<PAGE> 1
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 December 31, 1999
Commission File Number 0-23693
COMPOSITE AUTOMOBILE RESEARCH, LTD.
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Alberta, B.C. 93-1202663
----------------- --------------
(State of Incorporation) (I.R.S. Employer Identification No.)
635 Front Street, El Cajon, California 92020
---------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(619) 444-7254
------------------
(Registrant's telephone number, including area code)
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 December 31, 1999, the registrant had 10,452,912 shares of common stock,
no stated par value, issued and outstanding.
<PAGE> 2
PART 1 FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
COMPOSITE AUTOMOBILE RESEARCH, LTD. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
UNAUDITED
<TABLE>
<CAPTION>
December 31 December 31
1999 1998
<S> <C> <C>
ASSETS
CURRENT ASSETS
CASH 9,377 2,260
ACCOUNTS RECEIVABLE 287,594 39,209
INVENTORY 225,696 306,958
PREPAID EXPENSES AND OTHER 134,250 690
TOTAL CURRENT ASSETS 656,917 349,117
FIXED ASSETS
PROPERTY AND EQUIPMENT 1,278,333 2,172,999
LESS DEPRECIATION -676,351 -415,467
--------------------------
NET FIXED ASSETS 601,982 1,757,532
OTHER ASSETS
DUE FROM AFFILIATE - MEXICO 0 7,435
OTHER 6,438 32,088
--------------------------
TOTAL OTHER ASSETS 6,438 39,523
--------------------------
TOTAL ASSETS 1,265,337 2,146,172
==========================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 3
FINANCIAL STATEMENTS (continued)
COMPOSITE AUTOMOBILE RESEARCH, LTD. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
UNAUDITED
<TABLE>
<CAPTION>
December 31 December 31
1999 1998
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE 94,678 83,488
ACCRUED LIABILITIES 41,178 13,267
ADVANCES FROM RELATED PARTIES 75,734 176,833
DEPOSITS FOR STOCK 105,060 0
STOCK SUBSCRIPTIONS 0 13,000
---------------------------
TOTAL CURRENT LIABILITIES 316,650 286,588
LONG TERM LIABILITIES
DEFERRED LICENSE FEE 40,000 40,000
---------------------------
TOTAL LONG TERM LIABILITIES 40,000 40,000
---------------------------
TOTAL LIABILITIES 356,650 326,588
STOCKHOLDERS' EQUITY
COMMON STOCK - NO PAR VALUE, 8,466,657 5,534,055
UNLIMITED SHARES AUTHORIZED,
10,452,912 AND 6,033,137 SHARES ISSUED
AND OUTSTANDING, RESPECTIVELY
BEGINNING RETAINED DEFICIT -6,759,297 -2,904,860
NET INCOME (LOSS) -798,673 -809,611
ENDING RETAINED DEFICIT -7,557,970 -3,714,471
---------------------------
TOTAL STOCKHOLDERS' EQUITY 908,687 1,819,584
---------------------------
TOTAL LIAB & STOCKHOLDERS' EQUITY 1,265,337 2,146,172
===========================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 4
FINANCIAL STATEMENTS (continued)
COMPOSITE AUTOMOBILE RESEARCH, LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
December 31 December 31
1999 1998
<S> <C> <C>
REVENUE
SALES - PRODUCTS 614,078 36,047
SALES - LICENSE FEES 112,000 96,250
------------------------------
TOTAL REVENUE 726,078 132,297
COST OF GOODS SOLD
PRODUCTION COSTS 165,558 76,422
FACTORY SET UP COSTS 0 15,524
------------------------------
TOTAL COST OF GOODS SOLD 165,558 91,946
GROSS PROFIT (LOSS) 560,520 40,351
OPERATING EXPENSES
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,142,214 580,001
DEPRECIATION AND AMORTIZATION 217,002 213,898
------------------------------
TOTAL OPERATING EXPENSES 1,359,216 793,899
------------------------------
INCOME (LOSS) FROM OPERATIONS -798,696 -753,548
OTHER INCOME & EXPENSE
INTEREST EXPENSE 0 -1,737
INTEREST INCOME 4 38
OTHER (EXPENSE) INCOME 19 -54,364
------------------------------
TOTAL OTHER INCOME & EXPENSE 23 -56,063
INCOME (LOSS) BEFORE TAXES -798,673 -809,611
PROVISION FOR TAXES 0 0
------------------------------
NET INCOME (LOSS) -798,673 -809,611
==============================
LOSS PER SHARE -0.03 -0.14
==============================
Weighted average number of shares outstanding 10,452,912 5,597,480
==============================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 5
FINANCIAL STATEMENTS (continued)
COMPOSITE AUTOMOBILE RESEARCH, LTD.
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME (LOSS) -798,673 -809,611
ADJ TO RECONCILE NET INCOME (LOSS) TO NET
CASH USED IN OPERATING ACTIVITIES:
DEPRECIATION & AMORTIZATION 217,002 213,898
LOSS ON SALE OF EQUIPMENT 0 27,504
COMMON STOCK ISSUED FOR SERVICES 482,650 263,649
COMMON STOCK ISSUED FOR EQUIPMENT 0 890,000
CHANGES IN ASSETS AND LIABILITIES:
(INCREASE) DECREASE IN ACCOUNTS RECEIVABLE -287,594 -39,209
(INCREASE) DECREASE IN INVENTORY 142,999 -63,862
(INCREASE) DECREASE IN PREPAID CONSULTING -131,250 -7,435
(INCREASE) DECREASE IN PREPAID OTHERS 0 -1,465
(INCREASE) DECREASE IN OTHER RECEIVABLES -3,000
(INCREASE) DECREASE IN RELATED PARTY RECEIVABLES 33,027 107,981
(INCREASE) DECREASE IN ACCRUED MANAGEMENT FEES 0 -70,000
(INCREASE) DECREASE IN DEPOSITS -2
INCREASE (DECREASE) IN ACCOUNTS PAYABLE -28,708 -6,251
INCREASE (DECREASE) IN ACCOUNTS PAYABLE - RELATED PARTIES 0 -5,000
INCREASE (DECREASE) IN STOCK SUBSCRIPTIONS 0 -326,483
INCREASE (DECREASE) IN ACCRUED LIABILITIES -48,074 3,620
INCREASE (DECREASE) IN DEFERRED LICENSE FEES -52,985 8,750
------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES -474,608 186,086
CASH FLOWS FROM INVESTING ACTIVITIES:
COMMON STOCK ISSUED FOR EQUIPMENT 0 -890,000
PURCHASE OF PROPERTY AND EQUIPMENT -1,821 -33,991
------------------------
-1,821 -923,991
CASH FLOWS FROM FINANCING ACTIVITIES:
PROCEEDS FROM ISSUANCE OF COMMON STOCK 286,400 368,502
PROCEEDS FROM STOCK SUBSCRIPTIONS 105,060 63,000
INCREASE (DECREASE) IN NOTES PAYABLE 75,734 62,500
------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 467,194 494,002
NET INCREASE (DECREASE) IN CASH -9,235 -243,903
CASH AT BEGINNING OF PERIOD 18,612 246,163
CASH AT END OF PERIOD 9,377 2,260
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS
1. Management's Opinion
In the opinion of management, the accompanying financial statements contain all
adjustments necessary to present fairly the financial position of the company as
of December 31, 1999 and 1998, and the results of operations for the six months
ended December 31, 1999 and 1998 and changes in cash for the six months ended
December 31, 1999 and 1998.
2. Interim Reporting
The results of operations for the six months ended December 31, 1999 and 1998
are not necessarily indicative of the results to be expected for the remainder
of the year.
3. Organization and Summary of Significant Accounting Policies:
Organization and Nature of Operations
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, World Transport Authority,
Inc. ("WTA"), 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.
4. Basis of Consolidation
The accompanying consolidated financial statements include the accounts of
Composite Automobile Research, Ltd. and its wholly owned subsidiary, World
Transport Authority, Inc.
For purposes of these consolidated financial statements, Composite Automobile
Research, Ltd. and its subsidiary will be referred to collectively as the
"Company". All material intercompany transactions and account balances have been
eliminated.
<PAGE> 7
5. Basis of Accounting
The Company's policy is to use the accrual method of accounting and to prepare
and present financial statements which conform to generally accepted accounting
principles. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from those estimates.
6. Cash and equivalents
For purpose of the statements of cash flows, all highly liquid investments with
a maturity of three months or less are considered to be cash equivalents. There
were no cash equivalents as of December 31, 1999 and 1998.
7. Inventory
The inventory is valued at the lower of cost or market. Cost is determined under
the first-in, first- out (FIFO) method.
8. Property and Equipment
Property and equipment are recorded at cost. Depreciation and amortization of
property and equipment is provided using the straight line method over estimated
useful lives ranging from five to seven years. Upon retirement or disposal of
depreciated assets, the cost and related depreciation are removed and the
resulting gain or loss is reflected in income. Major renewals and betterments
are capitalized while maintenance costs and repairs are expensed in the year
incurred. Any assets acquired from shareholders are recorded at historical cost
at the time of transfer.
9. Stock Options
The Company adopted a method of accounting for stock-based compensation as
required by Statement of Financial Accounting Standards No. 123 (SFAS No. 123)
which allows for two methods of valuing stock-based compensation. The first
method allows for the continuing application of Accounting Principles Board
Opinion No. 25 (APB No. 25) in measuring stock- based compensation, while
complying with the disclosure requirements to value stock compensation and
record as such within the financial statements. The Company will continue to
apply APB No. 25, while complying with SFAS No. 123 disclosure requirements.
<PAGE> 8
10. Revenue Recognition
The Company offers two types of licenses to manufacture vehicles: a
Manufacturing and Distribution License and a Master License. The Manufacturing
and Distribution License requires the Company to supply manufacturing
facilities, including all components necessary to manufacture vehicles. Revenues
from the sale of a master license are recognized when the master license holder
has paid its license fee to the Company and performed marketing services
sufficient to sell at least one manufacturing and distribution license.
The Master License provides the licensee with the right to sell Manufacturing
and Distribution Licenses. Under this agreement, the licensee pays all costs
associated with any license sold in addition to payment for the Master License.
Revenues from the sale of a manufacturing and distribution license, consisting
of a percentage of the license fee, are recognized when the licensee has made
payment to the Company, and the Company has provided substantially all of the
factory components and training sufficient for the licensee to begin vehicle
production.
The Company also plans to generate revenue from the sales of manufactured
vehicle components. Such revenue will be recognized upon shipment of the
components. In addition, the Company may receive royalty payments on the
production and/or sale of vehicles. Such revenue will be recognized when earned.
11. Net Loss per Share
Net loss per share is provided in accordance with Statement of Financial
Accounting Standards No. 128 (SFAS No. 128) "Earnings Per Share". Basic loss per
share is computed by dividing losses available to common stockholders by the
weighted average number of common shares outstanding during the period. Diluted
loss per share reflects per share amounts that would have resulted if dilutive
common stock equivalents had been converted to common stock. As of December 31,
1999 and 1998, the Company had stock options outstanding, each convertible into
one share of common stock. The stock options were not included in the
computation of diluted earnings per share for any periods presented due to their
anti-dilutive effects based on net loss reported each period. Accordingly, basic
and fully diluted loss per share is the same for all periods presented.
12. Income Taxes
Income taxes are provided for using the liability method of accounting in
accordance with Statement of Financial Accounting Standards No. 109 (SFAS 109),
"Accounting for Income Taxes." A deferred tax asset or liability is recorded for
all temporary differences between financial and tax reporting. Deferred tax
expense (benefit) results from the net change during the year of deferred tax
assets and liabilities.
<PAGE> 9
PART 1 FINANCIAL INFORMATION
ITEM 2: Management's Discussion and Analysis of financial condition and results
of operations.
Material changes in financial condition:
As of December 31, 1999 the Company had $9,377 cash on hand and in the bank. The
primary sources of cash and financing for the Company for the six months then
ended were $391,400 from sales of common stock and deposits for the purchase of
common stock, and $75,700 from loans. The primary uses of cash during that
period were $474,600 to finance the Company's operations and $1,800 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 $726,078 during the six months ended December 31,
1999, an increase of 448.8% from its net sales of $132,297 during the six months
ended December 31, 1998. Revenue from both years consisted of manufacturing and
license sales.
The Company sustained a net loss of $798,673 for the six months ended December
31, 1999 compared to net loss of $809,611 for the six months ended December 31,
1998. A decrease of 1.35% in net loss was primarily due to the increase in
revenue and decreases in both cost of goods sold and other expense.
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings
On April 1, 1999, the Company agreed to settle a dispute with B.A.T.
International, Inc. ("B.A.T."). Based on this settlement, the Company was to
issue $5,000 worth of the Company's Common Stock to B.A.T. upon completion of
the return of the Company's materials such as body molds and automobile bodies.
Given the nature of the issuance of the stock, it may contain certain trading
restrictions as required by the Securities and Exchange Commission.
Pursuant to the settlement, B.A.T. was required to return all vehicles and/or
vehicle components, body parts and associated pieces in its possession which
incorporate the World Star composite platform, either partially or completely
manufactured, to the Company's office in El Cajon, California by June 1, 1999.
B.A.T. also acknowledged and recognized the rights to the World Star Vehicle
owned by WTA. B.A.T. also agreed to pay a royalty to the Company for all
vehicles B.A.T. produces in the future.
<PAGE> 10
In July 1999, the Company filed suit against B.A.T. in the Superior Court of San
Diego, California for not honoring the terms of the settlement agreement dated
April 1, 1999. The Company acquired a $100,000 judgement against B.A.T.
ITEMS 2-4: Not applicable
ITEM 5: Information required in lieu of Form 8-K: None
ITEM 6: Exhibits and Reports on 8-K:
a) Exhibit # 27.1, "Financial Data Schedule"
b) No reports on Form 8-K were filed during the fiscal
quarter ended December 31, 1999
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.
COMPOSITE AUTOMOBILE RESEARCH, LTD.
Date: February 17, 2000 /s/ LYLE WARDROP
----------------------------------------
Lyle Wardrop,
President, Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INTERIM
FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH COMPOSITE AUTOMOBILE RESEARCH, LTD. 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 9,377
<SECURITIES> 0
<RECEIVABLES> 287,594
<ALLOWANCES> 0
<INVENTORY> 225,696
<CURRENT-ASSETS> 656,917
<PP&E> 1,278,333
<DEPRECIATION> (676,351)
<TOTAL-ASSETS> 1,265,337
<CURRENT-LIABILITIES> 316,650
<BONDS> 0
0
0
<COMMON> 8,466,657
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,265,327
<SALES> 726,078
<TOTAL-REVENUES> 726,078
<CGS> 165,558
<TOTAL-COSTS> 165,558
<OTHER-EXPENSES> 1,359,216
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (798,673)
<INCOME-TAX> 0
<INCOME-CONTINUING> (798,673)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (798,673)
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
</TABLE>
