In a letter to shareholders,Total Apparel Group, Inc. updated its most recent developments. Management indicated that it has struggled to launch both its Kappa as well as its FIFA Collections brands with both launches hurt by delays.


An aggressive push around its FIFA brand tied to the World Cup event drew orders from Burlington Coat Factory, Sports Authority, Costco and Wal-Mart and others but many retailers wound up canceling their orders due to late shipments and late deliveries.


On the positive said, TAG said it was able to leverage World Cup excitement to create relationships with key accounts such as Wal-Mart, Costco and Sports Authority for the FIFA Collections brand. It said it has developed “a comprehensive plan to ensure the success of the FIFA Collections brand in the U.S. marketplace in 2011 and beyond as we move toward the World Cup games in Brazil in 2014.”


For the Kappa brand, management plans a full U.S. launch for the 2011 Summer/Back to School selling season.


The full letter follows:


Dear Shareholder:


We would like to personally thank you for your patience and support during our growth phase as a commercial enterprise and public company. We have reached certain key milestones and would like to share with you our recent developments and our future outlook for Total Apparel Group, Inc. (the “Company” as we move toward becoming a more transparent and fully reporting public company.


Since the last official shareholder letter that we sent to you approximately two years ago, the Company has undergone a major transformation in its effort to become a leading licensing and brand management partner in the United States for a highly diversified portfolio of well-known international sports, entertainment and lifestyle brands. Our intent when we signed the licensing agreement with Basic Net S.p.A., Basic Properties America, Inc. and Kappa North America, Inc. in April, 2009 and the non-exclusive Distribution Agreement with Global Brands (Football) Pte. Ltd. (through our wholly owned subsidiary Active Apparel Group, Inc.) in November 2008 (the “FIFA Distribution Agreement”) was to augment our efforts in implementing our business plan.


Concurrent with these activities, we developed a comprehensive long term strategy and vision on a platform that we call the “Nine Principles of Growth,” established a proven management team; opened two offices/showrooms in New York and Los Angeles; engaged new legal and accounting representation; and began the process of becoming a fully reporting public company quoted on the Over-the-Counter Bulletin Board.


As a result of the recession, we faced a number of setbacks and obstacles beginning in late 2008, such as limited access to financial resources, severe changes in the retail market and the overall economic uncertainty of consumers. Because of these factors, we had to adjust our plans and temper initial expectations, which impacted our ability to meet certain short-term contractual obligations and sales objectives, and resulted in the decline in our stock price.  We have finally managed to achieve, however, a number of the goals that we set forth in our “Nine Principles of Growth,” such as the filing of a registration statement (which includes our audited financial statements for the two years ended December 31, 2009 and 2008 and unaudited financial statements for the six month period ended June 30, 2010) with the Securities and Exchange Commission (the “SEC”), which we announced in a press release that we issued on September 8, 2010.  This will move us closer to our goal of being quoted on the Over-the-Counter Bulletin Board, a critical element of our strategy.


Below is a summary of the Company's other developments since our last shareholder letter to you in 2008:


Kappa North America (KNA)


Kappa North America, Inc. (KNA) is the Company's wholly owned subsidiary that maintains the U.S. and Canadian master licensing rights for men's, women's and children's accessories, footwear, and apparel for the Kappaâ and Robe Di Kappaâ brands.  Although we generated some fairly good sales in the four months after we acquired the rights for the brands, we faced fiscal challenges in our launch efforts for the Kappaâ and Robe Di Kappa brands similar to those experienced with the FIFA Collections brand. We are currently working through these challenges internally and with the team at Basic Net S.p.A., the parent company of the Kappaâ and Robe Di Kappaâ brands. Most of our 2009 sales were generated through our Canadian sales force and account base, which includes major accounts such as Footlocker, Forzani, Athletes World and SportChek. Due to a transition within our sales team in the Canadian market, however, our sales efforts have slowed while we reassess our strategy and restructure our approach to the Canadian market.


With respect to the U.S. market, we have delivered a minimal amount of seasonal product to key accounts such as Eurosport/Soccer.com, but are roughly six months off of our intended launch schedule and have not launched any comprehensive national retail and marketing programs.  We believe that because we have not rolled out any significant sales initiatives in this market, there is a large amount of pent up demand for the product based on overall market research and direct feedback from retailers and consumers.


Over the next few months, we will continue to slowly introduce product into the marketplace and work closely with Basic Net to achieve our initial sales and marketing strategy. Based on our current timetable to complete a revised plan with Basic Net, our plans are to have a full U.S. launch for the 2011 Summer/Back to School selling season.  In any event, we believe that with a strong sales and marketing strategy, sound financial structure and solid management team, the Kappaâ brand has the potential to become a highly successful performance lifestyle brand in North America. Kappa represents the best short and long term growth opportunity that we currently have under contract.


Active Apparel Group, Inc. (AAG)


In the fall of 2009, we generated modest sales and recognized minimal revenues for the FIFA Collections™ brand through our wholly owned subsidiary Active Apparel Group, Inc., which has the rights to the FIFA Distribution Agreement. We generated the majority of the revenue from the FIFA Distribution Agreement through key accounts such as Eurosport, Delivery Agent (FIFA.com) and Modecraft (Burlington), which experienced moderate success at retail. Although the initial introduction of the FIFA brand apparel received a favorable response, it was mitigated by the consumer interest in purchasing World Cup Event Merchandise developing at a later date then expected. As a result, our first quarter 2010 sales figures were significantly lower than anticipated.


Subsequently, we put together an aggressive World Cup sales campaign to offset the lower than expected revenues by generating orders from many of the large retailers, including Burlington Coat Factory, Sports Authority, Costco and Wal-Mart. Many of these major retailers, however, cancelled their orders due to late shipments and late deliveries.  We were unable to deliver in a timely manner because, among other reasons, we were unable to pay additional fees associated with increased airfreight costs resulting from flight disruptions caused by the Icelandic Volcano and other external factors. Therefore, although the World Cup was, and remains, an important part of the FIFA Collections™ brand, it is not the focal point of the brand, but rather one that we were able to leverage to:



  • Create relationships with key accounts (such as Wal-Mart, Costco and Sports Authority), maximizing our company's exposure;
  • Establish additional long-term business opportunities (such as acquiring licenses and other acquisition targets) for our Company and our other licensed properties; and
  • Develop a comprehensive plan to ensure the success of the FIFA Collections brand in the U.S. marketplace in 2011 and beyond as we move toward the World Cup games in Brazil in 2014.

The Future


In closing, we will continue to follow our mission of creating transparency and stability and providing a new level of responsible corporate governance that we believe will guide the Company into the future, afford us the best chance for success, and ultimately create long term value and positive returns for our shareholders.  We thank you for your continued support and are excited to embark on the next stage of the Company�€�s growth. A Company Executive Summary follows this letter.


Warmest regards,



Janon Costley
Chief Executive Officer
Total Apparel Group, Inc.


Don Jones
Chairman
Total Apparel Group, Inc.