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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d) of
Securities Exchange Act of 1934
For Quarter ended September 30, 2000
Commission File Number 0-23693
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WORLD TRANSPORT AUTHORITY, INC.
(formerly Composite Automobile Research, Ltd.)
(Exact name of registrant as specified in its charter)
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<S> <C>
Alberta, BC 93-1202663
(State of Incorporation) (I.R.S. Employer Identification No.)
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635 Front Street
El Cajon, California 92020
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(Address of Principal Executive Offices)
(619) 387-8888 Fax: (619) 444-9026
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(Registrant's telephone and fax number, including area code)
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock at the latest practicable date.
As of September 30, 2000, the registrant had 60,334,227 shares of common
stock, no stated par value, issued and outstanding.
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WORLD TRANSPORT AUTHORITY, INC. AND SUBSIDIARIES
(formerly Composite Automobile Research, Ltd.)
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
(UNAUDITED)
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ASSETS
Current Assets:
Cash and cash equivalents $ 96,861
Accounts receivable, net of allowance 212,601
For doubtful accounts of $2,102
Inventories 235,074
Prepaid consultants 239,196
Prepaid rent 17,145
Other current assets 986
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Total Current Assets 801,863
Fixed Assets:
Property and Equipment 1,351,356
Less Depreciation 772,200
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579,156
Other Assets:
Due from affiliates 5,000
Other 7,348
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Total Other Assets 12,348
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TOTAL ASSETS $ 1,393,367
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 142,990
Accrued liabilities 96,023
Advances from related party 79,277
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Total Current Liabilities 318,290
Deferred license fees 70,000
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TOTAL LIABILITIES 388,290
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Commitments and Contingencies
Stockholders' Equity:
Common stock - unlimited shares authorized,
no par value; 60,334,227 shares issued
and outstanding 11,131,546
Accumulated Deficit (10,126,469)
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Total stockholders' equity 1,005,077
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,393,367
============
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SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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WORLD TRANSPORT AUTHORITY, INC. AND SUBSIDIARIES
(formerly Composite Automobile Research, Ltd.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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<CAPTION>
Three Months Ended
September 30,
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2000 1999
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Revenue:
License fees $ 0 $ 142,000
Net sales 198,599 242,078
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Total revenue 198,599 384,078
Cost of goods sold 190,912 144,912
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Gross profit 7,687 239,166
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Operating expenses:
Selling and general expenses 1,337,282 $ 428,172
Depreciation and amortization 62,977 61,611
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Total operating expenses 1,400,259 489,783
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Net loss $ (1,392,572) $ (250,617)
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Basic net loss per share $ (0.02) $ (0.01)
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Basic weighted average shares
outstanding 58,188,256 30,144,196
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SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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WORLD TRANSPORT AUTHORITY, INC. AND SUBSIDIARIES
(formerly Composite Automobile Research, Ltd.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
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2000 1999
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Operating activities:
Net loss $(1,392,572) $ (250,617)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 62,977 61,611
Common stock issued for services 1,085,513 151,613
Changes in operating assets and liabilities:
Accounts receivable (83,533) (223,790)
Inventories (1,957) 144,519
Related party receivable 22,183 33,027
Prepaid expenses and other assets (98,923) (93,500)
Due from affiliates (5,000)
Accounts payable 66,215 10,655
Accrued liabilities (10,540) (41,516)
Payable to related party 43,423
Deferred license fees 10,000 (52,985)
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Net cash used in operating activities (345,637) (217,560)
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Investing activities - purchases of
property and equipment (21,406) (14,221)
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Financing activities:
Advances from related party 79,277
Proceeds from sales of common stock 209,470 235,000
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Net cash provided by financing activities 288,747 235,000
Net increase (decrease) in cash and cash equivalents (78,296) 3,219
Cash and cash equivalents at beginning of period 175,157 18,612
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Cash and cash equivalents at end of period $ 96,861 $ 21,831
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SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Interim Reporting
In the opinion of management, the accompanying condensed consolidated
financial statements contain all adjustments (consisting of only normal
recurring transactions) necessary to present fairly the financial position of
World Transport Authority, Inc. and its subsidiaries (the "Company") as of
September 30, 2000 and their results of operations for the three months ended
September 30, 2000 and 1999 and cash flows of the three months ended September
30, 2000 and 1999.
Pursuant to the rules and regulations of the Securities and Exchange
Commission, (the "SEC") certain information and disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted from these financial statements unless
significant changes have taken place since the end of the most recent fiscal
year. Accordingly, these unaudited condensed consolidated financial statements
should be read in conjunction with the audited financial statements of the
Company as of June 30, 2000 and for the years ended June 30, 2000 and 1999
included in the Company's Annual Report on Form 10-KSB for the year ended June
30, 2000 that was previously filed with the SEC.
Results for the three months ended September 30, 2000 are not indicative
of the results to be obtained for the full year.
2. Basis of Presentation
As shown in the accompanying financial statements, the Company had a net
loss of $1,392,572 and net cash used in operating activities of $345,637 for the
three months ended September 30, 2000. Management cannot determine when the
Company will become profitable and when operating activities will begin to
generate cash. If operating activities continue to use substantial amounts of
cash, the Company will need additional financing. These matters raise
substantial doubt about the ability of the Company to continue as a going
concern.
Historically, the Company has funded its operations through sales of
common stock to private investors and borrowings from a stockholder. Management
plans to obtain the funds needed to enable the Company to continue as a going
concern through the private sales of common stock and sales of master licenses
and manufacturing and distribution licenses. However, management cannot provide
any assurance that the Company will be successful in consummating any private
sales of common stock or generating sufficient sales of master and manufacturing
and distribution licenses.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern, which contemplates
continuity of operations, realization of assets and satisfaction of liabilities
in the ordinary course of business. If the Company is unable to raise additional
capital or generate sales of licenses it may be required to liquidate assets or
take actions, which may not be favorable to the Company, in order to continue
operations. The accompanying consolidated financial statement do not include any
adjustments related to the recoverability and classification of
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assets or the amounts and classification of liabilities that might be necessary
should the Company be unable to continue its operations as a going concern.
3. Organization and Summary of Significant Accounting Policies
Organization and Nature of Operations
The accompanying condensed financial statements include the accounts of
World Transport Authority, Inc. (formerly Composite Automobile Research, Ltd.)
(the Company) and its wholly-owned subsidiaries, World Transport Authority, Inc.
(WTA)and World Star Logistics (WSL) and majority-owned subsidiary, Pan American
Automotive (PAAT). The amounts related to PAAT are not material.
The accompanying consolidated financial statements and these notes have
been retroactively restated to reflect the effects of a 4 for 1 stock split
effective August 31, 2000.
The Company was incorporated in the Province of Alberta, Canada in
January 1996 pursuant to the Alberta Business Corporations Act. The Company was
incorporated to facilitate an initial public offering in order to provide
funding for a new motor vehicle prototype.
The Company, through its wholly owned subsidiary, WTA, a Nevada
corporation, is in the business of designing vehicles, and selling licenses to
others to produce these vehicles in markets around the world.
The Company sells a Master License for each predetermined geographic
region or each country, depending on the estimated vehicle sales in each market.
The price for this Master License varies depending upon the population
of the geographic region or country served. The Master Licensee is responsible
for selling Manufacturing and Distribution Licenses for individual factories
throughout their country or region. The Master Licensee provides all support for
each factory, including training and marketing, utilizing local customs and
language.
Generally, a manufacturing and distribution license holder is required
to pay its master license fee by remitting a specified percentage of each
manufacturing and distribution license fee to the Company. As a result of the
uncertainties related to the realization of such fees, revenues from the sale of
a master license are recognized when the Company receives the specified
percentage payment from the master license holder upon the sale of a
manufacturing and distribution license, and the Company has provided
substantially all of the factory components and training sufficient to enable
the licensee to begin vehicle production.
Sales of manufactured vehicle components are recognized upon shipment of
the components. Royalty payments based on the production and/or sale of vehicles
will be recognized when earned. Revenues from sales of licenses to build and
sell manufacturing plants will be recognized upon completion and shipment of the
manufacturing plants by the licensee.
The Company, through its wholly owned subsidiary, World Star Logistics,
Inc. (WSL), generates revenue from the sales of manufactured vehicle components.
WSL was incorporated in the state of Nevada and began operations in May 2000.
WSL recognizes component revenue upon shipment of the components.
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In addition, the Company may receive royalty payments on the production
and/or sale of vehicles. The Company will recognize such revenue when earned.
MASTER LICENSE AND MANUFACTURING & DISTRIBUTION LICENSES
The Company entered into the following license agreements during the
three months ended September 30, 2000:
NIGERIA
A Master License Agreement was executed on July 12, 2000 between the
Company and IMR Motors Limited. (IMR). The agreement establishes the cost of the
Master License for the region of Nigeria at three million US dollars ($3,000,000
US). The exclusive region encompasses the Republic of Nigeria. The license fee
is paid in $112,000 increments to the Company upon the execution of sub-licenses
by the IMR and receipt of funds, until paid in full. The agreement sets a
royalty fee of $275 per vehicle. From the royalty fee, the IMR retains $75 and
$200 is forwarded to the Company.
The Master License Holder is obligated to establish the first factory in
their region. This facility is to be a showcase used as a tool for selling
sub-license agreements. The facility will additionally be used for the training
of sub-licensees.
CHINA
A Master License Agreement was executed on September 12, 2000 between
the Company and World Star Utility, Inc. (WSU). The agreement establishes the
cost of the Master License for the region of China at forty million US dollars
($40,000,000 US). The exclusive region encompasses the Republic of China. The
license fee is paid in $112,000 increments to the Company upon the execution of
sub-licenses by the WSU and receipt of funds, until paid in full. The agreement
sets a royalty fee of $275 per vehicle. From the royalty fee, the WSU retains
$75 and $200 is forwarded to the Company.
The Master License Holder is obligated to establish the first factory in
their region. This facility is to be a showcase used as a tool for selling
sub-license agreements. The facility will additionally be used for the training
of sub-licensees.
INDIA:
A Master License Agreement was executed on September 15, 2000 between
the Company and AMR Motors Limited (AMR). The agreement establishes the cost of
the Master License for the region of India at thirty three million six hundred
thousand dollars ($33,600,000 US). The exclusive region encompasses the Republic
of India. The license fee is paid in $112,000 increments to the Company upon the
execution of sub-licenses by the AMR and receipt of funds, until paid in full.
The agreement sets a royalty fee of $275 per vehicle. From the royalty fee, the
AMR retains $75 and $200 is forwarded to the Company.
The Master License Holder is obligated to establish the first factory in
their region. This facility is to be a showcase used as a tool for selling
sub-license agreements. The facility will additionally be used for the training
of sub-licensees.
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A Standard Manufacturing and Distribution License Agreement was executed
between AMR Motors Limited (as MLH for the region) and Premier Skinner Motor
Company, Limited (as sub-licensee). The cost to the Sub-Licensee for the M&D
License is three hundred seventy two thousand US dollars ($372,000 US).
This facility has a sales quota of sixty percent (60%) of the 324 car
per year capacity. This requirement is waived for first year of production. This
contract may be renewed every 10 years.
GUINEA
A Master License Agreement was executed on September 20, 2000 between
the Company and African Motors Ltd. (AML). The agreement establishes the cost of
the Master License for the region of Guinea at six hundred thousand US dollars
($600,000 US). The exclusive region encompasses the Republic of Guinea. The
license fee is paid in $112,000 increments to the Company upon the execution of
sub-licenses by AML and receipt of funds, until paid in full. The agreement sets
a royalty fee of $275 per vehicle. From the royalty fee, AML retains $75 and
$200 is forwarded to the Company.
The Master License Holder is obligated to establish the first factory in
their region. This facility is to be a showcase used as a tool for selling
sub-license agreements. The facility will additionally be used for the training
of sub-licensees.
4. Related party transactions:
The Company has an outstanding stockholder's loan of $79,277 on
September 30, 2000, which is unsecured, non-interest bearing and due on demand.
5. Inventory:
Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out ("FIFO") method. Inventory as of
September 30, 2000 is comprised of the following:
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Raw materials $ 30,330
Work in process 66,458
Finished goods 138,286
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$235,074
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6. Common Stock Transactions:
Stock issued for services:
During the three months ended September 30, 2000, the Company issued
3,636,188 shares of common stock to various independent contractors for services
rendered and to be provided. The stock was issued at market value, which varied
from $.25 per share to $.53 per share. Compensation expense associated with this
issuance was equal to $1,085,513. These figures have been retroactively adjusted
for the four-for-one forward stock split effective August 31, 2000.
Included in the figures for stock issued for services, the Company
issued 2,916,000 shares to a related party stockholder as commission paid for
the execution of license agreements. Market prices ranged from $.25 to $.3125
per share. Compensation expense associated with this issuance amounted to
$855,450.
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These figures have been retroactively adjusted for the four-for-one forward
stock split effective August 31, 2000.
Sale of stock:
For the three months ended September 30, 2000, the Company issued
683,259 shares of common stock at market prices ranging from $.125 to $.70 to
new stockholders of the Company, in exchange for $209,470. These figures have
been retroactively adjusted for the four-for-one forward stock split effective
August 31, 2000.
PART 1 FINANCIAL INFORMATION
ITEM 2: Management's Discussion and Analysis of financial condition and results
of operations.
Material changes in financial condition and liquidity:
As shown in the financial statements, the Company had a net loss of
$1,392,572 and net cash used in operating activities of $345,637 for the three
months ended September 30, 2000. Management cannot determine when the Company
will become profitable and when operating activities will begin to generate
cash. If operating activities continue to use substantial amounts of cash, the
Company will need additional financing. These matters raise substantial doubt
about the ability of the Company to continue as a going concern.
Historically, the Company has funded its operations through sales of
common stock to private investors and borrowings from a stockholder. Management
plans to obtain the funds needed to enable the Company to continue as a going
concern through the private sales of common stock and sales of master licenses
and manufacturing and distribution licenses. However, management cannot provide
any assurance that the Company will be successful in consummating any private
sales of common stock or generating sufficient sales of master and manufacturing
and distribution licenses.
The consolidated financial statements have been prepared assuming the
Company will continue as a going concern, which contemplates continuity of
operations, realization of assets and satisfaction of liabilities in the
ordinary course of business. If the Company is unable to raise additional
capital or generate sales of licenses it may be required to liquidate assets or
take actions, which may not be favorable to the Company, in order to continue
operations. The accompanying consolidated financial statement do not include any
adjustments related to the recoverability and classification of assets or the
amounts and classification of liabilities that might be necessary should the
Company be unable to continue its operations as a going concern.
As of September 30, 2000 the Company had $96,861 cash on hand and in the
bank. Included in the cash on hand was restricted cash of $75,598 in the form of
a Letter of Credit at Wells Fargo Bank. These funds are designated for the
payment to vendor for engine sets. The bank releases the funds upon presentation
of vendor's invoice and verification that the order has shipped.
The primary sources of cash and financing for the Company for the three
months then ended were $209,470 from sales of common stock and deposits for the
purchase of common stock, and $79,277 from a shareholder loan. The primary uses
of cash during that period were $345,637 to finance the Company's operations and
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$21,406 to purchase fixed assets. The Company currently maintains a positive
cash balance through sales of common stock.
Material changes in the results of operations:
The Company's net sales were $198,599 during the three months ended
September 30, 2000, a decrease of 48% from its net sales of $384,078 during the
three months ended September 30, 1999. Revenue from the three months ended
September 30, 2000 consisted mainly of the sale of automobile parts. The same
three-month period for 1999 had sales that consisted primarily of manufacturing
and license sales. The gross profit on the license sales is substantially higher
than for the sale of automobile parts. The order for one component packet of
automobile parts yields an acquisition fee of $400 to the Company, relative to
the cost, which has varied from $3,500 to $4,800.
During the three months ended September 30, 2000 the Company executed
four Master License agreements. Deposits for several of the license agreements
are categorized under deferred license fees. According to the Company's revenue
recognition, deferred license fees up to $112,000 per licensee are recorded as
license sales upon signing of the Manufacturing and Distribution Agreement for
that Master License Holder and receipt of funds. In the case of India, the
Manufacturing and Distribution Agreement has been executed. The Master License
Holder is now undergoing the necessary paperwork to enable them to expatriate
funds from their country for the initial deposit required.
The Company sustained a net loss of $1,392,572 for the three months
ended September 30, 2000 compared to net loss of $250,617 for the three months
ended September 30, 1999. An increase of 456% in net loss was primarily due to
the increase in expenses, especially professional fees, commission expense and
travel expense. Commissions of $855,450 were paid during the three-month period
in the form of stock compensation. In comparison to the prior year the Company
incurred increased professional fees in the area of public relations, logistics,
consulting and public relations. With the addition of new offices in Beijing,
China and Washington D.C. since the prior year, the Company has incurred
increased travel expenses.
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings
The company from time to time is faced with legal issues presented to
the company. As of the end of this quarter, there are no legal issues that have
any material bearing on the Company.
ITEM 2 PROPERTIES
In August 2000, the Company leased an office location in Beijing, China,
located at Beijing International Financial Building, Fuxingmen Nei Avenue, No.
156, Suite 1401, 14/F, Block `D', Beijing, China 100031. This lease commenced on
August 18, 2000 and expires on August 17, 2002, with a monthly rental payment of
$6,540.
ITEMS 3-5: Not applicable
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ITEM 6: Exhibits and Reports on 8-K:
a) Exhibit # 27.1, "Financial Data Schedule"
b) Exhibit 99.1 Addendum to Consulting Agreement
between Composite Automobile, Ltd. and Douglas
Norman
c) No reports on Form 8-K were filed during the
fiscal quarter ended September 30, 2000.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WORLD TRANSPORT AUTHORITY, INC.
Date: November 13, 2000 /s/ LYLE WARDROP
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Lyle Wardrop,
President, Director
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