U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1 TO FORM 10-SB
GENERAL FORM FOR REGISTRATION
OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of the Securities
Exchange Act of 1934
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LandStar, Inc.
Name of Small Business Issuer in its Charter
State of Nevada State or Jurisdiction of
Incorporation or Organization 86-0914051
I.R.S. Employer Identification Number
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3795 Carey Road, Suite 600
Victoria, British Columbia, Canada V8Z 6T8
Address and Telephone Number of Principal
Executive Offices
(250) 475 - 6000
Issuer's Telephone Number
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<PAGE> 1
Securities to be registered pursuant to Section
12(b) of the Act:
None
Securities to be registered pursuant to Section
12(g) of the Act:
Common Stock, $.001 par value
Title of Class
BUSINESS
Background and Business Development
LandStar, Inc. was incorporated as a Nevada corporation on
May 4, 1998, for the purpose of purchasing, developing and
reselling real property, with its principal focus on the
development of raw land. From incorporation through
December 31, 1998, LandStar had no business operations and
was a development-stage company. LandStar did not purchase
or develop any properties and subsequently determined to
change its business plan and operations. On March 31, 1999,
the Company acquired approximately 98.5% of the common
stock of Rebound Rubber Corp. pursuant to a share exchange
agreement with Rebound Rubber Corp. and substantially all
of Rebound Rubber's shareholders. The acquisition was
effected by issue of 14,500,100 shares which constituted
14.5% of the 100,000,000 authorized shares of LandStar and
50.6% of the 28,622,100 issued and outstanding shares on
completion of the acquisition. The acquisition was treated for
accounting purposes as a continuation of Rebound Rubber under
the LandStar capital structure. LandStar originally issued
1,000,000 founders shares and sold 1,600,000 shares to initial
subscribers for a total of 2,600,000. Due to the consolidation
method the attached consolidated statements record these initial
LandStar shares as "Shares issued in March 1999 to acquire net
assets of LandStar". If viewed from a non-consolidated perspective,
on March 31, 1999 LandStar issued 14,500,100 shares for the
acquisition of the shares of Rebound Rubber. At the same time
LandStar issued 8,500,000 shares for acquisition of the joint
venture interest of United Trans-Western, Inc., issued 2,762,000
shares for cash and issued 260,000 shares for finders fees.
The cumulative effect of the four issues increased the shares
outstanding in LandStar from 2,600,000 to 28,622,100.
Rebound Rubber Corp. owns an exclusive North American license
granted by the Guangzhou Research Institute for the Utilization
of Reusable Resources, P.R. of China, pursuant to a technology
for the reclamation and devulcanizing of recycled rubber .
Reclamation and de-vulcanization of recycled rubber involves
shredding and grinding of the post-consumer and post-industrial
rubber into a granular material, and the processing of this
material to sever the chemical bonds formed in the manufacture
of the original products. In connection with the share exchange
agreement, LandStar issued 14,500,100 restricted shares of
its common stock to the shareholders of Rebound Rubber in
exchange for 98.5% of the outstanding shares of Rebound
Rubber, and Rebound Rubber became a subsidiary of LandStar.
The acquisition was treated for accounting purposes as a
recapitalization of Rebound Rubber under the capital structure
<PAGE> 2
of LandStar, Inc. and an acquisition of the net assets of
LandStar.
Rebound Rubber Corp. was originally formed on
December 13, 1996 in the Province of Alberta, Canada under the
name 721097 Alberta Ltd. as a private limited liability
corporation, and subsequently changed its name to Rebound
Rubber Corp. on May 20, 1997. Rebound Rubber was initially
formed as a corporate vehicle to acquire certain rubber
recycling technology from the Guangzhou Research Institute
for the Utilization of Reusable Resources, P.R. of China
(hereinafter the Guangzhou Research Institute). The Guangzhou
Research Institute is a research institute in Guangzhou P.R.
China that is owned by the Government of the P.R. China and
operates under the direction of Senior Engineer Li Xing-Ru.
The P.R. of China central government mandates the Guangzhou
Research Institute to research recycling of waste rubber
products. In early 1996, D. Elroy Fimrite, Michael C.
Pinch C.A. and Kennie Chee, principal officers and directors
of Rebound Rubber met with members of the Guangzhou Research
Institute and its Senior Engineer, Li Xing-Ru. The proponents
conducted a thorough technology review and due diligence
examination of the rubber recycling technology throughout 1996
and early 1997. This review included but was not limited to
the following: (1) review of devulcanizing testing procedures
and test results; (2) observing the complete processing of used
tires to "crumb",(the granular material produced by the
shredding and grinding of recycled rubber is called crumb
rubber which is commonly classified by mesh sizes with mesh
designations determined by the number of wires per square
inch of screening through which material passes during
production) the activation of the crumb and the processing of
the activated modified rubber powder ("AMR") in substantial ratios
with new rubber back into new tires; (3) visiting a number of
manufacturing operations and observing AMR being used in a
variety of new rubber products; (4) research into other claims
of devulcanizing technologies to determine whether there were
any other true devulcanizing processes in commercial production
anywhere in the world; (5) review of proprietary rights, Chinese
patents/registrations pursuant to the technology; (6) review of
chemicals used in activation process pursuant to environmental
and workplace hazards; and (7) review of availability and pricing
of reactivation chemicals and crumb rubber supplies.
Following the due diligence process, Rebound Rubber entered into
three contracts with the Guangzhou Research Institute. The
three agreements were signed on March 12, 1997 with a series
of payments being made in 1997 and 1998. The payment schedules
provided for in the agreements were altered by verbal agreements
without amendments in writing to the contracts being affected.
The final payment and official declaration of completion of the
technology acquisition was announced in a public news conference
in Guangzhou P.R. China on May 12, 1998 and was reported in
local and official media in China.
<PAGE> 3
The three agreements are as follows:
Rebound Rubber acquired a license to the exclusive North
American rights to the AMR (30-40 mesh crumb) technology and
the scrap latex reactivation technology, in exchange for a
one-time license fee of $500,000. This technology was assigned
the process identification name of "AMR", an apparent acronym for
"activated modified rubber". The license is perpetual and no
further fees are required. The license also grants Rebound Rubber
non-exclusive rights to establish production operations anywhere
in the world.
Rebound Rubber acquired a license to the exclusive North
American rights and non-exclusive operating rights in other
parts of the world to a new activation technology that uses
4-28 mesh crumb rubber and achieves a high level of
devulcanization, in exchange for a one-time license fee of
$400,000. This technology was assigned the process
identification name of "RU" rubber. There is no apparent
significance to the letters "RU" and the letters are not an
acronym. The license is perpetual and no further fees
are required. Rebound Rubber also funded some research and
development efforts for this technology.
Rebound Rubber entered into an agency agreement with
the Guangzhou Research Institute in which Rebound Rubber is
authorized to market the rubber recycling technologies
throughout the world. This agreement provides for a revenue
sharing between Rebound Rubber and the Guangzhou Research
Institute for licensing agreements with third parties negotiated
by Rebound Rubber. The agreements with the </R >
Guangzhou Research Institute provide for the Company having
exclusive rights of usage of the technologies
throughout
North America (and non-exclusive rights wherever else in the
world that the Company sets up manufacturing operations), without
any further payment of any kind to the Guangzhou Research Institute.
Under the terms of the Letter of Appointment, the Company is
appointed to market the technologies in areas outside China.
The terms of the Letter of Appointment provide that in these
markets the revenues derived from such contracts shall be shared
between the Company and the Guangzhou Research Institute in
accordance with the Letter of Appointment. The revenue sharing
agreement provides that for revenues derived from applications
of the technology concerning the activation and transmutation of
rubber powder and rubber renewal technology (i.e.: AMR and latex
technologies), the revenues will be shared 30% by the Company
and 70% by the Guangzhou Research Institute. For revenues
derived from technology employing coarse grained (10-28 mesh)
waste vulcanized rubber for the manufacture of de-sulphurized
and modified rubber (i.e.: RU technology), the revenues will
be shared 40% by the Company and 60% by the Guangzhou Research
Institute .
In May 1997, United Trans-Western, Inc., a Delaware corporation,
acquired 100% of the shares of Rebound Rubber Corp . from
D.Elroy Fimrite for a purchase price of $1,000 and assumed
responsibility for market development. United Trans-Western
also conducted extensive research into tire collection, shredding
and crumb production operations, product quality, crumbing methods
and profitability. In conjunction with the acquisition of Rebound
Rubber by United Trans-Western, D. Elroy Fimrite and Michael C.
<PAGE> 4
Pinch were appointed to the board of directors of United
Trans-Western, and assumed the positions of president and
chief financial officer, respectively. In early 1998, the
Board of Directors of United Trans-Western, Inc. decided that
as all efforts to obtain sufficient financing to fund payments
of Rebound Rubber Corp.'s obligations to the Guangzhou Research
Institute had not succeeded, that there was a significant risk
to continuing to seek financing under the ownership of United
Trans-Western, Inc. The Directors received a financing proposal
for Rebound Rubber Corp. that was contingent upon Rebound Rubber
Corp. being a privately held company. During the period that
United Trans-Western, Inc. owned the shares of Rebound Rubber
Corp., Kentucky Financial Inc. (a company related to D. Elroy
Fimrite) provided debt financing to Rebound Rubber Corp. in the
amount of $750,000. In March , 1998 United Trans-Western, Inc.
sold all of its shares of Rebound Rubber Corp. to Kentucky
Financial Inc. for $1,000 with a requirement that Kentucky
Financial Inc. convert its loans to Rebound Rubber Corp. into
shares of Rebound Rubber Corp. and United Trans-Western
retained an interest in a joint venture agreement with
Rebound Rubber, for the development, implementation and
exploitation of the rubber recycling technology in the United
States market. Subsequently, in connection with the share
exchange agreement between Rebound Rubber and LandStar, on
December 31, 1998 LandStar entered into a purchase agreement
with United Trans-Western to acquire all of United Trans-Western's
interest in the joint venture. The acquisition was effective
March 31, 1999 and LandStar issued 8,500,000 shares of its
common stock and paid $100,000 cash to United Trans-Western
in the transaction. The Company has conducted negotiations
with United Trans-Western, Inc. pursuant to the acquisitions
of a supply of crumb rubber from United Trans-Western, Inc.,
should United Trans-Western, Inc. achieve its stated objective
of developing a business of crumbing scrap tires. No supply
terms, prices or agreements of any kind have been completed
We believe that the terms of any supply agreement entered
into between United Trans-Western, Inc and the Company will
be on terms no less favorable to the Company than with any
other third-party supplier.
The share exchange with Rebound Rubber and the joint venture
acquisition from United Trans-Western were effective on March
31, 1999 and resulted in a change of control of LandStar and
the appointment of new officers and directors of the Company.
These transactions also redefined the focus of the Company on
the development and exploitation of the technology to devulcanize
and reactivate recycled rubber for resale as a raw material in
the production of new rubber products. The Company's business
strategy is to demonstrate to potential customers that activated
modified rubber powder (AMR) and RU rubber
can be produced in substantial quantities on a consistent basis
and that AMR and RU chemical and physical properties
confirm AMR and RU materials as viable rubber substitutes.
The Company intends to develop operational facilities that
will apply the AMR and RU technologies to vulcanized
crumb rubber and sell the resulting devulcanized material
(and compounds using the materials to manufacturers of
rubber products. The Company has constructed and is operating
<PAGE> 5
a production prototype demonstration plant in Dayton, Ohio for
the purpose of producing commercial quantities of devulcanized
materials and demonstrating the process to potential customers.
The Company has not completed a sale to any potential customer,
as the Company has not produced sufficient volume in the pilot
plant to provide goods for sale. The Company is negotiating sales
contracts with a number of potential customers. In addition,
the Dayton facility contains a lab, which will be used in the
future for the development of rubber compounds using substantial
quantities of AMR and RU materials in combination with
various plastics, natural rubber and synthetic rubbers. The
Company has commenced research of potential sites for its first
production scale facility. At the present time sites in Florida
and in Ohio are under consideration.
LandStar's current executive offices are located at 3795
Carey Road, Suite 600, Victoria, British Columbia, Canada,
V8Z 6T8 and its telephone number is (250) 475-6000 or 888-669-2300.
The Company is researching head office sites throughout the
United States and intends to relocate executive offices within
the year 2000. The Company also maintains a web site at
www.ldsr.com. Information accessed on or through the Company's
web site does not constitute a part of this Registration
Statement.
Rubber Recycling Industry
The Company believes that the market for new raw rubber or
equivalent is enormous, with North America alone using over
10 billion pounds every year. The auto industry consumes
approximately 79% of new rubber and 57% of synthetic rubber.
To date, recycled rubber in significant quantities has not
been used as a replacement for new or synthetic rubber,
largely because required properties could not be achieved.
The rubber industry has focused on the disposal of waste
rubber rather than on recapturing the economic value of
the resources incorporated in the waste. As a consequence,
the uses for waste rubber have been of low economic value
resulting in low volumes of recycling, accumulation of tire
stockpiles, and an industry characterized by low profitability
and business failures. Tires are the most visible of waste
rubber products; the accumulation of discarded rubber tires
is increasing worldwide at an alarming rate with very few
cost-effective ways of recycling the resources. North
America alone generates approximately 300 million waste
tires annually, with over half of them being added to the
already huge stockpiles. It is estimated that less than
10% of waste rubber is reused in any kind of new product.
The United States, the European Union, Eastern Europe,
Latin America, Japan and the Middle East collectively produce
about one billion tires annually with large accumulations
stockpiled in Europe and in North America . This provides
a significant source of raw materials for a viable recycling
application.
<PAGE> 6
In general, the rubber recycling process commences with the
collection and shredding of discarded tires. Numerous types
of equipment and processes exist for the shredding, grinding and
separating of tires. A shredding process reduces the rubber to
a granular material with some steel and other fibers removed.
Secondary grinding reduces the granular material to a desired
mesh size with all steel and other fibers removed. The resulting
rubber powder is then ready for product remanufacture. However,
the volume of applications that can utilize this inert material
in substantial ratios is limited to products that do not
require vulcanization. There have been significant prior attempts
at recycling rubber. It is estimated that a waste tire contains
approximately 75% rubber, which has been changed only about
15-20% from its original properties. The difficulty in recycling
rubber has traditionally been with devulcanizing the rubber
without compromising its properties. Vulcanization is the process
by which an agent, such as sulfur, is added to rubber in the
manufacturing process to give the product certain required
characteristics, such as strength, hardness and elasticity.
Generally, the more vulcanizing agent that is used, the harder
the resultant rubber product will be. Likewise, in the rubber
recycling process, devulcanization is the process by which the
sulfur molecules are de-linked from the rubber molecules, thereby
facilitating the formation of new cross-linking structures.
Two general rubber recycling processes have been developed:
modified oil process and water-oil process. With each of these
processes, oil and a reclaiming agent are added to the reclaimed
rubber powder, treated at high temperatures and under high
pressure for a long period (5-12 hours) in special equipment, and
require strong mechanical post-processing efforts. The reclaimed
rubber from these processes has degraded properties and is
generally not suitable for use in many products, including tire
compounds. Typically, these alternative de-vulcanization
processes have resulted in low levels of de-vulcanization,
have failed to produce consistent quality or have been
prohibitively expensive. The Company believes that its
AMR and RU processes produce new polymer compounds with
consistent properties that approach the properties of
natural and synthetic rubber, with a significant price
advantage.
The LandStar Strategy
The Company's strategy is to be a leading provider of activated
modified rubber (AMR and RU) through its proprietary
processes and devulcanization and reactivation technology, and
to be a recognized supplier of reusable recycled rubber for use
in rubber manufacturing applications. The Company's process is
simple and facilitates the de-vulcanization of the rubber,
while maintaining much of the rubber's original properties.
<PAGE> 7
LandStar's Business
LandStar's Process -- Devulcanization and Reactivation
The reactivation technology licensed by the Company exploits
the molecular characteristics of vulcanized rubber powder in
conjunction with the use of an activator, a modifier and an
accelerator reacting homogeneously with each particle
of rubber. The chemical reaction that occurs in the mixing
process facilitates the delinking of the sulfur molecules thus
enabling a re-enactment of the characteristics of natural or
synthetic rubber. A mixture of chemical additives are added to
the rubber crumb in a mixer and mixed for
approximately five minutes, after which the reactivated crumb
passes through a cooling process and is then ready for
packaging.
In the production of the RU rubber, the material is further
processed on a mixing mill with an additional agent. The
Company's reactivation process is simple, and does not release
any toxins, by-products or contaminants. The Company does not
require special equipment, but intends to use standard North
American high intensity mixers in its reactivation process.
Reactivated rubber may be compounded and processed in accordance
with specific customer requirements.
To successfully market activated modified rubber (AMR
and RU Rubber) as activated crumb or as a component part
of a compound, the Company concluded that it needed to
demonstrate an ability to supply a consistent quality material
with specific properties at a competitive price. To this end,
the Company has completed a demonstration plant facility and
research/quality control lab in Dayton, Ohio. The
demonstration plant initiated manual production of AMR in
October 1999 with automated production capability achieved in
February 2000.
Considerable development and construction of
the plant was effected in January and February 2000 and the plant
was not deemed complete until February 2000 for accounting purposes.
The purpose of the pilot plant was to demonstrate the reactivation
and devulcanization technology which is technology applied to
"crumb rubber". Accordingly, the plant does not include the
equipment or facilities and licensing to process whole tires or
other post-consumer and post-industrial rubber into "crumb rubber".
The equipment to process whole tires into crumb rubber typically
costs about $2,000,000 for a basic operation capable of production
of 15-25 ton of crumb rubber per day. Numerous suppliers of crumb
rubber are available for the supply of crumb rubber in the size and
quantities required by the pilot plant. The pilot plant is a
recycling facility to the extent that crumb rubber is the material
processed into devulcanized rubber and crumb rubber is derived
from the recycling of post-consumer and post-industrial rubber.
The plant is capable of producing 600 pounds of
AMR per hour but currently production is only initiated for
demonstration and testing purposes. The production capacity is
not large enough for anticipated minimum sales orders, therefore,
significant sales are expected to commence only after
construction of a larger scale plant. The Company can increase
the pilot plant production capability to 2,400 pounds per hour
by purchasing a larger mixer at an approximate cost of $100,000
and substituting it for
<PAGE> 8
the current mixer. The Company expects to manufacture some
initial sales orders with the pilot plant and expects to modify
the plant by replacing the mixer to supply product for smaller
customers or moderate custom orders. Although the Company
does not process tires, the above capacities of AMR production
are equivalent to processing 25 tires per hour and 100 tires per
hour respectively. This facility is totally automated and can
be operated with very few personnel. Commissioning of the plant
has been completed with the plant now able to perform production
runs on a demonstration basis or at small commercial levels.
Key technical and marketing prospective employees have been
contracted and the Company has a staff of five operating and
marketing personnel engaged in Ohio.
AMR produced at the Dayton, Ohio facility, is currently being
tested by an independent lab to establish its physical and
chemical properties. The properties profile and production
demonstration capability facilitate commencement of marketing
of AMR. Marketing staff have initiated customer contact with
the numerous manufacturers that have expressed an interest in
AMR. The Company belives that this marketing initiative may
result in orders requiring installation of a large production
facility although there are no assurances that the Company
will receive such orders, if any.
Principal Products and Markets
The initial product line of the Company will be activated modified
rubber (AMR) and compounds using AMR in conjunction with natural
rubber, synthetic rubber or plastics. The Company intends to
sell these materials to rubber product manufacturers as a raw
material for processing into rubber based manufactured goods.
AMR is essentially a new polymer that has chemical and physical
properties facilitating integration of substantial quantities of
AMR as an active polymer in most rubber based products.
Initially, the Company intends to target its marketing efforts
to manufacturers of products that have low consumer liability
and that do not have strict specifications for raw materials
(i.e., that can accept small deviations in certain specifications
for its rubber components). The Company has targeted markets
with low consumer liability concerns not because of any concern
with quality of the product produced by the Company, but rather
because the markets with higher Consumer liability involve longer
product testing and verification times that delay the procurement
of sales orders. The Company has targeted markets that can
accommodate small consistency variations to accommodate the
evolution of some historical statistics of the effectiveness of
the Company's quality assurance procedures. The Company is not
aware of any concerns with quality and performance of the
Company's products but cannot guarantee that quality and
performance defects will not occur. The largest markets
for AMR are in automotive products, a market that accounts for
about two thirds of demand for natural and synthetic rubber
(AMR has been extensively used in new and retread tires in ratios
of up to 40% of raw polymer). Commercial production of
devulcanized rubber using the AMR technology commenced in about
1995 when the Institute granted a license to the Chini Rubber
Company in Huado City, P.R. China. The Chini Rubber Company have
advised that they produce about 4,000 tonnes of devulcanized rubber
per annum using the AMR technology and have advised the Company
verbally that about 50% of this production is
<PAGE> 9
sold to tire companies in China for incorporation into new and
recapped tires. The Company has contracted production of test
volumes of tires incorporating variable percentages of AMR and
RU rubber and is currently testing these products. The Company has
not completed this process and accordingly does not have the
results confirming or denying the suitability of AMR or RU rubber
in the Manufacture of new or recapped tires. The Company
does not intend to focus initially on this market, due to the
heightened testing and safety standards to which tire manufacturers
are subject. Large markets also exist in manufacture of safety
supply products, advertising materials, household goods,
industrial applications and sporting goods. The Company intends
to subsequently integrate. The RU rubber product line, which is
produced using a larger particle size of crumb rubber to serve
the same markets.
Following successful commercial implementation of the AMR
and RU product lines described above, the Company expects
to develop a secondary product line based on recycled latex
materials that the Company will activate to produce either thin
rubber sheet or liquid latex. Additional applied research and
development will be conducted on these products to establish
physical and chemical characteristics and to determine market
opportunities. This technology has been applied on small-scale
laboratory based production levels and has not been produced in
any facilities of the Company. The technology has not been
developed to commercial levels and the Company does not intend
to initiate such development until sales and production of AMR
and RU Rubber have been established.
The Company believes that activated modified rubber powder,
as a feedstock, will be a strong competitor with natural and
synthetic rubber that is currently used by rubber manufacturers
in the production of a variety of products. The price of natural
and synthetic rubber is variable and, as a commodity, price is
driven by supply and demand. The Company believes that once it
successfully establishes a production facility, its price of
AMR and RU products may be significantly less than the price
of natural and synthetic rubber. In addition, the Company
intends to develop specialized compounds with unique
characteristics to compete with high-priced compounds of neoprene,
EPDM and similar high-end products. Development of these products
will be customer driven, but the Company expects fierce competition
from established suppliers seeking to retain market share in
this high margin, high price sector of the rubber market. To
the extent that there are other compounding facilities that
supply to the rubber industry the Company will be competing
with other rubber compound material suppliers. The competitive
advantage in these markets will be the use of low cost AMR and
RU Rubber resulting in a price advantage to users as well as
the ability to recycle the customers scrap that typically goes to
landfill at the present time.
There are some current uses for recycled crumb rubber that has
been treated or processed in some manner for use in low-end
products. The Company does not intend to participate in this
market except as a means of disposing of material that the
Company does not consider of an appropriate quality for AMR
or RU rubber production.
<PAGE> 10
Marketing
LandStar (Rebound Rubber) conducted pre-marketing activities
during 1998 prior to the establishment of the demonstration
plant. As part of this process, Rebound Rubber met with several
manufacturers of rubber products to discuss the use of activated
modified rubber (AMR) as part of the manufacturer's rubber
compound. The AMR compounds were evaluated by the manufacturers
with positive results and the Company received verbal expressions
of interest in the Company's products. The manufacturers
generally expressed their desire to observe the manufacture of
AMR in North America to establish that commercially viable
volumes of AMR can be produced with consistent physical and
chemical properties. The Company has initiated a program under
the guidance of professional rubber industry consultants to
obtain independent verification of the AMR and RU Rubber
product characteristics. The Company is in the process of
recruiting experienced rubber industry professionals and has
engaged two initial personnel in early 2000. The Company
has attended numerous industry events over the past three years,
and has a developed an extensive contact list of interested
potential customers. The Company currently produces sample
materials that, in conjunction with chemical and physical
property profiles that are independently verified, will be used
by the marketing team to solicit sales orders from the intended
customers.
Distribution
The Company's activation process currently focuses on crumb
rubber (30 -40 mesh) with the output being activated crumb
rubber. This material can be bagged and sold as is or compounded
with natural or synthetic rubber and plastics. Packaging will
include bagging in 50# bags or in super sacks, or the material
(and compounds thereof) can be sheeted or pelletized. The Company
intends to enter into strategic relationships or agency agreements
to establish a marketing group, and intends to sell its products
directly to manufacturers capable of ordering large quantities
under long-term supply contracts.
Competition
The rubber industry has been researching the devulcanization
of rubber for many years. The process of devulcanization is
"the treatment of rubber granulate with heat and /or softening
agents to return its elastic qualities to enable the rubber to
be reused". We are aware of several processes that have met with
varying degrees of success at the laboratory level but are less
successful at commercial production levels. Also, different
processes result in different levels of de-vulcanization, for
example the use of a very fine granulate and a process which
results in surface devulcanization will yield a product with
some of the desired qualities of rubber. Typically, alternative
de-vulcanization processes have resulted in low levels of
devulcanization, have failed to produce consistent quality or have
been prohibitively expensive. The Company believes that its AMR
and RU's processes produce a new polymer with consistent
properties that approach the properties of natural and synthetic
rubber, with a significant price advantage.
<PAGE> 11
Pursuant to evaluation of the Company's devulcanized material,
the Company has conducted tests of its material at a world renowned
independent rubber laboratory and have had the results of the tests
interpreted by accredited rubber industry consultants. While this
information is proprietary and the process is ongoing, results to
date support the unique physical and chemical characteristics of
material produced with the licensed technology. The chemical and
physical properties create a unique product, a complete mix of
polymers, reinforcing agents (such as carbon black), anti-oxidants
and other additives and processing aids complete with a curing
(vulcanizing) package, in a stable chemical state. This material
can, because of its processing state, reduce processing time and
provide competitive cost advantages on the multiple levels of
reducing or eliminating the use of virgin materials for the
various ingredients and eliminating the processing cost of
blending materials.
There are currently no direct competitors of the Company, as the
technology licensed to the Company is unique. However, other
participants in both the natural rubber and synthetic rubber
areas may be considered competitors. The Company is aware
of several development stage and established companies,
including The Goodyear Tire and Rubber Company, which are
exploring rubber de-vulcanization.
Technology Rights
The Company purchased the rights to three technologies:
1. The AMR technology is a surface activation devulcanization
technology. In this technology proprietary chemical agents
are applied to the surface of 30-40 mesh crumb rubber particles
and react chemically to sever vulcanization bonds which are
exposed on the surface of the particles. As the interior material
in the particles also contains bonds formed in vulcanization,
surface de-vulcanization only partially de-vulcanizes the material.
By this process the surface of the particle becomes reactive and
can bond with other particles in a new vulcanization process to
form new vulcanized products. There are other technologies that
create a reactive surface, but the Company believes that the AMR
technology is unique and superior in terms of the chemical
structure created, the low heat involved in the reaction and
the low cost of production. The AMR process is a production
level technology as it has been used in production operations
in China for over four years. AMR has been used in significant
quantities in the production of tires and other rubber goods
during the four years. Management is not aware of any other
surface activation technology that has produced material that
has been used in the proportion or volume of AMR. The Dayton
pilot plant now produces AMR by a fully automated process. The
Company expects to develop variations of the AMR technology in
the future that will expand this materials market opportunity.
2. The Latex reactivation technology is the only technology known
to the Company or referenced in available data sources that
reactivates or de-vulcanizes latex post-consumer and
post-industrial materials creating a "new" rubber material that
can be used in new rubber products. This unique technology is not
in commercial production at the present time, however the Company
believes that no further research is required prior to initiating
production.
While the Company can commence production, applied
<PAGE> 12
research and development will be required to prepare verified
product characteristics and to interface the characteristics of
the product with manufacturers specifications. The applied research
and development will be conducted using equipment and resources
acquired in the development of the AMR and RU product lines and
accordingly will involve minimal incremental costs expected to
not exceed $50.000. The Company is deferring implementation of
the latex technology until the AMR and RU technologies are
operational rather than allocate resources and manpower during
the development of the Company. The Company believes that this
technology has significant value as it is unique in the world
and essentially all latex waste currently is land filled or
burned. The Company has not produced any reactivated latex
product or conducted any market research and accordingly cannot
verify that this product line will be viable.
3. The RU technology is a unique penetrating devulcanization
technology. The proprietary chemical compounds applied in the
RU process penetrate the crumb rubber particles and sever
vulcanization bonds internal to the crumb rubber particle. As
a result of this penetrating effect the process works better
with larger particle crumb, typically 4-28 mesh. The use of
larger crumb reduces the grinding costs and improves the
quality of the devulcanized material. The effect of the more
complete devulcanization is creation of a material that costs
less to process, becomes plastic at a lower temperature and
has a greater capacity to melt into and bond with other
ingredients in a new rubber compound. Preliminary test data
from potential customers is extremely positive and the Company
believes that this material will revolutionize the rubber
recycling industry. The production of this material uses the
same materials and equipment as the AMR process with the
addition of a standard rubber mixing mill attached at the end
of the process to blend in the proprietary RU special agent.
The RU product line is a more advanced state of the AMR
technology with benefits of being a more complete
devulcanization by virtue of penetration and severing of
cross-links within the crumb rubber particle. The additional
advantage of the RU technology over the AMR technology is
that it is applied to a larger size of crumb rubber which
means that the raw materials (4-28 mesh crumb rubber than
30-40 mesh crumb rubber), are less expensive to produce
and more readily available.
Raw Materials
The Company's AMR and RU's processes requires that
there be an adequate supply of rubber for recycling and
requires the availability of several chemical compounds developed
by the Institute. The Company has been advised of the ingredients
and processes involved in the production of the reactive
proprietary compounds and has verified the source of the
ingredients from multiple North American sources. .
The Company believes that there is an abundance of raw material
in the form of used tires, factory scrap and inventories of
partially processed crumb rubber for supply of crumb rubber to
make AMR and RU rubber. North America generates approximately
300 million used tires per year and billions more are stockpiled
throughout the world. Numerous existing shredding and crumbing
operations with excess unused production capacity are available
to supply
<PAGE> 13
crumb rubber for reactivation. In addition, the Company intends
to become actively involved in this sector of the business by
acquiring subsidiaries or forming strategic partnerships with
processors of tire crumb to supply the Company with its raw
materials. The Company has engaged in discussions with United
Trans-Western Inc. regarding it acting as a potential supplier of
raw materials to the Company, although no specific agreement has
been reached. United Trans-Western, Inc. has no
experience in the production of crumb rubber and any agreement
with United Trans-Western, Inc. for such supply will be contingent
upon demonstration of their acquisition of human and other
resources with the capability of reliably producing crumb rubber
on a basis competitive with alternate suppliers. Any such
agreement with United Trans-Western, In. will be on terms at
least as favorable to the Company as agreements with third
parties.
Customers
The Company has no production operations to date and has not
sold any product to any customers. However, the Company's
pre-market research efforts have indicated significant expressions
of interest from manufacturers of various rubber products for the
Company's technology and products. Activated modified rubber
(AMR and RU Rubber ) are an alternative feedstock that
can be used in various compounds depending on the product being
manufactured and can replace natural or synthetic rubber in
varying percentages. The Company believes that there are
potential significant cost savings from the use of AMR and
RU Rubber in rubber manufacturing processes. The Company
believes that the versatility of activated modified rubber allows
most manufacturers of rubber products to use AMR and RU
Rubber as raw materials, and expects to offer its products
to broad range of potential customers.
Research and Development Activities
The AMR technology licensed by the Company has been in commercial
production for over four years in Asia. Accordingly, the
Company believes that its AMR technology is operationally complete
and the Company intends to initiate production without substantial
further research and development efforts. This initial production
will apply standard chemical formulation of the AMR process to
whole tire crumb rubber to produce standard AMR. Standard AMR
has a myriad of applications and markets which the Company intends
to explore.
The Company does not intend to restrict its business activity to
the standard AMR market and intends to conduct research and
development activities to enhance its array of products and
applicable markets through its applied research and development
lab at the Company's demonstration facility in Dayton, Ohio.
The Company intends to do extensive applied research and
development pursuant to the development of new products
incorporating AMR in polymer compounds. This research will
focus on three primary areas: reactivation formula modification,
compound development and processing formulas:
Reactivation Formula Modification: The Company at inception
<PAGE> 14
will base all production on whole tire crumb rubber. The Company
will develop streaming methods to isolate types of rubber waste by
similar rubber type such as separating bead rubber and side-wall
rubber from tread materiel. The Company will research activation
formula modifications to improve the characteristics of AMR
produced from each type of waste rubber.
Compound Development: Many manufacturers use raw materials
that are compounds of various types of natural and synthetic
rubber and plastics. The Company will conduct an ongoing research
program to develop a matrix of compounds reflecting various
physical and chemical properties.
Processing Formulas: The introduction of AMR as a substitute
for virgin material affects the proportions of other additives
and vulcanizing agents. The Company will research the alterations
to processing formulas necessary for manufacturers to use AMR and
RU Rubber based compounds.
The Company's initial research and development efforts will focus
on development of compounds and manufacturing formulations using
AMR and RU Rubber . Generally, rubber product manufacturers
process raw materials according to different formulations of
polymers, fillers and extenders, processing agents, additives
such as anti-oxidants, and vulcanizing agents in a specified
combination of time, temperature and pressure. Often the polymer
component will include premixed compounds of several polymers that
are supplied by external suppliers. The Company intends to develop
premixed compounds with suitable physical and chemical
characteristics to facilitate substitution of AMR and RU Rubber
based compounds in these formulations. Due to the fact that
AMR and RU Rubber retain the fillers, extenders, additives
and vulcanizing agents that are resident in the crumb rubber, the
"formula" used by the manufacturer will change when an
de-vulcanized compound is used. The Company intends to
develop amended formulations for customers, determining the
reductions in the additives and agents and amending the time,
temperature and pressure parameters. The Company believes that
each such compound and processing formula will constitute a new
product and will open a potentially new market segment.
During 1999, the Company spent approximately $48,000 on research
and development efforts and anticipates expending between
$500,000 and $1,000,000 during 2000. Research and
development efforts will focus on improving, refining and
testing the Company's technology and expansion of the product
range using AMR and RU rubber.
Intellectual Property and Other Proprietary Rights
The Company relies on a combination of registration in the
Peoples Republic of China, strict secrecy of the formula,
confidentiality procedures and contractual provisions to
protect its proprietary rights. The technologies are
not protected by patent but the AMR and Latex technologies
have been registered with the Science and Technology Quality
Bureau of Domestic Trading Ministry, P.R. China under
<PAGE> 15
#85-911-04-01 on October 28, 1994. The Chinese registration
process does not provide protection equivalent to a patent, but
does provide documentation of prior art. The Chinese patent for
the RU technology has been applied for by the Guangzhou Research
Institute. Upon completion of the Chinese patent, that patent
will be extended by application for patent in the United States,
Canada and parts of Europe. In addition, the Company has entered
into Non-Disclosure and Non-Analysis agreements with third parties
with respect to the technology. The Company also relies on a
combination of common law and statutory law to protect its trade
secrets, proprietary information, know-how and trademarks. The
AMR and Latex technologies were complete and the AMR technology
was in commercial production when licensed to the Company in
1998. The RU technology was not competed at that time and the
Company provided capital pursuant to the contract with the
Guangzhou Research Institute to fund the completion of the
technology. The RU technology has subsequently been completed
and we believe it will be officially registered in August, 2000
with the Science and Technology Quality Bureau of Domestic
Trading Ministry, P.R. of China. The Company also believes
that factors such as the technological and creative skills of
its personnel, new product developments, frequent product
enhancements, name recognition and reliable product maintenance
are essential to establishing and maintaining a technological
leadership position. There can be no assurance that others
will not develop technologies and products that are similar or
superior to the Company's technology. Despite the Company's
efforts to protect its proprietary rights, unauthorized parties
may attempt to copy aspects of the Company's products or to
obtain and use information that the Company regards as proprietary.
There can be no assurance that the Company's means of protecting
its proprietary rights in the United States or abroad will be
adequate or that competition will not independently develop similar
technology.
The Company is not aware that it is infringing on any proprietary
rights of third parties. There can be no assurance that third
parties will not claim infringement by the Company of their
intellectual property rights. The Company expects that product
developers will increasingly be subject to infringement claims
as the number of products and competitors in the Company's
industry segment grows and the functionality of products in
different industry segments overlaps. Any such claims, with
or without merit, could be time consuming to defend, result in
costly litigation, divert management's attention and resources,
cause product shipment delays, or require the Company to enter
into royalty or licensing agreements. Such royalty or licensing
agreements, if required, may not be available on terms acceptable
to the Company, if at all. In the event of a successful claim of
product infringement against the Company and failure or inability
of the Company to license the infringed or similar technology,
the Company's business, operating results and financial condition
would be materially and adversely affected.
Government Regulations
Government approval is not required for use of AMR or RU
Rubber in manufactured goods except to the extent that
<PAGE> 16
particular manufactured goods may be subject to requirements for
government approval. Through the Company's market development
activities to date, it is not aware of any applicable governmental
requirements for manufacturers that the Company is currently
targeting. Although AMR and RU Rubber have been used in
the manufacture of new tires outside of North America, it is
expected that significant testing by tire manufacturers will be
required before they are used in North America for
this purpose. At that time, all necessary safety standards and
related regulations will have to be met.
Environmental Compliance
The Company has constructed its Dayton, Ohio facility as a
prototype for a full size production plant. This development
process has included addressing all applicable environmental
regulations and requirements. The Company has developed material
safety data sheets for all materials related to the process and
the Company believes that it is in compliance with all federal,
state and local environmental laws and regulations. The AMR
and RU Rubber processes do not produce any residual solid
waste as all components of the manufacturing process remain in the
product. Gases that are emitted in the process have
been tested and demonstrated to be organic in nature and are
controlled by standard filtering and venting systems.
Employees
As of March 31, 2000, the Company had a total of six full-time
employees, of which four were in management positions and two
were in administration. The Company also has five contract
personnel at the Dayton pilot plant. From inception of the
Company through the present time, the Company has hired operational,
engineering, construction and marketing personnel on a consulting
basis. The future success of the Company depends in significant
part upon the continued service of its key management personnel
and its ability to attract and retain highly qualified technical
and marketing personnel. Competition for highly qualified
personnel is intense and there can be no assurance that we will
be able to retain its key managerial and technical employees or
that it will be able to attract and retain additional highly
qualified technical and managerial personnel in the future.
The Company is currently interviewing potential management,
marketing and technical personnel for positions in the Company's
Dayton, Ohio facility and expects to hire up to 10 additional
full-time or part-time employees during 2000.
Reports to Security Holders
Following the effective date of this registration statement, the
Company will be required to comply with the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Company will file annual, quarterly and other reports
with the Securities and Exchange Commission, and will also be
subject to the proxy solicitation requirements of the Exchange
Act and, accordingly, will furnish an annual report with audited
financial statements to our stockholders.
<PAGE> 17
Available Information
Copies of this registration statement may be inspected, without
charge, at the SEC's Public Reference Room at 450 Fifth Street
N.W., Washington D.C. 20549 and at the Northeast Regional
offices of the SEC located at 7 World Trade Center, Suite 1300,
New York, New York 10048. The public may obtain information on
the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0300. The SEC maintains an Internet site that contains
reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC at
http://www.sec.gov.
PLAN OF OPERATIONS
The following discussion contains forward-looking statements
regarding the Company, its business, prospects and results of
operations that are subject to risks and uncertainties posed by
many factors and events that could cause the Company's actual
business, prospects and results of operations to differ materially
from those that may be anticipated by such forward-looking
statements. Factors that might cause such a difference include,
but are not limited to, those discussed herein as well as those
discussed under the caption "Business" as well as those discussed
elsewhere in this Registration Statement. Readers are cautioned
not to place undue reliance on these forward-looking statements,
which speak only as of the date of this Registration Statement.
The Company undertakes no obligation to revise any forward-looking
statements in order to reflect events or circumstances that may
subsequently arise. Readers are urged to carefully review and
consider the various disclosures made by the Company in this
Registration Statement that attempt to advise interested parties
of the risks and factors that may affect the Company's business.
General
On March 31, 1999, the Company acquired approximately 98.5% of the
common stock of Rebound Rubber Corp. The acquisition was treated
for accounting purposes as a recapitalization of Rebound Rubber
under the capital structure of LandStar, Inc. and an acquisition
of the net assets of LandStar. Through December 31, 1999,
the Company has had no revenues from operations and is considered
a development stage company and had a net loss for the year ended
December 31, 1999 of
$1,474,531. The increase in general and
administrative expenses in the year ended December 31, 1999 was
due largely to investor relations costs of approximately $350,000
and finders fees of $319,000. Additional costs were due to the
general increase in level of operations. This Plan of
Operations should be read in conjunction with "Business" and
"Financial Statements" contained within this registration statement
on Form 10-SB.
Operations
Since inception, the Company has devoted substantially all
of its efforts to commercial development of its rights to certain
proprietary rubber devulcanization and reactivation technology.
During 1999, the Company finished construction and began limited
operations of its demonstration facility in Dayton, Ohio and has
engaged in discussions with representatives of several rubber
product manufacturers. The Company has the capacity for
small-scale production at its Dayton, Ohio facility but does for
the
<PAGE> 18
next 6 months not anticipate production of other than demonstration
volumes at this facility. In the first quarter of 2000, the
Company completed full automation of the Dayton pilot plant. The
Company has also commenced product characterization testing,
material safety data sheet development and marketing materials
development. The Company has also initiated testing and marketing
of the RU rubber product line. During the fiscal year ended
December 31, 2000, the Company anticipates increasing operations
at the Dayton, Ohio facility to increase production and to
demonstrate results of the rubber devulcanization technology and
the AMR and RU products. The Company anticipates building at least
one full-scale production facility during 2000, having a minimum
production capacity of 50 tons per day of output, and is currently
exploring possible locations for construction of the production
facility. The Company estimates that the cost for construction
of a production facility to range between $1.5 million and
$2.5 million. The Company intends to obtain funds by means of
private offerings of equity and debt securities or from bank or
other traditional means of financing. There are no assurances
that any such financing will be available to the Company, or, if
available, that it will be on terms acceptable to the Company.
As of December 31, 1999, the Company had a cumulative net loss
of approximately $3,362,248. The Company expects that losses
from operations will continue for the foreseeable future. The
Company expects that operating losses will continue until such
time as product sales generate sufficient revenues to fund its
continuing operations, as to which there can be no assurance.
The Company currently anticipates that revenues from sales
will not occur until at least the third quarter of 2000.
The Company's ability to achieve profitability will depend, in
part, on its ability to successfully demonstrate its technology
and to consistently produce high-quality AMR and RU Rubber
products with characteristics required by its customers,
and to develop the capacity to manufacture and market its
products on a wide scale. There is no assurance that the Company
will be able to successfully make the transition to a full-scale
production facility and to marketing products on a broad basis.
While attempting to make this transition, the Company will be
subject to all risks inherent in a growing venture, including
the need to produce reliable and consistent products and to
develop marketing expertise and an effective sales force. In
the event that the market for the Company's product does not
develop as anticipated, or the market is slow to or does not
accept the Company's product as a viable alternative to natural
or synthetic rubber, the Company's business, financial condition
and results of operations would be adversely affected.
Capital Expenditures.
The Company's capital requirements for the 2000 fiscal year will
depend on numerous factors, including the costs of hiring new
employees and related occupancy costs, sales and marketing
efforts, capital expenditures, professional costs associated
with being an Exchange Act reporting company, the terms of any
new collaborative, licensing or strategic relationships that
the Company may establish, and developments and changes arising
from the Company's continuing research.
<PAGE> 19
The Company's AMR and RU processes uses standard equipment
available from multiple suppliers to the rubber industry.
Management believes that much of this equipment is available as
used equipment. The Company expects to build a full production
plant in 2000 that will require acquisition of high intensity
mixers, hoppers, conveyors, coolers, pneumatic and DDC control
systems and ancillary materials handling equipment. The Company
will also be acquiring extensive lab equipment including tensile
testers, rheometers, lab mixers and related supplies. The Company
will also acquire administrative and lab computer equipment and
furnishings.
To date, the Company's operations have been funded from equity
and debt financing and management anticipates that additional
equity and/or debt financing will be necessary to fund operations
during the 2000 fiscal year. The Company believes that it will
be successful in locating sufficient financing to fund operations
through 2000. However, there can be no assurances that the
Company will be successful in finding debt or equity financing on
terms acceptable to the Company, or at all.
Research and Development. For the 2000 fiscal year, the Company
intends to continue its research and development activities,
focusing on the three primary areas as discussed above in
"Business": reactivation formula modification, compound
development and processing formulas. The Company does not
intend to place an emphasis on research and development
activities, but believes that it is important to continue
its efforts in this area to develop additional products
and open new markets for the Company.
Employees. The Company intends to hire a full complement of
sales and marketing personnel and operating and lab personnel
for its Dayton, Ohio facility in fiscal 2000. Currently,
management expects that a minimum of six employees and up to
15 employees will be hired. During the first quarter of
fiscal 2000, the Company has been actively engaged in recruiting
qualified key personnel and has contracted five personnel
including marketing, administrative, technical and operational
personnel. There is no assurance that the Company will be
successful in locating, hiring or retaining qualified personnel
in any or all of these areas. In the event that the Company
cannot hire employees on its current projected time schedule,
or at all, the Company's plan of operations and financial
results will be materially and adversely affected.
Year 2000 Compliance
The Company did not experience any year 2000 failures or
disruptions of any kind.
DESCRIPTION OF PROPERTY
The Company leases approximately 3,330 square feet of office
space in the LandStar Building, Victoria, British Columbia,
Canada where the corporate head office is located. The lease
agreement is with Carey Holdings Ltd., a company in which
<PAGE> 20
Mr. D. E. Fimrite, president and director of LandStar, has a
financial interest. See "Certain Relationships and Related
Transactions" below. The Company recently entered into a new
lease agreement, effective January 1, 2000, for a term of five
years through December 31, 2004, at a monthly lease rate of
$4,163 plus applicable additional rent for common costs. The
building is a multi-tenant facility and the rental rate is
equivalent to rental rates paid by other tenants within the
facility for comparable space.
The Company also leases its demonstration plant and laboratory
facility, which contains approximately 12,800 square feet of
office and manufacturing space, in Dayton, Ohio. The lease
for this facility expired in April, 2000, and the Company has
an oral agreement with the landlord to extend the lease through
September 2000 for a monthly rent of $4,267 plus common and
direct costs applicable to the space leased. The Company
is considering other sites for development of a full production
operation and expects to confirm arrangements on new facilities
by mid 2000.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth as of March 31, 2000, the name
and the number of shares of Company common stock, $.001 par value
per share, held of record or beneficially by the following
persons: (1) each director of the Company; (2) the Company's
Chief Executive Officer;(3) all directors and executive officers
of the Company as a group; and (4) each person who is known by the
Company to beneficially own more than 5% of the common stock.
Except as otherwise noted, the address of each such person is
c/o LandStar, Inc. Suite 600 - 3795 Carey Road, Victoria,
British Columbia, Canada, V8Z 6T8.
<TABLE>
<CAPTION>
Shares of Common Stock Beneficially Owned (1)
<S>
<C> <C> <C>
Beneficial Owner No. Of Shares Percent of Total (2)
---------------- -------------- -----------------
D. Elroy Fimrite (3) 7,600,100 20.0%
Michael C. Pinch (4) 600,000 1.6
Dr. Ian Hadfield (5) 515,000 1.4
Philip Pimlott (6) 235,000 *
Scott B. Randolph -- --
United Trans-Western Inc.(7) 8,500,000 22.4
Kentucky Financial Inc. (8) 5,600,100 14.7
Kui Lim Lu (9) 3,000,000 7.9
85 English Bluff Road,
Delta British Columbia,
Canada V4M 2M4
<PAGE> 21
All executive officers and directors as a group
(six persons) (10) 9,072,100 23.9%
* Less than 1%
</TABLE>
(1) This table is based on information supplied by executive
officers, directors and shareholders. Subject to applicable
community property laws, each shareholder named in the table
has sole voting and investment power with respect to the shares
set forth opposite such shareholder's name.
(2) Based on 38,036,124 shares of common stock issued and
outstanding as of March 31, 2000.
(3) Includes 5,600,100 shares of common stock held of record by
Kentucky Financial, Inc., a company owned by members of Mr.
Fimrite's family and for which Mr. Fimrite serves as an officer
and director; Mr. Fimrite disclaims beneficial ownership over
all of such shares except to the extent of his pecuniary interest
therein. The amount beneficially owned by Mr. Fimrite does not
include 8,500,000 shares held by United Trans-Western, Inc., a
public company for which Mr. Fimrite formerly served as an officer
and director. All of the shares beneficially owned by Mr. Fimrite
are subject to the terms of a voluntary pooling agreement, pursuant
to which he has agreed to certain transfer restrictions on the
shares over a two-year period following closing of the acquisition
of Rebound Rubber on March 31, 1999. See "Certain Relationships
and Related Transactions."
(4) The amount beneficially owned by Mr. Pinch does not include
8,500,000 shares held by United Trans-Western, Inc., a public
company for which Mr. Pinch serves as an officer and director.
All of the shares beneficially owned by Mr. Pinch are subject to
the terms of a voluntary pooling agreement, pursuant to which he
has agreed to certain transfer restrictions on the shares over
a two-year period following closing of the acquisition of
Rebound Rubber on March 31, 1999. See "Certain Relationships
and Related Transactions."
(5) Of the shares beneficially owned by Dr. Hadfield, 480,000
shares are subject to the terms of a voluntary pooling agreement,
pursuant to which he has agreed to certain transfer restrictions
on the shares over a eighteen month period following
closing of the acquisition of Rebound Rubber on March 31, 1999.
See "Certain Relationships and Related Transactions."
(6) Includes 35,000 shares of common stock held of record by
Five Star Systems, Ltd., a company for which Mr. Pimlott serves
as an officer, director and shareholder; Mr. Pimlott disclaims
beneficial ownership over all of such shares except to the extent
of his pecuniary interest therein. Of the shares beneficially
owned by Mr. Pimlott, 140,000 shares are subject to the terms of
a voluntary pooling agreement, pursuant to which he has agreed
to certain transfer restrictions on the shares over an
eighteen month period following closing of the acquisition
of Rebound Rubber on March 31, 1999. See "Certain Relationships
and Related Transactions."
(7) The shares beneficially owned by United Trans-Western, Inc.
were issued in connection with the acquisition by LandStar in
March 1999 of United Trans-Western's joint venture rights to
the rubber devulcanization technology, and are subject to the
terms of a voluntary pooling agreement, pursuant to which the
holder has agreed to certain transfer restrictions on the shares
over a two-year period following closing of the acquisition on
<PAGE> 22
March 31, 1999. See "Certain Relationships and Related
Transactions." Mr. Pinch is an officer and director of United
Trans-Western, Inc., and Mr. Fimrite is a former officer and
director.
(8) All of the shares beneficially owned by Kentucky Financial
Inc. are subject to the terms of a voluntary pooling agreement,
pursuant to which the holder has agreed to certain transfer
restrictions on the shares over a two-year period following
closing of the acquisition of Rebound Rubber on March 31, 1999.
Mr. Fimrite serves as president and director of Kentucky
Financial Inc. See "Certain Relationships and Related
Transactions."
(9) All of the shares beneficially owned by Dr. Lu are subject
to the terms of a voluntary pooling agreement, pursuant to which
he has agreed to certain transfer restrictions on the shares
over a two-year period following closing of the acquisition of
Rebound Rubber on March 31, 1999.
(10) Consists of Messrs. Fimrite, Pinch, Hadfield, Pimlott,
Randolph and Terry Karpiuk. See "Directors and Executive
Officers."
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names and ages of the current
directors and executive officers of the Company and the principal
offices and positions with the Company held by each person. The
Company's Board of Directors currently consists of five directors,
each of whom serves a term of one year until the next annual
meeting of shareholders and until the election and qualification
of his successor, or his death, resignation or removal. The
executive officers of the Company are appointed by the Board
of Directors and serve until the appointment and qualification
of their successors and until their death, resignation or removal.
There are no family relationships between any of the directors
and executive officers. There is no voting agreement or other
agreements by which any director is to be elected as a director.
There are no arrangements or understandings between any director
or executive officer and any other person pursuant to which
any person was selected as director or executive officer.
<TABLE>
<S> <C> <C>
Name Age Position
------ ----- ---------
D. Elroy Fimrite 50 President, Chief Executive Officer
and Director
Michael C. Pinch 55 Chief Financial Officer,
Secretary and Director
Philip Pimlott 51 Executive Vice President and
Director
Terry Karpiuk 49 Vice-President, Corporate Relations
Dr. Ian Hadfield 55 Director
Scott B. Randolph 46 Director
</TABLE>
<PAGE> 23
Set forth below is biographical information for the directors
and executive officers:
Directors
D. Elroy Fimrite, age 50, has served as President and Chief
Executive Officer and a Director of the Company since January 29,
1999. Mr. Fimrite has served as a director of Rebound Rubber
Corp., a wholly-owned subsidiary of the Company, since
December 1996 and currently serves as its President.
Mr. Fimrite is a professional accountant with a business degree
and 26 years of diverse business experience including auditing,
controller, treasury, commercial real estate development and
general management. He has been a self-employed owner and operator
of a group of private companies since 1983 and has been involved
with public companies since 1993. In the past five years, he
has served as a director and officer of nine private and family
companies that are involved in real estate management and
development. Since January 1996, Mr. Fimrite has served as
president and director of Kentucky Financial Inc., a private
company that has provided management and financial
servicesto the Company (see " Certain Relationships and Related
Transactions"). Mr. Fimrite served as a director of Renco
Rescouces Inc., a public company based in Calgary, Alberta
(from August 1995 to October 1997), as an officer and director
of Trellis Technology Corp., a British Columbia public company
(from April 1994 to February 1996), and as an officer and director
of United Trans-Western, Inc., a Delaware public company (from May
1997 to June 1999).
Michael C. Pinch, C.A., age 55, has been a Director of
the Company since January 29, 1999 and has served in various
executive positions in the Company since that date, currently
serving as its Chief Financial Officer and Secretary. Mr. Pinch
has served as an officer of Rebound Rubber Corp., a
wholly-owned subsidiary of the Company, since June 1997 and
currently also serves as its Chief Financial Officer and Secretary.
Mr. Pinch obtained his professional accounting designation in 1970
and has been a self-employed practitioner and consultant since
1976. Since June 1982, Mr. Pinch has served as the sole owner,
officer and director of Shina Investments Ltd., a personal private
companythat has provided management services to the Company
(see " Certain Relationships and Related Transactions"). He
currently serves as president, chief executive officer and a
director of United Trans-Western, Inc., a Delaware public company
(since November 1997), and has also acted as a director and
officer of Vescan Equities Inc. (from March 1996 to January 1997)
and Trellis Technology Corp. (from June 1996 to November 1998),
two British Columbia public companies. During the periods served
as director and officer of the above companies, Mr. Pinch was active
in accounting and administration.
Philip Pimlott, age 51, was appointed to the Board of Directors
and appointed as Executive Vice President of the Company
in November 1999. From August 1989 to November 1999, Mr. Pimlott
served as a partner and a co-owner of Syscom Consulting Inc., a
company located in Victoria, British Columbia providing computer
systems support. He has been active in that business for the past
ten years and has broad management experience.
<PAGE> 24
Dr. Ian Hadfield, age 55, was appointed to the Board of Directors
of the Company in November 1999. Dr. Hadfield has practiced
periodontal dentistry since September 1970 in Victoria, British
Columbia. He is currently President of Dr. K Ian Hadfield, Inc.
which is the professional corporation in which the dental practice
is operated.
Scott B. Randolph, age 46, was appointed to the Board of Directors
of the Company in November 1999. Mr. Randolph also currently
serves as Vice-President of Consulting Services for Oil and Gas
Consultants, Inc. in Tulsa Oklahoma and has been in that position
since November 1994. Mr. Randolph has served as a director of
United Trans-Western, Inc., a Delaware public company, since
May 1997.
Executive Officers
In addition to Messrs. Fimrite, Pinch and Pimlott, the Company's
executive officers are as follows:
Terry Karpiuk, age 49, was appointed as the Company's Vice
President of Corporate Relations in October 1999. Prior to
that time, Mr. Karpiuk served as an agent for London
Life, an insurance company, from September 1993 through
September 1998.
Information Regarding the Board of Directors
During 1999, the Company's Board of Directors met or took action
by written consent four times. Meetings were conducted by
telephone and fax and documented by consent resolutions signed
by all directors as physical distance restricted attendance at
formal meetings for all directors. The Company does not currently
have an audit committee or a compensation committee,although it
intends to establish both an audit committee and a compensation
committee during the 2000 fiscal year.
Compensation of Directors
During 1999, Company directors were not compensated for their
service on the Company's Board of Directors.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth all compensation paid to or
earned by the Company's Chief Executive Officer for the fiscal
years ended December 31, 1999 and 1998. No executive officer
of the Company received compensation in salary and bonus in
excess of $100,000 during 1999.
<TABLE>
<S> <C> <C>
Name and Principal Position Year Annual Compensation
Salary
--------------------------- ----- -------------------
D. Elroy Fimrite
Chief Executive Officer,
President, Director 1999 $90,000
1998 $90,000
</TABLE>
<PAGE> 25
Employment Contracts and Termination of Employment and Change
in Control Arrangements
During 1998 and 1999, the Company was obligated under a management
services agreement entered into by Rebound Rubber Corp. with
Kentucky Financial Inc., a corporation owned by members of Mr.
Fimrite's family and for which Mr. Fimrite serves as president
and director. Under this agreement, Kentucky Financial provided
management services to the Company and it's subsidiaries at a rate
of $11,625 (CDN) per month (representing approximately $7,500 (US)
per month or $90,000 (US) annually based on current exchange rates).
The management services include supplying the Company with a
full-time Chief Executive Officer, a position filled by Mr. Fimrite
throughout the term of the agreement. This agreement terminated on
December 31, 1999. The Company anticipates renegotiating an
agreement in early 2000, subject to the approval of the Company's
board of directors or its compensation committee. See "Certain
Relationships and Related Transactions."Currently, the Company
has an oral, at-will agreement present pursuant to which it is
paying $12,000 US per month ($144,000 annualized) for Mr. Fimrite's
services.
During 1998 and 1999, the Company was obligated under a management
services agreement entered into by Rebound Rubber Corp. with
Shina Investments Ltd., a corporation owned by Mr. Pinch. Under
this agreement, Shina Investments provided management services to
the Company and it's subsidiaries at a rate of $7,750 (CDN) per
month (representing approximately $5,000 (US) per month or $60,000
(US) annually based on current exchange rates) The management
services included supplying the Company with a full-time Chief
Financial Officer, a position filled by Mr. Pinch throughout the
term of the agreement. This agreement terminated on December
31, 1999. The Company anticipates renegotiating an agreement in
early 2000, subject to the approval of the Company's board of
directors or its compensation committee. See "Certain
Relationships and Related Transactions."Currently, the Company
has an oral, at-will agreement pursuant to which it is paying
$8,000 US per month ($96,000 annualized) for Mr. Pinch's
services.
On March 31, 1999, the Company closed on the transactions
contemplated by the share exchange agreement with Rebound Rubber
Corp., resulting in the issuance of 14,500,100 shares of Company
common stock to substantially all of the former shareholders of
Rebound Rubber Corp. See "Certain Relationships and Related
Transactions." The issuance of 14,500,100 shares of Company
common stock in the share exchange represented approximately
87% of the Company's issued and outstanding shares outstanding
immediately following the transaction, resulting in a change of
control of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 28, 1998, the Company entered into a share exchange
agreement with Rebound Rubber Corp. and substantially all of
the shareholders of Rebound Rubber Corp. This agreement provided
for the issuance of 14,500,100 shares of Company common stock
in exchange for substantially all of the issued and outstanding
shares of Rebound Rubber Corp., at a deemed value of $.25 per
share or a total purchase price of $3,681,025. The acquisition
was effective on March 31, 1999.
<PAGE> 26
On December 28, 1998, the Company entered into a purchase
agreement with United Trans-Western, Inc. to acquire certain
joint venture rights held by United Trans-Western, Inc. under a
joint venture agreement between it and Rebound Rubber Corp.
relating to rubber recycling technology. On March 31, 1999,
effective upon the share exchange with Rebound Rubber, the Company
closed on the transaction with United Trans-Western, Inc. and
issued 8,500,000 share of common stock (valued at $.25 per share)
and paid $100,000 cash. United Trans-Western, Inc. further agreed
that all shares would be subject to transfer restrictions pursuant
to a two-year voluntary pooling agreement (in addition to any
restrictions imposed by law). Mr. Pinch, the Company's Chief
Financial Officer, serves as an officer and director of United
Trans-Western, Inc., and Mr. Fimrite, the Company's Chief
Executive Officer, is a former officer and director.
On December 28, 1998, in connection with the share exchange
agreement, the shareholders of Rebound Rubber Corp. who received
shares of Company common stock also entered into a voluntary
pooling agreement. Under the voluntary pooling agreement,
each shareholder agreed to certain restrictions on the transfer
of their shares (in addition to any transfer restrictions imposed
on them by applicable law) for a period of 18 months following
March 31, 1999, the date on which the share exchange became
effective. Under the voluntary pooling agreement, each
shareholder's shares are to be released from the transfer
restrictions at the following rate: 10% released six months
after the closing on March 31, 1999; an additional 15% to be
released nine months after the closing on March 31, 1999; an
additional 20% to be released 12 months after the closing on
March 31, 1999; an additional 25% to be released 15 months after
the closing on March 31, 1999; and the remainder to be released
18 months after the closing on March 31, 1999. In addition,
certain affiliates of Rebound Rubber Corp. and United
Trans-Western Inc. orally agreed to be bound by a further
voluntary pooling agreement, pursuant to which each holder
agreed to additional transfer restrictions on their shares for a
period of two years through March 31, 2001.
The Company, and its predecessor-in-interest Rebound Rubber Corp.,
have previously received funding from Kentucky Financial, Inc.,
a corporation owned by members of Mr. Fimrite's family and for
which Mr. Fimrite serves as an officer and director. On September
15, 1998, Kentucky Financial, Inc. entered into a standby
financing agreement with Rebound Rubber Corp. pursuant to which
Kentucky Financial, Inc. provided interim financing to Rebound
Rubber Corp. in the amount of $300,000, evidenced by a convertible
debenture. In consideration for the financing, Rebound Rubber
Corp. paid to Kentucky Financial, Inc. a fee of $15,000,
representing five percent of the financing amount. The
convertible debenture had a term of one year and was convertible
into units (each unit consisting of one share of common stock
and one stock purchase warrant to purchase an additional share
of common stock) at the following rates: if converted prior
to September 30, 1999, a conversion rate of $.10 per share for
a maximum of 3,000,000 shares plus 3,000,000 warrants with an
exercise price of $.10 per share; if converted after September
20, 1999 and prior to September 30, 2001, a conversion rate of
<PAGE> 27
$.20 per share for a maximum of 1,500,000 shares plus 1,500,000
warrants with an exercise price of $.20 per share; and if
converted after September 20, 2001 and prior to September 30, 2003,
a conversion rate of $.30 per share for a maximum of 1,000,000
shares plus 1,000,000 warrants with an exercise price of $.30
per share. As a result of the share exchange with Rebound Rubber
Corp. in March 1999, the Company assumed Rebound Rubber Corp.'s
obligations under the convertible debenture. Subsequently, in
September 1999 the holders of the convertible debentures converted
the outstanding principal into 3,000,000 shares of Company common
stock at a conversion rate of $.10 per share and exercised in
full their stock purchase warrants for an additional 3,000,000
shares of Company common stock at an exercise price of $.10 per
share.
The Company leases approximately 3,330 square feet of office space
in the LandStar Building, Victoria, British Columbia, Canada where
the corporate head office is located. The lease agreement is with
Carey Holdings Ltd., a company in which Mr. D. E. Fimrite,
president and director of LandStar, has a financial interest.
The Company recently entered into a new lease agreement, effective
January 1, 2000, for a term of five years through December 31, 2004,
at a monthly lease rate of $4,163 plus applicable additional rent
for common costs. The building is a multi-tenant facility and the
rental rate is equivalent to rental rates paid by other tenants
within the facility for comparable space. The Company believes
that the terms of its office lease are at least as favorable
as those the Company could obtain from an independent third
party.
DESCRIPTION OF SECURITIES
The following is a summary description of the Company's capital
stock and of certain provisions of the Company's Articles of
Incorporation and Bylaws, each as amended. This summary is not
intended to be complete and is subject to and qualified in its
entirety by reference to the Articles and the Bylaws, copies of
each of which are filed as exhibits to this Registration
Statement on Form 10-SB.
General
The Company's authorized capital consists of 100,000,000 shares
of common stock, $.001 par value per share. As of
March 31, 2000, the Company had 38,036,124 shares of common
stock issued and outstanding, all of which are validly issued,
fully paid and non-assessable.
Common Stock
Holders of outstanding shares of common stock are entitled to
one vote per share on all matters submitted to a vote of the
shareholders. All shares of the common stock have equal voting
rights. There are no cumulative voting rights in the election
of directors. Holders of a majority of the outstanding shares
of common stock constitute a quorum at any meeting of
shareholders and the vote by the holders of a majority of the
outstanding shares of common stock is required to effect certain
fundamental corporate changes, including any liquidation, merger
or sale of substantially all of the Company's assets.
<PAGE> 28
Holders of outstanding shares of common stock are entitled to
receive dividends, if, as, and when declared by the Board of
Directors out of funds legally available therefore. Dividends
may be paid in cash, property, or shares of common stock. Upon
liquidation of the Company, holders of outstanding shares of
common stock are entitled to share ratably in all assets of the
Company remaining after payment of liabilities. Holders of
outstanding shares of common stock have no preemptive rights
or other rights to subscribe for unissued or treasury shares
or securities convertible into or exercisable or exchangeable
for shares of common stock.
Preferred Stock
The Company has not authorized or issued any preferred stock.
Anti-Takeover Provisions
The Company's Articles of Incorporation and Bylaws do not contain
any provision that may delay, defer or prevent a change in control
of the Company.
Sections 78.378 through 78.3793 of the Nevada Revised Statutes
contain provisions that govern the acquisition of, and place
restrictions on an acquirer's voting rights following acquisitions
of, controlling interests in Nevada corporations that have at least
200 shareholders of record with at least 100 that have street
addresses in the State of Nevada. These statutory provisions do
not apply to the Company.
Director and Officer Liability and Indemnification
The Company's Articles and Bylaws provide that the liability of
the Company's directors and officers is limited and that the
Company will indemnify its directors, officers and employees to
the fullest extent permitted by law. The Company is not obligated
to indemnify it directors, officers or employees for any action in
which the person was adjudged guilty of willful misfeasance or
malfeasance in the performance of his duties. Insofar as
indemnification for liability arising under the Securities Act
may be permitted to directors, officers and controlling persons
of the Company pursuant to those provisions, or otherwise, the
Company has been advised that, in the opinion of the Securities
Exchange Commission, this indemnification is against public policy
as expressed in the Securities Act and is unenforceable.
Transfer Agent and Registrar
The transfer agent and registrar for the Company common stock
is Manhattan Transfer Registrar Co., whose address is 58
Dorchester Rd., Lake Ronkonkoma, N.Y. 11779.
<PAGE> 29
PART II
MARKET PRICE OF AND DIVIDENDS ON THE
COMPANY COMMON STOCK AND OTHER
SHAREHOLDER MATTERS
The Company common stock is traded on the National Trading
Bureau's Pink Sheets under the symbol "LDSR." There is very
limited trading of the Company common stock on the Pink Sheets.
The common stock first began trading on the OTC Bulletin
Board on October 2, 1998, trading was terminated on the
OTC BB on January 20, 2000 due to the failure of the Company to
be a reporting company under the Securities Exchange Act of 1934.
The table below sets forth, for the calendar quarters indicated
since the date that the common stock began trading, the high and
low bid prices for the common stock as reported by the OTC
Bulletin Board for the period ending December 31, 1999 and as
reported by the National Trading Bureau's Pink Sheets for the
quarter ending March 31, 2000. These prices reflect
inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.
<TABLE>
<CAPTION>
LandStar, Inc.
Common Stock
<S> <C> <C> <C>
High Low
1998 First Quarter -- --
Second Quarter -- --
Third Quarter -- --
Fourth Quarter
(beginning October 2,1998) $1.28 $0.25
1999 First Quarter $2.00 $0.41
Second Quarter $1.56 $0.91
Third Quarter $0.42 $0.24
Fourth Quarter $0.77 $0.23
2000 First Quarter $0.75 $0.17
</TABLE>
On March 31, 2000, there were approximately 215
shareholders of record. The Company has not declared dividends
on the common stock and does not anticipate paying dividends on
the common stock in the foreseeable future.
OTC Trading Market
The common stock is currently traded on the National Trading
Bureau's Pink Sheets under the symbol "LDSR". As of the date of
this registration statement, the Company does not qualify for
quotation on the OTC Bulletin Board and is filing this
registration statement for the purpose of satisfying the
eligibility criteria. There can be no assurance that the Company
common stock will regain quotation on the OTC Bulletin Board,
<PAGE> 30
or that a regular trading market will develop or be sustained
after the date of this registration statement. In the event that
the Company does not qualify for resumption of quotation
on the OTC Bulletin Board , an investor may find it more
difficult to dispose of, or to obtain accurate quotations as to
the market value of, the common stock than if it were listed on
the OTC Bulletin Board or any other quotation system. In the
event the common stock fails to resume quotation on the OTC
Bulletin Board, the Company expects its common stock would
continue to be listed on the National Quotation Bureau's Pink
Sheets.
Penny Stock Regulation
For as long as the common stock is traded on a system other
than a national securities exchange or The Nasdaq Stock Market
quotation system, and the trading price of the common stock is
below $5.00 per share, trading in such securities will be
subject to the requirements of certain "penny stock" rules
promulgated under the Exchange Act. These rules require
additional disclosure to investors by broker-dealers in
connection with any trades involving a stock defined as a
penny stock (generally, any equity security that has a market
price of less than $5.00 per share, subject to certain
exceptions). Such rules require that, prior to any penny stock
transaction, the broker-dealer deliver to the investor a
disclosure statement explaining the penny stock market and the
associated risks with the market. The rules also impose sales
practice requirements on broker-dealers who sell penny stocks
to persons other than to established customers or accredited
investors (generally institutions). For these types of
transactions, the broker-dealer must make a special suitability
determination for the purchaser and have received the purchaser's
written consent to the transaction prior to sale. The additional
burdens imposed upon broker-dealers by such requirements may
discourage broker-dealers from effecting transactions in the
Company's securities, which could severely limit the market price
and liquidity of such securities and the ability of investors to
dispose of any shares of common stock in the secondary market.
Shares Eligible For Future Sale
The Company common stock is currently traded on the National
Trading Bureau's Pink Sheets and there is a limited public market
for the common stock. Sales of substantial amounts of the
common stock in the public market, or the perception that such
sales may occur, could adversely affect market price of the
common stock from time to time in the public market and could
impair the Company's ability to raise additional capital through
the sale of its equity securities in the future.
As of March 31, 2000, there were 38,036,124 shares of common
stock issued and outstanding, consisting of 33,414,624
restricted shares of common stock, and 4,621,500 shares of
common stock that are currently freely tradable without
restriction.
<PAGE> 31
The 33,414,624 restricted shares will become freely tradable
if subsequently registered under the Securities Act or to the
extent permitted by Rule 144 or some other exemption from
registration under the Securities Act. The Company has not
granted any registration rights with regard to any shares of
common stock. In addition, holders of approximately 23,000,100
restricted shares have entered into voluntary pooling agreements
agreeing to certain restrictions on the transfer of their shares
for 18 to 24 months following March 31, 1999, the closing of
the share exchange agreement between LandStar and Rebound Rubber
Corp. "Certain Relationships and Related Transactions."
In general, under Rule 144 as currently in effect, if one year
has elapsed since the date of acquisition of restricted shares
from the Company or an affiliate of the Company, the holder
will be entitled to sell in the public market, during any three
month period, a certain amount of shares of common stock. The
maximum number of shares of common stock that may be sold
during such period will be the greater of 1% of the total number
of the then outstanding shares of common stock or the average
weekly trading volume of shares of common stock during the
four calendar weeks preceding the date on which notice of the
sale is filed with the Securities Exchange Commission. Sales
under Rule 144 are also subject to certain requirements as to
the manner of sale, notice and availability of current public
information about the Company. If the holder of the shares has
held the common stock for at least two years, the shareholder,
other than an affiliate of the Company, will be entitled to sell
the restricted shares in the public market under Rule 144(k)
without regard to the volume limitations, manner of sale
requirements, public information requirements or notice
requirements.
Of the restricted shares, approximately 24,000,600 shares
are currently eligible for sale pursuant to Rule 144 under the
Securities Act (subject to volume limitations and the voluntary
pooling agreements). The remaining restricted shares will become
eligible for sale under Rule 144 (subject to volume limitations)
upon the expiration of one-year holding periods beginning in
July 2000.
LEGAL PROCEEDINGS
On December 15, 1999, the Company filed a complaint in the
Supreme Court of British Columbia (file no. C996620) against
Walter Brandl, Dr. F. Kui Lim Lu, Peter Lochhead, Pollutec
Resources Inc., GWN Pyrolytic Corp. and Jan Fikkert. Dr. F.
Kui Lim Lu beneficially owns more than five percent of the
outstanding common stock of the Company and is a former director
of Rebound Rubber Corp., a subsidiary of the Company. The
complaint alleges: i) intentional interference by the defendants
with intention to induce the Guangzhou Research Institute to
breach its contracts with the Company, ii) breach of contract
by Dr. Lu, iii) conspiracy by the defendants to convert the
Guangzhou Research Institute contracts or opportunity to their
collective or individual benefit, iv) breach of confidence, v)
intentional interference with business relations, and vi)
defamation. The Company seeks monetary and injunctive relief.
<PAGE>32
The defendants have filed a statement of defense which denies
each and every item in the statement of claim. The proceedings
are currently progressing through production of documents and
examinations for discovery. No trial date has been determined.
The Company intends to vigorously pursue this matter.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
RECENT SALES OF UNREGISTERED SECURITIES
The Company was incorporated in the State of Nevada on
May 4, 1998. On March 31, 1999, pursuant to the terms of a
share exchange agreement with Rebound Rubber Corp., substantially
all of the shareholders of Rebound Rubber exchanged their shares
for shares of Company common stock on a one-for-one basis. As a
result of the share exchange, the shareholders of Rebound Rubber
acquired a majority of the outstanding shares of the Company and
Rebound Rubber became a subsidiary of the Company. For
accounting purposes, the share exchange was accounted for as a
reverse purchase, with Rebound Rubber as the continuing entity.
The following paragraphs set forth information with respect to
all securities of the LandStar since incorporation in May 1998.
All of the securities issued and sold, as described below, were
sold in reliance on exemptions under the Securities Act and were
not registered under the Securities Act.
The Company was incorporated in May 1998 and issued a total
of 1,000,000 shares of its common stock to its two founders, in
consideration for their contributions to the business and
capital of the Company. The shares were issued in reliance
on Section 4(2) under the Securities Act, bearing appropriate
restrictive legends, and were issued as follows:
<TABLE>
<S> <C>
Name Number of Shares
----- ----------------
Daniel L. Hodges 500,000
Robert J. Paul 500,000
----------------
TOTAL 1,000,000
</TABLE>
From May 25, 1998 through June 8, 1998, the Company sold
and issued in a private placement to 59 foreign investors an
aggregate of 1,600,000 shares of common stock. The private
offering was made in reliance on Rule 504 under the Securities
Act. The total offering price was $50,000, or a price of
$0.03125 per share. The Company filed a Form D with the
Commission on August 13, 1998, relating to the offering.
On December 28, 1998, the Company entered into a share
exchange agreement with Rebound Rubber Corp. and its shareholders.
On March 31, 1999, upon consummation of the share exchange, the
<PAGE> 33
Company issued an aggregate of 14,500,100 unregistered shares
of Company common stock to the shareholders of Rebound Rubber Corp.
pursuant to the terms of the share exchange agreement. All of
the shareholders who acquired shares of Company common stock in
the share exchange were foreign/non-U.S. persons. The shares
were issued in reliance on Regulation S under the Securities Act
and the certificates for the shares bear appropriate restrictive
legends.
On December 31, 1998, the Company entered into a purchase
agreement with United Trans-Western, Inc. for the acquisition
of United Trans-Western's joint venture interest relating to
certain rubber recycling technology. On March 31, 1999, upon
closing of the acquisition, the Company issued an aggregate of
8,500,000 unregistered shares of Company common stock (at a
deemed price of $.25 per share) and paid $100,000 cash to United
Trans-Western, Inc. The shares were issued in reliance on
Section 4(2) of the Securities Act and the certificates for
the shares bear appropriate restrictive legends.
On March 31, 1999, the Company sold and issued in a private
placement to 14 foreign investors an aggregate of
1,828,000 shares of Company common stock. The private
offering was made in reliance on Rule 504 under the Securities Act.
The total offering price was $457,000 or a price of $0.25
per share. In connection with this private offering, the Company
issued an aggregate of 260,000 shares of common stock to certain
foreign persons as finders fees for their assistance in the
offering. The Company filed a Form D with the Commission on
April 6, 1999, relating to the offering. The Company issued the
shares as payment of finders' fees as follows:
<TABLE>
<S> <C>
Name No. of Shares
------ -------------
Nascan Ventures Ltd. 35,000
Keith McLennon 40,000
Rhapaw Capital Corp. 110,000
Roy G. Biv & Associates 75,000
</TABLE>
On March 31, 1999, the Company sold and issued in a private
placement to 3 foreign investors an aggregate of 934,000 units,
each unit consisting of one share of common stock and one stock
purchase warrant to purchase an additional share of common stock.
The total offering price was $233,500, or a price per unit of
$0.25. The stock purchase warrants had a term of two years and
were exercisable at a price of $0.25 at any time on or before
March 31, 2000, and at a price of $0.50 at any time after
March 31, 2000 and before March 31, 2001. The private offering
was made in reliance on Rule 504 under the Securities Act. The
Company filed a Form D with the Commission on April 6, 1999,
relating to the offering. In September 1999, each of the
investors exercised their stock purchase warrants in full and
the Company issued an additional 934,000 shares of common stock.
<PAGE> 34
On July 5, 1999, the Company sold and issued in a private
placement to one foreign investor 300,000 shares of common stock
for a total offering price of 100,000 or a price per share
of $0.333. The private offering was made in reliance on
Regulation S under the Securities Act and the certificates for
the shares bear appropriate restrictive legends.
In September 1999, holders of certain conversion rights
on a Fixed Charge Convertible Debenture dated September 30,1998
between Rebound Rubber Corp. and Kentucky Financial Inc.,
exercised their conversion rights. The convertible debenture
was originally issued to evidence a $300,000 financing from
Kentucky Financial to Rebound Rubber, pursuant to a standby
financing agreement dated September 15, 1998. The convertible
debenture had a term of one year and was convertible into units
(each unit consisting of one share of common stock and one stock
purchase warrant to purchase an additional share of common stock)
at the following rates: if converted prior to September 30, 1999,
a conversion rate of $.10 per share for a maximum of 3,000,000
shares and 3,000,000 warrants with an exercise price of $.10
per share; if converted after September 30, 1999 and prior to
September 30, 2001, a conversion rate of $.20 per share for a
maximum of 1,500,000 shares and 1,500,000 warrants with an
exercise price of $.20 per share; and if converted after
September 20, 2001 and prior to September 30, 2003, a conversion
rate of $.30 per share for a maximum of 1,000,000 shares and
1,000,000 warrants with an exercise price of $.30 per share.
On September 30, 1999, the holders of the convertible debentures
converted the outstanding principal into 3,000,000 shares of
Company common stock at a conversion rate of $.10 per share and
exercised in full their stock purchase warrants for an additional
3,000,000 shares of Company common stock at an exercise price
of $.10 per share. The shares were issued in reliance on
Regulation S under of the Securities Act and the certificates
for the shares bear appropriate restrictive legends.
In December 1999, the Company sold and issued in a private
placement to four accredited U.S. purchasers an aggregate of
1,440,024 units, each unit consisting of one share of common
stock and one warrant to purchase an additional share of common
stock, at a purchase price of $.20833 per unit or a total
offering price of $300,000. The warrants have a term of one
year and are exercisable at a rate of $2.00 per share. The
private offering was made in reliance on Regulation 506 under
the Securities Act and the Company filed a Form D for the
offering in December 1999.
In January 2000, the Company sold and issued in a
private placement to nine accredited and/or sophisticated U.S.
purchasers an aggregate of 740,000 shares of common at a
purchase price of $.25 per share for a total offering price
of $185,000. The private offering was made in reliance on
Regulation 504 under the Securities Act and the Company filed a
Form D for the offering in April 2000.
<PAGE> 35
INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 78.037 of the Nevada Revised Statutes,
the Company's Articles of Incorporation limit the personal
liability of its directors and officers to the Company or its
shareholders for damages for breach of fiduciary duty as a
director or officer. This provision, however, does not for
and of the following: (a) acts or omissions which involve
intentional misconduct, fraud or a knowing violation of the
law; or (b) the payment of unlawful distributions or dividends.
The Company's Bylaws also provide that the Company will indemnify
its directors, officers and employees to the full extent of the
law, except in cases in which the person is adjudged guilty of
willful misfeasance or malfeasance in the performance of his
duties. In addition, the Bylaws provide that the Company will
provide to any person who is or was a director, officer, employee,
or agent of the Company (or is or was serving at the request of
the Company as a director, officer, employee, or agent of a
corporation, partnership, joint venture, trust or enterprise)
indemnification against litigation or settlement expenses, to
the extent specifically permissible under applicable law.
[CAPTION]
Index to the Financial Statements
[S] [C]
Independent Auditor's' Report on the
Financial Statements
Audited Financial Statements:
Independent Auditor's Opinion F-1
Consolidated Balance Sheet as of
December 31, 1999 F-2
Consolidated Statements of Operations
for the years ended December 31, 1999,
and 1998 and for the period
from December 13, 1996(date of incorporation)
to December 31, 1999 F-3
Consolidated Statements of Shareholders' Equity for
the period from December 13, 1996
(date of incorporation) through
December 31, 1999 F-4
Consolidated Statements of Cash Flows for the years
ended December 31, 1999,and 1998
and for the period from December 13, 1996
(date of incorporation) to December 31, 1999 F-5
Notes to Consolidated Financial Statements F-6-9
<PAGE> 36
INDEPENDANT AUDITOR'S REPORT
Board of Directors
LandStar, Inc.
Victoria, British Columbia
We have audited the accompanying consolidated balance
sheet of LandStar, Inc. (a development stage enterprise)
as of December 31, 1999, and the related statements of
operations, shareholders' equity and cash flows for the
years ended December 31, 1999 and 1998 and the period
from incorporation (December 13, 1996) through
December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management,
as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of LandStar, Inc. (a development stage enterprise)
as of December 31, 1999 and the results of its operations
and its cash flows for the year ended December 31, 1999 and
1998 and the period from incorporation (December 13, 1996)
through December 31, 1999, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern.
As discussed in Note 1, the Company is in the development
stage, has incurred significant losses since inception and
will require additional amounts of funding to fully implement
its business plan. These factors raise substantial doubt
about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also
described in Note 1. The accompanying financial statements
do not include any adjustments that might result from the
outcome of this uncertainty.
As described in Note 7 to the financial statements, the
Company has restated its previously issued financial statements
to correct the amount recorded for its investment in technology
rights.
Hein + Associates LLP
Dallas, Texas
March 7, 2000, except for note 7, which is dated
July 5, 2000
F-1
LANDSTAR, INC.
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEET
31-Dec-99
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
CURRENT ASSETS:
Cash $10,042
Accounts receivable 26,793
Prepaid expenses and deposits 6,867
-------
Total current assets 43,702
PLANT AND EQUIPMENT, net:
Plant and laboratory equipment 597,687
Leasehold improvements 81,920
Office equipment 17,310
Less accumulated depreciation (3,000)
--------
693,917
INTANGIBLE ASSET- technology rights,
net of accumulated
amortization of $147,296 737,708
---------
Total Assets $1,475,327
=========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C>
CURRENT LIABILITIES:
Accounts payable and accrued expenses $315,299
Advances from related parties 247,830
-------
Total current liabilities 563,129
COMMITMENTS (Note 3)
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value, 100,000,000 shares
authorized;37,296,124 shares issued and
outstanding 37,296
Additional paid-in capital 4,298,900
Common stock subscriptions,
200,000 shares 50,000
Deficit accumulated in the
development stage (3,423,998)
-----------
Total shareholders' equity 912,198
-----------
Total liabilities and shareholders'
equity $1,475,327
===========
<R/></TABLE>
See accompanying notes to these consolidated financial
statements.
F-2
LANDSTAR, INC.
(A Development Stage Enterprise)
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
<S> <C> <C> <C>
For The
Period
13-Dec-96
(Date of
Year Ended Year Ended Incorporation)
31-Dec-1999 31-Dec-1998 to 31-Dec-99
------------ ------------ -------------
REVENUE $ - $ - $ -
EXPENSES:
Research 48,221 - 48,221
and development
General 1,177,938 382,190 1,859,405
and administrative
Depreciation 231,246 57,800 289,046
and amortization
Interest, net 17,126 1,110,200 1,127,326
--------- -------- ----------
Total Expenses 1,474,531 1,550,190 3,323,998
----------- ----------- ----------
NET LOSS (1,474,531) (1,550,190) (3,323,998)
===================================================
NET LOSS PER SHARE
(Basic and Diluted) (0.05) (0.16)
===========================
WEIGHTED AVERAGE SHARES
OUTSTANDING 30,298,000 9,643,000
===============================
</TABLE>
See accompanying notes to these consolidated financial
statements.
F-3
<TABLE>
<CAPTION>
LANDSTAR, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM DECEMBER 13, 1996
(DATE OF INCORPORATION) THROUGH DECEMBER 31, 1999
<S> <C> <C> <C> <C>
ADDITIONAL DEFECIT
PAID IN ACCUMULATED
CAPITAL & IN THE
COMMON STOCK COMMON STOCK DEVELOPMENT
SHARES AMOUNT SUBSCRIPTIONS STAGE TOTAL
----------------------------------------------------------
Shares issued upon
incorporation at
$.68 per share 100 - $ 68 - $ 68
Net loss for year - - - (299,277) (299,277)
---------------------------------------------------------
Balances,
Dec.31, 1997 100 - 68 (299,277) (299,209)
Shares issued to
Founders for pre-
incorporation
and start-up
phase services
for cash at
$.0068 per share in
March, July and
September
1998 7,260,000 7,260 42,108 - 49,368
Shares issued in
March 1998 for
reduction in
related party
advances made
during 1997 at
$.102
per share 5,000,000 5,000 505,000 - 510,000
Shares issued for
cash at $.34 per
share during
April through
June 1998 2,464,000 2,464 835,296 - 837,760
Value of
beneficial conversion
feature associated
with
debenture - - 1,100,000 - 1,100,000
Net loss for year - - - (1,550,190)(1,550,190)
--------------------------------------------------------
Balances,
Dec.31, 1998 14,724,100 14,724 2,482,472 (1,849,467) 647,729
Shares issued for
cash in February
and March 1999 at
$.25 per
share 2,762,000 2,762 687,738 - 690,500
Shares issued in
March 1999 to
acquire net assets
of
LandStar 2,600,000 2,600 (2,600) - -
Adjustment for RRC
shareholders not
participating in
reverse acquisition
of
LandStar (224,000) (224) 224 - -
Shares issued in March
1999 to acquire U.S.
Joint Venture
Technology rights at
$.00 per share 8,500,000 8,500 (8,500) - -
Payment to related
Party for technology
Rights - - - (100,000) (100,000)
Shares issued in
March 1999 as
finder's fee at
$.25 per share 260,000 260 64,740 - 65,000
Shares issued in
September 1999 to retire
debenture due related
party at $.067 per share;
valued at total of $.25
per share in 1998
6,000,000 6,000 394,000 - 400,000
Shares issued in
September 1999 upon
exercise of warrants
for cash at $.25
per share 934,000 934 232,566 - 233,500
Shares issued in
September 1999 for
cash at $.333 per
share 300,000 300 99,700 - 100,000
Shares issued in
December 1999 for
cash at $.208 per
share 1,440,024 1,440 298,560 - 300,000
Common stock
subscriptions
received - - 50,000 - 50,000
Net loss for period - - - (1,512,781) (1,512,781)
-----------------------------------------------------------
37,296,124 $37,296 $4,298,900 $(3,423,998) 912,198
===========================================================
</TABLE>
See accompanying notes to these consolidated financial
statements.
F-4
<TABLE>
<CAPTION>
LANDSTAR, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASHFLOWS
<S> <C> <C> <C>
For The
Period
13-Dec-96
(Date of
Year Ended Year Ended Incorporation)
31-Dec-1999 31-Dec-1998 to 31-Dec-99
------------ ------------ --------------
OPERATING ACTIVITIES:
Net Loss $ (1,474,531) $(1,550,190) $(3,323,998)
Adjustments to reconcile
net loss to net cash
used in operating activities:
Depreciation &
Amortization 92,496 57,800 150,296
Value of beneficial
conversion feature - 1,100,000 1,100,000
Stock issued for 65,000 - 65,000
finders fee
Changes in operating assets
and liabilities:
Current assets (27,021) (6,639) (33,660)
Accounts Payable
and accrued expenses 292,761 (238,791) 315,299
------- -------- -------
Net cash used in operating
activities (1,051,295) (637,820) (1,727,063)
--------- ---------- -----------
INVESTING ACTIVITIES:
Acquisition of
technology rights (10,672) (579,212) (885,004)
Payment to related party
for technology rights (100,000) - (100,000)
Additions to plant and
equipment (696,917) - (696,917)
--------- ----------- ------------
Net cash used in investing
activities (807,589) (579,212) (1,681,921)
--------- ---------- -------------
FINANCING ACTIVITIES:
Proceeds from
debenture 284,400 115,600 400,000
Advances from related
parties 244,200 205,505 779,998
Proceeds (repayment)
of loan (34,000) 31,169 -
Proceeds from
issuance of
common stock 1,374,000 864,960 2,239,028
---------- -------- ---------
Net cash provided by
financing activities 1,868,600 1,217,234 3,419,026
------------ ----------- ---------
NET INCREASE IN
CASH 9,716 202 10,042
CASH AND CASH
EQUIVALENTS AT
BEGINNING OF PERIOD 326 124 -
--------- ----------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 10,042 $ 326 $ 10,042
========= ========== =========
SUPPLEMENTAL INFORMATION-
cash paid during the period
for interest $ 17,159 $ - $ 17,159
========= =========== ==========
NONCASH TRANSACTIONS:
Shares issued to retire
liabilities 400,000 532,168 932,168
</TABLE>
See accompanying notes to these consolidated financial
statements
F-5
LANDSTAR, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Presentation
------------------------------
LandStar, Inc. ("LandStar") was incorporated on May 4, 1998 as
a Nevada corporation. LandStar was basically inactive until it
acquired approximately 98.5% of the common stock of Rebound
Rubber Corporation ("RRC") on March 31, 1999. RRC is involved
in the development of certain technology rights for the recycling
of rubber. In the acquisition of RRC, the shareholders of RRC
obtained the controlling interest of the combined entity, and
RRC's management became the management of the combined entity.
For accounting purposes, the merger is treated as a
re-capitalization of RRC under the capital structure of LandStar
and an acquisition of the net assets of LandStar. Therefore,
the historical financial statements included herein are those of
RRC, but reflect the legal capital structure of LandStar. RRC,
LandStar and a wholly-owned subsidiary, LandStar (Ohio) L.L.C.,
are referred to collectively as "the Company". The Company has
had no revenues from operations and is considered to be in the
development stage at December 31, 1999.
The accompanying financial statements have been prepared in
accordance with U.S. generally accepted accounting principles.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of
the Company and its subsidiaries. All significant inter-company
accounts and transactions have been eliminated in consolidation.
Foreign Currency Translation
-------------------------------
Gains and losses from the effects of exchange rate fluctuations
denominated in foreign currencies are included in results of
operations. Assets and liabilities of the Company's Canadian
operations are translated into U.S. dollars at period-end
exchange rates, and their revenues and expenses are translated
at average exchange rates for the period. Translation adjustments
are accumulated in a separate component of stockholders' equity
until a foreign operation is sold or substantially
liquidated.
Loss per Common Share
---------------------
Basic loss per common share is based upon the weighted average
number of common shares outstanding. Diluted loss per share
also considers common stock equivalents in the determination
of weighted average shares, unless the common stock equivalents
would be anti-dilutive.
Plant and Equipment
-------------------
Plant and equipment is recorded at cost, less accumulated
depreciation. Depreciation is calculated using the straight-line
method over the estimated useful lives of the assets beginning
when the assets are placed in service. At December 31, 1999,
the Company's plant and laboratory equipment were under
construction, and depreciation on these assets had not commenced.
Cash Equivalents
----------------
For purposes of reporting cash flows, the Company considers all
highly liquid investments with a maturity of three months or
less when purchased to be cash equivalents.
Income Taxes
------------
The Company accounts for deferred income taxes on the liability
method, whereby deferred income taxes are provided for temporary
differences between financial statements and income tax
reporting amounts. The Company files a Canadian tax return
for RRC and U.S. tax returns for LandStar and LandStar
(Ohio) L.L.C.
F-6
LANDSTAR, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fair Value of Financial Instruments
-----------------------------------
The carrying amount of cash, accounts receivable, accounts
payable and advances from related parties approximate fair
value because of the short maturity of those instruments.
Use of Estimates
----------------
The preparation of financial statements in conformity with
generally accepted accounting principals requires the Company's
management to make estimates and assumptions that affect the
amounts reported in these financial statements and accompanying
notes. Actual results could differ from those estimates.
Comprehensive Income (Loss)
---------------------------
Comprehensive income is defined as all changes in shareholders'
equity, exclusive of transactions with owners, such as capital
investments. Comprehensive income or loss includes net income
or loss, changes in certain assets and liabilities that are
reported directly in equity such as translation adjustments on
investments in foreign subsidiaries, and certain changes in
minimum pension liabilities. The Company's comprehensive loss
was equal to its net loss for all periods presented.
Long-Lived Assets
-----------------
In the event that facts and circumstances indicate that the cost
of long-lived assets may be impaired, an evaluation of
recoverability would be performed. If an evaluation is required,
the estimated future undiscounted cash flows associated with the
asset would be compared to the asset's carrying amount to determine
if a write-down to market value or discounted cash flow value
is required.
Technology Rights
-----------------
The acquisition costs of the Company's technology rights for the
recycling of rubber have been capitalized and are being amortized
over ten years.
Continuation as a Going Concern
-------------------------------
The accompanying financial statements and related footnotes have
been prepared assuming the Company will continue as a going
concern. The Company is in the development stage, has incurred
significant losses since inception and will require additional
funding to fully implement its business plan. These factors raise
substantial doubt about the Company's ability to continue as a
going concern. The ability of the Company to continue as a going
concern and carry out its business plan is dependent on the
Company raising capital and achieving projections of sales
reflected in the business plan. The Company intends to raise
capital through private placements and through a public offering,
but there is no assurance that the Company will be successful in
raising any capital by these means.
2. ACQUISITION OF TECHNOLOGY RIGHTS
--------------------------------
In 1997 and 1998, the Company paid a total of approximately
$874,000 to the Guangzhou Research Institute for Reclaimed
Resources ("GRI"), a state owned enterprise in the Peoples
Republic of China, for the rights to use certain technology
for the recycling of rubber. In March 1999, simultaneous with
the merger with LandStar described in Note 1, the Company paid
$100,000 and issued 8,500,000 shares of common stock to acquire
certain rights to the rubber recycling technology, which were
held by United Trans-Western, Inc.("UTWI"). Two officers and
directors of the Company were also officers and directors of UTWI.
In addition, the Company paid certain costs associated with this
acquisition of $138,750.
Due to the non-arms length nature of
the transaction, the stock issued UTWI was recorded based on the
historical cost of UTWI in the technology rights which was zero.
The cash payment of $100,000 to UTWI was accounted for as a
capital distribution.
F-7
LANDSTAR, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. COMMITMENTS
-----------
The Company leases office space from an entity affiliated with
an officer and director of the Company for $4,750 per month.
The term of the lease is through December 2004. The Company also
leases warehouse space used for construction of its pilot plant.
The terms of the lease require monthly payments of $4,267 through
September 2000. Rental expense was $60,355 and $36,750 respectively
for the year ended December 31, 1999 and 1998.
Future minimum lease payments as of December 31, 1999 were as
follows:
<TABLE>
<S> <C>
Year ended December 31
-----------------------
2000 $95,403
2001 57,000
2002 57,000
2003 57,000
2004 57,000
--------
$323,403
========
</TABLE>
4. INCOME TAXES
------------
The components of the Company's deferred tax accounts at
December 31, 1999 are as follows:
<TABLE>
<S> <C>
Deferred tax asset-net
operating loss carryforwards $1,300,000
Deferred tax liability-development
costs capitalized for tax and
expensed for book (140,000)
Deferred tax asset valuation
allowance 1,160,000
-----------
Net deferred tax asset $ -
===========
</TABLE>
At December 31, 1999, the Company had net operating loss
carryovers of approximately $2,100,000 for United States tax
purposes and approximately $1,000,000 for Canadian tax purposes.
If not utilized, the United States net operating loss will expire
in 2019; and the Canadian tax loss will expire in 2005 and 2006.
5. RELATED PARTY TRANSACTIONS
--------------------------
The Company has received funding from Kentucky Financial, Inc.
("KFI")since inception. KFI is a major shareholder of the Company
and one of KFI's principals is an officer and director of the
Company. Amounts advanced by KFI during 1997 of $510,000 were
converted to common stock in March 1998, based on a prior
understanding, at $.102 per share. The shares were recorded at
the conversion price of $.102 per share based on the estimated
value of the shares during the period of the advances. A debenture
payable to KFI and other investors of $400,000 for loans made
in mid to late 1998, were converted to common stock in September
1999 at $.067 per share. The estimated value of the common stock
at the issuance of the debenture was $.25 per share. The excess of
the estimated value over the conversion price was deemed to be a
beneficial conversion feature. This amount, which totaled
$1,100,000, was recorded as an expense in 1998.
F-8
LANDSTAR, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 1999, the Company had $182,402 of advances due
KFI and $65,428 due an entity affiliated with another director
of the Company. These advances are non-interest bearing and
contain no specific repayment terms.
In March, July and September 1998, the Company issued a total of
7,260,000 shares of common stock, based on prior agreements, at
$.0068 per share to founders of the Company, who are currently
directors and other affiliated parties. The shares were issued
for services related to the formation and start-up of the
Company. The shares were sold at the estimated value of the
stock at the time the services were performed.
The Company acquired certain technology rights from UTWI, a
related party, as described in Note 2. A substantial amount of
UTWI's funding has been provided by shareholders of the
Company.
6. COMMON STOCK WARRANTS
---------------------
In connection with a sale of stock in December 1999, the
Company granted the investors warrants to purchase a total
of 1,440,024 shares of common stock at $2.00 per share anytime
through December 2000.
7. RESTATEMENTS
------------
An error in the application of generally accepted accounting
principles as of, and for the year ended December 31, 1999
resulted in the following restatement of previously reported
amounts of total assets, accumulated deficit and net loss.
As of December 31, 1999
----------------------- Year Ended
Total Accumulated December 31,1999
Assets Deficit Net Loss
------- ----------- -----------------
As previously reported $3,662,077 $(3,362,248) $(1,512,781)
Adjustment to amount
Recorded for acquisition
Of technology rights (2,363,750) (238,750) (138,750)
Adjustment to amortization
Of technology rights 177,000 177,000 177,000
--------- ----------- ------------
As restated $1,475,327 $(3,423,998) $(1,474,531)
The foregoing had no effect on the loss per share results previously
reported.
F-9
PART III
SIGNATURES
In accordance with Section 12 of the Securities Exchange
Act of 1934, the registrant caused this amendment no. 1 to
registration statement to be signed on its behalf, thereunto
duly authorized.
Dated as of the 28th day of April, 2000
LANDSTAR, INC.
By: /s/ D. Elroy Fimrite
D. Elroy Fimrite, President
By:/s/ Michael C. Pinch
Michael C. Pinch, Chief Financial Officer
