<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
2nd amendment
General Form For Registration of Securities
of Small Business Issuers Under Section 12(b)
or 12(g) of the Securities Act of 1934
COMPOSITE AUTOMOBILE RESEARCH, LTD.
(Name of Small Business Issuer in Its Charter)
Alberta, BC 93-1202663
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
635 Front Street, El Cajon, CA 92020
(Address of principal Executive Offices) (Zip Code)
(619)444-7254
(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
- -------------------------------- --------------------------------------
- -------------------------------- --------------------------------------
Securities to be registered under Section 12(g) of the Act:
Common Stock - No Stated Par Value
(Title of Class)
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10-SB
ITEM 1
DESCRIPTION OF THE BUSINESS
GENERAL
Composite Automobile Research, Ltd. ("CAR") is filing this Form 10-SB on a
voluntary basis in order to make CAR's financial information equally available
to any interested parties or investors and meet certain listing requirements for
publicly traded securities.
CAR has no current plans with respect to deregistration.
CAR will voluntarily make available public information to its shareholders in
the event its obligation to file Exchange Act reports is terminated.
HISTORY OF THE COMPANY:
CAR was incorporated in Calgary, Alberta on January 5, 1996 to provide research
and development as well as financing for a new business venture in the
automotive arena. CAR acquired the shares of World Transport Authority, Inc., a
Nevada Corporation ("WTA") and Thunder Ranch, Inc., a Nevada Corporation on
March 19, 1996 in exchange for 8,000,000 shares (2,666,001 shares after the 3 to
1 reversal of shares on June 3, 1997) of CAR stock.
WTA, was acquired and set up to perform all daily business operations and
develop an inexpensive vehicle specifically for developing nations. Several
prototype vehicles were built, based upon a design called the "Island Car" from
Inno Tech Engineering Services, a Texas company owned by Jahan Eftekhar who is
also a shareholder of CAR. In December, 1996 WTA abandoned the Island Car design
and created a completely new design called the WorldStar(R) using advanced
fiberglass and composite materials. All rights, including intellectual rights
and trademarks for the WorldStar(R) were created by employees of WTA beginning
in December, 1996 and all such rights and trademarks are owned solely by WTA.
Mr. Eftekhar has acknowledged the foregoing in an Affidavit dated January 9,
1998.
Thunder Ranch, Inc. was acquired to provide production facilities, equipment,
and experienced technicians necessary for the support of the WTA vehicle design.
Thunder Ranch, Inc. was in the business of selling "kit" cars, and purportedly
was to provide public exposure for the WTA vehicle concept through automobile
shows and "kit" car magazine articles. It became apparent by June, 1996 that
Thunder Ranch, Inc. did not provide the necessary production support and public
relations results required. In order to remove the Thunder Ranch, Inc.
operations from association with CAR and WTA, an Agreement dated September 27,
1996 was signed, in which Mr. Thomas McBurnie exchanged his CAR stock and rights
in exchange for the transfer of Thunder Ranch, Inc.
to Mr. McBurnie.
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BUSINESS DEVELOPMENT:
CAR is an automotive technology company that sells a combination of products and
services designed to enable its licensees to manufacture, assemble and market
rugged, low-cost vehicles worldwide under the brand name WorldStar(R). CAR's
target market consists of 189 developing nations with more than two-thirds of
the world's population. Demand for automobiles in developing nations is rising
rapidly, especially at the basic transportation end of the market. As a result,
CAR is positioned to be a significant player in one of the most dynamic global
growth industries of the 21st century.
BUSINESS OF THE ISSUER:
OVERVIEW:
CAR sells a "Master License" for each predetermined geographic region (or each
country, depending on the estimated vehicle sales in the market). The price for
this Master License varies, again depending upon the population (250,000 persons
per facility), from $250,000 to $50,000,000 or greater. The Master License
holder is responsible for selling our manufacturing licenses only in their
country or region. They will provide all local support for the manufacturing
license holder's marketing, sales and training utilizing their knowledge of
local customs and language. The Master License holder reports directly to CAR
and is responsible to do whatever is necessary to make each license holder
successful.
CAR through its Master License holder sells each individual license to
manufacture our utility style vehicle. The current price for one license is
$372,000, of which the Master Licensee receives $112,000, and CAR receives
$260,000. For this price, the individual license holder owns 70% of the license,
and the Master Licensee owns 30%. CAR has determined this will unite the network
of Master License holders with their individual license holders in order to
provide the maximum incentive for success in every region and country.
If it is determined that a specific region or country is not large enough or
other factors prohibit the sale of a Master License, CAR acts as the Master
Licensee, providing all training and retaining a 30% interest in the license.
CAR controls and coordinates the ordering of all required parts and materials
from its network of international suppliers. Shipments to the license holders
are made using just-in-time inventory management procedures.
CAR's decentralized "micro-enterprise" approach to auto-making is ideally suited
to the vehicle manufacturing needs of developing nations. The company sells and
services WorldStar(R) licenses, each of which include a turnkey
micro-manufacturing facility and a license to produce as many as 324 vehicles
every twelve months. CAR provides purchasing services that give it's licensees
the same just-in-time inventory management and buying power enjoyed by much
larger companies. CAR also conducts research and development to improve product
design and make available new models and options.
Composite technology developed in the United States makes the WorldStar(R) both
inexpensive and simple to produce on a small scale. Its design features an
engine cage supporting a Volkswagen "Boxer" engine and front-wheel-drive
transaxle, which attaches to a single-mold body made of fiberglass reinforced
plastic -- one of the strongest and most resilient materials available.
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The result is an easily serviced, durable vehicle with fewer than 500 parts,
consisting of proven off-the-shelf technology.
Developing countries presently import vehicles from North America, Europe and
Eastern Asia. The average buyer of an import vehicle must contend with expensive
and hard to find spare parts and service. One of the advantages for a buyer of
the WorldStar(R) is the manufacturer is close by to provide local service and
spare parts. Because the vehicle is much simpler and has significantly fewer
parts that the standard small production vehicle of today service requirements
are greatly reduced.
THE WORLDSTAR(R) VEHICLE:
The vehicle, in its standard pickup configuration, is a 1500 lb. capacity truck
that can hold a driver and two passengers next to the driver. With the addition
of a snap-on van shell the WorldStar(R) then becomes a lockable delivery van.
Removal of the tailgate of the pickup and the addition of a simple bolt-in
seating module in the bed area of the truck transforms the WorldStar(R) into an
11- passenger taxi. CAR has specifically designed the vehicle in this manner and
believes it is the most inexpensive and practical utility vehicle produced
anywhere in the world. The target market for the WorldStar(R) is the developing
nations of the world and not the industrially advanced nations such as the
United States, Canada and Western Europe. The Master License holder for Mexico,
Grana Baja, S.A. de C.V. in conjunction with Environmental Process Advanced,
S.A. de C.V., secured all permits necessary to begin production of the
WorldStar(R) vehicle in Tijuana, Mexico on April 1, 1998 for export purposes.
The Tijuana facility began operations in June 1998 to build export vehicles. As
of this filing, two vehicles have been built and sold for a fifty five vehicle
order for the first commercial customer. The permit for Mexican sales and use of
the WorldStar(R) vehicle has been applied for through SECOFI and is pending. The
permit process in Honduras is the responsibility of Diamond Plastics and is
pending. CAR granted Diamond Plastics a Manufacturing and Distribution License
instead of a Master License due to the small population of Honduras. C.B.N.
WorldStar Philippines, the Master License Holder in the Philippines, has passed
a preliminary process approval and now anticipates final permit approval through
the Vehicle Manufacturing Department of the Board of Investment Applications,
LDA Program, in September 1998.
The layout of the vehicle varies from a pickup to an open taxi to a van without
changing the basic structure or method of manufacture. The body is constructed
of inner and outer shells bonded together forming the desired vehicle. To that
structure the front drive package is bolted, then rear suspension, front body
shell, windshield, gages and wiring and the vehicle is ready to drive.
The WorldStar(R) is a composite vehicle manufactured from plastic resins,
structural foam, other core materials and fiberglass. The configuration of the
materials provide adequate structure and strength for the vehicle, and has been
proven by a Finite Element Analysis and the design and testing of the prototype
vehicles. The basic version is the pickup with the 1.6 liter VW Boxer engine.
The transaxle is a four speed front wheel drive. The engine/transaxle plus
suspension is bench assembled to a heavy duty tubular engine cage and then the
complete drive is assembled and attached to the composite body.
The vehicle itself can evolve from a basic piece of transportation into a more
prestigious vehicle filled with amenities - but the method of construction
remains the same. Most major manufacturers shun this approach because their
investment is in steel, steel fabricating equipment, robotic welding
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equipment, etc. and that investment is enormous.
The design of the WorldStar(R) vehicle is complete with no material developments
or uncertainties remaining prior to the sale of vehicles. CAR has produced two
complete prototypes of the WorldStar(R) with ongoing engineering testing
performed by Comtec in California. The WorldStar(R) has been subjected to
in-house testing, road testing, and off-road testing. In addition the
WorldStar(R) was entered in a road race in Battle Mountain, Nevada, in 1997 and
finished the race with an average speed of ninety miles per hour with no
mishaps. Comtec, Inc. of Irvine, California will complete all engineering
testing to include structural adequacy, material strength, and crash worthiness
at a remaining cost of $50,000 by September, 1998. The Company has allocated
$50,000 to complete the above testing.
THE MARKET:
There is a vast market for the WorldStar(R). Over five billion people in the
world do not have automotive transportation. Automobile manufacturers have been
slow in meeting the transportation needs of this emerging market. When
traditional automobile manufacturers sell their vehicles in developing
countries, transportation costs and tariffs greatly inflate the selling price,
in many cases adding up to 200% to the price. The target market for the
WorldStar(R) is the developing nations of the world and not the industrially
advanced nations such as the United States, Canada and Western Europe. Existing
automobiles are designed for sophisticated roads and infrastructure and bear the
cost of extensive governmental regulation. The WorldStar(R) has been designed
for unimproved roads. It has up to 10 inches of ground clearance, will get over
35 miles to the gallon, or use propane where gasoline is not readily available.
The car will be manufactured, sold and serviced locally by persons who speak the
same language as the customer. The basic design of the WorldStar(R) can be made
in various colors and configured as a pickup, van or taxi. The WorldStar(R) is a
basic transportation vehicle.
"Emerging markets hold the key" stated a report released by the U.S. Office of
Automotive Affairs in 1996. "These markets accounted for almost 21 percent of
worldwide motor vehicle output and sales in 1995. Projected long-term growth
rates for motor vehicle sales in many emerging markets are ten to fifteen times
higher than those in the United States and Europe. Almost all this growth
represents new vehicle sales, rather than those of replacements. Governments of
the developing world now play a major role in shaping the global motor vehicle
industry through their efforts to develop local manufacturing capability." CAR's
mission is to aid these developing nations by strategically placing
micro-manufacturing facilities within their borders to build infrastructure,
create jobs, teach new skills and act as a magnet for new business rather than
importing vehicles from large factories located outside the country.
It is far more economical and efficient to ship bulk material and components to
local manufacturers than to transport completed vehicles from a distant
manufacturing facility. The WorldStar(R) has been designed for local manufacture
by semi-skilled workers. The local workers who build the WorldStar(R) can be
paid an above-average wage that allows them to also be buyers of these vehicles.
(The Henry Ford Plan).
The management of CAR believes CAR will prevail in the market place through its
unique manufacturing methods that exactly fit the needs of smaller nations with
restricted capital
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resources. The response to CAR's manufacturing strategy from interested business
people in developing nations has been overwhelming. The marketplace today
rewards innovation and quality new concepts with rapid feedback and exponential
growth. As examples of companies that combined small size in their market with
dramatic innovation, one can look to what occurred in United States and Asian
steel production when the mini-mill concept displaced the traditional steel
mill, Internet start-ups with spectacular sales competing against traditional
distribution sources, and the massive response to Volkswagen's reintroduction of
its "new" Beetle concept car in 1998.
THE COMPETITION:
There are very few automobiles in the world today with a selling price under
$10,000. The Volkswagen Beetle, manufactured in Mexico, is one of the lowest
priced automobiles at a selling price of approximately $8700. In the major
automobile manufacturing countries, Japan, Korea and the United States, the
entry level price is well above $10,000. The raw materials and components for
the WorldStar(R) will cost the local manufacturer about $4200. The manufacturer
adds 100-200 hours of labor at the local rate and sets the sales price. We
estimate the sales price of the WorldStar(R) to be approximately $6,000 to
$7,000 per vehicle. At a direct cost per vehicle of less than $5,000 before
tariffs, the WorldStar(R) has a formidable price advantage over its competition.
We estimate that the total operating costs of the WorldStar(R) are approximately
one-third that of competing vehicles. Developing nations often levy heavy import
duties on finished products, but not on parts. In many markets WorldStar(R) will
thus have as much as a sixfold cost advantage over its nearest competitors.
Major automotive manufacturers, such as Chrysler, GM, Ford and Diahatsu (see
comparison chart below) have also identified this untapped market and begun
design of their concept vehicles, which they estimate to be ready for production
within 5 years. While these established manufacturers have superior marketing
and operational corporate structure, CAR management believes the WorldStar(R) to
be a superior vehicle to any concept vehicle currently under development by
these manufacturers due to our use of existing uncomplicated reliable components
already sold worldwide, our low sales price advantage, our low capital
requirements for a factory start-up, and our vehicle's ability to carry a
greater payload than our competitors' vehicles. CAR is also intent upon aiding
the developing nations by placing the micro-manufacturing facilities within
their borders to build infrastructure, create jobs, teach new skills and act as
a magnet for new business rather than importing vehicles from large factories
located outside the country.
The following chart assumes vehicle prices are for vehicles manufactured and
assembled only in country of origin. Shipments of completed vehicles across
national borders normally require payment of 100% or greater duties. While
Chrysler, GM, Ford, Daihatsu, and Fiat have not yet indicated the number of
factories planned, Chrysler estimates its capital cost of $300,000,000 for one
factory is much less than those planned by GM and Ford.
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<TABLE>
<CAPTION>
Manufacturer:(1) CAR Regional Chrysler GM Ford Daihatsu Fiat
- ------------- --- ------------ -------- -- ---- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Vehicle WorldStar CCV Blue Macaw Ka Midget II Uno
Sticker Price $6,000 $6,000 $9,000 $11,000 $4,600 $10,000
Engine 1600cc VW 800cc Briggs 1000cc 1000cc 659cc unknown
Target Market Developing India, China Brazil Europe & Japan Mexico
Nations Dev. Nations Brazil
Truck Yes No No No Yes No
Payload 1500 lbs N/A N/A N/A limited N/A
Delivery Van Yes No No No No No
Passengers Up to 11 4 4 4 1 4
Fuel Gas/Propane Gas Only Gas Only Gas Only Gas Only Gas Only
# of Parts App. 500 -1100 unknown -4,000 unknown unknown
Locally built Yes Limited Brazil only Mexico only Japan only Italy
</TABLE>
CAR is utilizing the unique concept of licensing its designs and manufacturing
processes to small localized manufacturing plants in order to compete
successfully in the vehicle manufacturing business in developing countries on a
world-wide basis. With an entry level manufacturing start-up and initial
operating cost of approximately $500,000, our licensee will be producing
vehicles at less than 1% of the traditional vehicle production line capital
cost. CAR's competitors all have significant traditional advantages over CAR
with respect to their size, financial resources, experienced personnel, dealer
networks, purchasing leverage, design and engineering staffs, and advertising
budgets. The competitors' vehicles are all technically more advanced than CAR's.
However, CAR's vehicle is designed to be operated in world markets where
durable, simple, inexpensive, non-technical, easy to repair components are
superior to vehicles that require intricate and expensive components requiring
elaborate repair facilities and expensive computer controlled diagnostic
equipment. CAR's market niche is specifically to provide vehicles that are
simple to build and maintain and are, therefore, inexpensive entry level
vehicles.
While CAR has no current market position, its first production facility will be
in operation in May, 1998, the table below shows what management believes to be
an attainable market position within five years in the low-cost vehicle market
for developing nations:
<TABLE>
<CAPTION>
Manufacturer: CAR Regional Chrysler GM Ford Daihatsu Fiat
- ------------- ------------ ------- -- ---- -------- ----
<S> <C> <C> <C> <C> <C> <C>
% of market 10 40 10 30 <5 <5
</TABLE>
- -----------------
(1) The chart is compiled from articles from the 1997 Frankfurt
International Auto Show and other publications including: an Associated Press
article dated 9/25/97 about the Frankfurt International Auto Show concept
vehicles, Los Angeles Times article dated 12/14/97 about automobile
manufacturers in Brazil, Wall Street Journal article dated 9/9/97 about the
Chrysler plastic body vehicle, Car and Driver article dated November 1997 about
the Daihatsu Midget II.
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THE MARKETING PLAN:
To be successful CAR must reach developing nation manufacturing entrepreneurs.
In order to accomplish this, CAR is marketing its WorldStar(R) directly to
developing nation's trade and privatization agencies. We are also utilizing our
network of business contacts within these nations as well as direct advertising
within each country. The local manufacturer will provide a manufacturing
facility which has electrical service (200amp) and at least 4,000 square feet of
enclosed manufacturing space and 1000-2000 feet of outside storage. CAR does not
manufacture the WorldStar(R), instead it licenses its unique design and
manufacturing process, and provides for a complete turnkey business including
tooling, equipment and materials necessary to build the WorldStar(R). The
regional manufacturer also receives full documentation, including video tapes
and a TV/VCR to provide visual training for their employees. Two technicians
from CAR or its Master Licensee will assist the manufacturer in setting up the
manufacturing facility and training. Subsequent orders for material will be
provided through CAR and it's worldwide network of suppliers directly to the
licensee.
By meeting the expected and designed goal of producing one vehicle per day, per
each single license, or 324 vehicles per year, the license holder has the
ability to recover the cost of the license within one year. This makes the
license an enticing business opportunity for international entrepreneurs.
CAR's target market consists of 189 developing nations worldwide. CAR has sold a
Master License in Mexico and a Master License in the Philippines. Because of the
large size of the automobile market in Mexico, our Master License holder is
negotiating with six other potential Master Licensee partners to divide Mexico
into six regions, with all partners reporting to our Master License holder in
Tijuana, Mexico. The Master Licensee in Tijuana, Mexico is also currently
conducting factory tours of the Tijuana facility and negotiating final terms
with nine Individual License factory candidates for the state of Baja California
in Mexico. The next factory license is expected to be sold in September or
October of 1998. The Master License in Mexico will allow the owner to be the
principal operating center providing support for all marketing, sales and
training for the expected 150 micro-manufacturing facilities throughout Mexico
over the next three years. Assuming a production of 324 vehicles per year, per
facility, Mexico will produce over 48,000 units per year with an anticipated
return of $500 per vehicle to CAR ($24.3M).
The terms and conditions for existing Master Licenses are summarized as follows:
<TABLE>
<CAPTION>
Region License # of years Payments Date of
Fee of license received as sale
of 12/31/97
<S> <C> <C> <C> <C>
Mexico $260,000 perpetual $26,250 (a) 2/4/97
Philippines $2,000,000 perpetual $10,000 (b) 9/3/97
</TABLE>
(a) Balance payable within thirty days of receiving molds & equipment from
CAR, $233,750.
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(b) Balance payable: $400,000 upon Master Licensee signing contracts for
eight Manufacturing Licenses, remaining $1,590,000 payable at rate of
$50,000 per each additional License sold. As of July 1998, the Master
License holder in Mexico has paid CAR $235,000 on a timely basis for the
first factory. Both Master License holders have secured financial
backing and are far enough along in negotiating new factory licenses in
their respective countries that CAR management is confident of complete
payment for licenses. Should a license holder be unable to complete
payments to CAR, management will attempt to reach a reasonable financial
resolution with the license holder, however, all payments to CAR per
contract terms are non-refundable. Management believes, due to the
amount of current interest from potential license holders in each
country, that there are enough backup licensees available to take over
current Master License holder contracts. While there is a risk in a
license holder's failure to pay CAR, it would be a timing setback for
CAR's expansion, and not a devastating financial event to CAR.
CAR provides approximately $150,000 of training, sales literature, parts for
three vehicles, and one set of factory molds, equipment, manuals and tooling.
CAR is responsible for all vehicle design changes and updates and all parts,
supplies, and materials procurement. CAR may terminate Master License for
nonperformance of agreed upon License sales or lack of support of Licenses per
agreement.
Master License holder is responsible for regional sales of Licenses per agreed
upon schedule, auditing of Licenses for control and quality assurance purposes,
liaison between Licenses and CAR, assisting Licenses with marketing and business
planning, and all training of Licenses. Master License holder is responsible for
all costs and expenses incurred by regional office and support staff.
CAR has granted a reduced fee to the Master License holder in Mexico in order to
monitor the Company's first production facility in Tijuana, Mexico which began
operations in June 1998. The Master License holder has agreed to work with CAR
in order to provide valuable manufacturing systems and testing feedback in an
operating production environment. This should allow CAR to quickly change and
upgrade design and manufacturing processes due to the close proximity of Tijuana
to CAR's facility in El Cajon, California (approximately 30 miles).
The Master License for Mexico is held by Grana Baja, S.A. de C.V. in conjunction
with Enviromental Process Advanced, S.A. de C.V. ("EPACV") EPACV is the largest
manufacturer and distributor of water purification systems and liquid containers
in Baja California, with its main facilities in Tijuana, Mexico.
The Master License for the Philippines is held by C.B.N. WorldStar Philippines,
Inc. located in Manila. C.B.N. WorldStar Philippines is negotiating the sale of
several Manufacturing and Distribution Licenses with Gillamac's Inc., the owner
of forty existing automobile sales locations in the Philippines. The criteria
for choosing a Master License holder is financial strength, manufacturing
experience, length of time in business, advertising and marketing expertise,
name recognition and influence in region of proposed license sales, and
experience in distribution and franchise sales.
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The terms and conditions for existing Licenses are summarized as follows:
<TABLE>
<CAPTION>
Region License # of years Payments Date of
Fee of license received as sale
of 12/31/97
<S> <C> <C> <C> <C>
Honduras $260,000 10 $10,000 2/20/97
</TABLE>
CAR provides approximately $150,000 of training, sales literature, parts for
three vehicles, and one set of factory molds, equipment, manuals, and tooling.
CAR is responsible for all vehicle design changes and updates and all parts,
supplies, and materials procurement.
CAR may terminate License for nonperformance of agreed upon vehicle sales of a
minimum of 162 units in a twelve month period, substandard quality control, and
any other material noncompliance with terms of the License Agreement.
License holder is responsible to provide a proper manufacturing facility,
employees, utilities, all licenses and permits, advertising, and insurance
necessary for all insurance, including liability insurance pertaining to vehicle
production and sales. License holder is responsible for advertising and
promotion sufficient for minimum vehicle sales. License holder must cooperate
with Master License holder for all support and training, allow audit of premises
and books by CAR and Master License holder, and maintain sufficient working
capital in order meet cash flow needs.
The License is held by Diamond Plastics in Tegucialpa, Honduras C.A. The
business has existed over twenty years and is a large manufacturer of plastic
products and medicines in Honduras.
The criteria for choosing a Manufacturing License holder is financial strength,
manufacturing experience, and length of time in business.
In addition to the standard price for a Manufacturing License, $372,000 (CAR
granted a one-time price reduction to our first license holder, Diamond
Plastics), the Licensee must have $300,000 of working capital available for
start-up and production costs. CAR does not provide funding assistance to
Licensees.
REGULATION:
The Company only licenses the proprietary right to manufacture the WorldStar(R)
vehicle within a specific country. The Company retains legal council through
each licensee as to its obligations for government regulations and taxes. Each
licensee is contractually responsible to obtain all required permits and
insurance within each country of domicile for the manufacture and sales of motor
vehicles. The permit process is centralized in Mexico through the federal
government's Secretaria De Comercio Y Fomnento Industrial (SECOFI). The Master
Licensee for Mexico has secured all permits for production of the WorldStar(R)
vehicle in Tijuana, Mexico for export purposes. The permit for Mexican sales and
use of the WorldStar(R) vehicle has been applied for through SECOFI and is
pending final approval in Mexico City. The permit process in Honduras is the
responsibility of Diamond Plastics and is pending.
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C.B.N. WorldStar Philippines has passed a preliminary process approval and now
anticipates final permit approval through the Vehicle Manufacturing Department
of the Board of Investment Applications, LDA Program, in September 1998.
At this time, there are no material uncertainties as to the approval of the
WorldStar(R) vehicle for manufacture and sale in any of the above countries.
ITEM 2
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
General:
The Company anticipates that current license sales and negotiations for
near-term license sales should provide sufficient cash flows for the foreseeable
future.
Results of Operations:
Revenue from license sales was $31,250 for the period ended December 31, 1997.
Revenue for the period ended December 31, 1996 consisted of sales from
discontinued operations of Thunder Ranch of $52,446. There were no license sales
for the period ended December 31, 1996. The Company sustained a net loss of $
1,076,826 for the period ended December 31, 1997 and a net loss of $496,679 for
the period ended December 31, 1996. Losses were primarily attributable to
expenditures for research and development of the WorldStar(R) vehicle.
The Company had sold two Master Licenses and one Manufacturing & Distribution
License for WorldStar(R) factories, with nine additional licenses in Mexico
pending financing.
Subsequently, the Master Licensee for Mexico has leased a facility in Tijuana,
Mexico, and began vehicle production in June 1998. Utilizing its master molds,
the Company has produced the first set of production molds for the Tijuana
facility and delivered all molds and equipment to the facility in May 1998.
Management has had continuing negotiations with potential licensees who have
indicated interest in Mexico and other countries pending the start up of the
first facility in Tijuana. There has been a significant increase in perspective
licensees as the Company has announced the start-up of the Tijuana facility.
Management expects this positive trend to continue and result in license sales.
Liquidity and Capital Resources:
As of December 1996, the Company had $52,277 cash on hand and in the bank. The
primary costs and operating expenses for the period ended December 1996 were:
salaries & wages $92,655, marketing $14,177, outside services $89,636, other
operating expenses $154,000. Additional non-cash expenses of $198,646 were
related to the sale of the Thunder Ranch subsidiary.
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As of December 31, 1997, the Company had $3,913 cash on hand and in the bank.
The primary costs and operating expenses for the period ended December 1997
were: salaries & wages $62,745, marketing $220,482, outside services $210,842,
other operating expenses $314,007. Additional non-cash expenses of $300,000 were
related to the write-off of a consulting contract and a note receivable from a
former shareholder, Thomas McBurnie.
Currently, the Company maintains a sufficient positive cash balance for
production and working capital. The substantial losses through December 1997
were due to product development expenses. Subsequent Licensee payments and
additional sales of the Company's equity securities have allowed the Company to
complete production and increase marketing efforts.
ITEM 3
DESCRIPTION OF PROPERTY
The Company with its wholly-owned subsidiary World Transport Authority, Inc.
leases 18,720 sq. ft. of administrative, registered office, and design center
offices, and training facility space at 635 Front Street, El Cajon, CA USA
92020, for $8,900 per month, pursuant to a noncancelable operating lease which
expires on March 31, 2001. Management considers the Company's current facilities
adequate for current and estimated growth for the term of the existing lease.
Management considers the current insurance coverage for the Company to be
adequate. Each manufacturing plant, per contract terms, must carry adequate full
insurance coverage as required in each country of domicile.
EMPLOYEES
The Company, through its wholly-owned subsidiary WTA, currently employs three
full-time officers and seven full-time persons including technicians, secretary
and receptionist.
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ITEM 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth information on the ownership of the Company's
voting securities by Officers, Directors and major shareholders as well as those
who own beneficially more than five percent of the Company's common stock
through the most current date - April 30, 1998:
<TABLE>
<CAPTION>
Title Of Name & Amount & Percent
Class Address Nature of owner Owned
- ------- ------- --------------- -------
<S> <C> <C> <C>
Common Dean Amaru, 20212 Modoc Rd. 63,334 (c) 1.6%
Apple Valley, CA 92308
Common Jahan Eftekhar, 8627 Cinnamon 311,667 (b) 7.8%
# 301, San Antonio, Texas 78240
Common Maritime International, Ltd. 726,667 (a) 18.3%
Trevor Lloyd, 635 Front St
El Cajon, CA 92020
Common Majid Mehrafza, 8627 Cinnamon 301,666 (b) 7.6%
# 301, San Antonio, Texas 78240
Common Rodger Ward, 1329 Craigmont 28,667 (c) .7%
El Cajon, CA 92019
Common Lyle Wardrop, 19879 49th Ave 13,810 (c) .4%
Langley, BC V3A 3R5
Common Steven Wright, 2635 30,619 (c) .8%
Camino del Rio South, Ste 211
San Diego, CA 92108
Common Douglas Norman 213,080 (c) 5.4%
1103 Topper Lane
El Cajon, Ca 92021
Total Shares 1,689,510 42.5%
</TABLE>
(a) Effective December 1, 1997, the 726,667 shares owned by Maritime
International, Ltd. (Beneficial Owner & Control Person - Trevor Lloyd) were
placed in an irrevocable trust dated December 1, 1997. Due to the size of the
stock ownership by one owner, the Shareholders, including Maritime
International, voted on June 3, 1997 to grant the Board additional control of
the amount of shares that Maritime International could offer for sale. On
December 1, 1997, the Board voted to accept an irrevocable stock trust set up
for three years, with Lyle Wardrop, a director of CAR, as trustee.
13
<PAGE> 14
The trust requires that any sale or transfer of the trust's shares must be
approved by CAR's Board of Directors. Trustee retains legal right to vote the
shares of the Trust in all required shareholder votes. The purpose of this trust
arrangement is to restrict Maritime International from utilizing its large share
holdings to unduly enrich itself at the expense of the smaller shareholders.
(b) Includes shares totaling 133,333 jointly held by Jahan Eftekhar and Majid
Mehrafza.
(c) Dean Amaru, Lyle Wardrop, Rodger Ward, Douglas Norman, and Steven Wright
purchased their shares during 1996 and 1997.
The other Beneficial Owners obtained their shares in the following transaction:
<TABLE>
<CAPTION>
Name Shares Exchanged Shares Received
Thunder Ranch, Composite Auto-
Inc. mobile Research, Ltd
<S> <C> <C>
Jahan Eftekhar 1,950 245,000
Maritime International, Ltd 5,400 726,667
Majid Mehrafza 1,850 235,000
</TABLE>
ITEM 5
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS,
AND CONTROL PERSONS
The Directors and Officers of the Company, all of those whose terms will expire
6/30/98, or at such a time as their successors shall be elected and qualified
are as follows:
<TABLE>
<CAPTION>
Name & Address Age Position Date First Elected
- -------------- --- -------- ------------------
<S> <C> <C>
Dean Amaru 54 President 6/1/96
20212 Modoc Road
Apple Valley, CA 92308
Steven R. Wright 53 Secretary, 6/1/96
2635 Camino del Rio S. Treasurer &
San Diego, CA 92108 Director
Rodger Ward 77 Vice President of 6/1/96
1329 Craigmont Public Relations
El Cajon, CA 92019
Lyle P. Wardrop 56 Director 3/19/96
19879 49th Avenue
Langley, B.C. Canada V3A 3R5
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
Name & Address Age Position Date First Elected
- -------------- --- -------- ------------------
<S> <C>
Douglas Norman 54 Promoter n/a
1103 Topper Lane
El Cajon, Ca 92021
</TABLE>
Each of the foregoing persons may be deemed a "promoter" of the Company, as that
term is defined in the rules and regulations promulgated under the securities
and Exchange Act of 1933.
Directors are elected to serve until the next annual meeting of stockholders and
until their successors have been elected and qualified. Officers appointed to
serve until the meeting of the Board of Directors following the next annual
meeting of stockholders and until their successors have been elected and
qualified.
No Executive Officer or Director of the Corporation has been the subject of any
Order, Judgement, or Decree of any Court of competent jurisdiction, of any
regulatory agency enjoining him from acting as an investment advisor,
underwriter, broker or dealer in the securities industry, or as an affiliated
person, director or employee of an investment company, bank, savings and loan
association, or insurance company or from engaging in or continuing any conduct
or practice in connection with any such activity or in connection with the
purchase or sale of any securities nor has any such person been the subject of
any Order of a State authority barring or suspending for more than sixty (60)
days, the right of such a person to be engaged in such activities or to be
associated with such activities.
No Executive Officer or Director of the Corporation has been convicted in any
criminal proceeding (excluding traffic violations) or is the subject of a
criminal proceeding which is currently pending.
Per Item 8, Pending Legal Proceedings, the Company as well as Dean Amaru and
Steven Wright were named in a complaint filed by Thomas McBurnie in Superior
Court in San Diego on December 10, 1997 due to a dispute involving the
consideration for the sale of Thunder Ranch, Inc. by the Company in 1996. On
April 10, 1998, the Superior Court dismissed Mr. McBurnie's entire complaint.
15
<PAGE> 16
<TABLE>
RESUMES:
Dean Amaru, President
<S> <C>
1989 - Current Owner - URAMA SALES & MARKETING, HESPERIA CA -
Company provides all aspects of sales and marketing to small
businesses including consultation, product development,
market analysis, sponsorships, advertising and graphic
design from concept to design & printing.
1994 - Current Founder, President, Treasurer - VICTOR VALLEY
MARKETING GROUP, VICTORVILLE CA - Network of local business
owners and professionals who use ethical business practices
and fair market prices for honest work and goods. Organized
as an Advertising Club to increase quality and quantity of
member's business through networking, referrals,
group-buying power, publication and promotions.
1988 - 1989 Sales & Marketing Manager - TRIM-LOK INC., PARAMOUNT CA
Responsible for all aspects of sales and marketing for vinyl
extrusion edge trim for United States OEM and wholesale market.
Opened international distribution.
1986 - 1988 Sales Manager / Special Products & Projects - FORD WHOLESALE
COMPANY INC., SANTA ANA CA - Responsible for sales program for
roofing wholesaler with seven California locations for all special
products. Designed, implemented and evaluated sales training &
marketing methods promoting new products in market.
1966 - 1986 Regional Sales Manager - GENSTAR / FLINTKOTE COMPANY, LOS
ANGELES CA - Responsible for regional sales of roofing products and
supervision of employees in production, warehouse, office and sales.
Established policies, procedures and training promoting leadership
skills. Smoothly integrated new acquisition and personnel for
company.
Education
UNIVERSITY OF LAS VEGAS
Major: Business Administration
</TABLE>
16
<PAGE> 17
<TABLE>
STEVEN R. WRIGHT, SECRETARY TREASURER & DIRECTOR
<S> <C>
1978 - Present Owner - WRIGHT & GEIS, INC. CERTIFIED PUBLIC
ACCOUNTANTS, SAN DIEGO, CA - Serve as director and financial
officer for two public companies. Responsible for all
aspects of accounting, Securities & Exchange filing, taxes
and strategic planning. Corporate tax specialist responsible
for corporation, individual, partnership and fiduciary
federal and multi-state income tax returns. Manage client
contact, quality control, tax review and planning, research,
and audit representation. Provide management advisory
services in design and installation of data processing
systems, budgets, job costing, estimating, financial
planning, analysis and personnel management. Extensive
experience with financial institutions, creditors and
investors for financing and cash management.
1976 - 1978 Manager of Financial Planning - CAMPBELL INDUSTRIES, INC., SAN
DIEGO, CA - Responsible for financial projections and strategic
planning for board of directors. Developed project budgets with
projected cash flow, estimating, and cost accounting for new
construction and ship repair work. Supervised cost accounting
and financial planning staff.
1974 - 1976 Senior Accountant - ROHR INDUSTRIES, INC., CHULA VISTA, CA
Responsible for accounting for three subsidiaries. Prepared
accounting entries, subsidiary ledgers, general ledgers, financial
statements, cash and sales forecasts and account analysis.
Education
SAN DIEGO STATE UNIVERSITY
B.S. Accounting, 1974
SAN DIEGO STATE UNIVERSITY
B.A. Public Administration, 1970
LYLE P. WARDROP, DIRECTOR
1963 - Present President - GOLDEN MILE MOTORS, LTD. & UNITED AUTO BROKERS,
LTD. - Both companies are involved in the sale of used trucks and autos.
1972 - Present President - SURREY LAND CENTER, VANCOUVER, B.C. -
This company is involved in the sale, development, and
rental of industrial land and warehouse space.
1976 - 1986 President - INTERNATIONAL WATERBED DISTRIBUTORS - This company
was involved in the manufacture, distribution, and retail sale of
</TABLE>
17
<PAGE> 18
<TABLE>
<S> <C>
waterbeds and bedroom furniture and became Canada's largest
waterbed wholesaler.
1978 - 1983 Treasurer - CANADIAN WATERBED MANUFACTURING ASSOCIATION - This
association represented the manufacturing companies in the
waterbed industry.
1993 - Present Chairman Used Car Division - AUTOMOTIVE RETAILERS
ASSOCIATION OF BRITISH COLUMBIA - This association
represents the automotive retail sector in dealing with
government and private agencies.
1994 - Present Director and Board Member - AUTOMOTIVE RETAILERS ASSOCIATION
OF BRITISH COLUMBIA - This association represents 1300 member
companies in six divisions employing over 25,000 people.
RODGER WARD, VICE PRESIDENT OF PUBLIC RELATIONS
1990 - Present Chief Steward - AMERICAN INDYCAR SERIES
1986 - Present Owner - RODGER WARD & ASSOCIATES - Auto and race
car restoration business, President Vintage Racing.
1983 - 1985 President - CITIZENS SECURITY SYSTEMS, DALLAS TX
1979 - 1982 Team Manager - CIRCUS CIRCUS HOTEL, LAS VEGAS NV - Manager
of the Unlimited Hydroplane Race Team.
1972 - 1976 Owner - RODGER WARD TIRE CENTERS, ROSEMEAD & MONROVIA CA
1969 - 1972 Director of Public Relations - ONTARIO MOTOR SPEEDWAY, ONTARIO
CA
1967 - 1970 Owner - FIRESTONE TIRE CENTER, SPEEDWAY IN
1946 - 1966 PROFESSIONAL RACE CAR DRIVER - Accomplishments include National
Stock Car Championship 1951, Indianapolis 500 Winner 1959 & 1962, and
USAC Champion 1959 & 1962.
1990 - Present BOARD OF DIRECTORS - SAN DIEGO AUTOMOTIVE MUSEUM
1972 - 1976 BOARD OF DIRECTORS - SUPERIOR INDUSTRIES
1958 - 1968 CHAMPION SPARK PLUG CO. HIGHWAY SAFETY PROGRAM
1958 - 1966 BOARD OF DIRECTORS - USAC
1941 - 1946 U.S. AIR FORCE
</TABLE>
18
<PAGE> 19
ITEM 6
EXECUTIVE COMPENSATION
The company's current officers receive the following compensation:
<TABLE>
<CAPTION>
Name Position Annual Remuneration
<S> <C> <C>
Dean Amaru President $38,000 Salary
Steven Wright Secretary- $0
Treasurer
</TABLE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Name &
principle Restricted Options LTLP All other
compen- Year Salary Bonus Other compen- stock SARs Payouts
sation ($) position ($) ($) annual sation ($) awards ($) (#) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dean Amaru 1996 19,000 -0- 71,000 -0- -0- -0- -0-
Pres. 1997 38,000 -0- 52,000 -0- 50,000 -0- -0-
Steven 1996 -0- -0- 75,000 -0- -0- -0- -0-
Wright 1997 -0- -0- 75,000 -0- 33,333 -0- -0-
Sec/Tres
Lyle 1996 -0- -0- 5,000 -0- -0- -0- -0-
Wardrop 1997 -0- -0- 5,000 -0- 33,333 -0- -0-
Director
Rodger 1997 32,000 -0- -0- -0- -0- -0- -0-
Ward 1997 38,000 -0- -0- -0- 33,333 -0- -0-
V.P.
</TABLE>
There are no current employment agreements between the Company and its executive
officers.
The Directors and Principal Officers have worked with minimum or no remuneration
until such time as the Company receives sufficient revenues necessary to provide
proper salaries to all Officers and compensation for Directors' participation.
The Officers and the Board of Directors have the responsibility to determine the
timing of remuneration based upon a positive cash flow to include stock sales,
license sales, estimated cash expenditures, accounts receivable, accounts
payable, notes payable, and a cash balance of not less than $100,000 at each
month end. A verbal understanding exists to pay the President $90,000 per year
and the Treasurer $75,000 per year at the time sufficient revenues and cash flow
permit. Per SAB 1.b, "Other Annual Compensation" represents amounts recorded
that reflect the difference between cash compensation paid and the fair value of
services performed by officers and directors on behalf of the Company.
19
<PAGE> 20
There are no annuity, pension or retirement benefits proposed to be paid to
officers, directors or employees of the Corporation in the event of retirement
at normal retirement date pursuant to any presently existing plan provided or
contributed to by the Corporation or any of its subsidiaries, if any.
ITEM 7
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Dean Amaru, President and Steven Wright, director and treasurer, have advanced
funds to the Company in order to pay for operating expenses as follows:
<TABLE>
<CAPTION>
Funds Advanced Dean Amaru Steven Wright
<S> <C> <C>
From 10/1/96 through 12/16/96 $38,650 $7,500
From 2/28/97 through 12/31/97 $66,485 $4,500
Total $105,135 $12,000
</TABLE>
There are no formal repayment terms and these funds are classified as a current
liability as the Company intends to repay the amounts in full within one year.
All funds advanced were deemed to be current in nature and no interest or other
consideration was required or stipulated.
CAR has had a consulting contract with Douglas Norman, a shareholder, since
April 15, 1996 that provides a commission of fifteen percent of gross sales be
paid to Mr. Norman for each fully-paid license agreement he arranges between the
Company and each licensee.
As described in Item 1, Description Of The Business, CAR acquired Thunder Ranch,
Inc. from Thomas McBurnie. Mr. McBurnie signed an Agreement dated September 27,
1996 in which Mr. McBurnie severed his relationship with CAR and gave his CAR
stock and rights and agreed to pay $200,000 to CAR in exchange for the transfer
of Thunder Ranch, Inc. to Mr. McBurnie.
ITEM 8
PENDING LEGAL PROCEEDINGS
The Company entered into binding arbitration with a former shareholder, Thomas
McBurnie regarding the consideration for the disposition by the Company of
Thunder Ranch, Inc., a corporation sold back to its sole original shareholder,
Mr. McBurnie on September 27, 1996. After the sale of Thunder Ranch, a
disagreement between CAR and Mr. McBurnie arose as to consideration each party
to the Agreement was to provide. On November 10, 1997, Mr. McBurnie's attorney,
Daniel Grindle was involuntarily disqualified from the arbitration due to a
conflict of interest. The arbitration was summarily dismissed in favor of the
Company on November 24, 1997.
On December 10, 1997, Mr. McBurnie filed a complaint in Superior Court of the
State of California in San Diego against Composite Automobile Research, Ltd,
World Transport Authority, Inc., Douglas Norman, Dean Amaru, and Steven Wright
for "breach of contract, conversion, unjust enrichment, constructive trust and
accounting, and fraud".
20
<PAGE> 21
On March 6, 1998, the Superior Court ruled against Mr. McBurnie and sustained a
demurrer of all individuals named in his complaint. The judge advised Mr.
McBurnie the documents he had filed were "imperceptible" and allowed him thirty
days in which to amend his complaint. No amended complaint was filed by Mr.
McBurnie. During March, the Company's attorneys filed Requests for Admissions
demanding documented proof of all of Mr. McBurnie's allegations by the scheduled
Superior Court hearing on April 10, 1998. Mr. McBurnie could not substantiate
his claims and provided no documented proof of his allegations. On April 10,
1998, the Superior Court dismissed Mr. McBurnie's entire complaint. The Board of
Directors of CAR is now considering legal options available against Mr. McBurnie
and his attorney, Mr.
Grindle.
ITEM 9
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company, as of July 24, 1997 has filed for trading on the OTC Electronic
Bulletin Board which is sponsored by the National Association of Securities
Dealers (NASD). The OTC Electronic Bulletin Board is a network of security
dealers who buy and sell stock. The dealers are connected by a computer network
which provides information on current "bids" and "asks" as well as volume
information. As of the date of this filing, the above application is pending.
As of the date of this filing, there is no public market for the Company's
securities. As of December 31, 1997, the Company had 159 shareholders of record.
The Company has paid no cash dividends. The Company has outstanding options,
which, if all exercised, will result in the issuance of 368,334 shares of common
stock. The company has no outstanding warrants or convertible securities. The
number of shares that could be sold under Rule 144 is 1,824,858 shares of common
stock. The Company has no plans to register any of its securities under the
Securities Act for sale by security holders. There is no public offering of
equity and there is no proposed public offering of equity.
ITEM 10
RECENT SALES OF UNREGISTERED SECURITIES
On March 19, 1996 the Company issued the following shares of its common stock in
return for cash and other assets as follows:
<TABLE>
<CAPTION>
Name Shares Exchanged Cash Shares Issued by Less Shares Net Shares
Thunder Ranch, Paid Composite Auto- Canceled at sale Issued
Inc. & World mobile Research, Ltd of Thunder Ranch
Transport Auth for Thunder Ranch & Sept 27, 1996
World Transport Auth
<S> <C> <C> <C> <C> <C>
Jahan Eftekhar 1,950 0 245,000 245,000
Maritime International, Ltd 5,400 0 726,667 726,667
Majid Mehrafza 1,850 0 235,000 235,000
Thomas McBurnie 30,400 0 1,346,667 -1346667 0
Adrian Corbett 400 0 46,667 46,667
Jack Norman 1,257 20,000 20,000
Douglas Norman 1,257 20,000 20,000
Rodger Ward 1,676 26,667 26,667
</TABLE>
21
<PAGE> 22
The above shares were issued in exchange for 100% of the stock of two
corporations, World Transport Authority, Inc. and Thunder Ranch, Inc., and for
cash. The Company relied upon Section 4(2) of the 1933 Securities act, as
amended, for sales not involving a public offering. All of the above
transactions were among the original founders of the Company who shared equally
in all financial information of the Company in its development.
Commencing on approximately March 19, 1996 and continuing until approximately
October 1, 1996, the Company offered and sold common stock warrants for
$704,599. Each prospective investor was given a private placement memorandum
designed to disclose all material aspects of an investment in the Company. This
offering was not accompanied by general advertisement or general solicitation.
Further, each purchaser acknowledged that the warrants were restricted per Rule
144 and could not be resold without registration under the Securities Act of
1933, as amended or without an available exemption therefrom. The Company relied
on Rule 504 as the basis of exemption from registration, as identified on Form D
as filed with Commission on December 2, 1996. Blue Sky filings were made (where
required) in each state that the warrants were offered and sold. All warrants
converted to common stock by vote of shareholders on June 3, 1997.
From the period of approximately January 15, 1997 until December 31, 1997, the
Company offered and sold additional warrants for $1,748,857 in reliance upon
Rule 505 of Regulation D as the basis for exemption from registration. These
warrants were offered and sold in the same manner as the offering above and were
restricted under Rule 144. All warrants converted to common stock by vote of
shareholders on June 3, 1997.
Concurrent with the offering initiated on approximately January 15, 1997, it was
determined through legal counsel that the two offerings could be considered
"integrated" as defined under Rule 502 of the Securities Act of 1993, as
amended, since the Company issued the same class of securities within a six
month period. With both offerings integrated, the Company was required to rely
solely on Rule 505 of Regulation D as the basis for exemption from registration
for all of its securities sales. Due to the possible integration of the
offerings, in March 1997, we offered the individuals who purchased securities
under Rule 504 a refund of their equity investment in return for the
cancellation of their stock. However, in both offerings, the Company's Private
Placement Offering Memorandum disclosed that the Company was only selling
securities under an exemption from registration under Rule 144. All such
securities were issued with proper notification of limitations on transfer and
sale under Rule 144. All stock was issued from treasury and no individual
holders exchanged or sold any of the Company's stock.
The two offerings combined resulted in the sale to thirty five (35) or fewer
non-accredited investors.
Note: Per a vote of the shareholders of record on June 3, 1997, the Directors of
Composite Automobile Research were authorized to complete a 3 to 1 reversal of
all shares, options and warrants. All references to a number of shares in this
document reflect that reversal.
22
<PAGE> 23
ITEM 11
DESCRIPTION OF SECURITIES
Common Stock:
The Company's Certificate of Incorporation authorizes the issuance of unlimited
Shares of Common Stock, no stated par value per share, of which 3,975,531 shares
were outstanding as of December 31, 1997. Holders of shares of Common Stock are
entitled to one vote for each share on all matters to be voted on by the
stockholders. Holders of Common Stock have cumulative voting rights. Holders of
shares of Common Stock are entitled to share ratable in dividends, if any, as
may be declared, from time to time by the Board of Directors in its discretion,
from funds legally available therefor. In the event of a liquidation,
dissolution, or winding up of the Company, the holders of shares of Common Stock
are entitled to share pro rata all assets remaining after payment in full of all
liabilities. Holders of Common Stock have no preemptive or other subscription
rights, and there are no conversion rights or redemption or sinking fund
provisions with respect to such shares. All of the outstanding Common Stock is,
and the shares offered by the Company pursuant to this offering will be, when
issued and delivered, fully paid and non-assessable.
Preferred Stock:
There is no preferred stock authorized.
Transfer Agent:
The Company's transfer agent is Pacific Corporate Trust Company, Suite 830 - 625
Howe Street, Vancouver, BC Canada, V6C 3B8. Telephone number is (604) 689-9853.
The Company acts as its own registrar.
ITEM 12
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's By-Laws allow for the indemnification of Company Officers and
Directors in regard to their carrying out the duties of their offices. The
By-Laws also allow for reimbursement of certain legal defenses.
As to indemnification for liabilities arising under the Securities Act of 1933
for directors, officers or persons controlling the Company, the Company has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy and unenforceable.
23
<PAGE> 24
ITEM 13
FINANCIAL STATEMENTS
EXPERTS:
The financial statements of the Company and related notes which are included in
this offering have been examined by Harlan & Boettger, LLP, and have been so
included in reliance upon the opinion of such accountants given upon their
authority as an expert in auditing and accounting.
ITEM 14
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
CONTROL AND FINANCIAL DISCLOSURE
None.
ITEM 15
FINANCIAL STATEMENTS AND EXHIBITS
(I) Audited financial statements for year end June 30, 1997 and 1996.
24
<PAGE> 25
IMPACT OF YEAR 2000
The year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have time- sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruption of normal business activities.
Based on a recent and ongoing assessment, the Company has determined that it
will be required to modify or replace portions of its software so that computer
systems will function properly with respect to dates in the year 2000 and
thereafter. The Company presently believes that with modifications to existing
software or conversions to new software, the Year 2000 issue will not pose
significant operational problems and will not materially affect future financial
results.
The Company has initiated communications with its significant suppliers to
determine the extent to which the Company is vulnerable to any third party's
failure to remedy their own Year 2000 issues. The Company will utilize both
internal and external resources to modify, or replace, and test software for
Year 2000 compliance. The Company currently anticipates completing the Year 2000
project within one year, but not later than September 30, 1999, which is prior
to any anticipated impact on its operating systems. The costs of the project,
which at the current time are projected to be immaterial, and the date on which
the Company believes it will complete Year 2000 modifications are based on
management's best estimates, which were derived utilizing numerous assumptions
of future events, including the continued availability of certain resources,
third party modification plans and other factors. However, there can be no
guarantee that these estimates will be achieved and actual results could
materially differ from those anticipated.
25
<PAGE> 26
SIGNATURES
In accordance with Section 12 of the Securities and Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Composite Automobile Research, Ltd.
Date 9-1-98 By /s/ DEAN AMARU
----------------------- ----------------------------------------
Dean Amaru,
President
Date 9-1-98 By /s/ STEVEN R. WRIGHT
----------------------- ----------------------------------------
Steven R. Wright,
Director, Secretary & Treasurer
26
<PAGE> 1
EXHIBIT 10.1
CONSULTING AGREEMENT
This Agreement is entered into and effective as of April 15, 1996, by and
between World Transport Authority, Inc. a subsidiary of Composite Automobile
Research, Ltd. ("CAR"), ("CLIENT"), and Douglas Norman ("CONTRACTOR").
RECITALS
This Agreement is entered into in contemplation of the following facts,
circumstances, representations, and intentions:
A CONTRACTOR is prepared to utilize its contacts and influence in
order to directly assist CLIENT with the sale of CLIENT'S
proprietary vehicle manufacturing licenses in a world-wide
developing nation program. It is understood the aforementioned
licenses are not for sale in the United States or any other
industrialized or developed nation.
B CLIENT desires to enter into this agreement with CONTRACTOR, and
to set forth the terms of CLIENT's Agreement with CONTRACTOR
pursuant to the terms and conditions as more specifically set
forth herein.
TERMS AND CONDITIONS OF ENGAGEMENT
In consideration of the premises and mutual convents and agreements contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereby agree as follows:
1 ENGAGEMENT: CLIENT hereby engages CONTRACTOR as an independent
contractor. CONTRACTOR hereby accepts the engagement upon the
terms and conditions set forth in the Agreement.
2 TERM: The term of this Agreement shall be for a period of one
year, beginning on the date of this Agreement. This Agreement
may renewed by mutual consent each year by the anniversary date
of this Agreement.
3 DUTIES: CONTRACTOR shall use its associations, business
relationships and name recognition in order to assist CLIENT
with the sale of CLIENT'S proprietary vehicle manufacturing
licenses in developing nations.
4 TIME COMMITMENTS: In addition to the term described in Paragraph
2, CONTRACTOR shall use reasonable common business practices in
assisting CLIENT in securing license sales in a timely fashion,
considering "time is of the essence" in the business affairs of
CLIENT.
<PAGE> 2
5 COMPENSATION: For services rendered by CONTRACTOR pursuant to
the terms of this agreement, CONTRACTOR shall be paid a fifteen
percent commission for each fully-paid license sale arranged by
CONTRACTOR per the period in Paragraph 2.
6 TERMINATION OF CONSULTING AGREEMENT: This Agreement may be
terminated by either CONTRACTOR or CLIENT with thirty days
written notice.
COOPERATION, ARBITRATION, INTERPRETATION, MODIFICATION, ATTORNEY FEES AND
MISCELLANEOUS PROVISIONS
The parties agree that they will do all that is required and necessary to
accomplish and facilitate the purposes of this Agreement and that they will
sign and execute and all documents necessary to bring about and perfect the
purposes of this Agreement.
The parties agree that should any provision of this Agreement be found to be
ambiguous in any way, such ambiguity shall not be resolved by construing such
provisions or any part of or the entire Agreement in favor of or against any
party herein, but rather by construing the terms of this Agreement fairly and
reasonably in accordance with their generally accepted meaning.
No amendment, modification or waiver of any provision of this Agreement shall
in any event be effective unless the same shall be in writing and signed by the
parties hereto.
None of the parties rights, duties or obligation under this Agreement are
assignable by any of the parties hereto without the prior written consent of
the other party and any attempted assignment without prior written consent
shall be null and void.
This Agreement constitutes the entire Agreement and understanding of the
parties hereto with respect to the matters herein set forth, and all prior
negotiations, writings and understandings relating to the subject matter of
this Agreement are merged herein and are superseded and canceled by this
Agreement.
The parties will attempt through good faith negotiation to resolve their
disputes. The term "disputes" includes, without limitation, any disagreements
between the parties concerning the existence formation and interpretation of
this Agreement and their obligation thereunder. If the parties hereto are
unable to resolve their disputes by negotiation, they shall attempt to resolve
their disputes through mediation.
<PAGE> 3
If mediation proves unsuccessful, either party may commence arbitration by
sending a written notice of arbitration to the other party. The notice will
state the dispute with particularity. As part of the arbitrators decision, the
arbitrator may allocate the cost of arbitration, including fees of attorneys and
experts, as the arbitrator deems fair and equitable in light of all relevant
circumstances. The arbitration hearing shall be commenced thirty (30) days
following the date of delivery of notice of arbitration to the other party, or
as soon thereafter as set by the arbitrator(s).
If any legal action or any arbitration or other proceeding is brought for the
enforcement of this Agreement, or because of an alleged dispute, breach,
default, or misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing party shall be entitled to recover
reasonable attorney's fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it may be entitled.
<TABLE>
<S> <C>
/s/ DEAN AMARU /s/ DOUGLAS NORMAN
- ------------------------------------ -------------------------------------
Dean Amaru, President Douglas Norman
Composite Automobile Research, Ltd. 1103 Topper Ln
635 Front Street, El Cajon, Ca 92020 El Cajon, CA 92020
</TABLE>
