President, Secretary, $-0- 3,000,000 shares of common
Treasurer and Key Employee stock*
Others:
Not applicable
Total: $-0- 3,000,000 shares of common stock
Directors as a group (number of persons - 1) $-0- 3,000,000 shares of common stock
- ------------------
*(1) The shares of common stock were received in consideration for certain
assets assigned to us by Ms. Powell, including web site software, soap making
supplies and utensils, books, furniture, soap recipes and a customer list,
valued at a total of $3,050.
(b) If remuneration is expected to change or has been unpaid in prior
50
years, explain: We have allocated the sums of $6,000 of the minimum proceeds,
and $25,000 of the maximum proceeds, of this offering to pay Ms. Lisa R. Powell,
the President/Secretary/Treasurer, a director and an 83.7% shareholder of Rub A
Dub Soap, a salary of $6,000 and $25,000 for a period of one year commencing
with the closing of this offering in the event of the minimum and the maximum
offerings, respectively. Except as aforesaid, we do not intend to pay Ms.
Powell, our sole executive officer, director and key employee, a salary or
compensate her with other remuneration for the foreseeable future.
(c) If any employment agreements exist or are contemplated, describe:
Not applicable. No employment agreement exists or is contemplated.
41.(a) Number of shares subject to issuance under presently
outstanding stock purchase agreements, stock options, warrants or rights: -0-
shares (-0-% of total shares to be outstanding after the completion of the
offering if all securities sold, assuming exercise of options and conversion of
convertible securities). Indicate which have been approved by shareholders.
State the expiration dates, exercise prices and other basic terms for these
securities:
Not applicable. We have no stock purchase agreements, stock options,
warrants or other convertible securities or rights outstanding.
(b) Number of common shares subject to issuance under existing stock
purchase or option plans but not yet covered by outstanding purchase agreements,
options or warrants: -0- shares.
Not applicable. We have no existing stock purchase, option or similar
plans.
(c) Describe the extent to which future stock purchase agreements, stock
options, warrants or rights must be approved by shareholders.
Shareholders of Rub A Dub Soap are not required to approve future stock
purchase agreements, stock options, warrants or rights.
42. If the business is highly dependent on the services of certain key
personnel, describe any arrangements to assure that these persons will remain
with the Company and not compete upon any termination:
Ms. Lisa R. Powell, the President, the Secretary and the Treasurer, the
sole director and the owner of 3,000,000 shares, representing approximately
83.7% of the outstanding shares, of common stock of Rub A Dub Soap, is our only
key employee. There are no arrangements to assure that Ms. Powell will remain
with us and not compete upon any termination.
Note: After reviewing the above, potential investors should consider whether or
not the compensation to management and other key personnel, directly or
indirectly, is reasonable in view of the present stage of the Company's
development.
51
LITIGATION
43. Describe any past, pending or threatened litigation or administrative
action which has had or may have a material effect upon the Company's business,
financial condition, or operations, including any litigation or action involving
the Company's officers, directors or other key personnel. State the names of the
principal parties, the nature and current status of the matters, and amounts
involved. Give an evaluation by management or counsel, to the extent feasible,
of the merits of the proceedings or litigation and the potential impact on the
Company's business, financial condition, or operations.
There is no past, pending or threatened litigation or administrative
action, including any litigation or action involving Ms. Lisa R. Powell, our
sole executive officer, director and key employee, that has had or may have a
material effect upon our business, financial condition or operations.
FEDERAL TAX ASPECTS
44. If the Company is an S corporation under the Internal Revenue Code of
1986, and it is anticipated that any significant tax benefits will be available
to investors in this offering, indicate the nature and amount of such
anticipated tax benefits and the material risks of their disallowance. Also,
state the name, address and telephone number of any tax advisor that has passed
upon these tax benefits. Attach any opinion or description of the tax
consequences of an investment in the securities by the tax advisor.
Not applicable. We are a "C" corporation under the Internal Revenue Code of
1986 and no such tax benefits are believed to exist. We have not consulted with
a tax advisor.
Name of tax advisor: not applicable
Address: not applicable
Telephone no.: not applicable
Note: Potential investors are encouraged to have their own personal tax
consultant contact the tax advisor to review details of the tax benefits and the
extent that the benefits would be available and advantageous to the particular
investor.
MISCELLANEOUS FACTORS
45. Describe any other material factors, either adverse or favorable, that
will or could affect the Company or its business (for example, discuss any
defaults under major contracts, any breach of bylaw provisions, etc.) or which
are necessary to make any other information in this Prospectus not misleading or
incomplete.
Not applicable.
52
FINANCIAL STATEMENTS
46. The audited Financial Statements of Rub A Dub Soap, Inc., commence on
page F-1 hereof in response to Part F/S of this prospectus section of Form SB-1.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CERTAIN RELEVANT FACTORS
47. If the Company's financial statements show losses from operations,
explain the causes underlying these losses and what steps the Company has taken
or is taking to address these causes.
Of our net loss of $(93,848) incurred during the period from our inception
(September 28, 2001) through May 31, 2002, the sum of $74,280 represents
compensation expense that we recorded for financial statement purposes in
connection with our issuance of 370,000 shares of our common stock to three
individuals for $2,770 in cash at the rate of $.007 per share. This amount was
calculated based upon the difference between the most recent price of $.20 per
share that we charged for the sale of shares of our common stock and the actual
price of $.007 that these three individuals paid for the acquisition of the
shares.
The causes underlying our operating losses include, primarily, (i)
insufficient capital available for the purchase of soap ingredients, packaging
materials and soap making equipment, marketing and sales, general and
administrative expenses, new product development and enhancement of our web
site; limited sales and marketing activities; (ii) limited prior experience as
an online retailer; insufficient customer traffic to our web site; (iii) an
inadequate volume of online purchases; (iv) an insufficient number of strategic
relationships needed to help promote our web site; (v) an insufficient number of
personnel; and (vi) only one product line and a limited number of products
available for sale. We are currently taking steps to increase our inventory of
soaps and gift baskets. We are conducting this offering to raise additional
capital for all of the activities listed in (i) immediately above. We are
striving to improve our skills as an online retailer and establish strategic
relationships with other natural product and related web sites and portals that
can drive customer traffic to our web site.
48. Describe any trends in the Company's historical operating results.
Indicate any changes now occurring in the underlying economics of the industry
of the Company's business which, in the opinion of management, will have a
significant impact (either favorable or adverse) upon the Company's results of
operations within the next 12 months, and give a rough estimate of the probable
extent of the impact, if possible.
We have only conducted operations as an online retailer of handmade,
natural, vegetable-based soaps and gift baskets since January 2001. While we are
currently participating in a test marketing trial in four of eleven Hallmark
card stores located in the Denver, Colorado, area and Phoenix, Arizona, the
results of this trial will not be known until late September 2002. We have plans
to commence attending trade shows with the proceeds anticipated from this
offering. Although we intend to generate direct product sales from
53
individually-hosted parties, no such parties have been held as of the date of
this prospectus. Accordingly, we believe that we have been operational for a
length of time inadequate for us to discern any significant trends in our
historical operating results. However, we have observed that the gift basket
portion of our business is seasonal in that sales increase on holidays and, in
particular, Mother's Day. The seasonality of our business is expected to
diminish as online sales increase and we continue to increase our marketing and
expand, enhance and improve our web site. Also, we experienced increasing sales
until May 2002, when sales decreased, in our opinion, coincident with the
general downturn in the economy. We believe, although we cannot be certain, that
increasing consumer interest in natural products of all types, including the
handmade, natural, herbal soaps that we produce, will enable us to increase our
annual sales in the future. While we believe that this phenomenon will favorably
impact the results of our operations in the next twelve months, we are unable to
quantify the probable extent of this expected impact.
Also in the next twelve months, we intend to increase our costs and
expenses substantially as we purchase soap ingredients, packaging materials and
soap making and office equipment; increase our sales and marketing activities
via participation in test marketing trials and other activities calculated to
generate sales contracts with wholesalers; attend trade shows; seek to generate
direct sales from individually-hosted parties; increase our general and
administrative functions to support our growing operations; develop new products
such as soap molds and soap making equipment; and further develop our Internet
web site. The additional revenue that we expect to generate from online
operations may not be sufficient to offset these costs and expenses and enable
us to operate profitably. Further, our efforts to grow our business may be more
expensive than we currently anticipate or these efforts may not result in
proportional increases in our revenues. Accordingly, the benefit to us from the
anticipated increase in our sales may be negated by the expected significant
increases in our costs and expenses. As a result, we believe that we may incur
an operating and net loss for at least the next year, and possibly longer, and
that the rate at which we incur these losses may increase.
49. If the Company sells a product or products and has had significant
sales during its last fiscal year, state the existing gross margin (net sales
less cost of such sales as presented in accordance with generally accepted
accounting principles) as a percentage of sales for the last fiscal year: __%.
What is the anticipated gross margin for next year of operations? Approximately
__%. If this is expected to change, explain. Also, if reasonably current gross
margin figures are available for the industry, indicate these figures and the
source or sources from which they are obtained.
The recipes for the handmade, natural, vegetable-based soaps we produce
were developed by Ms. Lisa R. Powell, the President/Secretary/Treasurer, the
sole director and the controlling shareholder of Rub A Dub Soap, and,
accordingly, are unique. Further, we know of no online retailers of natural
products whose sole product is soap. As a result, there are no standard industry
gross margin figures available.
50. Foreign sales as a per cent of total sales for last fiscal year: not
applicable. Domestic government sales as a per cent of total domestic sales for
last fiscal year: not applicable. Explain the nature of these sales, including
any anticipated changes:
54
We do not anticipate that Rub A Dub Soap will consummate any foreign or
government sales.
55
Rub A Dub Soap, Inc.
(A Development Stage Company)
FINANCIAL STATEMENTS
May 31, 2002
F-1
CONTENTS
Page
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-3
BALANCE SHEET F-4
STATEMENT OF OPERATIONS F-5
STATEMENT OF CASH FLOWS F-6
STATEMENT OF STOCKHOLDERS' DEFICIT F-7
NOTES TO FINANCIAL STATEMENTS F-8 - F-9
F-2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders of
Rub A Dub Soap, Inc.
We have audited the accompanying balance sheet of Rub A Dub Soap, Inc. (a
development stage company) as of May 31, 2002, and the related statements of
operations, stockholders' equity, and cash flows for the initial period from
inception (September 28, 2001) to May 31, 2002. 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 audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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 audit provides 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 Rub A Dub Soap, Inc. as of May
31, 2002, and the results of its operations and cash flows for the initial
period from inception (September 28, 2001) to May 31, 2002, in conformity with
accounting principles generally accepted in the United States.
Denver, Colorado
June 17, 2002
PROFESSIONAL CORPORATION
F-3
Rub A Dub Soap, Inc.
(A Development Stage Company)
BALANCE SHEET
May 31, 2002
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 15,722
Accounts receivable 95
Inventory 1,787
------------
Total current assets 17,604
------------
EQUIPMENT - AT COST
Furniture and equipment 11,106
Less accumulated depreciation 917
------------
10,189
TOTAL ASSETS $ 27,793
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,251
Payroll liabilities 354
Sales tax payable 21
------------
Total current liabilities 1,626
------------
LONG-TERM LIABILITIES
Shareholder loan 365
------------
Total long-term liabilities 365
------------
STOCKHOLDERS' EQUITY
Preferred stock, .01 par value; 10,000,000 shares
authorized; no shares issued and outstanding -
Common stock, .001 par value; 100,000,000 shares
authorized; 3,583,000 shares issued and outstanding 3,583
Additional paid-in capital 116,067
Deficit accumulated during the development stage (93,848)
------------
25,802
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 27,793
============
The accompanying notes are an integral part
of the financial statements.
F-4
Rub A Dub Soap, Inc.
(A Development Stage Company)
STATEMENT OF OPERATIONS
For the initial period from inception (September 28, 2001) to May 31, 2002
Revenues $ 971
Cost of sales 932
-------------
Gross profit 39
General and administrative expenses 93,227
-------------
Loss from operations (93,188)
-------------
Other income (expense)
Interest income 108
Loss on sale of assets (768)
-------------
NET LOSS $ (93,848)
=============
NET LOSS PER SHARE
Loss from continuing operations $ (0.03)
=============
WEIGHTED AVERAGE NUMBER OF SHARES OF
COMMONM STOCK AND COMMON STOCK
EQUIVALENTS OUTSTANDING 3,374,229
=============
The accompanying notes are an integral part
of the financial statements.
F-5
Rub A Dub Soap, Inc.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the initial period from inception (September 28, 2001) to May 31, 2002
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (93,848)
Adjustments to reconcile net loss to net cash
flows from operating activities:
Stock for services 74,280
Depreciation 917
Increase in inventory (1,787)
Increase in accounts receivable (95)
Increase in accrued expenses 375
Increase in accounts payable 1,251
----------------
Net cash flows from operating activities (18,907)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (11,106)
----------------
Net cash flows from investing activities (11,106)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable to stockholders 365
Issuance of common stock 45,370
----------------
Net cash flows from financing activities 45,735
----------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 15,722
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD -
----------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 15,722
================
The accompanying notes are an integral part
of the financial statements.
F-6
Rub A Dub Soap, Inc.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
For the initial period from inception (September 28, 2001) to May 31, 2002
Deficit
Common stock accumulated
---------------------------------- Additional during the Total
Number of paid-in development stockholders'
shares Amount capital stage equity
---------------- ---------------- ---------------- ---------------- ----------------
Common stock issued
September 2001 - for equipment 3,000,000 $ 3,000 $ 50 $ - $ 3,050
November 2001 - for cash & services 135,000 135 26,865 - 27,000
December 2001 - for cash & services 135,000 135 26,865 - 27,000
January 2002 - for cash & services 100,000 100 19,900 - 20,000
January 2002 - for cash 212,250 213 42,237 - 42,450
February 2002 - for cash 750 - 150 - 150
Net loss for the period ended
May 31, 2002 - - - (93,848) (93,848)
---------------- ---------------- ---------------- ---------------- ----------------
Balance, May 31, 2002 3,583,000 $ 3,583 $ 116,067 $ (93,848) $ 25,802
================ ================ ================ ================ ================
The accompanying notes are an integral part
of the financial statements.
F-7
Rub A Dub Soap, Inc.
(A Development Stage Company)
Notes to Financial Statements
May 31, 2002
1. Summary of Significant Accounting Policies
- -----------------------------------------------
Development Stage Activities and Basis of Presentation
------------------------------------------------------
Rub A Dub Soap, Inc. (a development stage company) (the "Company") was
formed to be a small online retailer of handmade, natural, vegetable-based
soaps and gift baskets. In the future, if sufficient demand exists, the
Company intends to add essential oils and herbs to their online inventory.
The Company has few sales and a net loss from operations for the period
from organization through the date of the balance sheet. Management
believes the Company has received a sufficient capital infusion through
issuance of stock to maintain operations for the next year.
Revenue Recognition
-------------------
The Company records income and expenses on the accrual method. Revenues are
recognized when the item is shipped to the customer.
Reporting Year
--------------
The reporting year of the Company is December 31.
Financial Instruments
---------------------
Unless otherwise indicated, the fair value of all reported assets and
liabilities that represent financial instruments (none of which are held
for trading purposes) approximate the carrying values of such assets and
liabilities.
Statement of Cash Flows
-----------------------
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
Loss per share
--------------
Loss per share has been calculated based upon the weighted average number
of shares outstanding.
Use of Estimates
----------------
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires the Company's management
to make estimates and assumptions that effect the amounts reported in these
financial statements and accompanying notes. Actual results could differ
from those estimates.
Consideration of Other Comprehensive Income Items
-------------------------------------------------
SFAS No. 130 - Reporting Comprehensive Income, requires companies to
present comprehensive income (consisting primarily of net income plus other
direct equity changes and credits) and its components as part of the basic
financial statements. For the period ended May 31, 2002, the Company's
financial statements do not contain any changes in equity that are required
to be reported separately in comprehensive income.
F-8
Rub A Dub Soap, Inc.
(A Development Stage Company)
Notes to Financial Statements
May 31, 2002
1. Summary of Significant Accounting Policies (continued)
- -----------------------------------------------------------
Stock-Based Compensation
------------------------
SFAS No. 123 - Accounting for Stock-Based Compensation allows companies to
choose whether to account for stock-based compensation under the method
prescribed in Accounting Principles Board Opinion No. 25 ("APB 25") or use
the fair value method described in SFAS No. 123. The Company continues to
follow the accounting measurement provisions of APB 25 and implements the
disclosure provisions of SFAS 123.
Income Taxes
------------
The Company accounts for income taxes in accordance with SFAS No. 109 -
Accounting for Income Taxes. Deferred tax assets and liabilities are
recognized with respect to the tax consequences attributable to differences
between the financial statement carrying values and tax basis of existing
assets and liabilities. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which these temporary differences are expected to be recovered or settled.
Further, the effect on deferred tax assets and liabilities of changes in
tax rates is recognized in income in the period that includes the enactment
date.
2. Stockholders' Equity
- -------------------------
The Company is authorized to issue 10,000,000 shares of preferred stock.
The Company's Board of Directors is authorized to divide the preferred
stock into series, and with respect to each series, to determine the
preferences and rights and qualifications, limitations or restrictions
thereof, including the dividend rights, conversion rights, voting rights,
redemption rights and terms, liquidation preferences, sinking fund
provisions, and the number of shares constituting the series and the
designations of such series. The Board of Directors could, without
stockholder approval, issue preferred stock with voting and other rights
that could adversely affect the voting rights of the holders of common
stock which issuance could have certain anti-takeover effects.
The Company issued 370,000 shares of stock to consultants for cash
consideration of $2,770, an average of $0.007 per share. For financial
statement purposes, the Company recorded compensation expense equal to the
difference between the public offering price of $0.20 per share and the
cash price, a total of $71,230.
3. Related Party Transactions
- -------------------------------
As of May 31, 2002, the Company had notes payable to the president in the
amount of $365.
4. Income Taxes
- -----------------
A deferred tax asset of $4,000 at May 31, 2002 relates to net operating
losses and deductible temporary differences due to development stage costs.
Management does not consider it more likely than not that the entire
deferred tax asset will be realized. Therefore, a full valuation allowance
has been established against the deferred tax asset. The net operating
losses will expire in 2022.
F-9
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 1. Indemnification of Directors and Officers.
- --------------------------------------------------
Sections 7-109-101 through 7-109-110 of the Colorado Business Corporation
Act provide for the indemnification of the officers, directors and controlling
persons of a corporation as follows:
Section 7-109-101 Definitions. As used in this article:
------------------------------
(1) "Corporation" includes any domestic or foreign entity that is a
predecessor of a corporation by reason of a merger or other transaction in which
the predecessor's existence ceased upon consummation of the transaction.
(2) "Director" means an individual who is or was a director of a
corporation or an individual who, while a director of a corporation, is or was
serving at the corporation's request as a director, an officer, an agent, an
associate, an employee, a fiduciary, a manager, a member, a partner, a promoter,
or a trustee of, or to hold any similar position with, another domestic or
foreign corporation or other person or of an employee benefit plan. A director
is considered to be serving an employee benefit plan at the corporation's
request if the director's duties to the corporation also impose duties on, or
otherwise involve services by, the director to the plan or to participants in or
beneficiaries of the plan. "Director" includes, unless the context requires
otherwise, the estate or personal representative of a director.
(3) "Expenses" includes counsel fees.
(4) "Liability" means the obligation incurred with respect to a proceeding
to pay a judgment, settlement, penalty, fine, including an excise tax assessed
with respect to an employee benefit plan, or reasonable expenses.
(5) "Official capacity" means, when used with respect to a director, the
office of director in a corporation and, when used with respect to a person
other than a director as contemplated in section 7-109-107, the office in a
corporation held by the officer or the employment, fiduciary, or agency
relationship undertaken by the employee, fiduciary, or agent on behalf of the
corporation. "Official capacity" does not include service for any other domestic
or foreign corporation or other person or employee benefit plan.
(6) "Party" includes a person who was, is, or is threatened to be made a
named defendant or respondent in a proceeding.
56
(7) "Proceeding" means and threatened, pending, or completed action, suit,
or proceeding, whether civil, criminal, administrative, or investigative and
whether formal or informal.
7-109-102. Authority to indemnify directors.
---------------------------------------------
(1) Except as provided in subsection (4) of this section, a corporation
may indemnify a person made a party to a proceeding because the person is or was
a director against liability incurred in the proceeding if:
(a) The person conducted himself or herself in good faith; and
(b) The person reasonably believed:
(I) In the case of conduct in an official capacity with the
corporation, that his or her conduct was in the corporation's best
interests; and
(II) In all other cases, that his or her conduct was at least
not opposed to the corporation's best interests; and
(c) In the case of any criminal proceeding, the person had no
reasonable cause to believe his or her conduct was unlawful.
(2) A director's conduct with respect to an employee benefit plan for a
purpose the director reasonably believed to be in the interests of the
participants in or beneficiaries of the plan is conduct that satisfies the
requirement of subparagraph (II) of paragraph (b) of subsection (1) of this
section. A director's conduct with respect to an employee benefit plan for a
purpose that the director did not reasonably believe to be in the interests of
the participants in or beneficiaries of the plan shall be deemed not to satisfy
the requirements of paragraph (a) of subsection (1) of this section.
(3) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct
described in this section.
(4) A corporation may not indemnify a director under this section:
(a) In connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the corporation;
or
(b) In connection with any other proceeding charging that the
director derived an improper personal benefit, whether or not involving
action in an official capacity, in which proceeding the director was
adjudged liable on the basis that he or she derived an improper personal
benefit.
57
(5) Indemnification permitted under this section in connection with a
proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding.
7-109-103. Mandatory indemnification of directors. Unless limited by its
----------------------------------------------------
articles of incorporation, a corporation shall indemnify a person who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which the person was a party because the person is or was a director, against
reasonable expenses incurred by him or her in connection with the proceeding.
7-109-104. Advance of expenses to directors.
--------------------------------------------
(1) A corporation may pay for or reimburse the reasonable expenses
incurred by a director who is a party to a proceeding in advance of final
disposition of the proceeding if:
(a) The director furnishes to the corporation a written affirmation
of the director's good faith belief that he or she has met the standard of
conduct described in section 7-109-102;
(b) The director furnishes to the corporation a written undertaking,
executed personally or on the director's behalf, to repay the advance if it
is ultimately determined that he or she did not meet the standard of
conduct; and
(c) A determination is made that the facts then known to those making
the determination would not preclude indemnification under this article.
(2) The undertaking required by paragraph (b) of subsection (1) of this
section shall be an unlimited general obligation of the director but need not be
secured and may be accepted without reference to financial ability to make
repayment.
(3) Determinations and authorizations of payments under this section shall
be made in the manner specified in section 7-109-106.
7-109-105. Court-ordered indemnification of directors.
------------------------------------------------------
(1) Unless otherwise provided in the articles of incorporation, a director
who is or was a party to a proceeding may apply for indemnification to the court
conducting the proceeding or to another court of competent jurisdiction. On
receipt of an application, the court, after giving any notice the court
considers necessary, may order indemnification in the following manner:
(a) If it determines that the director is entitled to mandatory
indemnification under section 7-109-103, the court shall order
indemnification, in which case the court shall also order the corporation
to pay the director's reasonable expenses incurred to obtain court-ordered
indemnification.
58
(b) If it determines that the director is fairly and reasonably
entitled to indemnification in view of all the relevant circumstances,
whether or not the director met the standard of conduct set forth in
section 7-109-102 (1) or was adjudged liable in the circumstances described
in section 7-109-102 (4), the court may order such indemnification as the
court deems proper; except that the indemnification with respect to any
proceeding in which liability shall have been adjudged in the circumstances
described in section 7-109-102 (4) is limited to reasonable expenses
incurred in connection with the proceeding and reasonable expenses incurred
to obtain court-ordered indemnification.
7-109-106. Determination and authorization of indemnification of directors.
---------------------------------------------------------------------------
(1) A corporation may not indemnify a director under section 7-109-102
unless authorized in the specific case after a determination has been made that
indemnification of the director is permissible in the circumstances because the
director has met the standard of conduct set forth in section 7-109-102. A
corporation shall not advance expenses to a director under section 7-109-104
unless authorized in the specific case after the written affirmation and
undertaking required by section 7-109-104 (1) (a) and (1) (b) are received and
the determination required by section 7-109-104 (1) (c) has been made.
(2) The determinations required by subsection (1) of this section shall be
made:
(a) By the board of directors by a majority vote of those present at
a meeting at which a quorum is present, and only those directors not
parties to the proceeding shall be counted in satisfying the quorum; or
(b) If a quorum cannot be obtained, by a majority vote of a committee
of the board of directors designated by the board of directors, which
committee shall consist of two or more directors not parties to the
proceeding; except that directors who are parties to the proceeding may
participate in the designation of directors for the committee.
(3) If a quorum cannot be obtained as contemplated in paragraph (a) of
subsection (2) of this section, and a committee cannot be established under
paragraph (b) of subsection (2) of this section, or, even if a quorum is
obtained or a committee is designated, if a majority of the directors
constituting the quorum or the committee so directs, the determination required
to be made by subsection (1) of this section shall be made:
(a) By independent legal counsel selected by a vote of the board of
directors or the committee in the manner specified in paragraph (a) or (b)
of subsection (2) of this section or, if a quorum of the full board cannot
be obtained and a committee cannot be established, by independent legal
counsel selected by a majority vote of the full board of directors; or
(b) By the shareholders.
59
(4) Authorization of indemnification and advance of expenses shall be made
in the same manner as the determination that indemnification or advance of
expenses is permissible; except that, if the determination that indemnification
or advance of expenses is permissible is made by independent legal counsel,
authorization of indemnification and advance of expenses shall be made by the
body that selected this counsel.
7-109-107. Indemnification of officers, employees, fiduciaries, and agents.
---------------------------------------------------------------------------
(1) Unless otherwise provided in the articles of incorporation:
(a) An officer is entitled to mandatory indemnification under section
7-109-103, and is entitled to apply for court-ordered indemnification under
section 7-109-105, in each case to the same extent as a director;
(b) A corporation may indemnify and advance expenses to an officer,
employee, fiduciary, or agent of the corporation to the same extent as to a
director; and
(c) A corporation may also indemnify and advance expenses to an
officer, employee, fiduciary, or agent who is not a director to a greater
extent, if not inconsistent with public policy, and if provided for by its
bylaws, general or specific action by its board of directors or
shareholders, or contract.
7-109-108. Insurance. A corporation may purchase and maintain insurance on
---------------------
behalf of a person who is or was a director, officer, employee, fiduciary, or
agent of the corporation, is or was serving at the request of the corporation as
a director, officer, partner, trustee, employee, fiduciary, or agent of another
domestic or foreign corporation or other person or of an employee benefit plan,
against liability asserted against or incurred by the person in that capacity or
arising from his or her status as a director, officer, employee, fiduciary, or
agent, whether or not the corporation would have power to indemnify the person
against the same liability under section 7-109-102, 7-109-103, or 7-109-107. Any
such insurance may be procured from any insurance company designated by the
board of directors, whether such insurance company is formed under the laws of
this state or any other jurisdiction of the United States or elsewhere,
including any insurance company in which the corporation has an equity or any
other interest through stock ownership or otherwise.
7-109-109. Limitation of indemnification of directors.
------------------------------------------------------
(1) A provision treating a corporation's indemnification of, or advance of
expenses to, directors that is contained in its articles of incorporation or
bylaws, in a resolution of its shareholders or board of directors, or in a
contract, except an insurance policy, or otherwise, is valid only to the extent
the provision is not inconsistent with sections 7-109-101 to 7-109-108. If the
articles of incorporation limit indemnification or advance of expenses,
indemnification and advance of expenses are valid only to the extent not
inconsistent with the articles of incorporation.
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(2) Sections 7-109-101 to 7-109-108 do not limit a corporation's power to
pay or reimburse expenses incurred by a director in connection with an
appearance as a witness in a proceeding at a time when he or she has not been
made a named defendant or respondent in the proceeding.
7-109-110. Notice to shareholders of indemnification of director. If a
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corporation indemnifies or advances expenses to a director under this article in
connection with a proceeding by or in the right of the corporation, the
corporation shall give written notice of the indemnification or advance to the
shareholders with or before the notice of the next shareholders' meeting. If the
next shareholder action is taken without a meeting at the instigation of the
board of directors, such notice shall be given to the shareholders at or before
the time the first shareholder signs a writing consenting to such action.
Item 2. Other Expenses of Issuance and Distribution.
- ----------------------------------------------------
The following is an itemized statement of the expenses incurred in
connection with this registration statement and the issuance and distribution of
the shares of common stock being registered under this registration statement.
All such expenses will be paid by Rub A Dub Soap.
Securities and Exchange Commission registration fee.............. $ 50
Legal fees and expenses.......................................... 10,000
Accounting fees and expenses..................................... 4,000
Blue sky fees and expenses....................................... 200
Transfer agent fees and expenses................................. 500
Printing, electronic filing and engraving expenses............... 1,500
Miscellaneous expenses........................................... 750
---
TOTAL ................................................... $ 17,000
All of the above items except the Securities and Exchange Commission
registration fee are estimates.
Item 3. Undertakings.
- ---------------------
(e) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer 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 small business issuer of expenses incurred or paid by a director,
officer or controlling person of the small business issuer 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
small business issuer will, unless in the opinion of its counsel the matter has
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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 Securities Act and will be governed by the final
adjudication of such issue.
Item 4. Unregistered Securities Issued or Sold Within One Year.
- ---------------------------------------------------------------
Since September, 2001, the date of our inception, we have sold securities
in transactions summarized in the following subsections (a) and (b).
(a)
Number of Shares of
Purchaser Date of Sale Consideration Common Stock Sold
- ------------------- ------------ ------------- ------------------
Lisa R. Powell 9/28/01 (1) 3,000,000
Bruce A. Capra 11/29/01 $135.00(3) 135,000
Derek J. Jones(2) 12/10/01 $135.00(3) 135,000
Paul J. Zueger 1/2/02 $2,500.00(4) 100,000
- ------------------
(1) Includes assets comprised of web site software, soap making supplies
and utensils, books, furniture, soap recipes and a customer list valued at a
total of $3,050.
(2) Patricia Cudd, Esq., Rub A Dub's legal counsel, purchased the shares
on June 14, 2002.
(3) Does not include the value of $26,865 in services in excess of cash
paid, recorded for financial statement purposes.
(4) Does not include the value of $19,900 in services in excess of cash
paid, recorded for financial statement purposes.
(b)
Paul J. Zueger 1/31/02 $.20 25,000
Aylin Cankardes 1/24/02 $.20 20,000
Bruce Granger 1/16/02 $.20 5,000
Joan Granger 1/21/02 $.20 5,000
Michael Legler 1/18/02 $.20 25,000
Karen Lucht 1/25/02 $.20 25,000
Margolis Trust 1/21/02 $.20 15,000
Barry Meyer 1/21/02 $.20 10,000
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Jodi Meyer 1/21/02 $.20 5,000
Darlene Nelson 1/17/02 $.20 15,000
Lynn Ohmstede 1/22/02 $.20 5,000
Michael Robinson 2/12/02 $.20 250
Tracy Robinson 2/12/02 $.20 250
James Scheel 1/30/02 $.20 500
Mark Shaner 1/22/02 $.20 1,250
Christopher Townson 1/22/02 $.20 250
Robin Kolsky Yaeger 1/23/02 $.20 5,000
Douglas Zueger 1/22/02 $.20 25,000
Paul Chris Zueger 1/21/02 $.20 25,000
With respect to the sales described in subsection (a), we relied upon
Section 4(2) of the Securities Act of 1933 for transactions by an issuer not
involving any public offering, as an exemption from the registration
requirements of Section 5 of the Securities Act of 1933. As the
President/Secretary/Treasurer and sole director and controlling shareholder of
Rub A Dub Soap, Ms. Powell had access to information enabling her to evaluate
the merits and risks of the transaction on the date of sale. Messrs. Capra,
Jones and Zueger are accredited or sophisticated investors and, accordingly, had
access to information enabling them to evaluate the merits and risks of the
transactions on the date of sale. Ms. Powell and Messrs. Capra, Jones and Zueger
each represented in writing that he or she acquired the securities for
investment for his or her own account and not with a view to distribution. Stop
transfer instructions have been issued to Rub A Dub Soap's transfer agent with
respect to the securities, and the transfer agent has been instructed to issue
the certificates representing the securities bearing a restrictive investment
legend. Each purchaser signed a written agreement stating that the securities
will not be sold except by registration under the Securities Act of 1933 or
pursuant to an exemption from registration.
With respect to the sales described in subsection (b), we relied upon Rule
504 of Regulation D under Section 3(b) of the Securities Act of 1933 for
transactions by an issuer not involving any public offering, as an exemption
from the registration requirements of Section 5 of the Securities Act of 1933.
All of the purchasers had a pre-existing personal or business relationship with
Rub A Dub Soap's sole executive officer and director. Each said person had
enough knowledge and experience in finance and business matters to evaluate the
risks and merits of making his, her or its investment in Rub A Dub Soap. The
company made the determination that these individuals were sophisticated
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investors who had enough knowledge and experience in business to evaluate the
risks and merits of the investment. Additionally, each of these persons was
provided with the Confidential Offering Memorandum dated January 10, 2002, and
otherwise had access to the kind of information normally provided in a
prospectus. Each investor represented in writing that he, she or it received the
shares of common stock for investment for his, her or its own account and not
with a view to distribution. Each purchaser signed a written agreement stating
that the securities will not be sold except by registration under the Securities
Act of 1933 or pursuant to an exemption from registration.
Item 5. Index to Exhibits
- ---------------------------
(a) An index to the exhibits filed should be presented immediately
following the cover page to Part III.
(b) Each exhibit should be listed in the exhibit index according to the
number assigned to it under Item 6. below.
(c) The index to exhibits should identify the location of the exhibit
under the sequential page numbering system for this Form SB-1.
(d) Where exhibits are incorporated by reference, the reference shall be
made in the index of exhibits.
Item 6. Description of Exhibits
- ---------------------------------
The following Exhibits are filed as part of this Registration Statement on
Form SB-1.
Item
Number Description
- ------ --------------------------------------------------------------------
(2.1)* Articles of Incorporation of Rub A Dub Soap, Inc., filed September
28, 2001.
(2.2)* Bylaws of Rub A Dub Soap, Inc.
(3)* Form of Stock Certificate.
(4)* Form of Subscription Agreement.
(10)(a)* Consent of Cudd & Associates (included in Exhibit (11) hereto).
(10)(b)* Consent of Comiskey & Company, Professional Corporation, Certified
Public Accountants & Consultants, independent auditors.
(11)* Opinion and Consent of Cudd & Associates.
64
- ------------------
*Filed herewith.
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
of the requirements for filing on Form SB-1 and authorizes this registration
statement to be signed on its behalf by the undersigned, in the City of Denver,
State of Colorado, on August 12, 2002.
RUB A DUB SOAP, INC.
(Registrant)
By: /s/ Lisa R. Powell
------------------------------------
Lisa R. Powell, President, Secretary
and Treasurer (Principal Executive,
Financial and Accounting Officer)
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following person in the capacities and
on the dates stated.
Date: August 12, 2002 /s/ Lisa R. Powell
----------------------------------------
Lisa R. Powell, President, Secretary,
Treasurer and Director (Principal
Executive, Financial and Accounting
Officer)
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EXHIBIT INDEX
The following Exhibits are filed as part of this Registration Statement on
Form SB-1.
Item
Number Description
- ------ -----------
(2.1)* Articles of Incorporation of Rub A Dub Soap, Inc., filed September
28, 2001.
(2.2)* Bylaws of Rub A Dub Soap, Inc.
(3)* Form of Stock Certificate.
(4)* Form of Subscription Agreement.
(10)(a)* Consent of Cudd & Associates (included in Exhibit (11) hereto).
(10)(b)* Consent of Comiskey & Company, Professional Corporation, Certified
Public Accountants & Consultants, independent auditors.
(11)* Opinion and Consent of Cudd & Associates.
- ------------------
*Filed herewith.
66