U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
UNDER SECTION 12(B) OR (G) OF THE SECURITIES AND EXCHANGE ACT OF 1934.
DIRECTION TECHNOLOGIES, INC.
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(Name of Small Business Issuer in its charter)
Nevada 88-0413417
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
250 H Street, Suite 723, Blaine, Washington 98230
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (604) 683-6648
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Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None
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None
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Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock
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(Title of Class)
None
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(Title of Class)
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Number of shares of Common Stock, $0.001 par value per share, of the registrant
outstanding as of December 31, 1999: 10,031,000.
DOCUMENTS INCORPORATED BY REFERENCE
A description of any "Documents Incorporated by Reference" is contained in Item
6 of this report.
Transitional Small Business Issuer Format Yes No X
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EXHIBIT INDEX IS ON PAGE 21
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DIRECTION TECHNOLOGIES, INC.
TABLE OF CONTENTS
PART I
ITEM 1. Business 4
ITEM 2. Properties 14
ITEM 3. Legal Proceedings 14
ITEM 4. Submission of Matters to a Vote of Security Holders 14
PART II
ITEM 5. Market for Registrant's Common Equity and Related
Shareholder Matters 14
ITEM 6. Selected Financial Data 16
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 16
ITEM 8. Financial Statements and Supplementary Data 17
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 17
PART III
ITEM 10. Directors and Executive Officers of the Registrant 17
ITEM 11. Executive Compensation 19
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management 19
ITEM 13. Certain Relationships and Related Transactions 20
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K 20
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PART I.
ITEM 1. DESCRIPTION OF BUSINESS.
(a) BUSINESS DEVELOPMENT.
Direction Technologies, Inc., a Nevada corporation ("Company"), was originally
organized on April 30, 1998 as Fuji International, Inc.; the name was changed on
December 28, 1998 to Direction Technologies, Inc. The business office of the
Company is located at 250 H Street, Suite 723, Blaine, Washington, 98230. The
Company operates on the calendar fiscal year. Currently, the Company has no
employees, but anticipates having at least several employees within the next 12
months.
(b) BUSINESS OF ISSUER.
Statements made, beliefs stated, and figures given for the electric automobile
are taken from a report issued by Roger D. Touchie B.C., MBA, of Touchie &
Associates Ltd. Touchie & Associates Ltd., an independent business planning
consulting firm, was commissioned by E.T.C. Industries Ltd. to prepare an
independent report on the electric vehicle in 1993. This report was based on
corporate information supplied by E.T.C. Industries management and independent
industry data gathered from industry research. Although written in 1993, a
director of the Company, Ken Liebscher, has been intimately involved in the
electric vehicle continuously since that date and is of the opinion that the
statements made in the report are accurate and complete today.
1. Electric Automobile.
One of the specific reasons the Company was founded is for the purpose of
entering into a worldwide license agreement with E.T.C. Industries Ltd. of
Vancouver, British Columbia, Canada to license certain technology, and
obtain advice in facilitating the production of electric vehicles using
certain technology developed by the licensor and currently licensed in the
State of California. A copy of the license agreement ("License Agreement"),
entered into on January 9, 1999, is attached as Exhibit 10.1 to this Form
10-SB/A. Under the terms of the License Agreement, E.T.C. Industries Ltd.
will be paid the sum of $50,000, plus a royalty of 2% of the Gross Sales
Price (as defined in this agreement) on every electric vehicle sold by the
Company. Payment of the entire $50,000 sum is evidenced by a promissory
note, which is attached as Exhibit 10.2 to this Form 10-SB/A. There is no
minimum payment in connection with the 2% royalty.
The term of the License Agreement is for five years (the "Initial Term") and
is renewable for another five years under the same terms and conditions,
unless: (1) the licensee is in default of this License Agreement; (2) the
Licensee or the Licensor elects not to renew the License Agreement; or (3)
the licensee does not achieve annual gross sales of CDN$2,000,000
($1,345,200 with the exchange rate of 1.49 Canadian Dollars to the U.S.
Dollar, as of April 21, 1999) within the Initial Term. Also, the License
Agreement may be terminated after two years from the commencement of the
Initial Term if the licensee fails to build 3 prototype electric vehicles
based on the technology licensed within such two year period.
This license also includes the use of certain assets of E.T.C. during the term
of the agreement, as follows:
(1) All patents, patents pending, trademarks, copyrights, title,
engineering designs, concepts, models, prototypes, parts, manufacturing
machines and tools, trade secrets, know-how and show-how, and customer
lists associated with the research, development, manufacturing,
distributing and retailing business of electric powered vehicles of the
Vendor and more particularly:
(2) One 1987 Suburban Truck VIN# CSUBR 1GKGRZ6N1HF576447
(3) One 1993 Pace Trailer VIN# 4PZUB1626SU001744
(4) One prototype MI-5 Electric Car
(5) One prototype MI-6 Electric Car
(6) One complete set of MI-6 Electric Car Moulds
The objective of the Company in this area will be to determine if it can become
a profitable designer, manufacturer and distributor of zero-emission,
electric-powered automobiles based upon the technology integrated into the
prototype MI-6 electromagnetic automobile. The growth focus of the Company is
to respond to the environmental concerns surrounding the internal combustion
engine that powers the majority of vehicles in major cities. However, to date,
the Company has only manufactured two prototypes, the MI-5 and the MI-6, and it
will require a large injection of capital to put the cars into production. There
is no assurance that the Company will be able to obtain additional funding when
needed, or that such funding, if available, can be obtained on terms acceptable
to the Company. If the Company cannot obtain needed funds, it may be forced to
curtail or cease its activities. If additional shares were issued to obtain
financing, current shareholders may suffer a dilutive effect on their percentage
of stock ownership in the Company.
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The MI-6 was successfully introduced to the public at the International Electric
Vehicle Symposium held at Disneyland December 3-7, 1994. A parade of electric
cars down Main Street U.S.A. was held with electric cars from all parts of the
world represented, including GM, Ford, Chrysler, Honda, Nissan, Mitsubishi,
Toyota, BMW, and Peugeot. The MI-6 was chosen, along with the BMW conversion
entry to be featured on the front page of the December 3, 1994 Los Angeles Times
business section. However, the Company may never generate profits sufficient to
sustain the continued development and production of the electric vehicle. With
only limited cash resources at this time, activity will be initially limited to
the feasibility study as discussed under "Plan of Operation" hereafter.
While long acknowledged as a leading contender in resolving automobile-generated
pollution, commercial development of electric vehicles has been stalled in the
1980's by the restricted travel range and limitations of available electric
power sources. However, with significant advances in this field and the growing
social and political pressures to produce zero-emission automobiles, the
development of the electric car may be encouraged.
Derived from documentation provided by Electric Vehicle Research, Inc.,
marketing information provided by management and independent research, the
following discussion is designed to demonstrate the economic viability of the
business program and provide an overview of the production, marketing and
financial strategies of the Company.
a. The Electric Car Industry.
The information set forth in this section was derived from the following
sources: California Air Resources Board; Public Power Magazine (May-June 1993);
CALSTART Electric Transportation Infrastructure Update (dated December 28,
1993); Electric Vehicle Association of the Americas new release (dated December
21, 1995; and Time magazine science reporter Hill Williams. Based on limited
technical advance and sporadic media attention in the past decade, the electric
car industry has yet to earn the respect and acceptance of the general public.
It has been left to legislators in environmentally conscious regions such as
California, the Northeast U.S. and parts of Europe to force this development in
the interest of smog-free cities. The Company expects evolution to occur in the
auto industry as an efficient electric power plant emerges to challenge the
standards of auto design. The fact that all major automakers have serious
electric car development programs as part of their development agenda adds
credibility to the future growth of this market segment.
The evolution of the electric car dates back to the earliest days of the
automobile industry. At the turn of the century 38% of U.S. cars were powered
by electricity, 22% by gasoline and 40% by steam. The latter succumbed quickly
while the electric car gained popularity, mainly in urban areas. By 1912,
there were 34,000 U.S. electric cars produced versus 20,000 internal combustion
models. In Canada, 25 companies made electric cars before Henry Ford's mass
production concepts took over. Ironically, it was electricity, in the form of
spark ignition that aided this process. By the end of the Depression, internal
combustion ruled the market. It was not until the 1970's and the growing
awareness of air pollution that the potential of the electric car gained new
credibility. Still, the limitations of power sources and continued reliance on
the traditional lead-acid battery made commercial production impractical.
In recent years new strong legislative guidelines in sixteen states have forced
major auto manufacturers to respond to strict emission standards. In 1990 the
California Air Resources Board (ARB) mandated that all major producers of cars
sold in their state were to meet minimum requirements starting in 1998 when 2%
of units sold were to be zero-emission vehicles. Quotas were originally to
increase to 5% in the year 2000 and 10% or 800,000 cars by 2003. However, in
1996 the ARB decided not to mandate the introduction of electric vehicles in
1998. Instead they have said that by 2003, 10% of all vehicles sold must be
zero-emission vehicles.
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In 1992 the Energy Policy and Conservation Act specified that 23,000 government
purchased vehicles over the next three years were required to be "alternative
production vehicles". In 1993, President Clinton added his endorsement to the
program with an executive order upping this quota to 34,000 vehicles.
Initially, the majority of this went to natural gas and methanol conversions.
However, support of the electric car evolution is a major part of the Electric
and Hybrid Propulsion Division of the Energy Department. However, even if there
are legislative incentives in place there can be no guarantee that the Company
will be able to increase its sales or become profitable.
The major stumbling block in creating an electric car suitable to the consumer
is the power source. Secondary factors include the continued refinement of
electric motor and AC/DC adapter controllers. Solar energy research continues
to improve means of recharging to electric power base and recapture of energy
through shock absorber and/or braking system design is in the development stage.
Power sensitive heating and cooling systems continue to emerge.
A limited travel range before recharging, time requirements to recharge spent
batteries, and limited power on acceleration have been the traditional holdback
to electric car functionality. New battery designs featuring lead-acid,
sodium-sulphur, nickel-cadmiun-1, lithium molybdenum disulfide, and nickel-metal
hydride have only gradually resolved these issues. Concerted effort to meet
this challenge continues in Europe, Japan and North America. Asea Brown Boveri,
a German-Swiss consortium and its Canadian subsidiary, Powerplex Technologies
Inc. of Ontario, have used sodium-sulphur to expand the energy base of a battery
pack to twice the power density of the conventional lead-acid battery. In
mid-1992 they announced a 340-mile range test averaging 75 mph. The investments
being expended by other companies are primarily to create a better battery to
power the electric car. When a better battery is available, the Company intends
to use that technology in the MI-6, if economically feasible.
b. The MI-6 Electric Automobile.
The MI-6 prototype automobile was designed under the direction of Mr. Ken
Liebscher in Washington State in 1994. Production viability of the MI-6 had to
await the impact of environmental legislation and a consumer education program
that helps change the perception of what a commuter car should be. This hiatus
allowed the MI-6 creator ample time to address specific pre-production issues
and define a product specification with approximately 10% of the parts common to
a traditional Detroit assembly line product.
The MI-6 model is based on a body configuration using twenty-two molded parts.
The chassis meets auto industry standards and is built and assembled by
Metalcraft Products of Detroit, Michigan to stated specifications. Its power is
supplied by 18 lead-acid batteries capable of over 750 charge/discharge cycles
according to manufacturers specifications. This 108 volt system, when run
through a motor controller, powers an advanced 9-inch DC motor. The system can
be recharged from an onboard battery charger that can be plugged into a
household 110-volt source or a 220-volt systemThe Company remains familiar with
other battery options and will be able to move to a more exotic power source
when reliability, improved output efficiency and recharge capabilities move
beyond the experimental stage.
As weight has an inverse effect on the performance of the electric vehicle, the
MI-6 body parts are manufactured from Kevlar rather than fiberglass. Kevlar is
a much stronger material and allows the designer to create body parts that are a
fraction of the thickness as parts manufactured in fiberglass, and, as a result,
the MI-6 is much lighter than conventional automobiles. All of the parts for
the MI-6, with the exception of the body and chassis, can be bought off the
shelf and this was in fact done to hold down the cost
The names of the companies which are the principal suppliers of the parts for
the MI-6 are as follows:
Chassis - Metalcraft Products
Body - B&J Fiberglass
Motor - Advanced DC Motors
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Transmission - Volkswagen
Adapter - Electro Automotive
Controller - Curtis Instruments Inc.
Wheels - Centerline Magnesium Wheels
Tires - Goodrich Tire Co.
Seats - SCAT Interiors
Converter - Sevcon
Instruments - Westberg and Curtis
Batteries - Trojan Battery Company
Auto Parts - various major manufacturers
According to E.T.C. Industries, Ltd., that firm incurred costs relating to the
electric car project of $134,157 from 1993 to 1995. On a single-vehicle
manufacturing basis, the MI-6 has a manufacturing cost of $40,600. In order to
be economically viable, the cost will have to be lowered to less than $20,00,
which will require a manufacturing run of 100 vehicles at a time. There can be
no assurance that these objectives can be reached. Such non-performance by the
Company could have a material adverse effect on the Company's ability to execute
its business plan, as well as its profitability.
The MI-5 prototype engine has delivered 85,000 miles of trouble-free road time
in the past ten years. E.T.C. Industries Ltd. purchased the MI-5 vehicle, and
all intellectual property, from Electric Vehicle Research Inc. in 1993 (the
purchase price was $10,000 plus 100,000 shares of E.T.C. Industries Ltd.
stock.). A U.S. built, updated version of the original motor and controller
powers the first production model of the MI-6. To go into production of the MI-6
in North America would require a large influx of capital that could be beyond
the capabilities of the Company. That is why, at this time, there will be only
$25,000 spent on a feasibility study to determine if it would be economically
practical to establish manufacturing off-shore with marketing efforts channeled
to the international marketplace. The Company is in its initial stages of
development with no revenues or income and is subject to all the risks inherent
in the creation of a new business. Since the Company's principal activities to
date have been limited to organizational activities, prospect development, and
acquisition of interests, it has no record of any revenue-producing operations.
Consequently, there is no operating history upon which to base an assumption
that the Company will be able to achieve its business plans.
c. The Electric Car Marketplace.
General Motors research studies, as quoted by John Dabels, Director of Market
Development of GM Electric Vehicles, show that 84% of urban drivers travel less
than 75 miles per day. Mr. Dabels foresees the need for both fleet and consumer
markets, citing a need for consumer demand for used vehicles to establish
economic viability. GM requires a minimum market size of 100,000 units to make
the project profitable and is targeting a $20,000 to $25,000 price range. All
major auto makers either have, or have planned, an entry into the electric
vehicle sales arena. A negative factor of the Company is whether or not it will
be able to compete in the marketplace.
d. Marketing Strategy.
The body styling of the MI-6 distinguishes it from other electric car projects.
It was designed entirely by Kenneth Liebscher, one of the principals of the
Company, and Walt Patterson; electronic schematics for the car were designed by
Catherine Rodden, an electronic engineer. The sporty, convertible exterior
design of the MI-6 is targeted toward a specific market. The Company
commissioned no surveys but, on its own, has determined that the MI-6 customer
profile is the affluent businessperson who has both the financial capacity and
individual self-image that demands a vehicle out of the ordinary. This customer
is an established trendsetter, attracted to a sporty, "politically correct",
clean car that offers both status and style. Realistically, most buyers will be
multi-car owners with access to a traditional car for rural or cross-country
driving.
2. Qiblah Locator.
The other specific reason for formation of the Company is to purchase certain
assets of Qiblah International Industries Ltd. a British Columbia corporation,
of Vancouver, British Columbia, Canada (a non-operational holding company).
Qiblah International Industries Ltd. Owns 50% of Qiblah Technologies Ltd. a
duly registered non-reporting, non-listed South African public corporationThe
certain assets of Qiblah International Industries Ltd. purchased are as follows:
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(1) The exclusive rights to the use of all patents, patents pending under
application No. 972622 registered in South Africa March 26, 1997,
trademarks, copyrights, title, engineering designs, concepts, models,
prototypes, parts, manufacturing machines and tools, trade secrets,
know-how and show-how, and customer lists associated with the research,
development, manufacturing, distributing and retailing business of the
Qiblah Locator products of the Vendor (subject to the worldwide
manufacturing and certain marketing rights of Qiblah Technologies Ltd.
as set out in an agreement dated October 30, 1997.
(2) 10,000,000 common shares in Qiblah Technologies Ltd. a duly registered
non-reporting, non-listed South African public corporation.
This firm has developed a state-of-the art electronic device called the Qiblah
Locator, a battery-operated hand-held device that indicates the direction of the
Muslim religious center Mecca from any location in the world. The Qiblah Locator
is designed to be of assistance to the more than 1.5 billion adherents of the
Muslim faith in the performance of their religious observations. According to
the Holy Koran, it is a sin not to face the holy city of Mecca or "Qiblah"
during prayers. No Muslim follower wants to willfully disrespect the Koran. It
is therefore important for him to face the right direction and pray at the right
times as set out in the Daily Prayer Schedule. Although there are prayer mats
with compasses and other direction finding devices on the market, it is the
opinion of management that none has the sophistication, yet user friendliness,
that the Qiblah Locator combines.
A copy of the purchase agreement ("Purchase Agreement"), entered into on January
12, 1999, is attached as Exhibit 10.2 to this Form 10-SB/A. Under the terms of
the Purchase Agreement, Qiblah International Industries Ltd. has been paid
5,000,000 Shares, at the deemed issuance price of $0.10 per Share. This
issuance price was based upon the historical costs of the prototype (see chart
of historical costs, set forth hereafter). The Purchase Agreement is subject to
an agreement dated October 30, 1997 between Qiblah International Industries Ltd.
and its fifty percent owned South African subsidiary, Qiblah Technologies Ltd.
Under the terms of this agreement, Qiblah Technologies Ltd. was granted the
exclusive license to manufacture on a world-wide basis the Qiblah Locator, and
distribute and sell throughout certain regions and countries. These regions and
countries are: the entire continent of Africa, Yemen, The United Arab Emirates,
Saudi Arabia, Oman, Syria, Iran, and Jordan.
Audited financial statements on Qiblah Technologies, Ltd. are contained in
Exhibit 99.2 to this Form 10-K. These financial statements are denominated in
the South African Rand.
At the present time, there are no restrictions on the repatriation of profits
from South Africa to the United States as long as the nonresident investor own
less than 75% of the South African entity (as is the case with the Company and
Qiblah Technologies, Ltd.). In the event currency restrictions on this
investment were to be put in place in the future, then this may have a
materially adverse effect on the Company's operations. Such investment by the
Company also has the risk of currency fluctuations, which may materially affect
the Company's financial position and results. Five year annual exchange rates
of the U.S. Dollar to the South African Rand, to illustrate the fluctuations in
this exchange rate, are set forth in Exhibit 99.3 to this Form 10-K
The Qiblah Locator is comprised of a compass, a printed circuit board, a
pressure-sensitive membrane, a world map and a liquid crystal diode face. After
the user depresses a stylus onto a point on a world map, the device's arrow
points towards Mecca. The weight of the Qiblah Locator is approximately 100
grams. The Qiblah Locator is designed to function at altitudes between 0 and
39,000 feet and at temperatures from -30C to +80C. The usefulness of this
device is that a Muslim, when in an unfamiliar location, will know in which
direction to face for his daily prayer ritual.
The instrument comprises a mechanical compass, a specially designed LCD which
has radially configured sections, formed like an arrow, pointing to the center
of the LCD where there is a dot representing Mecca. Furthermore there is a
specially designed two sided circuit board, one side which has an area of 40 x
80 mm radially configured array of thin different shaped conductive lines. The
center of the circuit board section described represents Mecca. A pressure
sensitive rubbery membrane conductor is fitted above this conductive segment.
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This membrane conductor has been designed and produced for us, especially for
this application. On one side it is electrically conductive with the exception
of tiny little dots, printed on the conductive surface at a height of 0.03 mm.
They have the ability to keep the conductive surface away from the circuit
board. On the other side of the membrane conductor, the world map is displayed
(for the Global Qiblah Locator). Using a specially designed stylus and pressing
lightly on the geographical area required on the map, the membrane through its
conductive underside, touches the circuit board and transfers the electric
current into one of the circuit board patterns. These patterns are
representative to the magnetic variations, from the north, anywhere in the
world, in relation to the geographic position of Mecca.
The Qiblah Locator determines the true direction of Mecca by using the earth's
magnetic field. When a geographic location on the map is selected using the
stylus, a microprocessor chip in the locator is programmed to correct for
magnetic north by taking into account the magnetic deviation for the particular
location. It then sends a signal to the visible display in the form of a
direction arrow on the "LCD" face. The display on the LCD represents the true
position of Mecca. The LCD automatically shuts off after twelve seconds to
preserve battery life
The design information for the locator has been written and programmed from
information taken from the Mariners Map - number 5382 which has hundreds of
plotted and measured lines which show, in degrees, the variation of magnetic
influences from true north. The location of Mecca is derived by triangulation.
A compass installed in the Qiblah Locator is pointed north and this is
considered triangulation point one. The geographic position of Mecca is fixed
and is triangulation point two. By pressing slightly on the world map on the
face of the Locator, at the location of the user, the third reference point is
created, inclusive of the magnetic variation factor for the location in
question. Because of the location of the magnetic poles, the needle of a compass
will point to the geographical North Pole only in a few localities. In other
places, it will point either east or west of north. The difference in degrees
between the bearing of the compass needle and the bearing of true north is
called variation, or declination.
The computer arithmetically works out a position, magnetically corrected signal
in the form of an electrical impulse which is passed on through an LCD driver to
the LCD. The LCD lights up and shows an indicative arrow, pointing towards the
center of the LCD, which represents the position of Mecca. If the user now
positions himself to face the direction in which the arrow points, he will face
Mecca, from anywhere in the world, be it on land, sea or air.
Working prototypes of the Qiblah Locator have been completed. However, although
the prototypes have been well received, they are just prototypes. Production to
meet the numbers anticipated will require a large injection of capital. There
is no assurance that the Company will be able to obtain additional funding when
needed, or that such funding, if available, can be obtained on terms acceptable
to the Company. If the Company cannot obtain needed funds, it may be forced to
curtail or cease its activities. If additional shares were issued to obtain
financing, current shareholders may suffer a dilutive effect on their percentage
of stock ownership in the Company. The accuracy achieved by the prototype is
believed to be comparable to, or better than, the accuracy of competing devices.
Muslim religious leaders have confirmed that the accuracy achieved by the
current version of the Qiblah Locator provides a sufficiently fair
representation of the direction of Mecca for users needing to face in that
direction during prayer times. When compared to the devices of Casio and
Lockheed Martin, the Qiblah Locator is, in the opinion of management, easier to
use and, geographically speaking, more versatile. The Qiblah Locator can be
used from anywhere on earth simply by touching a map with a stylus. The
competing products require programming. If the user of a competing product is
not in a major city for which settings are pre-programmed into the unit, he is
required to provide information that may not be readily available to him, such
as a location's latitude and longitude. A negative factor could be the higher
price of the Company's locator, but this should be overcome by the locators'
accuracy and esthetic appeal.
The appearance of the Qiblah Locator, when packaged in an optional casing that
is lined with imitation silk, is attractive as a gift item. The world map and
built-in clock, which are included in the units as central to the Mecca finding
and prayer timer functions, indirectly increase the overall usefulness of the
unit. For example, a person may keep the unit in his office and only use the
Mecca finding function when he travels.
Rolf Papsdorf, the Chairman of the Company, conceived the idea of the Qiblah
Locator in the middle of 1995 and first did a patent search for similar
products. After not finding a match, Mr. Papsdorf commenced product
development. By the first half of 1996, Kinetic Technologies Inc.("Kinetic") of
Canada was retained to write the computer program, based on a mathematical
model, that would read the map and relate it to an LCD display by dividing the
360 degrees of the globe into 32 sections. Four programmers worked on this task
for five months.
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Mr. Papsdorf retained the German office of Seiko Corp. in March 1997 to design
the LCD, while at the same time Kinetic was designing the printed circuit board.
Once the printed circuit board and LCD were finished, it was possible to design
the mold. Based on the mold, packaging could now be created. The first mold
was a shell-only acrylic model. Component suppliers were located and the first
working prototype was completed. The Company showed this prototype to Muslim
religious leaders and to trade show attendees in order to solicit feedback on
appearance and ease of use. Historical development costs were incurred by the
inventor, Rolf Papsdorf, and Qiblah Technologies Limited (South Africa) through
October 1998 were $497,296, consisting of hard costs (e.g. travel expenses,
program development, prototypes, travel expenses) and soft costs (e.g. unpaid
time of Mr. Papsdorf). The total development time for this instrument was
nearly 2 years. The development of the Qiblah Locator began in July 1997. The
first workable prototypes were produced in Nov/Dec 1997 with the marketable
production unit prototype completed in November 1998.
Historical Costs (in U.S. Dollars):
Compass design to fit mould requirements $ 9,500
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Electronic developments, program writing 42,000
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LCD Designs and prototypes 17,000
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Housing design for instrument and model 16,000
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Subsequent first trial moulds for injection 23,000
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Changes and modifications to moulds 7,000
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Design and development of membrane switch 6,500
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Development of program to interact with time
of sunrise, worldwide in relation to our maps,
ongoing for upgraded Qiblah Locator 22,000
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(This program will be available in May 99 with
inclusion in new model by end of 99) Map reproduction
in required format, plotting and digital printing design
for printing machines suitable to print on flexible
material with high resolution in 6 colors 6,000
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Advertising material in various languages and simple
user manual 18,000
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Patent costs, ongoing 20,000
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Trips by the inventor to Germany, South Africa and
Canada during the development period approximately 12 times 80,000
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Approximate travel expenses to various suppliers,
worldwide in order to get best quality and prices,
ensuring to deal with reputable companies which will be
suppliers for many years 40,000
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Consult time for Rolf Papsdorf as per Evans & Evans Report 159,904
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Consult time for Dieter Schindelhauer as per Evans & Evans
Report 15,780
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Evans & Evans Due Diligence Report 14,612
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TOTAL $497,296
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a. Market Highlights.
Muslims are followers of Islam, a religion with approximately 1.5 billion
believers worldwide. The Arabic word "Islam" is derived from the Arabic root
"Salema", meaning peace, purity, submission and obedience. Islam, literally
defined, is "the submission or surrender of one's will to the only true God
worthy of worship, Allah". Followers trace Islam back to the age of Adam; its
message has been conveyed to man by God's prophets and messengers including
Abraham, Moses and Jesus. Muslims believe that Islam's message has been restored
and enforced in the last stage of the religious evolution by God's last prophet
and messenger, Muhammad.
The guidelines of Islam stipulate four major exercises of faith for Muslims.
Some of the exercises must be performed daily, while others are required weekly,
monthly, annually or a minimum of once in a lifetime. The four major exercises
are prayer, fasting, charity and pilgrimage. Offering of prayer is obligatory
upon all Muslims, male or female. Obligatory prayers are five daily prayers,
Friday's noon congregation prayer and the funeral prayer. Requirements of
prayer include the performing of ablution, purity of the whole body, clothes and
ground used for prayer, dressing properly and facing the "Qiblah", which is
literally defined as the direction of, or way to, the holy city of Mecca.
Muslims are not able practically to attend the mosque for all prayer sessions
and they may be away from their home or office at prayer times; therefore, they
often may not know in which direction they must face. The Qiblah Locator is
intended to alert Muslims when it is prayer time and assist them in identifying
the way to Mecca from wherever they may be. It is stated in the Holy Koran that,
if at all possible, each believer should, at least once in his/her lifetime
travel on pilgrimage to Mecca, the birthplace of Mohammed. The average number
of pilgrimages per year to Mecca is approximately 2.5 - 3.0 million people.
Mecca is also a large tourist destination and many visitors purchase gifts of
religious significance. It is the Company's opinion that the Qiblah Locator
will be purchased by many of these visitors. Muslim businessmen who travel are
also a target market for the Locator.
Islam is the fastest growing religion in the world today, in large part due to
population growth, which averages 2.6% per year in Muslim countries. Growth
through conversion from other religions is also a factor, particularly in
Africa. Islam rivals Christianity as the world's most widely held faith and is
the majority religion in about 50 countries. However, just 2% of the world's
Muslims live in the West. But in the United Kingdom, Islam is the fastest
growing religion among the Afro-Caribbean community. There are perhaps 10,000
British converts to Islam, predominantly white, middle-class women. Islam is
growing in organizational strength, not just numbers, in Britain and has
undergone massive restructuring in the last five years. Mosques and other
institutions are proliferating and Muslims are exerting their influence in such
fields as education and politics.
There are also many Muslims in the U.S. For example, Dearborn Heights, a suburb
of Detroit, has America's largest Muslim population. Los Angeles also has a
vigorous, growing Muslim population. Muslim in dominant Muslim countries get
reminded of their prayer times through the public address systems in the towers
of the Mosques. These are their traditional devices. However, if there is no
mosque in audible range the Muslim believer requires his own independent
reminder. The Qiblah Locator is just one of these alternative reminders and
locators.
Attempts to serve the market for Mecca finding devices and prayer timers by
large multinational companies such as Seiko and Lockheed Martin indirectly
confirms that the size of this market opportunity is significant. The market
potential for the Qiblah Locator is unlikely to decrease in the future. Daily
prayers will always be a responsibility of Muslims. It is the experience of the
African Muslin Agency, which sells a variety of religious books, pictures,
posters, prayer aids etc., that Muslims spend is disproportionate amount of
their disposable income on religious items, especially at holy times of the year
and at special events such as the Mecca pilgrimage. This is true even of
low-income earners in low-wealth countries.
The Company's contacts with the African Muslim Agency was not confined to one
meeting. In fact it was this agency which was very helpful in the final
development stages of the Qiblah Locator. They are situated in Fordsburg, a
suburb of Johannesburg and operate a radio station for the Muslim section in
Africa, training scholastic schools for religion, commerce and general
education. They also create their own Internet web pages and stay in close
contact with the worldwide Muslim organizations. The agency is also involved
with advising, administering and connecting business partners, investments and
other financial transaction on behalf of investors who wish to invest in Africa.
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b. Manufacturing Highlights.
Manufacturing of the Qiblah Locator will be undertaken in Pretoria, South Africa
by Casey Holdings Ltd. to take advantage of lower labor costs and the relative
proximity to export markets of the Middle East. Casey Holdings Ltd., a Muslim
owned, publicly traded computer company, is advancing sufficient production
capital to finance production requirements for the initial sales orders. Casey
Holdings Ltd. will provide ordering, stock control, assembly, packaging and
shipping services for the Qiblah Locator. The Company and Casey Holdings Ltd.
are currently in negotiations to conclude a manufacturing agreement.
Casey Holdings Ltd. currently manufactures 1,200 computers per month, has 120
employees and generates annual revenue of approximately $10.5 million. The
names of the South African companies which will be the principal suppliers of
the parts for the Qiblah Locator are as follows:
Printed circuit boards - Bosco Printed Circuits Pty. Ltd.
Packaging - Q Box and Cartoit Manufacturers
Plastic housing - Gottfert Plastics Pty. Ltd.
Electronic components - Factum Electronics Pty. Ltd.
All South African suppliers have confirmed that the projected volume of Qiblah
Locator units would make the Company one of their major customers. Accordingly,
all have expressed a willingness to show maximum flexibility on price and
scheduling.
The Company will sell the standard, assembled, global versions of the Qiblah
Locator for the equivalent of $25.00 per unit F.O.B. Johannesburg. This
represents a profit margin, excluding North American overhead costs, of
approximately 50%. Due to the weak Rand, which lost about 20 % of its value in
the last year, the price should still be below the $16 US level The Company
will monitor sales, marketing efforts and performance and will develop incentive
schemes, not yet defined, to entice maximum sales.
As the Company views its competitors in the market, the only real challenge is
Casio. They offer their unit at US $80 - in Germany and Saudi-Arabia. Their
unit is, in the opinion of management of the Company, is difficult to operate,
needs a certain amount of technical understanding, and only works in
preprogrammed geographic locations. That unit has only have 16 segments in a
360 radius against the Qiblah Locator's 32. Based on the above, management
does not expect erosion of the price structure of the Qiblah Locator.
c. Marketing Plan Highlights.
The Company's marketing strategy recognizes the unique, religious nature of the
Qiblah Locator. The Company is seeking endorsements from Muslim prayer leaders
and is emphasizing the fact that the Qiblah Locator is assembled, marketed and
distributed by Muslims. The Company has decided to manufacture a local version
of the Qiblah Locator. This item will have several benefits:
(1) It provides distributors from one country with territorial protection
versus the Company's distributors from another country. For example, a
consumer in Oman would have no interest in purchasing a local Saudi
version of the Qiblah Locator.
(2) It allows the distributor to structure his own price for his market. As
there are vast different income levels in certain Muslim or other
countries, the local distributor needs the necessary leeway to place
their product into the market. At the same time our sales potential
increases because some users may buy a local and a global unit and the
users who do not travel far, have the opportunity to purchase an
accurate, high definition local unit.
(3) Not all Muslims travel extensively and have a need for a Global Locator.
It makes possible multiple purchases by the same customer. Conceivably, an
individual may desire a global version of the Qiblah Locator for when he travels
and a local, more precise version of the Qiblah Locator for when he is in his
home country. A local version of the Qiblah Locator works on the same
principle as the Global Unit. However, it offers a much higher geographical
resolution. Whereas a country on the global unit may only be 2-4 mm in size, on
a lacal unit the same country would show as 40-80 mm in size and display
prominent features such as towns, roads, rivers and mountains. This enables the
user to locate his/her position more accurately. On a global locator the
magnetic deviation in a small country may only be 5 degrees and on a local
locator the accuracy achieved could be as accurate as 0.5 degrees.
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The local Qiblah Locator is in the developmental stage. A main computer program
with magnetic variations has been developed. The transference to a
micro-processor chip remains to be done. The need for this locator was
determined during the Company's attendance at Muslim trade shows held in Nov/Dec
1997. The item was requested by potential distributors at the trade shows.
The Qiblah Locator will be marketed through distributors. Direct sales by
management generally will not be undertaken. All products will be sold
against a letter of credit or other acceptable guarantees. The distributor has
to place a minimum order as agreed to from time to time; sales will not be made
on consignment.
The first step of the marketing plan is for the Company to be represented at
Muslim business trade shows in the Middle East and the rest of the world.
Yussuf Saley, International Marketing Director for the Company, and/or Reinhardt
Huebsch, Liaison Director for the Company, will be the representatives
initially, although in future years it is expected that the local distributor
will be present at these events. Qiblah International Industries Ltd. was
represented at three shows since 1997: (1) International Life Style Fair,
Jeddah, Saudi Arabia (November 2-7, 1997), attended by Yussuf Saley
(International Marketing Director); 5th Musiad International Trade Fair and 3rd
Business forum, Istanbul, Turkey (November 18-23, 1997), attended by Mr. Saley
and Reinhardt Huebsch, Liaison Director; and Third Afro-Arab Trade Fair,
Sharjah, United Arab Emirates (December 6-12, 1997), attended by Mr. Saley and
Mr. Huebsch. Attendance at the trade shows generated approximately seventy-five
prospects to be distributors for the Company's products. Within two weeks of
returning from a trade show, a representative of the Company sent a follow-up
letter to each serious prospect, inviting them to apply for their local
distributorship. The serious prospects that reply to this follow-up letter then
receive a second letter in which management outlines its terms and criteria for
distributors. Management intends to appoint one exclusive distributor per
country. Applicants will be selected based primarily on their distribution
network, as well as on other factors such as their reputations.
The Company at this stage has received requests for distributorships from three
companies; one in Turkey - n-Ce Group of companies in Istanbul, which intends
to place orders of 1000 pieces per month for the first year. This firm is, in
turn, working out arrangements with Medineks Ltd. Istanbul, which wants 100,000
units. The second company is Makkah Al- Mukarrama in Mecca, Saudi-Arabia. This
firm has ordered an initial 5,000 units, and have ten shop outlets inclusive of
one in the Hilton Hotel in Mecca. The third company is Imes GMBH, in
Munich-Germany; has 680 agents working across Germany and is a Turkish company
operating also in Belgium and France, and is well connected to all the Muslim
agencies in these countries. This last firm anticipates placing 50,000 units
into the market on short notice. These companies will be required to supply a
letter of credit against these purchases. In order for the Company and its
suppliers to meet distributor demands, these necessary letters of credit for the
required funding will have to be in place prior to firm order commitments.
Management will offer its agents the right to purchase a license to a country,
with the fee being based on a target market share of the national population.
For example, the license fee for a country of 2.5 million would be $30,000.
Alternatively, an agent could forego the up front license fee and instead add
10% to the quoted cost of the unit for the first year and 5% thereafter. The
end-user prices are expected to range from $50.00 to $100.00, depending on the
margin charged by the distributor, the distance of the market from South Africa,
the packaging style, whether it is a global or local version and whether a
prayer time function is included. By comparison, prices of between $80.00 and
$150.00 are charged for the Casio model and prices in the range of $85.00 are
charged for the Lockheed model. With the end user paying between $50.00 and
$100.00 for the Qiblah Locator there is a possibility of the competition selling
their unit for less. The Qiblah Locator will be purchased by the distributors
for $25.00 which, the Company believes, allows a large enough margin of profit
to compete in the marketplace. The Company anticipates no erosion of pricing
structure.
Distribution of the Qiblah Locator must take into account that it is a religious
item and thus cannot be marketed as a mass-market item. Tasteful advertising in
religious journals will be considered, but mainstream advertising is not
appropriate, especially in non-Muslim countries. Feedback and/or recommendations
of influential local Imans, who are the prayer leaders at mosques, has been
solicited. Shops that sell religious items like the Koran will be a major
retail vehicle for the Qiblah Locators. Gift shops in hotels and airports in
Muslim cities also are targeted. Sales are not expected to be seasonal,
although extra marketing efforts will be undertaken during special events such
as the attendance of Muslim pilgrims at Mecca during the holy month of Ramadan.
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The involvement of Mr. Saley, an active Muslim, and the alliance with Muslim
managed Casey Holdings Ltd., are major strengths of the Company that represent
votes of confidence in the Qiblah Locator. Many companies have tried and failed
at marketing devices similar to the Qiblah Locator. A major cause of failure in
all cases was the inability, or unwillingness, to enlist the support of the
Muslim community or to show adequate cultural sensitivity. The main reason for
business failure amongst other companies are as follows:
(1) Selling a religiously sensitive item to a Muslim with the label
"produced in the USA".
(2) Not obtaining approval from Muslim religious leaders.
(3) Not marketing only with and through the Muslim community.
(4) Not being aware of different cultural requirements.
The Company intends to surround itself with Muslims of good standing, studying
their culture and involving them with the development of the product.
It is also important to incorporate the religious leaders and get their
endorsement of the product in each distribution territory as part of the planned
activities and let them benefit as well. It is the Company's belief that the
right marketing, sensitivity to different cultures, flexibility and creativity
plus lean management, tight cost control and aggressive marketing through the
right channels gives the Company a decisive edge over the competition.
ITEM 2. PROPERTIES
- ------------------
The only property owned by the Company is that acquired under the purchase
agreement with Qiblah International Industries Ltd., as follows:
(a) The exclusive rights to the use of all patents, patents pending under
application No. 972622 registered in South Africa March 26, 1997,
trademarks, copyrights, title, engineering designs, concepts, models,
prototypes, parts, manufacturing machines and tools, trade secrets,
know-how and show-how, and customer lists associated with the research,
development, manufacturing, distributing and retailing business of the
Qiblah finders products of the Vendor (subject to the worldwide
manufacturing and certain marketing rights of Qiblah Technologies Ltd.
as set out in an agreement dated October 30, 1997.
(b) 10,000,000 common shares in Qiblah Technologies Ltd. a duly registered
non-reporting, non-listed South African public corporation.
(c) Tools, Dies and related manufacturing items for integrated L.C.D.'s
display units.
(d) Injection molding tools.
(e) 1 set technical drawings.
(f) Inventory comprised of: 5,000 compasses; 4,000 L.C.D.'s; and 2,000
Casings
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings and, to the
best of its knowledge, no such action by or against the Company has been
threatened.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDERS MATTERS
The Shares have not previously been traded on any securities exchange. At the
present time, there are no assets available for the payment of dividends on the
Shares.
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Page 15
The Articles of Incorporation authorize the issuance of 50,000,000 shares of
common stock, with a par value of $0.001. The holders of the Shares: (a) have
equal ratable rights to dividends from funds legally available therefore, when,
as, and if declared by the Board of Directors of the Company; (b) are entitled
to share ratably in all of the assets of the Company available for distribution
upon winding up of the affairs of the Company; (c) do not have preemptive
subscription or conversion rights and there are no redemption or sinking fund
applicable thereto; and (d) are entitled to one non-cumulative vote per share on
all matters on which shareholders may vote at all meetings of shareholders.
These securities do not have any of the following rights: (a) cumulative or
special voting rights; (b) preemptive rights to purchase in new issues of
Shares; (c) preference as to dividends or interest; (d) preference upon
liquidation; or (e) any other special rights or preferences. In addition, the
Shares are not convertible into any other security. There are no restrictions
on dividends under any loan other financing arrangements or otherwise. See a
copy of the Articles of Incorporation, and an amendment thereto, and Bylaws of
the Company, attached as Exhibit 3.1, Exhibit 3.2, and Exhibit 3.3,
respectively, to this Form 10-SB/A. As of the date of this Form 10-SB/A, the
Company had 10,031,000 shares of common stock outstanding.
Non-Cumulative Voting.
The holders of Shares of Common Stock of the Company do not have cumulative
voting rights, which means that the holders of more than 50% of such outstanding
Shares, voting for the election of directors, can elect all of the directors to
be elected, if they so choose. In such event, the holders of the remaining
Shares will not be able to elect any of the Company's directors.
Dividends.
The Company does not currently intend to pay cash dividends. The Company's
proposed dividend policy is to make distributions of its revenues to its
stockholders when the Company's Board of Directors deems such distributions
appropriate. Because the Company does not intend to make cash distributions,
potential shareholders would need to sell their shares to realize a return on
their investment. There can be no assurances of the projected values of the
shares, nor can there be any guarantees of the success of the Company.
A distribution of revenues will be made only when, in the judgment of the
Company's Board of Directors, it is in the best interest of the Company's
stockholders to do so. The Board of Directors will review, among other things,
the investment quality and marketability of the securities considered for
distribution; the impact of a distribution of the investee's securities on its
customers, joint venture associates, management contracts, other investors,
financial institutions, and the company's internal management, plus the tax
consequences and the market effects of an initial or broader distribution of
such securities.
Possible Anti-Takeover Effects of Authorized but Unissued Stock.
The Company's authorized but unissued capital stock consists of 39,969,000
Shares of common stock and 10,000,000 shares of preferred stock. One effect of
the existence of authorized but unissued capital stock may be to enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain control of the Company by means of a merger, tender offer, proxy contest,
or otherwise, and thereby to protect the continuity of the Company's management.
If, in the due exercise of its fiduciary obligations, for example, the Board of
Directors were to determine that a takeover proposal was not in the Company's
best interests, such shares could be issued by the Board of Directors without
stockholder approval in one or more private placements or other transactions
that might prevent, or render more difficult or costly, completion of the
takeover transaction by diluting the voting or other rights of the proposed
acquiror or insurgent stockholder or stockholder group, by creating a
substantial voting block in institutional or other hands that might undertake to
support the position of the incumbent Board of Directors, by effecting an
acquisition that might complicate or preclude the takeover, or otherwise.
Transfer Agent.
The Company has engaged the services of Pacific Stock Transfer Company, 3690
South Eastern, Suite 218, Las Vegas, Nevada 89109, to act as transfer agent and
registrar.
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Page 16
ITEM 6. SELECTED FINANCIAL DATA
An audited Report and Financial Statement, as of December 31, 1999 (the end of
the second fiscal year of the Company), is set forth in Exhibit 99.1 to this
Form 10-K. In accordance with Item 310-3(c)(3) of Regulation SB, an audited
Report and Financial Statement for Qiblah Technologies Ltd. for the last two
fiscal years of that company (1999 and 2000) are contained in Exhibit 99.2 to
this Form 10-K. A Financial Data Schedule on the Company is set forth in
Exhibit 99.3 to this Form 10-K
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The Company is in its initial stages of development with no revenues or income
and is subject to all the risks inherent in the creation of a new business.
Since the Company's principal activities to date have been limited to
organizational activities, prospect development, and acquisition of interests,
it has no record of any revenue-producing operations. Consequently, there is no
operating history upon which to base an assumption that the Company will be able
to achieve its business plans.
The funds available to the Company from the first two private offerings will not
be adequate for it to be competitive in the areas in which it intends to
operate. The proceeds from these offerings will not be sufficient for the
Company to proceed with the development of the electric car. In addition, they
will not be sufficient to proceed with even a feasibility study on the electric
car.
The company will need to raise additional funds in order to implement its
business plan. The Qiblah Locator will require approximately $175,000 working
capital. The Electric Car project will require an initial $25,000 for the
feasibility study. The Company's continued operations therefore will depend upon
its ability to raise additional funds through bank borrowings, equity or debt
financing, or asset sales. There is no assurance that the Company will be able
to obtain additional funding when needed, or that such funding, if available,
can be obtained on terms acceptable to the Company. If the Company cannot
obtain needed funds, it may be forced to curtail or cease its activities. If
additional shares were issued to obtain financing, current shareholders may
suffer a dilutive effect on their percentage of stock ownership in the Company.
The Company may experience substantial competition in its efforts to locate and
attract clients. Many competitors in the areas in which it intends to operate
have greater experience, resources, and managerial capabilities than the Company
and may be in a better position than the Company to obtain access to attractive
clientele. There are a number of larger companies which will directly compete
with the Company. Such competition could have a material adverse effect on the
Company's profitability.
1. Electric Automobile.
The following description of this project over the next 12 months and beyond is
provided to demonstrate the potential of this project based on a number of key
elements, including:
(a) How the specifications, performance, and design traits of the MI-6 stand up
to other known entries in this emerging market;
(b) The MI-6 design, with approximately 10% of the parts inventory required for
a standard internal combustion engine car, lends itself to efficient
assembly and maintenance; After a preliminary corporate analysis of the
project's feasibility, $25,000 will be allocated to a feasibility study to
determine what the Company will require to place the MI-6 prototype
electric car into production. The source of funds for this feasibility
will be from future private placements. There is no assurance that the
Company will be able to obtain additional funding when needed, or that
such funding, if available, can be obtained on terms acceptable to the
Company. If the Company cannot obtain needed funds, it may be forced to
curtail or cease its activities. If additional shares were issued to
obtain financing, current shareholders may suffer a dilutive effect on
their percentage of stock ownership in the Company
(c) Upon receiving a favorable feasibility study, the Company will embark on a
two-phased marketing program aimed at generating market exposure and
entrepreneurial interest in a decentralized distribution system.
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Production, if any, will be focused on overseas markets. Manufacturing
would be in South Africa where production labor is less expensive.
Worldwide sales would be the goal of the Company. In this process, the
Company will be using its best efforts in the development and production
of an electric vehicle suitable for the commuter market. If an unfavorable
feasibility study is received by the Company, it will cease activity in
this aspect of the business plan.
2. Qiblah Locator.
(a) Short-Term Development Plan (ending December 31, 2000)
Confirm a distribution network for the Qiblah Locator, with special
emphasis on the Middle East and South Africa.
Complete product enhancements such as the inclusion of a prayer time
function (which activates signals for the five daily prayer times; when
the user touches the map with the stylus, the Qiblah Locator will adjust
for local sunrise and sunset times, adjust for the day of the month and
calculate the five prayer periods for the particular position) and
development of local versions of the Qiblah Locator for individual
countries.
(b) Medium-Term and Long-Term Development Plan (Beyond 2000)
Expand the distribution network for the Qiblah Locator, with increased
emphasis on Southeast Asia and the non-Arab world.
Consider additional product enhancements such as utilizing Global
Positioning Technology and applying the patent to other location-
finding applications.
3. Patents.
There is nothing patentable with regard to the electric car project. The Qiblah
Locator is patented per patent application #972622 in the Republic of South
Africa. The patent was registered in the Republic of South Africa on March 26,
1997 and has a duration of 20 years from that date.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Part IV, Item 14, for the Financial Statement Schedules filed with Form 10-K
Report. An index to the financial statement schedules required to be filed by
Part II, Item 8 of this Form 10-K is set forth immediately before the attached
financial statement schedule in Exhibit 99.1. of this filing.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
During the Company's first fiscal year and up to the present time, the principal
independent accountant for the Company has neither resigned (or declined to
stand for reelection) nor been dismissed. The independent accountant for the
Company is Amisano Hanson, Chartered Accountants. This firm was engaged on or
about January 15, 1999. There have been no disagreements on accounting or
financial disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages, and respective positions of the directors, officers, and
significant employees of the Company are set forth below. All these persons
have held their positions since January 15, 1999. There are no other persons
which can be classified as a promoter or controlling person of the Company.
a. Rolf K. Papsdorf, Director (Chairman)/President.
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Mr. Papsdorf, age 54, is the inventor of the Qiblah Locator and the founder of
the Company. Mr. Papsdorf is an inventor and engineer who has developed a
number of patented technologies over the past 25 years. Prior to beginning
development on the Qiblah Locator in 1995, he founded Sims Technology in Germany
in 1993 to produce products out of polymer concrete. Between 1985 and 1993, he
developed and commercialized a system for making roof tiles out of mineral waste
in an interlocking system, first through Eurotile Manufacturing (B.C.), Ltd. of
Vancouver, British Columbia and then through a company in Germany which he had
acquired from the privatization authorities of the federal government.
In 1980, Mr. Papsdorf had started development on a keyless (fingerprint-
controlled) access control and security device for motor vehicles and general
lock systems, which he sold to Papsi Systems S.A. in 1983. From 1973 to 1980,
he developed a gas turbine system that had applications in stationary gas
turbine-driven power plants. He sold the patent for this technology to
Gasturbines S.A. in 1980. Mr. Papsdorf earned his degree in Mechanical
Engineering from the University of South Africa in 1974.
b. Dieter K. Schindelhauer, Director/Secretary/Treasurer/Controller.
Mr. Schindelhauer, age 63, is based in Vancouver, British, Columbia, Canada. He
is presently the President of Orlon Resources Ltd. of Vancouver, a private
project development company that holds patents on gravity separation recovery
systems. Since 1983 he has been the President of Chalice Mining Inc. of
Vancouver, a junior gold exploration company. Other former positions held since
1986 were President of Gulderand Mining, Director of Seastar Resources Ltd. and
President of Pala Gem and Mineral Mining. Between 1976 and 1983 he was the
Quality Assurance Manager for Hawker Siddeley Canada Inc., Canadian Car
(Pacific) Division in Surrey, British Columbia, a supplier of sawmill machinery
and lumber processing equipment. From 1973 to 1976 Mr. Schindelhauer was the
Plant Manager and then the General Plant Manager of Moore Dry Kiln Company of
Canada Limited of Richmond, British Columbia, which designed and manufactured
machinery and process equipment for the primary and secondary lumber industry.
Positions held at Noranda Metal Industries Limited on Annacis Island, New
Westminster, British Columbia between 1959 and 1973 included Superintendent of
Technical Services. From 1953 to 1957, Mr. Schindelhauer studied and trained
towards a diploma in Electrical Mechanical technology. He completed in 1976 a
four-year business course at the University of British Columbia that was
sponsored by the Canadian Institute of Management. Mr. Schindelhauer holds a
professional membership in the Canadian Institute of Management, of which he was
the Education Chairman for the Education Chapter from 1977 to 1983 and the
Program Director from 1983 to 1985.
c. Kenneth B. Liebscher, Director.
Mr. Liebscher, age 56, is an international businessman with an extensive
background in sales and marketing. In 22 years with Dentsply International, the
world's largest dental products manufacturer, he climbed the ranks to become
Manager of their West Coast Division, headquartered in San Francisco. In
February 1990, Mr. Liebscher was recruited by a major Europe-based competitor,
Ivoclar Liechtenstein to lead their entry into the North American market, and
within two years became Executive Vice-President of Sales and Marketing and
helped to expand this company's world-wide sales to $300,000,000 before
retiring.
In May 1992, Mr. Liebscher left his previous position to became a director of a
reporting company called E.T.C. Industries Ltd. Subsequently, he became
president of its wholly owned subsidiary The Electric Car Company and beginning
in 1994, led a team that developed the MI-6 prototype electric car from the
ground up. Mr. Liebscher also serves as a director of the following reporting
companies: (a) Belmont Resources Inc.; (b) Vanadium International Inc.; and
Montoro Resources Inc. Mr. Liebscher has attended the University of British
Columbia.
d. Yussuf Saley, International Marketing Director.
Mr. Saley, age 48, will be responsible for developing the overseas distribution
network of the Company and for promoting the Qiblah Locator at international
trade shows. Mr. Saley joined a film distribution company within the Jacquesson
Enterprises Group of South Africa in 1972, where he was responsible for
purchasing films from England, France and India and distributing them in South
Africa and throughout Africa. The film distribution company then established a
chain of cinemas in South Africa and Mauritius for the distribution of imported
<PAGE>
Page 19
films. In 1984, he gained control of Jaquesson Enterprises, which included an
electronics wholesaler and retailer, a consumer and fashion magazine publisher,
and a financial services company. In 1987, he was appointed the Chairman and
Chief Executive of Stem Diamond Co., whose business includes jewelry retailing,
packaging manufacturing, insurance and mail order. From 1992 until joining
Qiblah International Industries, Ltd. in July 1997, Mr. Saley was semi-retired,
managing personal property and business investments. Mr. Saley is presently an
executive member of the Islamic Business Chamber of South Africa and the Hajj
and Ummrah Council and he is a member of numerous Islamic organizations
including the Islamic Research Center, the Muslim Youth Movement (NFYNI) Radio
Station, the Muslim Business Association, Crescent International, the Muslim
Institute of UK, the Islamic Foundation and the Africa Muslim Agency. Mr. Saley
has studied at the London School of Economics.
e. Reinhardt Huebsch, Liaison Director.
Mr. Huebsch, age 41, joined Qiblah International Industries Ltd. in 1998. He
also is currently employed as the National Key Account Manager for Danone
Clover. From January to June 1998, Mr. Huebsch served as the Senior Accounts
Manager for Amato Foods. For the period of January 1997 to June 1998, he was a
principal in the firm Pick 'n Play Family Store. Prior to that he served as the
National Trade Marketing Manager of the Johannesburg office of Nabisco/Royal
Beechnut since 1994. Between 1989 and 1994 Mr. Huebsch was the National Trade
Marketing Manager of the Johannesburg office of Cadbury Schweppes and from 1986
to 1988 he was the National Key Accounts Manager of Ceres Fruit Juices. Mr.
Huebsch held various positions with Nestle-Rowntree between 1977 and 1986,
including Merchandiser, Supermarket Salesman, Retail Salesman, Wholesale
Specialist, Key Accounts Manager and National Accounts Manager. Mr. Huebsch
received his business management diploma in 1976.
ITEM 11. EXECUTIVE COMPENSATION.
(a) No officer or director of the Company is receiving any remuneration at this
time.
(b) There are no annuity, pension or retirement benefits proposed to be paid to
officers, directors, or employees of the corporation in the event of retirement
at normal retirement date pursuant to any presently existing plan provided or
contributed to by the corporation or any of its subsidiaries.
(c) No remuneration is proposed to be in the future directly or indirectly by
the corporation to any officer or director under any plan which is presently
existing.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The owners of 5% or more of the Shares, as well as the officers and directors
who own Shares, are set forth in the following chart:
- --------------------------------------------------------------------------
Title of Class Name of Beneficial Owner (1) Amount and Nature of
Beneficial Owner (2) Percent of Class
- --------------------------------------------------------------------------
Common Stock Rolf Papsdorf 2,000,000 19.94%
- --------------------------------------------------------------------------
Common Stock Qiblah International 5,000,000 49.85%
Industries Ltd.
- --------------------------------------------------------------------------
(1) Mr. Papsdorf owns a majority of the stock of Qiblah International
Industries Ltd. The business address for Mr. Papsdorf and Qiblah
International Industries Ltd. is 1177 West Hastings Street, Suite 2400,
Vancouver, British Columbia, Canada. Other than these Shares owned
beneficially by Mr. Papsdorf, none of the other officers or directors of
the Company own any of the Shares.
<PAGE>
Page 20
(2) Mr. Papsdorf does not have the right to acquire any amount of the
Shares within sixty days from options, warrants, rights, conversion
privilege, or similar obligations.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Other than as set forth in this Item 7, there are no relationships,
transactions, or proposed transactions to which the registrant was or is to be a
party, in which any of the named persons set forth in Item 404 of Regulation SB
had or is to have a direct or indirect material interest.
As indicated under Description of Business, the Company on January 9, 1999
entered into a license agreement with ETC Industries, Ltd. of Vancouver, British
Columbia, Canada. Ken Liebscher, one of the Directors of the Company, is a
director of ETC Industries Ltd.; also, Mr. Liebscher owns stock in that firm.
Under the terms of this agreement, E.T.C. Industries Ltd. will be paid the sum
of $50,000, plus a royalty of 2% of the Gross Sales Price (as defined in this
agreement) on every product sold by the Company.
As indicated under Description of Business, the Company on January 12, 1999
entered into a purchase agreement with Qiblah International Industries Ltd. to
purchase all the assets of this firm. Rolf Papsdorf, a Director and President
of the Company, is a majority owner of Qiblah International, Industries Ltd.
Under the terms of the purchase agreement, Qiblah International Industries Ltd.
was paid 5,000,000 Shares, at the deemed issuance price of $0.10 per Share.
PART IV
ITEM 14. EXHIBITS, FINANCIAL DATA SCHEDULE AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K.
None
(c) Financial data Schedule
See schedule 27 Below
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated:
Signature Title Date
/s/ Rolf K Papsdorf President, Director March 25, 2000
- -------------------
Rolf K Papsdorf
/s/ Dieter K Schindelhauer Secretary, Treasurer March 25, 2000
- -------------------------- (Principal Financial
Dieter K Schindelhauer and Accounting Officer),
Director
/s/ Kenneth B. Liebscher Director March 25,2000
- -------------------------
Kenneth B Liebscher
<PAGE>
Page 21
EXHIBIT INDEX
EXHIBIT DESCRIPTION METHOD OF
NUMBER FILING
3.1 Articles of incorporation (1)
3.2 Certificate of Amendment of Articles Of Incorporation (1)
3.3 Bylaws (1)
10.1 License agreement (1)
10.2 Promissory note (1)
10.3 Purchase agreement (1)
10.4 Amendment to Purchase Agreement (1)
27 Direction Technologies, Inc - Financial data Schedule See Below
99.1 Direction Technologies, Inc. - Report and Financial
Statements (Dated December 31, 1999) See Below
99.2 Five Year Historical Exchange Rates: U.S. Dollar to Rand See Below
(1) Filed with the Company's registration statement on Form
10SB12G/A dated 9/14/99 and incorporated by reference.
<PAGE>
Page 22
EXHIBIT 99.1
DIRECTION TECHNOLOGIES, INC. - REPORT AND FINANCIAL STATEMENTS (DATED DECEMBER
31, 1999
<PAGE>
DIRECTION TECHNOLOGIES INC.
(A Development Stage Company)
REPORT AND FINANCIAL STATEMENTS
December 31, 1999 and 1998
(Stated in US Dollars)
--------------------
<PAGE>
TERRY AMISANO LTD. AMISANO HANSON
KEVIN HANSON, C.A. CHARTERED ACCOUNTANTS
AUDITORS' REPORT
To the Stockholders
Direction Technologies Inc.
We have audited the balance sheets of Direction Technologies Inc. (A Development
Stage Company) as at December 31, 1999 and 1998 and the statements of loss and
deficit accumulated during the development stage, stockholders' deficiency and
cash flows for the year ended December 31, 1999 and for the period April 30,
1998 (Date of Incorporation) to December 31, 1998. 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 an audit to obtain
reasonable assurance 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.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at December 31, 1999 and 1998
and the results of its operations and its cash flows for the year ended December
31, 1999 and for the period April 30, 1998 (Date of Incorporation) to December
31, 1998, in accordance with generally accepted accounting principles in the
United States.
Vancouver, Canada /s/ AMISANO HANSON
April 7, 2000 Chartered Accountants
Comments by Auditors for U.S. Readers on Canada - U.S. Reporting Conflict
- -------------------------------------------------------------------------
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when there is
substantial doubt about a company's ability to continue as a going concern. The
accompanying financial statements have been prepared on the basis of accounting
principles applicable to a going concern which assumes the realization of
assets and discharge of liabilities in the normal course of business. As
discussed in Note 1 to the accompanying financial statements in respect of the
developmental nature of the company, the working capital deficiency and the
recurring losses from operations, substantial doubt about the company's ability
to continue as a going concern exists. The accompanying financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
Our report to the stockholders dated April 7, 2000 is expressed in accordance
with Canadian reporting standards, which do not permit a reference to such
uncertainty in the auditors' report when the uncertainty is adequately disclosed
in the financial statements.
Vancouver, Canada /s/ AMISANO HANSON
April 7, 2000 Chartered Accountants
SUITE 604 - 750 WEST PENDER STREET, VANCOUVER, TELEPHONE: (604) 689-0188
BC, CANADA, V6C 2T7 FACSIMILE: (604) 689-9773
E-MAIL: [email protected]
SEE ACCOMPANYING NOTES
<PAGE>
DIRECTION TECHNOLOGIES INC.
(A Development Stage Company)
BALANCE SHEETS
December 31, 1999 and 1998
(Stated in US Dollars)
--------------------
ASSETS
------
1999 1998
---- ----
Current
Cash $ 14 $ -
Prepaid expenses - 650
------- --------
14 650
License fees - Notes 3 and 6 50,000 -
------- --------
$ 50,014 $ 650
======= ========
LIABILITIES
-----------
Current
Accounts payable - Note 6 $ 58,490 $ 1,500
------- --------
STOCKHOLDERS' DEFICIENCY
------------------------
Share capital
Authorized:
50,000,000 common shares, $0.001 par value
10,000,000 preferred shares, $0.001 par value
Issued:
10,031,000 common shares - Note 5 25,500 -
Deficit accumulated during the development stage (33,976) (850)
------- --------
(8,476) (850)
------- --------
$ 50,014 $ 650
Nature and Continuance of Operations - Note 1
Commitment - Note 3
APPROVED BY THE DIRECTORS:
/s/ Ken B. Liebscher, Director Dieter K. Schindelhauer, Director
SEE ACCOMPANYING NOTES
<PAGE>
DIRECTION TECHNOLOGIES INC.
(A Development Stage Company)
STATEMENTS OF LOSS AND DEFICIT
ACCUMULATED DURING THE DEVELOPMENT STAGE
for the year ended December 31, 1999,
for the period April 30, 1998 (Date of Incorporation) to December 31, 1998
and the period April 30, 1998 (Date of Incorporation) to December 31, 1999
(Stated in US Dollars)
--------------------
April 30, 1998 April 30, 1998
(Date of (Date of
Incorporation) to Incorporation) to
December 31 December 31, December 31,
1999 1998 1999
---- ---- ----
Expenses
Accounting and legal $ 17,014 $ 850 $ 17,864
Filing fees 471 - 471
Interest and bank charges 282 - 282
Office expense 7,757 - 7,757
Transfer agent fees 1,043 - 1,043
Travel costs 1,559 - 1,559
--------- ---------- ----------
Net loss for the period
before other items 28,126 850 28,976
Other Items
Equity share of loss of
Qiblah Technologies Limited 3,952 - 3,952
Excess value of common shares
issued over net assets acquired
on investment in Qiblah
Technologies Limited 1,048 - 1,048
--------- ---------- ----------
Net loss for the period 33,126 850 33,976
Deficit, beginning of period 850 - -
Deficit, end of period $ 33,976 $ 850 $ 33,976
--------- ---------- ----------
Loss per share $ - $ -
========= ==========
Weighted average number of
shares outstanding 7,695,013 -
========= ==========
SEE ACCOMPANYING NOTES
<PAGE>
DIRECTION TECHNOLOGIES INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
for the year ended December 31, 1999,
for the period April 30, 1998 (Date of Incorporation) to December 31, 1998
and the period April 30, 1998 (Date of Incorporation) to December 31, 1999
(Stated in US Dollars)
--------------------
April 30, 1998 April 30, 1998
(Date of (Date of
Incorporation) to Incorporation) to
December 31 December 31, December 31,
1999 1998 1999
---- ---- ----
Cash Flows from Operating
Activities
Net loss for the period $ ( 33,126) $ (850) $ (33,976)
Add: items not affecting
cash
Equity share of loss
of Qiblah Technologies
Limited 3,952 - 3,952
Excess value of common
shares issued over net
assets acquired on
investment in Qiblah
Technologies Limited 1,048 - 1,048
--------- ---------- ----------
( 28,126) (850) (28,976)
Changes in non-cash
working capital balances
related to operations:
Prepaid expenses 650 (650) -
Accounts payable 56,990 1,500 58,490
--------- ---------- ----------
29,514 - 29,514
--------- ---------- ----------
Investing Activity
Acquisition of license fees (50,000) - (50,000)
--------- ---------- ----------
Financing Activity
Proceeds from issuance
of common shares 20,500 - 20,500
--------- ---------- ----------
Net increase in cash during
the period 14 - 14
Cash, beginning of the period - - -
--------- ---------- ----------
Cash, end of the period $ 14 $ - $ 14
========= ========== ==========
Non-cash Transactions - Note 9
SEE ACCOMPANYING NOTES
<PAGE>
DIRECTION TECHNOLOGIES INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' DEFICIENCY
for the period April 30, 1998 (Date of Incorporation) to December 31, 1999
(Stated in US Dollars)
--------------------
Deficit
Accumulated
Additional During the
Common Shares Paid-in Development
# Par Value Capital Stage Total
------ --------- ------- ----- -----
Net loss for the
period - $ - $ - $ (850) $ (850)
--------- ------- --------- -------- --------
Balance, as at
December 31, 1998 - - - (850) (850)
For cash:
Capital stock
issued pursuant
to an offering
memorandum
- at $0.001 5,000,000 5,000 - - 5,000
Capital stock
issued pursuant
to an offering
memorandum
- at $0.50 31,000 31 15,469 - 15,500
For acquisition
of Qiblah
Technologies
Limited 5,000,000 5,000 - - 5,000
Net loss for
the year - - - ( 33,126) ( 33,126)
---------- ------- --------- -------- --------
Balance, as at
December 31,
1999 10,031,000 $ 10,031 $ 15,469 $( 33,976) $ ( 8,476)
---------- ------- --------- -------- --------
SEE ACCOMPANYING NOTES
<PAGE>
Direction Technologies Inc.
(A Development Stage Company)
Notes to the Financial Statements
for the year ended December 31, 1999
and April 30, 1998 (Date of Incorporation) to December 31, 1998
(Stated in US Dollars)
--------------------
Note 1 Nature and Continuance of Operations
------------------------------------
The company currently is in the business of developing the Qiblah Locator
direction finding technology. In addition, the company has a license for the
exclusive rights to manufacture and market a proprietary electric vehicle
technology on a world-wide basis.
These financial statements have been prepared on a going concern basis. As at
December 31, 1999, the company has a working capital deficiency of $58,476 and
has accumulated losses of $33,976 since incorporation. Its ability to continue
as a going concern is dependent upon the ability of the company to generate
profitable operations in the future and/or to obtain the necessary financing to
meet its obligations and repay its liabilities arising from normal business
operations when they come due.
The company was incorporated in Nevada on April 30, 1998 as Fuji International,
Inc. and on December 28, 1998 the company changed its name to Direction
Technologies Inc.
Note 2 Summary of Significant Accounting Policies
------------------------------------------
The financial statements of the company have been prepared in accordance with
generally accepted accounting principles in the United States. Because a
precise determination of many assets and liabilities is dependent upon future
events, the preparation of financial statements for a period necessarily
involves the use of estimates which have been made using careful judgement.
Actual results may differ from these estimates.
The financial statements have, in management's opinion, been properly prepared
within reasonable limits of materiality and within the framework of the
significant accounting policies summarized below:
Development Stage Company
-------------------------
The company is a development stage company as defined in Statement of Financial
Accounting Standards No. 7. The company is devoting substantially all of its
present efforts to the business of developing the Qiblah Locator direction
finding technology and manufacturing and marketing a proprietary electric
vehicle technology. All losses accumulated since inception have been considered
as part of the company's development stage activities.
Income Taxes
------------
The company uses the liability method of accounting for income taxes pursuant to
Statement of Financial Accounting Standards, No. 109 "Accounting for Income
Taxes".
<PAGE>
Page 2
Direction Technologies Inc.
(A Development Stage Company)
Notes to the Financial Statements
for the year ended December 31, 1999
and April 30, 1998 (Date of Incorporation) to December 31, 1998
(Stated in US Dollars)
--------------------
Note 2 Summary of Significant Accounting Policies - (cont'd)
------------------------------------------
Investment in Qiblah Technologies Limited
- -----------------------------------------
The company uses the equity method of accounting for its investment in Qiblah
Technologies Limited ("Technologies"). Under this method the company records
its investment at cost and adjusts the carrying value to include the company's
pro-rata share of earnings or losses of Technologies.
Loss Per Share
- --------------
Loss per share has been calculated based upon the weighted average number of
shares outstanding during the period.
Fair Value of Financial Instruments
- -----------------------------------
The carrying value of cash and accounts payable approximates fair value because
of the short term maturity of those instruments.
Note 3 License fees
------------
On January 9, 1999, the company entered into a license agreement with E.T.C.
Industries Ltd., a company with a common director, whereby the company shall
have the exclusive rights to manufacture and market a proprietary electric
vehicle technology. To secure this license the company is required to:
a) Pay $50,000 to the licensor;
b) Pay a royalty of 2% of the gross sales price on each unit sold to the
licensor; and
c) Use its best efforts in the development and production of a
multi-passenger, short-haul, commercial vehicle suitable for hotel, resort
and high traffic local markets.
The initial term of this agreement is for five years from the date of approval
by the regulatory authorities and is renewable for another five years unless the
company does not achieve annual sales of US$1,345,200 within the initial term.
Note 4 Investment in Qiblah Technologies Limited
-----------------------------------------
On January 12, 1999, the company entered into a purchase agreement to acquire
certain of the assets of Qiblah International Industries Ltd. ("Qiblah").
Qiblah is controlled by a significant shareholder and director of the company
and is a British Columbia corporation which is engaged in the research,
development, manufacturing and marketing of the Qiblah Locator, a proprietary
direction finding technology (the "Technology"). The company issued 5,000,000
common shares valued at $5,000 to acquire the Technology.
<PAGE>
Page 3
Direction Technologies Inc.
(A Development Stage Company)
Notes to the Financial Statements
for the year ended December 31, 1999
and April 30, 1998 (Date of Incorporation) to December 31, 1998
(Stated in US Dollars)
--------------------
Note 5 Share Capital
--------------
Additional
Issued and fully paid Paid-in
common shares: # Par Value Capital Total
------ --------- ------- -----
Balance,
December 31, 1998 - $ - $ - $ -
Issued for cash:
- Pursuant to an
offering memorandum
at - $0.001 5,000,000 5,000 - 5,000
- Pursuant to an
offering memorandum
at - $0.5 31,000 31 15,469 15,500
For acquisition of
Qiblah Technologies
Limited 5,000,000 5,000 - 5,000
--------- --------- --------- ---------
Balance,
December 31, 1999 10,031,000 $ 10,031 $ 15,469 $ 25,500
========== ========= ========= =========
Note 6 Related Party Transactions - Notes 3 and 4
--------------------------
Accounts payable at December 31, 1999 includes $50,000 (1998: $Nil) owing to
E.T.C. Industries Ltd., a company with a common dirtector.
Note 7 Deferred Tax Assets
-------------------
The Financial Accounting Standards Board issued Statement Number 109 in
Accounting for Income Taxes ("FAS 109") which is effective for fiscal years
beginning after December 15, 1992. FAS 109 requires the use of the asset and
liability method of accounting of income taxes. Under the assets and liability
method of FAS 109, deferred tax assts and liabilities are recognized for the
future tax consequences attributable to temporary differences between the
financial statements carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
<PAGE>
Page 4
Direction Technologies Inc.
(A Development Stage Company)
Notes to the Financial Statements
for the year ended December 31, 1999
and April 30, 1998 (Date of Incorporation) to December 31, 1998
(Stated in US Dollars)
--------------------
Note 7 Deferred Tax Assets - (cont'd)
-------------------
The following table summarizes the significant components of the company's
deferred tax assets:
Total
-----
Deferred Tax Assets
Non-capital loss carryforwards $ 33,976
=======
Gross deferred tax assets $ 16,988
Valuation allowance for deferred tax assets ( 16,988)
-------
$ -
=======
The amount taken into income as deferred tax assets must reflect that portion of
the income tax loss carryforwards which is likely to be realized from future
operations. The company has chosen to provide an allowance of 100% against all
available income tax loss carryforwards, regardless of their time of expiry.
Note 8 Income Taxes
------------
No provision for income taxes has been provided in these financial statements
due to the net loss. At December 31, 1999, the company has net operating loss
carryforwards, which expire commencing in 2018 totalling $33,976, the tax
benefit of which has not been recorded in the financial statements.
Note 9 Non-cash Transactions
---------------------
Investing and financing activities that do not have a direct impact on current
cash flows are excluded from the statement of cash flows. During the year ended
December 31, 1999, the company issued 5,000,000 shares valued at $5,000 to
acquire its investment in Qiblah Technologies Limited.
<PAGE>
Page 5
Direction Technologies Inc.
(A Development Stage Company)
Notes to the Financial Statements
for the year ended December 31, 1999
and April 30, 1998 (Date of Incorporation) to December 31, 1998
(Stated in US Dollars)
--------------------
Note 10 New Accounting Standards
------------------------
In December 1997, the Accounting Standard Board Issued statement 3465, "Income
Taxes", which establishes standards for the recognition, measurement,
presentation and disclosure of income and refundable taxes. This statement is
effective for fiscal years beginning on or after January 1, 2000. Adopting this
standard will not have a material impact on the company's financial position,
results of operations or cash flows.
In April 1998, the Accounting Standards Executive committee issued SOP 98-5,
"Reporting on the cost of start-up activities". This statement is effective for
fiscal years beginning after December 15, 1998. Adopting this standard does not
have a material impact on the company's financial position, results of
operations or cash flows.
In June 1998, the Financial Accounting Standards board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which
standardized the accounting for derivative instruments. SFAS is effective for
all fiscal quarters of all fiscal years beginning after June 15, 1999. Adopting
this standard will not have a significant impact on the company's financial
positions, results of operations or cash flows.
Note 11 Uncertainty Due to the Year 2000 Issue
--------------------------------------
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
the year 2000 date is processed. In addition, similar problems may arise in
some systems which use certain dates in 1999 to represent something other than a
date. Although the change in date has occurred, it is not possible to conclude
that all aspects of the Year 2000 Issue that may affect the company, including
those related to customers, suppliers or other third parties, have been fully
resolved.
<PAGE>
EXHIBIT 99.2
FIVE YEAR HISTORICAL EXCHANGE RATES: U.S. DOLLAR TO RAND
Conversion Table: U.S. Dollar to South African Rand (Interbank Rate)
December 31, 1995: 3.6445
December 31, 1996: 4.6780
December 31, 1997: 4.8645
December 31, 1998: 5.8625
December 31, 1999: 6.1540
March 26, 2000: 6.4810
<PAGE>
