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APT Group Shareholder Update

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SOURCE APT Group, Inc.

KANSAS CITY, Mo., May 13, 2014 /PRNewswire/ -- Dear APT Group, Inc. Shareholders: 

We certainly have had an interesting introduction into becoming a public company.  We have received numerous inquiries over the last several weeks from current and potential investors.  This shareholder update is our attempt to answer these inquiries since many revolve around similar issues.  At the same time, it is important that we also update you on our ongoing business initiatives including current and new product launches.

We are APT Group, Inc., serving the world as a propulsion technology company that manufactures and distributes advanced environmentally friendly transportation, utility and recreational powersport products.

We planned to issue a quarterly shareholder update addressing these inquiries after our corporate name and ticker symbol were changed, but we decided to release this interim update containing additional background information immediately.

APT Group, Inc., Historical Overview

From 2008 to 2013, APT invested over $20M in the development of technology, an emissions testing laboratory, and the acquisition of an 18 acre campus of land and buildings.  We developed a corporate infrastructure of customer service, sales & warranty, product development, engineering, sales, marketing, supply chain and quality control departments.  In addition to these expenses and investments, APT recruited the management team and staff needed to drive a high revenue growth business.  

In efforts to minimize the sale of equity in the early stages of the company, we raised over 60% of the needed capital through debt financing to fund operations, acquisitions and patented technology development.  While this debt was necessary to build the company, the weight on our balance sheet and the associated interest costs inhibited our continued growth.  Our transition to a public company provides us with the tools necessary to improve our balance sheet and the growth capital to drive the company towards profitability.

We Have Three Business Initiatives for APT Group, Inc. in 2014

First Initiative Launch higher margin, technologically advanced products: 

1) MotoVox® is preparing to launch its MotoVox® Pro line.  The new specialty line will feature upgraded designs and proprietary technology that will result in higher margins for both APT and its dealer partners.  Standard MotoVox® products were initially targeted to mass merchants with market entry price points.  We achieved shelf space in some of the world's largest retailers and quickly brought the Motovox® brand to consumers across the country.   The expansion of the line to include 2015 MotoVox® Pro brings new products to the consumer that initiates the transition to the performance advantage vs. price advantageMotoVox® Pro will significantly expand distribution through specialty dealers and direct sales channels. 

2) MotoVox® Pro will unveil a 150cc ON-ROAD production motorcycle that achieves 100-150 miles per gallon.  This motorcycle features our patented SmartCarb® technology and is unique in five important ways:

  1. Design
  2. Performance
  3. Fuel Efficiency
  4. Automatic Altitude Compensation
  5. Ultra Low Emissions

We believe this new motorcycle will be the cleanest and most fuel-efficient on-road production vehicle of its kind, setting a new standard that will make a significant impact on the motorsport industry.  As the demand for low cost, environmentally friendly transportation products grows while emissions standards become more and more restrictive, our new motorcycle is expected to be a record success for MotoVox® Pro.  The company has already received pre-production order commitments from USA and International buyers.

3) MotoVox® will unveil its new 105cc industrial engine.  The engine was co-developed by APT Group and Chongqing Lifan Industry (Group) Co., Ltd., one of the world's largest engine manufacturers.   The engine is an evolution of the existing 79cc industrial engine currently used in certain MotoVox® products.  This design provides 1/3 more power and features key design improvements.  The 105cc industrial engine is expected to increase sales of existing products and will create a new product category for MotoVox®.  APT Group possesses the exclusive global distribution rights for this product for small engine vehicles and global industrial engine applications such as lawn & garden products.  The 105 is planned for market introduction in Q3 2014.

Additional Products and Technology

APT will announce exciting new technologies and technologically advanced products throughout the year as we execute our strategic plan.    

SmartCarb®

After an investment of over $4M and nearly four years of development, SmartCarb® is ready for primetime.  The small engine industry is desperate to find ways to meet current and future emission regulations without compromising the product's performance or raising manufacturing costs by using expensive catalytic converters.   SmartCarb® is our solution to costly and complicated fuel injection systems that most small engines cannot use.  SmartCarb® compensates for altitude, allows for exceptional gains in performance and fuel economy, and is cost effective and simple.  The opportunities are seemingly endless as the small engine market exceeds $19 billion in annual revenue.   

Much of 2012 and 2013 were focused on sponsoring racing teams to utilize the equipment.  In our industry, the most effective way to market technology is to first introduce it to the racing world and let them tell the story.  We sponsored many pro riders and they told the story over and over again, increasing SmartCarb's® exposure that led to impressive demands for the product.  

SmartCarb® began as a billet product.  In 2013, we moved to investment casting.  Our final move to die casting in 2014 will allow for mass production and will lower the cost even further to the consumer.   

This year, we are selling SmartCarbs® to the after-market as APT continues to negotiate OEM contracts.  This product is an exclusive technology to the MotoVox® brand within its product categories.

We have enjoyed a number of SmartCarb® testing successes.  It is also the first fuel system of its kind to atomize diesel, which has attracted the interest of developers of Unmanned Aerial Vehicles (UAV).  We are also celebrating multiple Pro and ProAM national and international competition wins in Gran Prix, Moto-cross and Enduros with SmartCarb®.

Stay tuned for more updates on our plans for the SmartCarb® as timing and non-disclosure agreements allow. 

Sonic Flow CSI Engine

Industries continue to scour the globe in search of the most efficient and powerful ultra low emission, high power density, light weight power plants.   We strongly believe the Sonic Flow CSI Engine is the best future technology to meet these demands due to its multiple fuel capabilities and various geometry and cylinder configuration platforms.   Stay tuned for important announcements in Q3 2014. 

Second Initiative The sale of "non-revenue" producing assets: APT is reviewing an attractive offer for the sale of certain non-core corporate assets that do not produce revenue and are not vital to operations or the company's long term business plan.  We anticipate the transaction to be completed in early Q3.  A portion of the sale proceeds are earmarked to fund the growth capital needs for 2014.  The balance is targeted for the direct retirement of debt instead of selling equity, which will result in improvements to the balance sheet, cash flow and operating expenses.

Third Initiative Restructure and improve the balance sheet.  APT is actively:

(a) strengthening the current balance sheet via conversion of seasoned debt to equity, with the added benefit of improved cash flow

(b) positioning the company for access to lower cost production financing directly from suppliers, resulting in large cost savings to the company

The reduction of debt is one of multiple strategies that will push APT into profitability in 2015.   Our goal is double digit EBITDA by 2016.  These management decisions have already begun to be effective.

The expected key impacts of the restructured balance sheet are:

  1. Over $700,000 to $900,000 annual savings in interest expenses
  2. A stronger balance sheet with improved performance ratios

Annual Summaries:

2011-2012 MARKET ENTRY AND RAPID GROWTH – Sales $6.5M 2011 and $10.7M 2012

The company entered revenue with the MotoVox® line beginning in 2011 with key accounts (Sears, K-Mart) and achieved $5.9M of revenue within a 7 month period.  In 2012, we were able to accelerate revenue to reach nearly $11M in annual product sales.  This 40% year-on-year growth was led by expansion into distribution via mass retailers such as Costco, PepBoys, Alco and select regional retailers.  Entering sales with mass retailers in the company's first year of sales is a significant reflection on the confidence in our product's quality, customer support, and attractiveness to consumers.

2013 RETAILER RE-ORDERS, COMPLETING PRODUCT DEVELOPMENT AND EMISSIONS LAB, AND EXPAND PRODUCT RANGE

Revenue goals for 2013 were not met as planned.  Low cost debt was an advantage for APT Group, however product demand and the production financing capital required to meet that demand grew beyond our primary lender's capacity.  This required a subordination agreement with a receivable lender.  The subordination took months to complete causing us to miss much of our spring 2013 business.  Shortly after the subordination agreement was signed, the new receivable lender capped the production capital line.  Due to these challenges, we made the decision to fast track our plans to take the company public.  We believed the public markets were going to be the most economical and effective answer to facilitate rapid growth.  We carefully analyzed multiple paths to public markets.  After a year of an arduous process, we determined that a reverse merger would be the most effective path to meet the company's immediate need for growth capital.

2014 RETAILER RE-ORDERS, NEW PRODUCT RELEASES, SIGNIFICANT TECHNOLOGICAL ADVANCES, EMISSIONS LAB REVENUE, OFFICIAL LAUNCH OF THE SMARTCARB TO THE OEM MARKET, RESTRUCTURING BALANCE SHEET, SALE OF NON REVENUE PRODUCING ASSETS

In 2014, we remain focused on expanding sales with our current and new mass retailers, launching international sales, and initiating OEM sales of the SmartCarb® fuel system technology line.  We project that overall gross margins will continue to improve.  APT is currently engaged in conversations with numerous national and regional retailers in both the US and international markets while continuing to build specialty channel and varied international opportunities.

ADDITIONAL ITEMS OF INTEREST

Share Structure

Common Shares

We have 20,000,000,000 authorized common shares and 500,000,000 authorized preferred shares.

At the signing of the Share Exchange Agreement on March 27, 2014, there were 897,071,625 issued and outstanding common shares of FROZ.  As of May 9, 2014, we have 4,425,633,898 common shares issued and outstanding.  Of that number, 2,735,501,971 common shares were issued to the legacy investors and employees of APT, all of which are restricted for 6 months from the issuance date.

Preferred Shares

We have four classes of preferred shares: A, B, C & E.

There are no shares of Class A Preferred Stock issued or outstanding. 

Old FROZ management retained 500,000 shares of Preferred B Stock in accordance with the terms of the Share Exchange Agreement. 

On May 9, 2014, we announced the creation of two new classes of convertible preferred stock, Class C and Class E, for exclusive issuance to the legacy investors and employees of APT.  We authorized and issued 19,738,646 Class C Preferred Shares and 22,155,729 Class E Preferred shares exclusively to the people who worked tirelessly for years to develop our products and to get them on store shelves.  Class C is restricted for 18 months from the issuance date and Class E is restricted for 12 months from the issuance date. 

Equity Partners

The company began operations in 2007 with angel capital investment and then financed production with working capital loans.  We also utilized account receivable factoring companies that were expensive, placed limits on orders, and made it hard for us to manage our own cash flow.  After reviewing several options and interviewing multiple firms, we selected Ironridge as our partner to remove those liabilities from our balance sheet so that we will be able to accept as many orders as we can produce.  It was a strategic decision that was in the best long-term interests of the company.

Name Change and Ticker Symbol Change

There are several steps in the process and each of those steps has a particular order.  We have been working with our counsel to draft the 14C Information Statement for issuance to our shareholders of record.  The shareholder record date for the 14C is May 9, 2014.  Once the SEC approves our 14C, which should be within two weeks from now, we will mail the Information Statement to our shareholders of record.  The SEC requires that we wait an additional 10 days after mailing to officially change the name.  We have already reserved our new name with the Delaware Secretary of State.  The actual name change is simple and takes about a day. 

FINRA requires that our name be changed before we can request a symbol change.  We have completed our application, but FINRA will not process the application until after the name change. 

We look forward to announcing our new name and ticker symbol to our shareholders soon. 

COMPLIANCE & REPORTING

APT management is committed to following federal regulatory and reporting guidelines as required. The company has retained various advisors to help guide us in this area.  We will issue news when, and only when, the company has valid news that does not reveal information that would give an advantage to our competitors. The executive management team at APT will manage this process ethically and responsibly.  Each quarter, management will issue a general shareholder update.  Throughout the quarter, management may also share pertinent information with our shareholders. 

The above strategies will accelerate growth, create sustained profitability, improve our margins, and ensure our regulatory compliance.  This allows management the ability to focus on the task at hand - managing an exciting and growing consumer oriented business. Thank you for your attention and continued support.

About APT Group, Inc.
APT Group, Inc. (OTC BB: FROZ) is a Missouri registered corporation headquartered in Kansas City and is the holding company for the MotoVox® motorsport product line, SmartCarb® patented fuel system, and the Sonic Flow small engine technology lines (http://www.motovox.com/ and http://www.powerapt.com/).

MotoVox® has become the fastest growing brand of small engine price-point power sport products in the world, with nearly 100,000 power sport products sold to date earning nearly $25 million in less than three years of commerce. 

Forward-Looking Statements
Some statements made in this press release are forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We use words such as "anticipate," "believe," "expect,'' "future," "intend," "plan," and similar expressions to identify forward-looking statements. These statements including those related to the growth of the industry and the Company's performance, are only predictions and are subject to certain risks, uncertainties and assumptions. Additional risks are identified and described in the Company's public filings with the Securities and Exchange Commission. Statements made herein are as of the date of this press release and should not be relied upon as of any subsequent date. The Company's past performance is not necessarily indicative of its future performance. The Company does not undertake, and the Company specifically disclaims any obligation to update any forward-looking statements to reflect occurrences, developments, events, or circumstances after the date of such statement.

Contact
William Maher, SVP
APT Group, Inc.
InvRel@motovox.com

Paul Knopick
E & E Communications
940.262.3584
pknopick@eandecommunications.com

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