Registration No. 333-______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
(Amendment Number 1)
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
LEGEND MOTORS WORLDWIDE, INC.
(Name of Small Business Issuer in its Charter)
NEVADA 5010 20-1625144
- ------------------------------------------------------------------------------
(State of Other Jurisdiction of (Primary Standard Industrial (IRS Employer
Incorporation or Organization) Classification Code Number) Identification No.)
1995 East US 20, LaGrange, Indiana 46761
(260) 463-4060
(Address and telephone number of principal executive offices
and principal place of business)
Mr. John G. Pendl CFO
17924 US 31 North
Westfield, Indiana 46074
(317) 867-2852
(Name, address and telephone number of agent for service)
Copies to:
The Law Office of James G. Dodrill II, PA
James G. Dodrill II, Esq.
5800 Hamilton Way
Boca Raton, FL 33496
(561) 862-0529
----------------------
Approximate date of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.
----------------------
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. (X)
If this Form is filed to register additional securities for an
offering pursuant to Rule 462 (b) under the Securities Act, check the
following box and list the Securities Act registration statement number
of earlier effective registration statement for the same offering. ( )
If this Form is a post-effective amendment filed pursuant to Rule
462 (c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. ( ).
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. ( ).
CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED
TITLE OF EACH CLASS MAXIMUM MAXIMUM
OF QUANTITY TO OFFERING AGGREGATE AMOUNT OF
SHARES TO BE BE PRICE PER OFFERING REGISTRATION
REGISTERED REGISTERED SHARE <F1> PRICE FEE
- ------------------- ---------- --------- --------- ------------
Common Stock,
$.0001 par value
to be sold by
selling
shareholders 12,000,000 $3.00 $36,000,000 $4,237.20
TOTAL 12,000,000 $3.00 $36,000,000 $4,237.20
- ----------------------
<FN>
<F1>
(1) Estimated solely for the purpose of calculating the
registration fee pursuant to Rule 457.
</FN>
- ------------------------------------------------------------------------------
The registrant hereby amends this registration statement on such
date or dates as may be necessary to delay its effective date until
the registrant shall file a further amendment which specifically
states that this registration statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of
1933 or until the registration statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a), may
determine.
Information contained herein is subject to completion or amendment.
A registration statement relating to these securities has been filed
with the Securities and Exchange Commission. We may not sell these
securities until the registration statement filed with the Securities
and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy
these securities in any state in which the offer or sale is not
permitted.
/===========================================================================/
/ This Amendment has been filed solely for the purpose of including /
/ the financial statements of GT 40 North America, Inc. which were omitted /
/ from the Registrant's initial filing. /
/===========================================================================/
PROPECTUS
SUBJECT TO COMPLETION, DATED AUGUST 15, 2005
12,000,000 Shares of Common Stock
LEGEND MOTORS WORLDWIDE, INC.
The Offering:
This is our initial public offering. We are registering a total of
12,000,000 shares of our common stock all of which are being offered by
selling shareholders and are being registered for sale at a price per
share of $3.00 per share until our shares are quoted on the Over The
Counter Bulletin Board and thereafter at prevailing market prices or in
privately negotiated transactions.
There is no established public market for our common stock and we
have arbitrarily determined the offering price. Although we hope to be
quoted on the OTC Bulletin Board, our common stock is not currently
listed or quoted on any quotation service. There can be no assurance that
our common stock will ever be quoted on any quotation service or that any
market for our stock will ever develop.
Proposed Trading Symbol: OTC Bulletin Board - "LMWW"
_________________________________
Investing in our stock involves risks. You should carefully
consider the Risk Factors beginning on page 6 of this prospectus.
We have not authorized anyone else to provide you with different
information. The common stock is not being offered in any state where
the offer is not permitted. You should not assume that the information
in this prospectus or any supplement is accurate as of any date other
than the date on the front of those documents.
______________________
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.
_______________________
The information in this prospectus is not complete and may be
changed. None of these securities may be sold until a registration
statement filed with the Securities and Exchange Commission is effective.
The prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer
or sale is not permitted.
The date of this prospectus is August 15, 2005
1
TABLE OF CONTENTS
Page
----
Prospectus Summary 3
The Offering 4
Summary Financial Information 5
Risk Factors 6
Use of Proceeds 12
Determination of Offering Price 12
Dividend Policy 12
Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
Business 19
Management 29
Principal Shareholders 32
Selling Shareholders 33
Certain Transactions 35
Description of Securities 36
Indemnification 38
Plan of Distribution 39
Legal Matters 40
Experts 40
Where You Can Find More Information 41
Index to Financial Statements F-1
As used in this prospectus, the terms "we," "us," "our," "the
Company," and "Legend Motors" mean Legend Motors Worldwide, Inc., a Nevada
corporation. The term "selling shareholders" means our shareholders who
are offering to sell their shares of Legend Motors common stock that are
being registered through this prospectus. The term "common stock" means
our common stock, par value $0.0001 per share and the term "shares" means
the 12,000,000 shares of common stock being offered through this
prospectus.
2
PROSPECTUS SUMMARY
Because this is a summary, it does not contain all of the
information that may be important to you. You should read the entire
prospectus. You should consider the information set forth under "Risk
Factors" and our financial statements and accompanying notes that appear
elsewhere in this prospectus.
Legend Motors Worldwide, Inc.
- -----------------------------
We provide the highest quality cars and trucks for the automobile
enthusiast. Our primary sources of revenue are luxury truck and van
conversions and assembly and sale of exotic supercar and roadster replicas.
We perform luxury truck and van conversions through our wholly owned
subsidiary, LA West, Inc. (LA West). LA West offers exclusive luxury van
conversions, sport truck conversions, and SUV conversions. These products are
marketed through LA West's extensive and well-recognized distribution
channels. LA West has entered into an inventory consignment agreement with
each of the big three domestic U.S. automakers (Ford, GM and Chrysler)
thereby providing superior marketing and distribution for company products.
LA West has been in operation for 17 years and has produced up to 1,800
conversions annually.
Our automobile assembly operations focus on delivering replica
supercars and roadsters from the 1930's through the 1970's. We are a
component car assembler that handcrafts an in-house designed chassis
with all other required items including wiring, plumbing, brakes,
interior wheels, tires and paint completed at our factory. Legend
Motors delivers state-of-the-art versions of cars that are otherwise
unattainable for most motor sports enthusiasts, including the GT40
Mk.1. Legend Motors products are sold without drive-trains, however we
have established relationships with highly qualified service
facilities around the country that can install engines and
transmissions to our specifications so as to ensure performance at the
highest levels.
We operate two facilities. The first is our state-of-the-art
78,000 square foot manufacturing and training facility which includes
an in-house paint line that allows for custom painting of all
vehicles. In addition to the quality paintwork performed at the
facility, vans and trucks are also modified to suit customer ideas.
These vehicles can be equipped with trim upgrades such as captain
chairs, paneling, raised roofs, sofa chairs, television sets, fold out
beds and even kitchens and bathrooms. Our second facility houses the
company's research and development operations for its replica vehicle
operations. The 12,600 square foot facility, which includes five
offices for administration and design, an automotive showroom and
assembly space, is sufficient to meet the company's research and
development projects for the foreseeable future.
We were incorporated in Nevada in 2004. We currently sell products
in 40 states. For the fiscal year ended December 31, 2004, we achieved
revenues of approximately $14,739,000.
Our office for services is located at 17924 US 31 North, Westfield,
Indiana 46074., Our telephone number is (317) 867-2852 and our Internet
address is www.legendmotorsww.com.
3
The Offering
------------
Securities Offered 12,000,000 shares of
common stock, all of
which are being offered
by the selling
shareholders; See
"Description of
Securities"
Common Stock Outstanding, before offering 10,000,000
Common Stock Outstanding, after offering (1) 12,000,000
Proposed OTC Bulletin Board Symbol LMWW
Use of Proceeds We will not receive any
proceeds from the sale
of common stock by our
selling shareholders.
We will receive proceeds
to the extent that any
of the warrants are
exercised and intend to
use the proceeds from
the exercise of any of
the warrants for an
acquisition(s) and for
general corporate
purposes. See "Use of
Proceeds."
Dividend Policy We do not intend to pay
dividends on our common
stock. We plan to
retain any earnings for
use in the operation of
our business and to
fund future growth.
(1) Assumes the exercise of all 2,000,000 Warrants.
4
Summary Financial Information
-----------------------------
The following is a summary of our Pro Forma Financial Statements, which are
included elsewhere in this prospectus. You should read the following
data together with the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" section of this prospectus as well
as with our Pro Forma Financial Statements and the notes therewith.
2004 2003
---- ----
Statement of Operations Data:
Total Revenue $14,739,376 $12,173,286
Cost Of Goods Sold $10,813,897 $8,244,134
Net Income (Loss) $(872,487) $11,756
Balance Sheet Data:
Cash and cash equivalents $72,259 $89,562
Total current assets $6,996,275 $9,351,623
Total assets $7,499,573 $9,928,292
Total current liabilities $7,140,919 $9,920,569
Total stockholders' equity $ 323,047 $ (7,371)
Total liabilities and stockholders' equity $7,499,573 $9,928,292
5
RISK FACTORS
------------
The securities offered are highly speculative. You should purchase
them only if you can afford to lose your entire investment in us. You
should carefully consider the following risk factors, as well as all
other information in this prospectus.
Investors should assume that if any of the following risks actually
materialize, our business, financial condition or results of future
operations could be materially and adversely affected. In that event, the
trading price of our common stock could decline, and you could lose all or
part of your investment.
Our businesses are highly cyclical and this can lead to fluctuations in
our operating results.
====================================================================
The industries in which we operate are highly cyclical and there
can be substantial fluctuations in our manufacturing, sales and operating
results. Consequently, the results for any prior period may not be
indicative of results for any future period. Companies within the
replica automobile sales and luxury truck and van conversion industries
are subject to volatility in operating results due to external factors
such as general economic conditions, including consumer confidence,
employment rates, prevailing interest rates, inflation, and other
economic conditions affecting consumer attitudes and disposable consumer
income generally, demographic changes and political changes. Specific
factors affecting our industries include:
- Overall consumer confidence and the level of discretionary
consumer spending;
- general economic conditions, particularly in our targeted
markets;
- interest rates;
- employment trends;
- fuel availability and prices.
Our business is affected by the availability and terms of financing to
dealers and retail purchasers.
=======================================================================
Our business is affected by the availability and terms of
financing to dealers and retail purchasers. Substantial increases in
interest rates and decreases in the general availability of credit would
have an adverse impact upon our business and results of operations.
Fuel shortages, or higher prices for fuel, could have a negative effect
on sales of our recreation vehicles.
=======================================================================
Gasoline is required for the operation of all motor vehicles we
produce. Recently gasoline prices have risen dramatically in the United
States. There can be no assurance that the supply of gasoline will
6
continue uninterrupted, that rationing will not be imposed or that the
price of or tax on gasoline will not significantly increase in the
future. Shortages of gasoline and substantial increases in the price of
gasoline have had a material adverse effect on the motor vehicle
industry as a whole in the past and could have a material adverse effect
on our business in the future.
If the frequency and size of product liability and other claims against
us increase, our business, results of operations and financial condition
may be harmed.
=======================================================================
We may in the future be subject, in the ordinary course of
business, to litigation involving product liability and other claims,
including wrongful death, against us related to personal injury and
warranties. We purchase product liability insurance in the commercial
insurance market. We cannot be certain that our insurance coverage will be
sufficient to cover all future claims against us. Any increase in the
frequency and size of these claims, as compared to our experience in
prior years, may cause the premium that we are required to pay for
insurance to increase significantly. It may also increase the amounts we
pay in punitive damages, not all of which are covered by our insurance.
Adverse determination of material product liability claims made against
us could have a material adverse effect on our financial condition and
results of operations.
Our officers and directors are not required to continue as shareholders.
=======================================================================
There is no requirement that our current or any of our future
officers and/or directors retain any of their shares of our common
stock. Accordingly, there is no assurance that all or any of our
officers and/or directors will continue to maintain an equity
interest in the company. Any officer or director who ceases to
maintain an equity interest in the company may find that their
interests do not continue to mirror those of other shareholders. In
this event such officer or director may make different decisions
than they might make if they continued to maintain an equity
interest in the company and these decisions may prove to be less
beneficial to the company or its shareholders and accordingly the
value of a shareholder's investment may be diminished.
We are dependent on the services of our President and the loss of
those services would have a material adverse effect on our business.
=================================================================
We are highly dependent on the services of Vern Kauffman
our Chairman of the Board and President. Mr. Kauffman maintains
responsibility for our overall corporate strategy. Mr. Kauffman's
business endeavors include nearly 20 years of experience in the
automobile industry. The loss of the services of Mr. Kauffman would
have a material adverse effect upon our business and prospects.
Without Mr. Kauffman's services we would likely not be able to
execute our business plan unless and until we found a replacement
with similar experience. There can be no assurance that we could
find such a replacement or that if we did that we could persuade
such individual to accept employment with us on acceptable terms, or
at all. We do not currently have "key man" insurance on Mr.
Kauffman and we do not anticipate purchasing such insurance in the
near future, if ever. Mr. Kauffman does have life insurance but the
company is not a beneficiary.
7
Failure to secure productive key personnel may adversely affect our
performance and revenue objectives.
=======================================================================
In addition to our reliance on Mr. Kauffman, our success depends to a
significant extent upon our ability to retain key personnel and to
attract talented new personnel. We anticipate that Mr. Kauffman's
leadership and expertise will play a significant factor in any future
success. The loss of Mr. Kauffman's services or our failure to retain or
attract talented new employees could have a material adverse effect on
our business.
Our President has the voting power to control our affairs and may
make decisions that do not necessarily benefit all shareholders
equally.
=======================================================================
As of the date of this prospectus, Mr. Kauffman owns
approximately 17% of our outstanding common stock and owns warrants to
purchase 1,000,000 additional shares bringing his percentage to approximately
23%. Consequently, Mr. Kauffman is in a position to substantially
influence matters submitted for shareholder votes, including the
ability to elect a majority of our Board of Directors and to
exercise control over our affairs in general. Mr. Kauffman's
decisions may not necessarily reflect those of our other
shareholders.
We face substantial competition.
=======================================================================
We face competition from various companies in each product we offer.
A number of our competitors are well financed and could develop
innovative products that would reduce our market share. Additionally, as
we expand our product offerings into new markets and into offering new
products we will face additional competition. Competition in foreign
markets may also be affected by duties, tariffs, taxes and the effect of
various trade agreements, import restrictions and fluctuations in
exchange rates.
A recession could detrimentally affect our sales.
=======================================================================
Our sales are partially dependent on discretionary consumer
spending, which may be affected by general economic conditions. A
recessionary environment could result in a decrease in consumer spending
in general, which could result in decreased spending in our markets,
directly or in the overall market for luxury supercar replicas, either of
which could have a material adverse effect on our business, operating
results and financial condition. Additionally, factors that influence
the general economic climate, such as consumer confidence levels,
interest rates, employment trends and fuel availability and prices could
also result in decreased spending in our markets. If we fail to make
adjustments in response to these events quickly, our operating results
and financial condition could be materially adversely affected.
There has never been a market for our common stock.
=======================================================================
Prior to this offering, there has been no public trading market for
our common stock and there can be no assurances that a public trading
market for the common stock will develop or, if developed, will be
8
sustained. Although we hope to be accepted for quotations on the Over
the Counter Bulletin Board, there can be no assurance that a regular
trading market will develop for the common stock offered through this
prospectus, or, if developed, that it will be maintained.
We have arbitrarily determined the offering price. Accordingly, the
price you pay may not accurately reflect the value of our common stock
and you may not be able to sell the common stock for at least the
offering price or at any price at any time.
=========================================================================
We have arbitrarily determined the offering price of the common
stock because there is no market for any of our securities. There can be
no assurance that the offering price accurately reflects the value of our
common stock or that investors will be able to sell the common stock for
at least the offering price or at any price at any time.
There is no assurance of future dividends being paid.
=======================================================================
At this time we do not anticipate paying dividends in the future,
but instead plan to retain any earnings for use in the operation of our
business and to fund future growth. We are under no legal or contractual
obligation to declare or to pay dividends, and the timing and amount of
any future cash dividends and distributions is at the discretion of our
board of directors and will depend, among other things, on our future
after-tax earnings, operations, capital requirements, borrowing capacity,
financial condition and general business conditions.
9
FORWARD-LOOKING STATEMENTS
--------------------------
This prospectus includes forward-looking statements that involve
risks and uncertainties regarding management's plans and objectives for
future operations, including plans and objectives relating to our planned
marketing and future economic performance. These forward-looking
statements include statements under the captions "Prospectus Summary,"
"Risk Factors," "Use of Proceeds," "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "Business" and
elsewhere in this prospectus. You should not rely on these
forward-looking statements that apply only as of the date of this
prospectus. These statements refer to our future plans, objectives,
expectations and intentions. We use words such as "believe,"
"anticipate," "expect," "intend," "estimate" and similar expressions to
identify forward-looking statements. This prospectus also contains
forward-looking statements attributed to third parties relating to their
estimates regarding the growth of certain markets. You should not place
undue reliance on these forward-looking statements, which apply only as
of the date of this prospectus. Our actual results could differ
materially from those discussed in these forward-looking statements.
Factors that could contribute to these differences include those
discussed in the preceding pages and elsewhere in this prospectus. In
addition to the risk factors identified elsewhere, important factors that
could cause actual results to differ materially from estimates or
projections contained in the forward-looking statements include, without
limitation:
- - Acts of war and other political events
- - Widespread adverse weather conditions or natural disaster
- - Unforeseen changes in laws or regulation
- - Increases in the cost of parts or labor could render the company's
primary products unaffordable under our marketing program
- - General downturn in the auto industry
- - Manufacturers doing more customizing on their own.
10
PENNY STOCK REGULATIONS
-----------------------
We are not listed on any stock exchange at this time. We hope to
become a bulletin board traded company. Such shares are referred to as
"penny stocks" within the definition of that term contained in Rules
15g-1 through 15g-9 promulgated under the Securities Exchange Act of
1934, as amended. These rules impose sales practices and disclosure
requirements on certain broker-dealers who engage in certain transactions
involving penny stocks. These additional sales practices and disclosure
requirements could impede the sale of our securities, including
securities purchased herein, in the secondary market. In general, penny
stocks are low priced securities that do not have a very high trading
volume. Consequently, the price of the stock is volatile and you may
not be able to buy or sell the stock when you want. Accordingly, the
liquidity for our securities may be adversely affected, with related
adverse effects on the price of our securities.
Under the penny stock regulations, a broker-dealer selling penny
stocks to anyone other than an established customer or "accredited
investor" (generally, an individual with a net worth in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 together with
his or her spouse) must make a special suitability determination for the
purchaser and must receive the purchaser's written consent to the
transaction prior to the sale, unless the broker-dealer is otherwise
exempt. In addition, unless the broker-dealer or the transaction is
otherwise exempt, the penny stock regulations require the broker-dealer
to deliver, prior to any transaction involving a penny stock, a
disclosure schedule prepared by the Securities and Exchange Commission
relating to the penny stock. A broker-dealer is also required to
disclose commissions payable to the broker-dealer and the Registered
Representative and current quotations for the securities. A
broker-dealer is additionally required to send monthly statements
disclosing recent price information with respect to the penny stock held
in a customer's account and information with respect to the limited
market in penny stocks.
11
USE OF PROCEEDS
---------------
We will not receive any proceeds from the sale of securities being
offered by our selling shareholders.
We will receive proceeds to the extent that any holder of a warrant
decides to exercise such warrant and intend to use the proceeds from the
exercise of any of the 2,000,000 warrants for working capital and
acquisitions. If all of the 2,000,000 warrants are exercised at $4.00, we
will receive gross proceeds of $8,000,000.
If less than all of the 2,000,000 warrants are exercised, we will
use any proceeds raised first for working capital then any remaining
funds will be used for general corporate purposes.
We expect to incur expenses of approximately $160,000 in connection
with the registration of the shares.
DETERMINATION OF OFFERING PRICE
-------------------------------
Prior to this offering, there has been no market for our common
stock. The offering price of the shares was arbitrarily determined and
bears no relationship to assets, book value, net worth, earnings, actual
results of operations, or any other established investment criteria.
Among the factors considered in determining the price were our historical
sales levels, estimates of our prospects, the background and capital
contributions of management, the degree of control which the current
shareholders desired to retain, current conditions of the securities
markets and other information.
DIVIDEND POLICY
---------------
It is our present policy not to pay cash dividends and to retain
future earnings for use in the operations of the business and to fund
future growth. Any payment of cash dividends in the future will be
dependent upon the amount of funds legally available, our earnings, our
financial condition, our capital requirements and other factors that the
board of directors may think are relevant.
12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
-----------------------------------------------------------
The following is a discussion of our results of operations and our
liquidity and capital resources. To the extent that our analysis
contains statements that are not of a historical nature, these statements
are forward-looking statements, which involve risks and uncertainties.
See "Forward-Looking Statements." Our analysis and discussion should be
read in conjunction with our financial statements and the related notes
included elsewhere in this filing.
Forward-Looking Statements
- --------------------------
All statements, trend analyses, and other information herein
contained relative to markets for the Company's products and/or the
Company's operations or financial results constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform
Act of 1995 (the Act). Forward-looking statements include statements
which are predictive in nature, which depend upon or refer to future
events or conditions, which include words such as "anticipate," "could,"
"feel," "believes," "plan," "estimate," "expect," "should," "intend,"
"will," and other similar expressions. In addition, any statements
concerning future financial performance, ongoing business strategies or
prospects and possible future Company actions which may be provided by
management are also forward-looking statements as defined by the Act.
Forward-looking statements are based on current expectations and
projections about future events and are subject to known and unknown
risks, uncertainties and other factors which may cause actual results to
be materially different from those contemplated by the forward-looking
statements. Such factors include, but are not limited to, general
economic conditions, including prevailing interest rate levels and stock
market performance; and the factors described in this section and
elsewhere in this filing. These forward-looking statements are not
guaranties of future performance and the Company has no specific
intention to update these statements.
Overview
- --------
Legend Motors Worldwide, Inc. (a Nevada corporation) was incorporated in
the state of Nevada on September 14, 2004 as a C corporation.
On July 1, 2005, the Company entered into an agreement to acquire 49% of
the outstanding common stock of LA West, Inc. (an Indiana corporation)
for 1,582,492 shares of the Company's common stock. LA West, Inc. was
originally incorporated on January 26, 1988 and is headquartered in LaGrange,
Indiana.
On July 1, 2005, the Company entered into an agreement to acquire the
remaining 51% of the outstanding common stock of LA West, Inc. (an
Indiana corporation) for 1,647,084 shares of the Company's common stock. LA
West, Inc. was originally incorporated on January 26, 1988 and is
headquartered in LaGrange, Indiana.
On July 1, 2005, the Company entered into agreements to acquire all of
the outstanding common stock of GT 40 North America, Inc. (a Florida
corporation) for 1,847,084 shares of the Company's common stock. GT 40 North
America, Inc. was originally incorporated on September 5, 2003 and is
headquartered in Westfield, Indiana.
13
As a result of the transactions described above, Legend Motors Worldwide,
Inc. is the successor company to the business activities of the aforementioned
companies.
We are recognized as a leader in the assembly of high quality van and
truck conversions and other motor vehicle component assemblies. This
reputation has enabled us to develop key, long term relationships with
major automobile manufacturers and dealers.
Critical Accounting Policies and Estimates
- ------------------------------------------
The Company's discussion and analysis of its financial condition and
results of operations are based upon the single entity Financial
Statements of LA West, Inc. and GT 40 North America, Inc., which have
been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these financial
statements required the use of estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. On an on-going
basis, the Company evaluates these estimates. The Company bases its
estimates on historical experiences and on various other assumptions that
are believed to be reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying value of
assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
The audited single entity Financial Statements of LA West, Inc. and GT 40
North America, Inc. are included elsewhere in this filing and should be
read in conjunction with management's discussion and analysis of
financial condition and results of operations
BUSINESS SEGMENTS
- -----------------
The Company operates two reportable business segments:
1. Van, truck and SUV Conversions.
2. Motor vehicle component assemblies.
OVERALL RESULTS OF OPERATIONS - Twelve Months Ended December 31, 2004 and 2003
- ------------------------------------------------------------------------------
Van, Truck and SUV Conversions
- ------------------------------
Total revenues for the twelve months ended December 31, 2004 increased
$2,065,790, or 17.1%, to $14,164,076 from $12,098,286 for the twelve
months ended December 31, 2003.
Van conversion revenues for the twelve months ended December 31, 2004
decreased $2,241,096, or 29.5%, to $5,356,587 from $7,597,683 for the
twelve months ended December 31, 2003. The decrease is primarily
attributable to the overall decline in consumer demand for conversion
vans. Management is addressing this issue with a move to commercial van
production. This is an area of concentration for acquisition in 2006.
Truck and SUV conversion revenues for the twelve months ended December
31, 2004 increased $4,056,933, or 108.2%, to $7,806,905 from $3,749,972 for
the twelve months ended December 31, 2003. The increase is primarily
14
attributable to the substantial upswing in consumer demand for modified
trucks and SUVs. With existing demand increasing, the company expects this
trend to continue.
Other revenues for the twelve months ended December 31, 2004 increased
$249,953, or 33.3%, to $1,000,584 from $750,631 for the twelve months
ended December 31, 2003. This increase is primarily attributable to
an increase in OEM marketing assistance earned and the overall increase in
the population of Company products in the marketplace.
Cost of goods sold for the twelve months ended December 31, 2004
increased $1,600,335, or 19.5%, to $9,817,587 from $8,217,252 for the
twelve months ended December 31, 2003. The increase is primarily
attributable to the overall increase in conversion
sales. There is also an affect as a result of changes in the product
mix. Company projections for product mix in 2006 show increased margins
due to a trend to higher value added product sales.
Gross profit as a percent of revenues was 30.7% for the twelve months
ended December 31, 2004 compared to 32.1% for the twelve months ended
December 31, 2003. The decrease is primarily attributable to the
staffing of an internal paint department and an increase in finished
product freight costs.
Selling, general, and administrative expenses decreased $73,672, or
(2.0)%, to $3,586,824 for the twelve months ended December 31, 2004 from
$3,660,496 for the twelve months ended December 31, 2003. The decrease
is primarily attributable to management's initiative to tighten controls
over administrative spending.
As a percentage of revenue, selling, general, and administrative expenses
were 25.3% for the twelve months ended December 31, 2004 compared to
30.3% for the twelve months ended December 31, 2003.
Interest and miscellaneous income (expense) increased $175,285, or
173.6%, to $(276,259) for the twelve months ended December 31, 2004 from
$(100,974) for the twelve months ended December 31, 2003. The increase
is primarily attributable to a gain realized on a weather-related
involuntary conversion during 2003. Although it is possible, management
considers it unlikely that such an event will recur.
Motor Vehicle Component Assemblies
- ----------------------------------
Total revenues for the twelve months ended December 31, 2004 increased
$500,300, or 667.1%, to $575,300 from $75,000 for the period from
September 5, 2003 (inception) to December 31, 2003.
Motor vehicle component assembly revenues for the twelve months ended
December 31, 2004 increased $535,300 to $535,300 from $-0- for the period from
September 5, 2003 (inception) to December 31, 2003. The increase reflects the
sale of six of the prototype vehicles produced during 2004.
Franchise fee revenues for the twelve months ended December 31, 2004
decreased $35,000, or (46.7)%, to $40,000 from $75,000 for the period
15
from September 5, 2003 (inception) to December 31, 2003. The decline
reflects management's decision to abandon its dealer network development
initiative in favor of establishing an internal sales and marketing
department.
Cost of goods sold for the twelve months ended December 31, 2004
increased $969,428, or 3,606.2%, to $996,310 from $26,882 for the
period from September 5, 2003 (inception) to December 31, 2003. The
increase reflects the assembly of six prototype and two production assemblies
during 2004 as compared to zero assemblies during 2003.
Gross profit was $(421,010) for the twelve months ended December 31, 2004
as compared to $48,118 for the for the period from September 5, 2003
(inception) to December 31, 2003. The decrease reflects the production
of six prototype and two production assemblies during 2004 as compared to
zero assemblies during 2003.
Selling, general, and administrative expenses increased $731,642, or
471.0%, to $886,981 for the twelve months ended December 31, 2004 from
$155,339 for the period from September 5, 2003 (inception) to December
31, 2003. The increase reflects the general ramp up of overall
operations, the hiring of a production manager, the hiring of two sales
and marketing representatives and the hiring of a financial controller.
As a percentage of revenue, selling, general, and administrative expenses
were 154.2% for the twelve months ended December 31, 2004 compared to
207.1% for the period from September 5, 2003 (inception) to December 31,
2003.
Interest and miscellaneous income (expense) increased $47,324, or
8,062.0%, to $(47,911) for the twelve months ended December 31, 2004 from
$(587) for the period from September 5, 2003 (inception) to December 31,
2003. The increase is primarily attributable to the accrual of interest
on shareholder and related party loans. These loans were converted into common
stock during the second quarter of 2005.
Liquidity and Capital Resources
- -------------------------------
Van, Truck and SUV Conversions
- -------------------------------
The primary source of liquidity of this segment has been cash generated
by operations.
Cash and cash equivalents were $72,197 as of December 31, 2004 compared
to $73,895 as of December 31, 2003.
Capital expenditures were $56,030 during the twelve months ended December
31, 2004 compared to $37,568 during the twelve months ended December 31,
2003.
Long term debt was $526,699 as of December 31, 2004 compared to
$749,044 as of December 31, 2003.
With respect to this segment, the Company maintains a secured credit
agreement with a commercial lender. Under the terms of the secured
credit agreement, the Company has a line of credit for up to $650,000.
Interest is payable monthly at the prime rate plus 0.5% (5.75% at
December 31, 2004). The line of credit matures on October 5, 2005 and is
16
collateralized by all the business assets of the van, truck and SUV conversion
segment. The outstanding balance on the line of credit was $438,000
as of December 31, 2004 compared to $515,000 as of December 31, 2003.
Specially Constructed Vehicles
- ------------------------------
The primary sources of liquidity of this segment have been cash generated
by operations, shareholder loans and related party loans.
Cash and cash equivalents were $0 as of December 31, 2004 compared
to $15,667 as of December 31, 2003.
Capital expenditures were $152,884 during the twelve months ended
December 31, 2004 compared to $63,988 for the period from September 5,
2003 (inception) to December 31, 2003.
Overall
- -------
Management believes that the Company's existing operations will not
require significant capital expenditures during 2005. Management believes
that existing cash balances, cash flow to be generated from operating
activities and available borrowing capacity will be sufficient to fund
operations and capital expenditure requirements for at least the next twelve
months. At this time management is not aware of any factors that would have a
materially adverse effect on cash flow during this period.
We do anticipate raising additional capital for acquisitions.
With respect to the Company van, truck and SUV conversion products,
chassis inventory is passed through to the Company's customers with no
gain or loss through COD terms on delivered product, which is standard in the
industry. The Company maintains a small amount of readily available parts such
as custom rims and equipment, miscellaneous lighting, step rails, etc. The
majority of parts are purchased only to fill current orders.
The Company does not intend to maintain inventory in excess of
a few units outside of production for immediate sale of replica vehicles.
The Company anticipates maintaining a small amount of inventory of
readily available parts such as wiring harnesses, dials air conditioning
units, alternators, tires and belts when it is able to purchase them on
favorable terms.
Recent Accounting Pronouncements
- --------------------------------
In December 2004, the FASB issued SFAS No. 123 (Revised 2004), Share-
Based Payments ("SFAS 123R"). SFAS 123R requires all share-based
payments to employees, including grants of employee stock options, to be
recognized in the income statement based on their fair values. The
Company is required to adopt the new standard in the first interim period
beginning after June 15, 2005. The Company maintains no share-based
compensation plans and does not expect the adoption of SFAS 123R to have
a material effect on its financial statements.
In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary
Assets, an amendment of APB Opinion 29 ("SFAS 153"). SFAS 153 requires
that exchanges of nonmonetary assets be measured based on the fair values
of the assets exchanged, and eliminates the exception to this principle
17
under APB Opinion 29 for exchanges of similar productive assets. The
Company is required to adopt the new standard in the first interim period
beginning after June 15, 2005. The Company does not expect the adoption
of SFAS 153 to have a material effect on its financial statements.
In December 2004, the FASB issued SFAS No. 151, Inventory Costs, an
amendment of ARB No. 43, Chapter 4 ("SFAS 151"). SFAS 151 clarifies that
abnormal amounts of idle facility expense, freight, handling costs and
wasted materials should be recognized as current-period charges and
requires the allocation of fixed production overheads to inventory based
on the normal capacity of the production facilities. The Company is
required to adopt the new standard in the first interim period beginning
after June 15, 2005. The Company has not yet determined the affect, if
any, of the adoption of SFAS 151 on its financial statements.
18
BUSINESS
--------
GENERAL
- -------
Legend Motors Worldwide was started in 2003 after several years of
research into the exotic sports car market. Former IndyCar teammates
Andrew Broadley, son of the famous Lola creator, Eric Broadley; Bob
Hancher, former IndyCar team Owner; and George Recentio, former Team
Manager anticipated the expansion of the exotic sports car market that is
now taking place. We are strategically located in the heart of the
automotive racing capitol and, accordingly, are able to attract the
highest caliber mechanics as well as benefit from our proximity to
premium component sources.
In 2005, LA West, Inc. (luxury truck, SUV & van conversion operation)
was combined with GT 40 North America, Inc. (exotic supercar replica
operation) to form Legend Motors Worldwide, an organization formed to
provide the highest quality cars and trucks for the automobile
enthusiast. LA West, a wholly owned subsidiary of Legend Motors,
headquartered in LaGrange, Indiana, offers exclusive luxury van
conversions, sport truck conversions and SUV conversions. These
vehicles can be equipped with trim upgrades such as captain chairs,
paneling, raised roofs, sofa chairs, television sets, fold out beds
and even kitchens and bathrooms. LA West has been in operation for 17
years and is a five-time recipient of Ford's Quality Excellence Award.
LA West also maintains an after market parts distribution system and a
service support program. LA West maintains extensive, well-recognized
distribution channels and an accomplished marketing team that has
generated as many as 1,800 unit sales annually. LA West has entered
into an inventory consignment agreement with each of the big three
domestic U.S. automakers (Ford, GM and Chrysler) thereby providing
superior marketing and distribution for company products. This merger
provides Legend Motors with an experienced sales force and proven
distribution channels along with extensive automotive production
experience.
The Company operates out of two facilities. The first is a
state-of-the-art 78,000 square foot manufacturing and training
facility. The facility includes an in-house paint line that allows for
custom painting of all vehicles. In addition to the quality paintwork
performed at the facility, vans and trucks are also modified to suit
customer ideas. This facility is located at 1995 East US 20, LaGrange,
Indiana 46761. It was built in 2000 and is on 22 acres of land.
Approximately 6,500 square feet of space, consisting of 12 offices, is
used for administration, and approximately 65,000 square feet of space
is used for productivity assembly of the conversions. Production,
service and delivery of the exotic supercar replicas operate in
approximately 6,500 square feet of space. The second facility houses
our research and development operations for the exotic supercar
replica operation. This facility is located at 17924 U.S. 31 North,
Westfield, Indiana 46074. The 12,600 square foot facility, which is on
2.45 acres of land, includes 5 offices for administration and design,
an automotive showroom and assembly space sufficient to meet our
research and development projects for the foreseeable future
Our automobile assembly operations focus on delivering a complete
line of replica supercars and roadsters from the 1930's through the
1970's; a legendary era of auto racing that offered classic designs
that still appear ahead of their time. We are a component car
assembler that handcrafts an in-house designed chassis with all other
required items including wiring, plumbing, brakes, interior wheels,
tires and paint completed at our factory. Legend Motors delivers
state-of-the-art versions of motor vehicles that are otherwise unattainable
19
for most motor sports enthusiasts, including the GT40 Mk.1. Legend Motors
products are sold without drive-trains, however we have established
relationships with highly qualified service facilities around the
country that can install engines and transmissions to our
specifications so as to ensure performance at the highest levels. By
duplicating the styling of historic motor vehicles, we are able to rapidly and
economically construct short production runs for established bases of
consumers that desire our products and have the financial ability to
pay for them. These fans of the supercar era will be able to select
from the following lineup of models, with more to be added as research
warrants:
+ GT Mk. I reproduction (available in street and race versions)
+ 1936 Ford Truck Reproduction
By selecting premium automotive components such as carbon fiber
composite bodies and performance based power trains and then handcrafting
each car by highly trained and experienced racecar mechanics, the company
is able to deliver high tech roller performance cars ready for final
assembly of engine & transmission before they are individually delivered
directly to the new owner. Reflecting a comprehensive approach to
meeting the customized standards of its target market, we provide
personalized service by selling to consumers through a select network of
exotic sports car and luxury automobile dealerships.
INDUSTRY OVERVIEW
- -----------------
We have estimated that customers who purchase conversion vans or
trucks and exotic sports cars and vintage trucks have an annual household
income greater than $100,000 and find making such a purchase to be
inconsequential.
Luxury Truck & Van Conversion Industry
- --------------------------------------
Conversion vehicles are typically manufactured by an automaker and
then modified for transportation and recreation use by a company
specializing in customized vehicles. Many of these vehicles are equipped
with trim upgrades such as captains chairs, paneling, raised roofs, sofa
chairs, television sets, beds, kitchens and bathrooms; all the comforts
of home. Types of conversion vehicles include vans, pickup trucks and
sport utility vehicles. We focus primarily on vans and trucks for the
time being.
The van conversion industry flourished in the late 1970's and early
1980's. Thousands of converters joined the ranks of those buying
vans, sprucing them up and reselling them for large profits. The Big
Three American auto makers joined the fray and developed conversion
programs in which the auto maker would contract with approved converters
who would convert a certain number of vehicles and then market the vans
to the auto makers' dealerships.
Kit Car and Component Car Industry
- ----------------------------------
In house research has been performed on the historical accuracy of
details for each product produced.
20
The Exotic/Super-Luxury Automobile market is approximately 7,000
units or $1.5 billion annually while the Ultra-Luxury/Prestige Sports
Coupe market enjoys over four times the sales volume, more than 30,000
units per year or approximately $3 billion annually. This translated
into a combined United States market of $4.5 billion in 2002. Road and
Track, as well as many other specialty auto magazines, has consistently
stated that there is a growing market for mid-engine sports cars priced
at or above $150,000. This leaves a tremendous opportunity for Legend
Motors to leverage its racecar experience into profitable gains for its
shareholders.
Mainstays such as Ferrari and Lamborghini have remained focused on
the exotic sports car segment over the past 30 years and offer products
ranging in price from $135,000 to $250,000. Over the years, companies
such as Fiat and Alfa Romeo have exited the U.S. market and until
recently manufacturers such as Ford, Aston Martin and Maserati
have not challenged the cult-like dominance of Ferrari and Lamborghini.
However, sales data and economic evidence has highlighted the demand for
new products in this space.
From 1986 through 2000, the U.S. automobile luxury market
experienced its longest and strongest rise in history. Unit sales
between 1997 and 2002 grew by 17% and despite 9/11 and the economic
recession, luxury sales fared better in 2001 and 2002 than either
standard or compact vehicles. The strength of this data proved to Legend
Motors management that the time was right for its offerings and this
decision is further validated by the decisions of other leading
automotive manufacturers. For the 2005 model year there are new models
by Ford, Maserati and Porsche. Ford is offering its production GT
version at a manufacturer's suggested retail price (MSRP) of approximately
$150,000. As Ford is only expected to produce 1500 cars each year for 3
years, the waitlist is long, dealers are raising prices above the MSRP and
prices in the secondary market are being bid up to $300,000. The Porsche
Carrera GT, is set to list at $440,000 and has a similarly long waiting list
for prospective buyers. Clearly, the demand for exotic sports cars is not
being met regardless of prices that are significantly higher than the Legend
Motors products.
While traditional car companies do not have the ability to
profitably manufacture short production runs, small companies with
experience designing and building in the racecar industry can profit
handsomely as they do not have the bloated R & D expenses, union labor,
and high overhead of the larger manufacturers. On small production runs,
efficiencies would allow for a profit after the first few cars. By
combining off-the-shelf, high-performance parts, a car can be engineered
quickly that will have the look and feel of the original car while adding
luxuries today's car buyers demand.
Legend Motors Worldwide is positioned to become a leading competitor
in the "component car" industry. While the term "kit car" is commonly
misused, there is a significant difference between kit cars and component
cars. The majority of "kit car" products are sold as unassembled "kits"
of individual components that generally do not have engines or
transmissions installed at time of delivery to the customer. For car
enthusiasts with the skills, tools, facilities, and time required to do
the job, the personal assembly aspect of kit cars may be more enjoyable
than driving the finished product. However, other consumers without the
required resources desire to purchase components and contract for
customized assembly of high-tech performance roller cars ready for final
assembly of engine & transmission. Legend Motors is structured as a pure
play in the component car industry and should not be considered a "kit
car" company in any way. All Legend Motors products are ready to perform
at the highest level the moment a customer accepts delivery. We are a
component car assembler that handcrafts an in-house designed chassis with
all other required items including wiring, plumbing, brakes, interior
wheels, tires and paint completed at our factory. Legend Motors delivers
21
state-of-the-art versions of cars that are otherwise unattainable for
most motor sports enthusiasts, including the GT40 Mk.1. Legend Motors
products are sold without drive-trains however we have established
trained facilities around the country to install your engine and
transmission to our spec to perform at the highest levels.
The industry generates approximately 1,600 component cars annually
with overall gross revenue of approximately $75,000,000. While kit cars
can be acquired for many familiar models such as the Ferrari Testarossa,
Lamborghini Diablo, Lotus Super Seven and other exotic cars, Car and
Driver magazine calls the Shelby Cobra the "undisputed darling of the kit
car industry." It is estimated that the Cobra represents 70% of all kit
cars sold with over 48 companies providing different versions of this
classic. According to Kit Car magazine, there are approximately 245
manufacturers, but 75% of all cars produced are generated by less than a
dozen companies, such as Superformance International and Factory Five,
Inc. who both claim to be the world's largest component car manufacturer
with estimated annual sales of approximately 200 cars. In 2004, Shelby
Automobiles Inc. led by Carroll Shelby became a publicly traded entity
and will be fighting for market share in this highly competitive niche.
Target Market Demographics
- --------------------------
With the baby boomer generation hitting their 40's and 50's, the
market for luxury cars is ripe for growth and that trend should continue
for decades. According to a Ford Motor executive, people are turning to
the luxury market earlier in life than they traditionally have. One
important difference between this group and previous generations is that
they tend to view cars as a way to enjoy driving rather than avoiding it.
Consumers in this category have continually shown their preference for
bigger engines and sporty suspensions. Most importantly, there is a
convergence of the target market and their fascination with the supercar
era that is represented by the company's product line.
To help identify prospective purchasers for Legend Motors products
and to develop its marketing strategy, the company has evaluated various
customer-profiling studies. While the details of this data will remain
proprietary, we have identified approximate household income and wealth
necessary to afford a car up to the $150,000 price point. During this
process, the company attempted to identify the difference between regular
"rich people" and those affluent individuals that are highly likely to
purchase a luxury vehicle. The latest edition of Merrill Lynch and Cap
Gemini Ernst & Young's World Wealth Report suggested that finding luxury
car buyers should not be a problem as the number of what they call "high-
net-worth individuals" grew by 2.9 percent last year to almost 7.2
million.
Sample demographics of the Legend Motors Target Market are as follows:
Sex: Male
Age Range 35-64
Average Age 51
Marital Status Married
Household Income Greater than $100,000 annually
Education College Graduate
Employment Working Full Time
Avg. number of Vehicles Owned 4
22
We believe that our customer base will continue to increase on a
worldwide basis. We do not anticipate that any one customer's purchases
will account for over 5% of our sales. Accordingly, the loss of any
individual customer will not have a material adverse effect on Legend
Motors Worldwide.
PRODUCTS
- --------
Current Products and Services
- -----------------------------
Primary revenues will be generated from the luxury conversions of
vans and trucks and the sale of our GT Mk. 1. Secondary revenue will
be derived from several sources. As the installed base of our cars
expands in the marketplace, an increasing percentage of revenues will be
obtained from customers who need replacement parts or upgrades for items
such as brake pads, rotors, shocks and alternators. With a typical gross
margin of 50% and minimal related administrative expense, substantial
revenues from parts are expected to flow to the bottom line.
Additionally, we expect that service revenues will be generated from
repairs of our primary products after the customers take possession, with
a profit margin potential of 60%. Projected service categories range
from body repair to engine maintenance and repair. Lastly, we have
developed lines of apparel & accessories products that will be sold
through our website at typical profit margin potentials of up to 35% per
item.
We selected a road version GT Mk. 1 reproduction of the famous 1966
Ford GT40 as our first model for production due to management's analysis
of the potential market, the established base of GT40 enthusiasts
demanding replicas, and the ability to generate immediate cash flow.
Historically, the GT40 Mk. 1's first prototype, named after its height of
40", was based on a 1963 design by Eric Broadley, famed head of Lola
Cars. From prototype to production, there was only one goal in mind - to
challenge Ferrari's dominance at Le Mans. In 1966, the GT40's took 1st,
2nd and 3rd at Le Mans. In 1967 Dan Gurney and A. J. Foyt finished
several miles ahead of the second place Ferrari. The Gulf-backed GT40
commanded victory in 1968 and 1969 becoming the only car of the same
chassis number to win Le Mans twice.
While race performance created the legend and forever solidified it
in the minds of automotive historians and enthusiasts, no one could have
predicted the demand and prices achieved in the years that followed.
Purchasing one of the 97 original GT40's manufactured by Ford in the
1960's can easily cost in excess of $1,000,000. At a base list price of
$121,000, we believe that the Legend GT Mk. 1 is well positioned to
attract the unmet demand for this classic.
Planned Products and Services
- -----------------------------
The costs of research and development for new models of exotic
sports cars at companies such as Porsche and Ferrari typically run
into the tens of millions of dollars and require several years before
production. Comparatively, we are able to identify models from
historical cars & trucks and bypass the majority of the research and
development costs to produce saleable prototypes. To date, we have
incurred product development and prototype production expenditures of
approximately $2,940,000. These expenditures were incurred with
respect to the development efforts on six models. These cars have
23
been selected for their historic appeal, established demand from our
target market, and the low assembly costs. Four of the six model
bodies fit on the chassis being used for current production of the GT
Mk. 1 and will require minimal additional expenditures for design,
engineering, and production. Currently produced models are as
follows:
+ The GT Mk. 1 race version is the same as the road version except for
enhanced performance from a 7.0 liter, 427 cu. in., 550 hp engine.
+ The Cobra Daytona Coupe was a another Shelby design that later was
transformed into the coupe version by Peter Brock that won the
Federation Internationale de l'Automobile (FIA) GT Championship in
1965. In the years leading up to the FIA Championship the
lightweight, fuel efficient Cobra raced smaller circuits winning the
first pro United States Road Racing Circuit (USRRC) title with 6 of
8 victories. The Cobras then moved on to the Ferrari dominated FIA.
The Cobras were slightly slower going into the circuit but the Cobra
team found a loophole in the FIA rules allowing them to modify the
body slightly under the protest of Ferrari. The Cobra team finally
developed a coupe that tested with a top speed of over 180 mph, a
gain of over 15 mph, enough to challenge Ferrari. The Daytona first
raced in Daytona and soon became known as the "Daytona Cobra Coupe."
The Cobras posed such a challenge to the Ferraris that there were
tales of saboteurs on the Cobras. After the championship in 1965 a
new challenge came to the Cobra that fall. Shelby received a call
from Goodyear to make "record attempts" at the Bonneville Salt Flats
challenging archrival Firestone. The Cobra went on to claim all the
straight-line records possible in its class going on to claim the
12-hour endurance record on the salt flats for a total of 23
international USAC/FIA records, including the incredible 150 mph
average for 12 hours.
We are expanding our product offerings from not only exotic supercar
replicas but also utilizing the skill of the team to produce a vintage
line of trucks. The first product to be produced will be a 1936 Ford
pickup. This model was extremely popular in its original day and holds a
great deal of nostalgic interest.
The company is also diversifying its conversion capabilities to
produce a line of Toter Homes, rigs used for hauling various types of
trailers. The rigs are large enough to house living accommodations
including beds, bathrooms and kitchen areas. Both projects are in the
early stages of research & development.
Cost, profit margin and revenue potential for the 1936 Ford pickup
and the Toter Home have not yet been defined. Production stages could
begin as early as late '05 or early '06.
We will continue to evaluate models to add to our product lines
either through internal development or strategic acquisitions that will
strengthen our brand and enhance shareholder value. Acquisitions of
other component car manufacturers will only be considered if their models
are consistent with our corporate strategy and if the acquisition is less
expensive than internal product development. Currently, we have
identified two such opportunities and have begun preliminary negotiations
to acquire a company with commercial applications for our custom van
line, and another company who would compliment our replica business.
24
PRODUCT DEVELOPMENT
- -------------------
Research
- --------
During the fiscal years 2002 thru 2004, research was done for the
supercar replica operation on the potential market, legislation, and
regulations regarding the compliance of primary products and their
viability in the market place. Our operations have been structured so as
to comply with applicable US laws and regulations, including the
Department of Transportation certification requirements.
Product Development
- -------------------
During calendar year 2003, one GT Mk. 1 prototype unit was begun.
During 2004 six prototypes and two production vehicles were completed. We
expect to be able to complete a total of fifteen model units in calendar
year 2005 and fifty in calendar year 2006.
As of December 31, 2004, approximately $2,100,000 had been spent on
product development and prototype production with respect to the GT Mk.
1 vehicle line.
Product Development Programs and Commitments Summary
- ----------------------------------------------------
We anticipate completing the prototype of the GT Mk. 1 race version,
Daytona Coupe and '36 Ford pickup models by the end of calendar 2005. In
year 2006 we expect to develop one product per quarter in our development
facility, and we will integrate all acquisition production products to
the LA West Standard.
Proposed New Products Requiring Material Investment Resources
- -------------------------------------------------------------
We expect to expand new product offerings over time. New product
offerings are expected to be the greatest source of growth for the
company. For example, we have developed design plans that will allow us
to produce a 1936 Ford pickup replica model along with toter homes.
PATENTS AND TRADEMARKS
- ----------------------
We have patents, trademarks and trade names for the following:
Patents
1. Design Patent - Exterior of a fiberglass hood - Application #29-222,947
2. Design Patent - Laser Fade Paint Design - Registered Copyright
#VA 620-652
Trademarks and Trade names
1. LA West and design Registration Number 1,961,460
2. Choo Choo Customs and design Registration number 1,425,160
3. L'il Red Express Truck and design Registration number 78,436,306
4. D'elegant Conversions
25
When we believe it is appropriate we will seek patent or trademark
protection for other products, marks or services.
SUPPLIERS
- ---------
The company does not depend upon any single source of supply for any
of production component.
MARKETING - CHANNELS OF DISTRIBUTION:
- -------------------------------------
We primarily market our products to franchised new car dealers
across the continental United States through the efforts of our company
sales staff, which includes eight employed and five independent
contracted representatives. With average experience in the car business
of 15 years, our outside sales force travels to strategic markets across
the U.S. We plan to expand into foreign markets, selling our supercar
assembly products through a master distributor outside the U.S. beginning
with entry into the South American market in 2006 followed by the
European market in 2007.
The sales force is responsible for sales of both luxury conversions
and exotic supercars. We believe that combining efforts for both products
brings better efficiencies to the overall operation.
In addition, we employ a sales and marketing manager who is
responsible for the sales force and general advertising and promotion.
Specific duties include targeted direct mailings, national print ads in
magazines and newspapers, maintenance of our Internet website, and
tradeshow operations.
LA West's market is virtually any Ford, General Motors and Chrysler
franchised dealer in the U.S. for its vans, trucks and SUV's.
Advertising and Promotion of Exotic Supercars, Vintage Trucks and Street Rods
- -----------------------------------------------------------------------------
Our primary marketing efforts are focused on a direct-to-consumer as
well as mass-market media advertising. To further its reach and exposure,
we are evaluating several upscale publications such as Robb Report and
DuPont Registry for a fit with our target demographics. Our management
has discovered that tradeshows offer the greatest potential to rapidly
expose our products and give our marketing personnel the opportunity to
meet more qualified customers than in any other scenario.
Additionally, we are currently evaluating our options to display
demo supercar vehicles at exotic auto shows and auctions including the
Carlisle and SEMA car events, the Barrett Jackson and Kruse International
auctions as well as Metropolitan auto shows and other shows such as
Detroit's American International Automobile Show and the New York Auto
Show.
Website
- -------
We believe that our website (www.legendmotorsww.com) is a
particularly strong marketing tool that yields cost effective, worldwide
exposure. Our website continues to receive several leads daily through
its interactive section where interested parties may request information
26
online. The website features our primary product models along with
general information describing the manufacturing facility, location,
product specifications, product pricing and optional upgrade pricing. We
also use the website to promote our apparel and accessories, which is an
additional source of revenue and exposure for our product and brand
image.
COMPETITION
- -----------
We have several close competitors in the luxury van and truck
conversion industry. These competitors include Starcraft Conversions,
Tuscany Automotive Solutions, Explorer Conversions and Southern Comfort
Conversions. We have few close competitors that offer assembled replica
products. ERA Replica Automobiles and CAV Holdings are the closest
comparable competitors because they offer the same type model, the Ford
GT40 Replica.
We expect the markets for our products to become even more
competitive if and when more companies enter them and offer competition
in price, support, additional value added services, and quality, among
other factors.
LEGAL PROCEEDINGS
- -----------------
We are not currently involved in litigation, nor are we a party to
any pending litigation.
EMPLOYEES
- ---------
As of the date of this prospectus we have 58 full-time employees,
including 21 in production, 8 in indirect operations, 10 in
sales/marketing, 7 in research and development, 11 in administration and
our CEO. In Addition, we have 5 independent sales contractors. We
presently have no labor union contract with any union and we do not
anticipate unionization of our personnel in the foreseeable future. We
believe our relationship with our employees is good.
DESCRIPTION OF PROPERTY
- -----------------------
Legend Motors Worldwide production facility is located at 1995 East
US 20, LaGrange, Indiana 46761. The 78,000 square foot facility was built
in 2000 and is on 22 acres of land. Approximately 6,500 square feet of
space, consisting of 12 offices, is used for administration, and
approximately 65,000 square feet of space is used for assembly of the
conversions. Production, service and delivery of the exotic supercar and
roadster replicas operate in approximately 6,500 square feet of space.
We have recently relocated our research and development operations
for the exotic supercar and roadster replica operation to 17924 U.S. 31 North,
Westfield, Indiana 46074. The 12,600 square foot facility, which is on
2.45 acres of land, includes 5 offices for administration and design, an
automotive showroom and assembly space sufficient to meet our research
and development projects for the foreseeable future
We lease both facilities from related parties. The monthly lease
payment for our LaGrange facility is $29,000 and the lease terminates on
February 28, 2010. The monthly lease payment for our Westfield facility
is $6,500 and the lease terminates on June 30, 2010.
27
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND/FINANCIAL
DISCLOSURE.
- -------------------------------------------------------------------------
We have had no disagreements with our accountants on accounting and
financial disclosure.
28
MANAGEMENT
----------
Directors and Executive Officers
- --------------------------------
Our directors, executive officers and key employees are as follows:
Name Age Position Director Since
Vern Kauffman 46 President, Chief Executive 2005
Officer and Director
Lowell G. Hancher 51 Director 2005
John G. Pendl 44 Chief Financial Officer
and Director 2005
Andrew Broadley 42 Chief Technical Officer
Joel Updike 57 Director 2005
Dennis Severson 53 Director 2005
Vern Kauffman
- -------------
Mr. Kauffman is the founder of LA West and has over 17 years of
dedication to excellence with that company. The award winning
organization was started by Mr. Kauffman customizing a single van and
reselling it. Mr. Kauffman grew the company to over $13 Million in
revenue in 2004. Mr. Kauffman has relationships at Ford, Chrysler and
General Motors and provides a personal touch to management with the
intention of maintaining a corporate culture to prosper around the
staples of quality and profit.
Lowell G. Hancher, Jr.
- ----------------------
Mr. Hancher is a founder of Legend Motors with over 20 years of
experience in product development and corporate management. He is
currently a principal of Commerce Street Venture Group, Inc. in which he
founded in 1999. He has proven to excel at developing business models in
multiple industries. As part of his ventures, he was a team owner in the
motor sports world for over 10 years, predominantly Indy Car. Among the
professionals that he has worked with throughout the years are A.J. Foyt,
Rick Mears, Danny Sullivan, Eddie Cheever, Darrell Waltrip, Scott
Goodyear, Jeff Ward, Steve Knapp, Dick Simon, Dennis Firestone, Ed Pimm,
Wally Dallenbach, and Todd Bodine. He is also responsible for introducing
the PI research technology (telemetry systems) to the U.S., which is now
used in all motor sports. Mr. Hancher has extensive experience with
corporate governance and is currently on the Board of Directors of other
publicly traded companies.
Andrew Broadley
- ---------------
Mr. Broadley is a founder of Legend Motors and possesses superior product
knowledge as well as the business acumen required to develop and maintain
strong working relationships with production personnel. Andrew's
experience as a racecar/streetcar designer began in childhood through
learning about the industry and engineering techniques from his legendary
father, Eric Broadley. After becoming a full time Engineer in the Lola
design office, Andrew was responsible for the design of the Lola T87/90
Sports 2000 car - the first in a series of models that won every national
and Pro-Series championship in the USA and Europe. Following this
success, Andrew became Lola's engineering liaison to their Indy/ChampCar
customers (1990-92) where he helped Indy legend AJ Foyt, Eddie Cheever,
Scott Goodyear, Buddy Lazier and other drivers to reach their goals. He
has also served as Senior Director of Engineering and Chief Engineering
Officer for Indian Motor Cycle Corporation(2002-03), directing over 40
employees, 22 of which were degreed engineers.
29
Joel Updike
- -----------
Joel M. Updike has more than 30 years experience in the banking and
consulting industries. The Indiana native graduated from Indiana State
University with a degree in Business Management and Finance before going
on to graduate and postgraduate studies in Banking in Wisconsin. Mr.
Updike previously worked as a bank supervisor for Federal Deposit
Insurance Corporation and as Senior Vice President for a Kendallville,
Indiana bank and trust company. He spent eight years starting in 1996
serving as President, Owner/Operator of Broadway & Jefferson Limited,
Inc., a commercial laundry facility, which he sold in 2004. He currently
has a small business and loan acquisition-consulting firm.
John G. Pendl
- -------------
Mr. Pendl is a corporate finance professional and CPA with experience in
controllership, capital budgeting, treasury and acquisitions. Prior to
joining Legend Motors in July, 2004, John served as Vice President, Chief
Financial Officer and Treasurer of Goran Capital, Inc. from October, 2001
to July, 2004, a publicly traded investment holding company. Earlier in
his career, John was an M&A Analyst and Divisional Controller for
Collision Team of America, Inc., a subsidiary of Ford Motor Company and a
tax consultant with the firm of Price Waterhouse.
Dennis Severson
- ---------------
Mr. Severson has over 25 years of business experience with growth-
oriented companies and understands how to develop profitable products.
Mr. Severson is currently President of Commerce Street Venture Group,
Inc. and has been with the company since 1999. His comfort with a
technical approach to product sales is well-suited to the company's
vehicles and his leadership skills will assist in aggressively developing
the company. As a previous Vice President with Dean Witter specializing
in private placements, he is uniquely capable of interacting with the
investing public and currently sits on the Board of Directors of a
publicly traded company. Mr. Severson has also been with management and
trading for Archer Daniels Midland, the largest publicly traded
agricultural company. In addition, he has been involved with management
of professional sports teams.
Directors' Remuneration
- -----------------------
Our directors are presently not compensated for serving on the board
of directors. It is anticipated they will be and it will be consistent
with public companies in the sector and of like size and profit.
Executive Compensation
- ----------------------
Employment Agreements
- ---------------------
We entered into an employment agreement with Vern Kauffman, our
President and Chief Executive Officer, effective July 1, 2005 for a
period of 5 years under which he will continue as our President.
The agreement calls for Mr. Kauffman to receive an annual
salary of $175,000 plus a bonus equal to five percent (5%) of
our net income before taxes. The agreement also provides for Mr.
Kauffman to receive standard benefits such as health insurance coverage,
sick and vacation time and use of an automobile.
30
Summary Compensation Table
- --------------------------
The following table sets forth the total compensation paid or
accrued for the years ended December 31, 2004, 2003 and 2002 to our Chief
Executive Officer and our other most highly compensated executive officer
who is serving as executive officers at the end of our last fiscal year.
Annual Compensation
Name and Other Restricted Securities All
Principal Annual Stock Underlying LTIP Other
Position Year Salary Bonus Compensation Awards Options Payouts Compensation
- --------- ---- ------ ----- ------------ ---------- ---------- ------- ------------
Vern Kauffman,
President 2004 130,000 - - - - - -
2003 130,000 - - - - - -
2002 129,750 - - - - - -
Andrew Broadley 2004 - - - - - - 103,205
2003 - - - - - - 24,999
2002 - - - - - - -0-
Stock Option Grants in the past fiscal year
- -------------------------------------------
We have not issued any grants of stock options in the past fiscal year.
31
PRINCIPAL SHAREHOLDERS
----------------------
The following table sets forth information regarding beneficial
ownership of our common stock as of the date of this prospectus and as
adjusted to reflect the sale of all shares which may potentially be sold
in connection with this registration statement, by (i) those shareholders
known to be the beneficial owners of more than five percent of the voting
power of our outstanding capital stock, (ii) each director, and (iii) all
executive officers and directors as a group:
Number of Percent Percent
Name and Address of Shares Before After
Beneficial Owner Owned Offering Offering (1)
- ---------------- --------- -------- --------
Anthony D. Altavilla Trust
& Leslie T. Altavilla
Trust DTD
14300 Clay Terrace Blvd.
Ste. 269
Carmel, IN 46032 500,130 5.001% 0%
Commerce Street Venture
Group, Inc.
17322 Westfield Park Road
Westfield, IN 46074 (2) 1,194,177 9.951% 0%
GT40 North America, Inc.
17924 US 31 North
Westfield, IN 46074 2,250,000 22.500% 0%
G. C. Hancher
1176 Pebblebrook Dr.
Noblesville, IN 46060 (3) 1,190,000 9.916% 0%
Vern Kauffman
58639 CR 35 Street
Middlebury, IN 46540 (4) 2,792,084 23.267% 0%
Magellan Capital
Management, Inc.
9940 Glenburr Court
Fishers, IN 46038 (5) 698,334 5.819% 0%
Dennis Severson
19560 Winwood Parkway
Noblesville, IN 46062 275,000 2.750% 0%
John G. Pendl 65.000 0.541% 0%
1995 East US 20
LaGrange, Indiana 46074 (6)
All Directors and Officers
as a Group (5 Persons) (7) 4,322,084 36.017% 0%
(1) Assumes that all warrants are exercised and all shares offered
hereunder are sold.
(2) Includes warrants to purchase 400,000 shares of common stock that
may be acquired at an exercise price of $4.00 per share commencing
120 days following the effective date of this prospectus. A five-member
committee has equal voting or investment control over shares owned by
Commerce Street Venture Group. Mr. Lowell G. Hancher is a member
of that group.
(3) Includes warrants to purchase 400,000 shares of common stock that may be
acquired at an exercise price of $4.00 per share commencing 120 days
following the effective date of this prospectus. G.C. Hancher is the
wife of Lowell G. Hancher, one of our directors.
(4) Mr. Kaufman is currently our President. Includes warrants to purchase
1,000,000 shares of common stock that may be acquired at an exercise
price of $4.00 per share commencing 120 days following the date of this
prospectus.
(5) Includes warrants to purchase 200,000 shares of common stock that may be
acquired at an exercise price of $4.00 per share commencing 120 days
following the effective date of this prospectus. Managing Partners David
Dozier and Marlin Marinaro of Magellan Capital Management have
the ultimate voting or investment control over shares owned by
this company.
(6) Mr. Pendl is our Chief Financial Officer and a Director.
(7) Includes warrants to purchase 1,000,000 shares of common stock that may
be acquired by our President at an exercise price of $4.00 per share
commencing 120 days following the date of this prospectus, 400,000 shares
of common stock that may be acquired by the wife of a Director at an
exercise price of $4.00 per share commencing 120 days following the
effectuve date of this prospectus adn 790,000 shares of common stock held
by the wife of such Director.
32
SELLING SHAREHOLDERS
--------------------
The following table sets forth certain information with respect to the
ownership of our common stock by selling shareholders as of the date of
this prospectus. Unless otherwise indicated, none of the selling
shareholders has or had a position, office or other material relationship
with us within the past three years.
Ownership of Ownership of
Shares of Common Shares of Common
Stock Prior to Number of Stock After the
Offering Shares Offering
----------------------- Offered ---------------------
Selling Shareholder Shares(1) Percentage(1) Hereby Shares Percentage Notes
- ----------------------------------------------------------------------------------------------
Joseph Abrahams 25,000 0.250% 25,000 0 0%
Anthony D. Altavilla
Trust & Leslie T.
Altavilla Trust DTD 500,130 4.176% 500,130 0 0%
Mark Anderson 6,250 * 6,250 0 0%
Michael Bagela 6,250 * 6,250 0 0%
BAM Ventures 20,000 * 20,000 0 0%
Kurtis Bear 6,250 * 6,250 0 0%
Andrew Broadley 100,000 * 100,000 0 0% 2
Richard Caron 100,000 * 100,000 0 0%
Stanley Coher 25,000 * 25,000 0 0%
Commerce Street
Capital Group, Inc. 281,568 2.346% 281,568 0 0%
Commerce Street Venture
Group, Inc. 1,194,177 9.951% 1,194,177 0 0% 3
Stephen I. Cooper 50,000 * 50,000 0 0%
John P. Cusick 12,500 * 12,500 0 0%
Todd Doom 58,333 * 58,333 0 0%
Angela Dozier 10,000 * 10,000 0 0%
David Dozier 20,000 * 20,000 0 0%
Olivia Dozier 10,000 * 10,000 0 0%
Steve Erickson 85,000 * 85,000 0 0%
Michael Felsher 12,500 * 12,500 0 0%
David Finke 58,333 * 58,333 0 0%
Barry S. Gevertz 12,500 * 12,500 0 0%
Paul Gilmartin 25,000 * 25,000 0 0%
Michael Glita & Joan
D. Glita 100,000 * 100,000 0 0%
GO CO LLC 30,000 * 30,000 0 0%
Michael Golden 12,500 * 12,500 0 0%
Jane Graham 10,000 * 10,000 0 0%
G S Property
Management, Inc. 25,000 * 25,000 0 0%
GT40 North
America, Inc. 2,250,000 18.750% 2,250,000 0 0%
G C Hancher 1,190,000 9.916% 1,190,000 0 0% 3, 4
HDE, Inc. 25,000 * 25,000 0 0%
Heidi A. Hoffman 50,000 * 50,000 0 0%
Daniel Hopkins 6,250 * 6,250 0 0%
Integrity Ventures,
Inc. 216,647 1.805% 216,647 0 0%
C James Jensen 150,000 1.250% 150,000 0 0%
Donald D. Johnson &
Ann J. Johnson JTTEN 6,250 * 6,250 0 0%
Vern Kauffman (3)(5) 2,792,084 23.067% 2,792,084 0 0% 2, 5
John Kellard 50,000 * 50,000 0 0%
David B. Kelly 25,000 * 25,000 0 0%
Mark G. Langmade 18,750 * 18,750 0 0%
Josh Larson 12,500 * 12,500 0 0%
Erwin Lemowitz TTEE 25,000 * 25,000 0 0%
Walter Lewis &
Gail Lewis 15,000 * 15,000 0 0%
Peter Liebert 15,000 * 15,000 0 0%
33
M&A Holdings 40,835 * 40,835 0 0%
Magellan Capital
Management, Inc. (6) 698,334 5.819% 698,334 0 0% 6
Jeffery Markowitz 37,500 * 37,500 0 0%
Dennis M. Mills 6,250 * 6,250 0 0%
Marlin G. Molinaro 281,250 2.344% 281,250 0 0%
Marlin G. Molinaro &
Melody Marinaro 97,072 * 97,072 0 0%
Oakbridge Equities 109,165 * 109,165 0 0%
Oakbrooke Consulting
Group, Inc. 120,000 * 120,000 0 0%
Kenneth Oestreich &
Sheryl Oestreich 6,250 * 6,250 0 0%
Paul Palmer 12,500 * 12,500 0 0%
Tomas Payan 12,500 * 12,500 0 0%
John Pendl 65,000 * 65,000 0 0% 2
George Recentio 100,000 * 100,000 0 0%
Robert John Richards 6,250 * 6,250 0 0%
Allen Reiss 12,500 * 12,500 0 0%
Steve Rizzone &
Mashid Rizzone 100,000 * 100,000 0 0%
Rydare, LLC 50,000 * 50,000 0 0%
Kevin Sallstrom 25,000 * 25,000 0 0%
David R. Schreiber 12,500 * 12,500 0 0%
Dennis Severson 275,000 2.292% 275,000 0 0% 7
Alan C. Shoaf 97,072 * 97,072 0 0%
H. Eliot Subin 25,000 * 25,000 0 0%
Samuel Trancredi 25,000 * 25,000 0 0%
Jeff Tetzlaff 25,000 * 25,000 0 0%
The Delaware Escrow
Group, Inc. 25,000 * 25,000 0 0%
Dwight R. Wade, Jr. 25,000 * 25,000 0 0%
James Whipple 25,000 * 25,000 0 0%
Theresia Whitfield 10,000 * 10,000 0 0%
Nick Williams 6,250 * 6,250 0 0%
Richard J. Wood 6,250 * 6,250 0 0%
Shannon J. Wood 6,250 * 6,250 0 0%
Edward W. Zappe 12,500 * 12,500 0 0%
- --------------------------------------------------------------------------------------------
Total 12,000,000 100.000% 12,000,000 0 0%
1) Assumes that all warrants are exercised and all shares are sold
pursuant to this offering and that no other shares of common stock are
acquired or disposed of by the selling shareholders prior to the
termination of this offering. Because the selling shareholders may
sell all, some or none of their shares or may acquire or dispose of
other shares of common stock, no reliable estimate can be made of the
aggregate number of shares that will be sold pursuant to this offering
or the number or percentage of shares of common stock that each
shareholder will own upon completion of this offering.
2) Current employee.
3) Includes warrants to purchase 400,000 shares of common stock that may
be acquired at an exercise price of $4.00 per share commencing 120 days
following the date of this prospectus.
4) G. C. Hancher is the wife of Lowell G. Hancher, one of our directors.
5) Mr. Kauffman is currently our President. Includes warrants to
purchase 1,000,000 shares of common stock that may be acquired at an
exercise price of $4.00 per share commencing 120 days following the date of
this prospectus.
6) Includes warrants to purchase 200,000 shares of common stock that may
be acquired at an exercise price of $4.00 per share commencing 120 days
following the date of this prospectus.
7) Mr. Severson is one of our directors.
34
CERTAIN TRANSACTIONS
--------------------
On July 1, 2005, Legend Motors Worldwide, Inc. entered into an agreement
to acquire 49% of the outstanding common stock of LA West, Inc. (an
Indiana corporation) for 1,582,492 shares of our common stock. LA West,
Inc. was originally incorporated on January 26, 1988 and is headquartered
in LaGrange, Indiana.
On July 1, 2005, Legend Motors Worldwide, Inc. entered into an agreement
to acquire the remaining 51% of the outstanding common stock of LA West,
Inc. (an Indiana corporation) for 1,647,084 shares of our common stock.
LA West, Inc. was originally incorporated on January 26, 1988 and is
headquartered in LaGrange, Indiana.
On July 1, 2005, Legend Motors Worldwide, Inc. entered into agreements to
acquire all of the outstanding common stock of GT 40 North America, Inc.
(a Florida corporation) for 1,847,084 shares of our common stock. GT 40
North America, Inc. was originally incorporated on September 6, 2003 and
is headquartered in Westfield, Indiana.
35
DESCRIPTION OF SECURITIES
-------------------------
General
- -------
Our authorized capital stock consists of 50,000,000 shares of common
stock, par value $0.0001 per share. As of the date of this prospectus,
10,000,000 shares of common stock are issued and outstanding. The
transfer agent for our common stock is Atlas Stock Transfer of Salt Lake
City, Utah.
Common Stock
- ------------
We are authorized to issue 50,000,000 shares of our common stock,
$0.0001 par value, of which 10,000,000 shares are issued and outstanding
as of the date of this prospectus. The issued and outstanding shares of
common stock are fully paid and non-assessable. Except as provided by law
or our certificate of incorporation with respect to voting by class or
series, holders of common stock are entitled to one vote on each matter
submitted to a vote at a meeting of shareholders.
The holders of shares of common stock will be entitled to receive
dividends, if and when declared payable from time to time by the board of
directors, from funds legally available for payment of dividends. Upon
our liquidation or dissolution, holders of shares of common stock will be
entitled to share proportionally in all assets available for distribution
to such holders.
Preferred Stock
- ---------------
The board of directors has the authority, without further action by
our shareholders, to issue up to 20,000,000 shares of preferred stock,
par value $.0001 per share, in one or more series and to fix the rights,
preferences, privileges and restrictions thereof, including dividend
rights, conversion rights, voting rights, terms of redemption,
liquidation preferences and the number of shares constituting any series
or the designation of such series. No shares of preferred stock are
currently issued and outstanding. The issuance of preferred stock could
adversely affect the voting power of holders of common stock and could
have the effect of delaying, deferring or preventing a change of our
control.
Warrants
- --------
We presently have 2,000,000 warrants outstanding. Each warrant
entitles the holder thereof to purchase one share of common stock at a
price per share of $4.00 commencing 120 days following the date of this
prospectus. All warrants expire December 31, 2007.
Pursuant to applicable federal and state securities laws, in the
event a current prospectus is not available, the warrant holders may be
precluded from exercising the warrants and we would be precluded from
redeeming the warrants. There can be no assurance that we will not be
prevented by financial or other considerations from maintaining a current
prospectus. Any warrant holder who does not exercise prior to the
redemption date, as set forth in our notice of redemption, will forfeit
the right to purchase the common stock underlying the warrants, and after
the redemption date or upon conclusion of the exercise period, any
outstanding warrants will become void and be of no further force or
effect, unless extended by our Board of Directors.
36
The number of shares of common stock that may be purchased with the
warrants is subject to adjustment upon the occurrence of certain events,
including a dividend distribution to our shareholders or a subdivision,
combination or reclassification or our outstanding shares of common
stock. The warrants do not confer upon holders any voting or any other
rights as our shareholders.
We may at any time, and from time to time, extend the exercise
period of the warrants, provided that written notice of such extension is
given to the warrant holders prior to the expiration date then in effect.
Also, we may reduce the exercise price of the warrants for limited
periods or through the end of the exercise period if deemed appropriate
by the Board of Directors. Any extension of the term and/or reduction of
the exercise price of the warrants will be subject to compliance with
Rule 13e-4 under the Exchange Act including the filing of a Schedule 14E-
4. Notice of any extension of the exercise period and/or reduction of
the exercise price will be given to the warrant holders. We do not
presently contemplate any extension of the exercise period or any
reduction in the exercise price of the warrants. The warrants are also
subject to price adjustment upon the occurrence of certain events
including subdivisions or combinations of our common stock.
Market for Common Equity and Related Stockholder Matters
- --------------------------------------------------------
There is no established public market for our common stock and we
have arbitrarily determined the offering price. Although we hope to be
quoted on the OTC Bulletin Board, our common stock is not currently
listed or quoted on any quotation service. There can be no assurance that
our common stock will ever be quoted on any quotation service or that any
market for our stock will ever develop or, if developed, will be
sustained.
As of July 31, 2005, there were 78 shareholders of record of our
common stock and a total of 10,000,000 shares outstanding. All
10,000,000 shares are being registered in this offering and accordingly
there are no outstanding shares at this time that would be subject to
Rule 144.
37
INDEMNIFICATION
---------------
Article 11 of our Articles of Incorporation includes certain
provisions permitted by the Nevada Revised Statutes, which provides for
indemnification of directors and officers against certain liabilities.
Pursuant to our Articles of Incorporation, our officers and directors are
indemnified, to the fullest extent available under Nevada Law, against
expenses actually and reasonably incurred in connection with threatened,
pending or completed proceedings, whether civil, criminal or
administrative, to which an officer or director is, was or is threatened
to be made a party by reason of the fact that he or she is or was one of
our officers, directors, employees or agents. We may advance expenses in
connection with defending any such proceeding, provided the indemnitee
undertakes to repay any such amounts if it is later determined that he or
she was not entitled to be indemnified by us.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers and
controlling persons pursuant to the foregoing provisions or otherwise, we
have been advised that in the opinion of the SEC such indemnification is
against public policy as expressed in the Securities Act and is
therefore, unenforceable.
38
PLAN OF DISTRIBUTION
--------------------
The selling stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their
shares of common stock on any stock exchange, market or trading facility
on which the shares are then traded or in private transactions at a price
of $3.00 per share. The selling stockholders may use any one or more of
the following methods when selling shares:
- - ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- - block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
- - purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
- - an exchange distribution in accordance with the rules of the
applicable exchange;
- - privately negotiated transactions;
- - a combination of any such methods of sale; and
- - any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under
the Securities Act, if available, rather than under this prospectus.
In order to comply with the securities laws of certain states, if
applicable, the shares may be sold only through registered or licensed
brokers or dealers. In addition, in certain states, the shares may not
be sold unless they have been registered or qualified for sale in such
state or an exemption from such registration or qualification requirement
is available and complied with.
The selling stockholders may pledge their shares to their brokers
under the margin provisions of customer agreements. If a selling
stockholder defaults on a margin loan, the broker may, from time to time,
offer and sell the pledged shares.
Broker-dealers engaged by the selling stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may
receive commissions or discounts from the selling stockholders (or, if
any broker-dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated. The selling stockholders do not
expect these commissions and discounts to exceed what is customary in the
types of transactions involved.
The selling stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within
the meaning of the Securities Act in connection with such sales. In such
event, any commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
39
We will pay all of the expenses incident to the registration,
offering and sale of the shares to the public, but will not pay
commissions and discounts, if any, of underwriters, broker-dealers or
agents, or counsel fees or other expenses of the selling shareholders.
We have also agreed to indemnify the selling shareholders and related
persons against specified liabilities, including liabilities under the
Securities Act.
We have advised the selling shareholders that while they are engaged
in a distribution of the shares included in this prospectus they are
required to comply with Regulation M promulgated under the Securities
Exchange Act of 1934, as amended. With certain exceptions, Regulation M
precludes the selling shareholders, any affiliated purchasers, and any
broker-dealer or other person who participates in such distribution from
bidding for or purchasing, or attempting to induce any person to bid for
or purchase any security which is the subject of the distribution until
the entire distribution is complete. Regulation M also prohibits any
bids or purchases made in order to stabilize the price of a security in
connection with the distribution of that security. All of the foregoing
may affect the marketability of the shares offered hereby in this
prospectus.
LEGAL MATTERS
-------------
The Law Office of James G. Dodrill II, P.A. of Boca Raton, Florida
will provide an opinion for us regarding the validity of the common stock
offered in this prospectus.
EXPERTS
-------
The financial statements of GT 40 North America, Inc. and LA West,
Inc included in this prospectus have been so included in reliance on the
report of Tedder, James, Worden & Associates, P.A., independent accountants,
given on the authority of said firm as experts in auditing and accounting.
40
WHERE YOU CAN FIND MORE INFORMATION
-----------------------------------
We have filed a registration statement under the Securities Act with
respect to the securities offered hereby with the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549. This prospectus, which is a part
of the registration statement, does not contain all of the information
contained in the registration statement and the exhibits and schedules
thereto, certain items of which are omitted in accordance with the rules
and regulations of the Commission. For further information with respect
to Legend Motors Worldwide, Inc. and the securities offered hereby,
reference is made to the registration statement, including all exhibits
and schedules thereto, which may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.
W., Room 1024, Washington, D. C. 20549, and at its Regional Offices
located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 at prescribed rates during regular business hours. You may
obtain information on the operation of the public reference facilities by
calling the Commission at 1-800-SEC-0330. Also, the SEC maintains an
Internet site that contains reports, proxy and information statements, and
other information regarding issuers that file electronically with the
Commission at http://www.sec.gov. Statements contained in this prospectus
as to the contents of any contract or other document are not necessarily
complete, and in each instance reference is made to the copy of such
contract or document filed as an exhibit to the registration statement,
each such statement being qualified in its entirety by such reference. We
will provide, without charge upon oral or written request of any person, a
copy of any information incorporated by reference herein. Such request
should be directed to us at Legend Motors Worldwide, Inc., 17924 US 31
North, Westfield, Indiana 46074, Attention: John G. Pendl, CFO.
Following the effectiveness of this registration statement, we will
file reports and other information with the Commission. All of such
reports and other information may be inspected and copied at the
Commission's public reference facilities described above. The Commission
maintains a web site that contains reports, proxy and information
statements and other information regarding issuers that file
electronically with the Commission. The address of such site is
http://www.sec.gov. In addition, we intend to make available to our
shareholders annual reports, including audited financial statements,
unaudited quarterly reports and such other reports as we may determine.
41
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholder of
L.A. West, Inc.:
We have audited the accompanying balance sheet of L.A. West, Inc. as
of December 31, 2004, and the related statements of income,
stockholder's equity, and cash flows for the years ended December 31,
2004 and 2003. 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 auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of L.A. West,
Inc. as of December 31, 2004, and the results of its operations and
its cash flows for the years ended December 31, 2004 and 2003 in
conformity with accounting principles generally accepted in the United
States of America.
/s/ Tedder, James, Worden & Associates, P.A.
July 1, 2005
Orlando, Florida
L.A. WEST, INC.
BALANCE SHEET
DECEMBER 31, 2004
ASSETS
Current Assets:
Cash $72,197
Accounts Receivable 279,927
Inventories 6,202,014
Prepaid Expenses and Other Current Assets 37,271
------
Total Current Assets 6,591,409
Property and Equipment, Net 278,091
Other Assets 58,435
Total Assets $6,927,935
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts Payable $690,613
Accrued Expenses 299,985
Current Portion of Capital Lease Obligations 38,512
Current Portion of Long Term Debt 14,580
Line of Credit 438,000
Floor Plan Payable 5,354,176
---------
Total Current Liabilities 6,835,866
Long Term Debt, Less Current Portion 35,607
------
Total Liabilities 6,871,473
---------
Commitments and Contingencies
Stockholder's Equity:
Common Stock 1,000
Additional Paid-In Capital 30,000
Retained Earnings 25,462
------
Total Stockholder's Equity 56,462
------
Total Liabilities and Stockholder's Equity $6,927,935
=========
See Accompanying Notes to Financial Statements.
L.A. WEST, INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
2004 2003
---- ----
Net Sales $14,164,076 $12,098,286
Cost of Goods Sold 9,817,587 8,217,252
--------- ---------
Gross Profit 4,346,489 3,881,034
--------- ---------
Operating Expenses (Income):
Selling, General and Administrative Expenses 3,586,824 3,660,496
Loss on Sale of Property and Equipment 40,143 36,088
Gain on Involuntary Conversion -0- (282,341)
-- --------
Total Operating Expenses 3,626,967 3,414,243
--------- ---------
Income from Operations 719,522 466,791
Other Income (Expenses):
Interest Income 111 373
Interest Expense (236,227) (347,600)
------- -------
Total Other Expense (236,116) (347,227)
------- -------
Net Income $483,406 $119,564
======= =======
Weighted Average Shares of Common Stock
Outstanding:
Basic and Diluted 100 100
--- ---
Earnings Per Common Share:
Basic and Diluted $4,834.06 $1,195.64
======== ========
See Accompanying Notes to Financial Statements.
L.A. WEST, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
2004 2003
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $483,406 $119,564
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 119,465 163,466
Loss on Sale of Property and Equipment 40,143 36,088
(Increase) Decrease in Assets:
Accounts Receivable (139,942) 109,153
Raw Materials and Finished Goods 125,339 (33,545)
Floor Planned Chassis 2,639,504 5,057,908
Prepaid Expenses and Other Current Assets 1,319 4,366
Increase (Decrease) in Liabilities:
Accounts Payable (85,677) 19,540
Accrued Expenses (11,317) 14,569
Floor Plan Payable (2,639,504) (5,057,908)
----------- -----------
Net Cash Provided by Operating Activities $532,736 $433,201
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in Other Assets $(9,779) $(9,778)
Purchases of Property and Equipment (56,030) (37,568)
Proceeds from Sale of Property and Equipment 800 200,000
--- -------
Net Cash Provided by (Used in) Investing Activities $(65,009) $152,654
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to Stockholder $(300,666) $(616,530)
Net Proceeds (Repayments) on Line of Credit (77,000) 325,000
Payments on Long Term Debt (13,864) (124,580)
Payments on Capital Lease Obligations (77,895) (109,023)
-------- ---------
Net Cash Used in Financing Activities $(469,425) $(525,133)
--------- ---------
Net Increase (Decrease) in Cash $(1,698) $60,722
Cash - Beginning of Year 73,895 13,173
------ ------
Cash - End of Year $72,197 $73,895
====== ======
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for Interest $247,553 $343,801
======= =======
Cash Paid During the Year for Income Taxes $5,127 $9,824
===== =====
Supplemental Disclosure of Non-cash Investing and
Financing Activities:
A net non-cash distribution of $30,541 was made that
transferred equipment with a net carrying value of
$84,126 and a capital lease obligation of $53,585 to an
entity related to the stockholder through common
ownership.
See Accompanying Notes to Financial Statements.
L.A. WEST, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
Additional Retained
Common Paid in Earnings Total
Stock Capital (Deficit) Equity
------ ------- --------- ------
Balances at December 31, 2002 $1,000 $30,000 $370,229 $401,229
Net Income -0- -0- 119,564 119,564
Distributions -0- -0- (616,530) (616,530)
------ ------- --------- ---------
Balances at December 31, 2003 $1,000 $30,000 $(126,737) $(95,737)
Net Income -0- -0- 483,406 483,406
Distributions -0- -0- (331,207) (331,207)
------ ------- --------- ---------
Balances at December 31, 2004 $1,000 $30,000 $25,462 $56,462
====== ======= ========= =========
See Accompanying Notes to Financial Statements.
L.A. WEST, INC.
Notes to Financial Statements
December 31, 2004
1. BUSINESS
L.A. West, Inc. (the "Company") is primarily engaged in the design,
assembly, and sale of specialty van conversions and truck
modifications throughout the United States of America. The Company's
headquarters and assembly facility are located in LaGrange, Indiana.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounts Receivable - Accounts receivable are recorded at net
realizable value. In the opinion of management, no provision is
deemed necessary for uncollectible accounts at December 31, 2004.
Revenue Recognition - The Company records revenue for the completion
of van conversions and truck modifications when products are shipped,
the price is final or determinable and collection of the sales price
is reasonably assured. The Company utilizes inventory chassis in
conjunction with their van conversions and truck modifications. These
chassis are held on a consignment-like basis until the completion of
the van conversion or truck modification, at which time they are sold
back to the respective manufacturer along with the components of the
Company's products to a designated dealership in accordance with Staff
Accounting Bulletin No. 104, Topic 13: Revenue Recognition. The
Company purchases and resells each floor planned chassis to the
respective manufacturer at the same invoice price, less any dealer
holdback, discounts and other incentives received.
Use of Estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America (GAAP) requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Inventories - Inventories are carried at the lower of cost or market.
The cost is determined using the first-in, first-out method. The
Company evaluates its inventory value at the end of each year to
ensure that it is carried at the lower of cost or market. This
evaluation includes an analysis of its physical inventories, a review
of potential obsolete and slow-moving stock based on historical
product sales and forecasted sales and an overall consolidated
analysis of potential excess inventory. The Company also maintains
inventory chassis consigned to others throughout the year which are
used in conjunction with the components of the Company's sale of
specialty van conversions and truck modifications products. This
consigned inventory makes up the floor plan inventory balance of
$5,354,176 at December 31, 2004.
L.A. WEST, INC.
Notes to Financial Statements
December 31, 2004
To the extent historical physical inventory results are not indicative
of future results and if future events affect, either favorably or
unfavorably, the salability of the Company's products or its
relationship with certain key vendors, the Company's inventory
reserves could differ significantly, resulting in either higher or
lower future inventory provisions.
Property and Equipment - Property and equipment are stated at cost
less accumulated depreciation. Depreciation is provided using the
straight-line method over the estimated useful life of the asset.
Maintenance and repairs are expensed as incurred.
Cost of Goods Sold - The components of cost of goods sold in the
accompanying statements of income include all direct materials and
direct labor associated with the assembly and/or manufacturing of the
Company's products.
Accrued Warranty Costs - Estimated future costs related to product
warranties are accrued as products are sold based on prior experience
and known current events and are included in accrued expenses in the
accompanying balance sheet. Accrued warranty costs have historically
been sufficient to cover actual costs incurred and are included within
cost of goods sold.
Advertising Costs - The Company expenses costs of advertising as
incurred. Advertising costs for the years ended December 31, 2004 and
2003 were approximately $347,000 and $369,000, respectively, and are
included within selling, general and administrative expenses.
Impairment of Long-Lived Assets - The Company evaluates its long-lived
assets for financial impairment as events or changes in circumstances
indicate that the carrying amount of such assets may not be
recoverable. The Company evaluates the recoverability of long-lived
assets used in operations by measuring the carrying amount of the
assets against their estimated undiscounted future cash flows. If
such evaluations indicate that the future undiscounted cash flows of
certain long-lived assets are not sufficient to recover the carrying
value of such assets, the assets are adjusted to their approximate
fair values.
Income Taxes - The Company's shareholder elected to be taxed under the
provisions of Subchapter S of the Internal Revenue Code. Under those
provisions, the Company does not pay federal or state corporate income
taxes on its taxable income. Instead, the shareholder is liable for
individual federal income taxes on the Company's taxable income or net
operating loss. The Michigan Single Business Tax was $5,194 and
$7,858 for 2004 and 2003, respectively. The Pennsylvania franchise
tax was $407 and $315 for 2004 and 2003, respectively.
Concentration of Credit Risk - Financial instruments which potentially
subject the Company to concentrations of credit risk consist
principally of cash. The Company places its cash with high credit
quality financial institutions. At various times throughout 2004, the
Company's cash balance in its cash account held at a financial
institution was in excess of the federally insured limit. The Company
L.A. WEST, INC.
Notes to Financial Statements
December 31, 2004
also maintains chassis inventory on its premises which are purchased
from and sold back to the respective manufacturer at the same price.
The chassis inventory is used in conjunction with the components of
the Company's independent sale of specialty van conversions and truck
modifications products.
3. INVENTORIES
The components of inventories at December 31, 2004 were as follows:
Floor Planned Chassis $5,354,176
Raw Materials 514,450
Finished Goods 333,388
----------
$6,202,014
4. PROPERTY AND EQUIPMENT
Property and equipment, their estimated useful lives and related
accumulated depreciation at December 31, 2004 were as follows:
Useful Life
(Years)
Shop Equipment and Fixtures 7 $493,806
Furniture and Office Equipment 3-5 195,793
Transportation Equipment 6 25,000
Signage 10 13,459
Leasehold Improvements 8-10 71,771
------
799,829
Less Accumulated Depreciation 521,738
-------
$278,091
=======
5. ACCRUED EXPENSES
The components of accrued expenses at December 31, 2004 were as
follows:
Accrued Warranty $201,000
Accrued Property Taxes 23,576
Accrued Payroll 23,177
Accrued Bonuses 26,692
Accrued Vacation 10,000
Accrued Interest 13,146
Other 2,394
-------
$299,985
=======
L.A. WEST, INC.
Notes to Financial Statements
December 31, 2004
6. FLOOR PLAN PAYABLE
The Company held chassis inventory totaling $5,354,176 at December 31,
2004. The Company had a floor plan payable with Ford Motor Credit
Company of $2,895,170, General Motors Acceptance Corporation of
$1,213,587 and Chrysler Financial Company, L.L.C. of $1,245,419 at
December 31, 2004, respectively. The Company accrues and pays
interest monthly on the outstanding floor plan payables ranging from
1% to 2%, as of December 31, 2004, for floor planned chassis held for
less than 90 days and prime plus 1% (6.25% at December 31, 2004) for
floor planned chassis held for greater than 90 days. The Company does
not make any payments on floor plan payable balances outstanding.
7. LINE OF CREDIT
The Company has a revolving line of credit with a maximum amount
available of $650,000. The balance at December 31, 2004 was $438,000.
Interest is payable monthly at the prime rate plus 0.5% (5.75% at
December 31, 2004), and matures on October 5, 2005. The line of
credit is collateralized by all the business assets of the Company and
is guaranteed by the stockholder.
8. LONG TERM DEBT
Long term debt consisted of the following at December 31, 2004:
Note payable to Farmers State Bank,
interest at prime plus 0.75% (6.0%
at December 31, 2004), payable in
equal monthly installments of
principal and interest of $1,396 to
March 2008, collateralized by all
the business assets of the Company
and is guaranteed by the
stockholder. $50,187
Less Current Portion 14,580
------
$35,607
======
Future maturities of long term debt are as follows:
Year Ending
December 31,
2005 $14,580
2006 15,002
2007 15,928
2008 4,677
--------
$50,187
========
L.A. WEST, INC.
Notes to Financial Statements
December 31, 2004
9. GAIN ON INVOLUNTARY CONVERSION
In May 2003, the Company experienced a hail storm which resulted in
damages to the Company's floor plan inventory. During the year ended
December 31, 2003, the Company incurred repair costs of approximately
$258,000 and received insurance recoveries of approximately $540,000,
resulting in a gain on involuntary conversion of approximately
$282,000.
10. RELATED PARTY TRANSACTIONS
The Company's operating facilities are leased from L.A. Investments,
LLC which is 50% owned by the stockholder and 50% owned by the
stockholder's spouse for $22,500 per month. The lease is for a period
of ten (10) years through February 28, 2010 and may be renewed for
five additional one-year terms. Rent expense paid to L.A.
Investments, LLC totaled $270,000 for the years ended December 31,
2004 and 2003, respectively, and is included within selling, general
and administrative expenses.
The Company paid Team L.A. Motorsports, Ltd. $103,000 and $86,800 for
the years ended December 31, 2004 and 2003, respectively, for
advertising and promoting of the Company. The stockholder's spouse
owns 100% of Team L.A. Motorsports, Ltd.
11. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases its operating facilities and certain equipment
under noncancellable lease agreements expiring at various dates
through February 2010. Rental expense amounted to approximately
$272,000 for the years ended December 31, 2004 and 2003, respectively.
The Company also leases various equipment under capital leases
expiring at various dates through June 2005. The leased assets are
included in the balance sheet as part of property and equipment at a
cost of $316,267 as of December 31, 2004. Amortization of these
assets held under capital leases is included with depreciation expense
and was approximately $50,500 for the years ended December 31, 2004
and 2003, respectively.
Future minimum lease payments under non-cancelable operating leases
(with initial or remaining terms in excess of one year) and future
minimum capital lease payments as of December 31, 2004 are as follows:
L.A. WEST, INC.
Notes to Financial Statements
December 31, 2004
Year Ending Capital Operating
December 31, Leases Leases
------------- --------- ---------
2005 $39,619 $329,798
2006 -0- 349,298
2007 -0- 348,325
2008 -0- 348,000
2009 -0- 348,000
Thereafter -0- 58,000
Total minimum lease payments 39,619 $1,781,421
Less amounts representing
interest, with annual
interest rates ranging from
9.76% to 11.71%. 1,107
-----
Present value of net minimum
capital lease payments 38,512
------
Less current portions of
obligations under capital
leases 38,512
------
Obligations under capital
leases, excluding current
portion $-0-
----
12. EMPLOYEE BENEFIT PLAN
The Company has a defined contribution plan (the "Plan") qualifying
under Section 401(k) of the Internal Revenue Code. Substantially all
employees who have met certain service requirements are eligible for
participation in the Plan. Participants may defer and contribute to
the Plan up to 15% of their compensation not to exceed the IRS limit.
The participants' contributions vest immediately, while the Company
contributions vest over six years. The Company's contribution rate is
determined on a year to year basis at the sole discretion of the
Company, not to exceed $3,000 in any plan year. There were no Company
contributions for the years ended December 31, 2004 and 2003.
13. STOCKHOLDER'S EQUITY
The Company has 1,000 shares of no par value common stock authorized
of which 100 shares were issued and outstanding at December 31, 2004.
14. SUBSEQUENT EVENTS
On March 11, 2005, the sole shareholder of the Company entered into an
agreement to sell 49% of the common shares outstanding to Commerce
Street Venture Group, Inc. ("Commerce Street") by executing a note
payable. On June 30, 2005 the last payment on the note payable was
made and the shares were transferred to Commerce Street..
On July 1, 2005, the former sole shareholder entered into a formal
share swap agreement with Legend Motors Worldwide, Inc. ("Legend") for
51% of the Company's shares. Pursuant to this agreement, the
L.A. WEST, INC.
Notes to Financial Statements
December 31, 2004
shareholder exchanged 51 shares of the Company's common stock for
shares of Legend. Also on July 1, 2005, Commerce Street entered into
a formal share swap agreement with Legend. Pursuant to this
agreement, Commerce Street exchanged 49 shares of the Company's common
stock for shares of Legend. As a result of the two exchanges, the
Company became a wholly-owned subsidiary of Legend.
On March 11, 2005, the Company entered into an employment agreement
with its President and Chief Executive Officer. The agreement is
effective July 1, 2005, has a 5 year term and provides for an annual
salary of $175,000 plus a bonus equal to five percent (5%) of the
Company's net income before taxes. The agreement also provides for
certain employee benefits, including health insurance coverage, sick
and vacation time and use of an automobile.
15. Pending Adoption of Accounting Standard
In January 2003, The Financial Accounting Standards Board issued
Interpretation No. 46 (FIN 46), Consolidation of Variable Interest
Entities, and in December 2003 issued a revision to that
interpretation (FIN 46R). FIN 46R replaces FIN 46 and addresses
consolidation by business enterprises of variable interest entities
that possess certain characteristics. A variable interest entity
("VIE") is defined as (a) an ownership, contractual or monetary
interest in an entity where the ability to influence financial
decisions is not proportional to the investment interest, or (b) an
entity lacking the invested capital sufficient to fund future
activities without the support of a third party. VIEs should be
consolidated by their primary beneficiary, including those to which
the usual condition for consolidation does not apply. This
interpretation is effective immediately to VIEs created after December
31, 2003. For all other non-public entities, it is effective for the
first annual period beginning after December 15, 2004. The
requirements of FIN 46R will apply to the Company for its year ending
December 31, 2005.
As disclosed in footnote 10 (RELATED PARTY TRANSACTIONS) above, the
Company's operating facilities are leased from L.A. Investments, LLC
(LAI). LAI owns the building that houses those operating facilities.
While management has not yet completed its evaluation of the
requirements of FIN 46R, management believes it is reasonably possible
the Company will consolidate or be required to provide certain
additional disclosures about LAI when FIN 46R becomes effective.
When FIN 46R becomes effective, the net amount that may be added to
the Company's balance sheet may be reported either as the cumulative
effect of an accounting change or by restating previously issued
financial statements with a cumulative-effect adjustment as of the
beginning of the first year restated. Since the Company is not
required to restate its financial statements, it does not intend to do
so.
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
GT 40 North America, Inc.:
We have audited the accompanying balance sheet of GT 40 North America,
Inc. as of December 31, 2004, and the related statements of
operations, stockholders' deficit, and cash flows for the year ended
December 31, 2004 and for the period from September 5, 2003
(inception) to December 31, 2003. 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 auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of GT 40
North America, Inc. as of December 31, 2004, and the results of its
operations and its cash flows for the year ended December 31, 2004 and
the period from September 5, 2003 (inception) to December 31, 2003 in
conformity with accounting principles generally accepted in the United
States of America.
/s/ Tedder, James, Worden & Associates, P.A.
July 1, 2005
Orlando, Florida
Balance Sheet
December 31, 2004
ASSETS
Current Assets:
Cash $-0-
Inventories 398,681
Prepaid Expenses and Other Current Assets 6,123
---------
Total Current Assets 404,804
Property and Equipment, Net 155,882
Other Assets 10,890
------
Total Assets $571,576
=======
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts Payable $210,199
Accounts Payable - Related Parties 139,239
Accrued Expenses 47,198
Accrued Interest 48,483
Loans From Stockholder 754,782
Loans From Related Parties 835,285
Total Current Liabilities 2,035,186
Commitments and Contingencies
Stockholders' Deficit:
Common Stock 100
Accumulated Deficit (1,463,710)
Total Stockholders' Deficit (1,463,610)
Total Liabilities and Stockholders' Deficit $571,576
See Accompanying Notes to Financial Statements.
GT 40 North America, Inc.
Statements of Operations
Period From
September 5,
2003
Year Ended (Inception) to
December 31, December 31,
2004 2003
---- ----
Net Sales $575,300 $75,000
Cost of Goods Sold 996,310 26,882
------- ------
Gross Profit (Loss) (421,010) 48,118
Selling, General and
Administrative Expenses 886,981 155,339
------- -------
Loss from Operations (1,307,991) (107,221)
Other Income (Expense):
Interest Expense (47,911) (587)
-------- -----
Loss Before Income Taxes (1,355,902) (107,808)
Income Tax Expense -0- -0-
Net Loss $(1,355,902) $(107,808)
============ ==========
Weighted Average Shares of
Common Stock Outstanding:
Basic and Diluted 100 100
Loss Per Common Share:
Basic and Diluted $(13,559.02) $(1078.08)
============ ==========
See Accompanying Notes to Financial Statements.
GT 40 North America, Inc.
Statements of Cash Flows
Period From
September 5,
2003
Year Ended (Inception) to
December 31, December 31,
2004 2003
---- ----
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Loss $(1,355,902) $(107,808)
Adjustments to Reconcile Net Loss to Net
Cash Used In Operating Activities:
Depreciation 30,019 3,110
Loss on Sale of Equipment 301 -0-
(Increase) Decrease in Assets:
Inventories (237,213) (161,468)
Prepaid Expenses and Other Current Assets 17,251 (23,374)
Other Assets (10,350) (540)
Increase (Decrease) in Liabilities:
Accounts Payable 181,438 28,761
Accounts Payable - Related Parties 114,869 24,370
Accrued Interest 47,896 587
Accrued Expenses 47,198 -0-
Customer Deposits (143,000) 143,000
--------- -------
Net Cash Used In Operating Activities (1,307,493) (93,362)
----------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchases of Property and Equipment (152,884) (63,988)
Proceeds from Sale of Property and
Equipment 5,500 -0-
----- ---
Net Cash Used In Investing Activities (147,384) (63,988)
--------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Issuance of Common Stock -0- 100
Loans From Stockholder 702,842 74,000
Loans From Related Parties 736,368 98,917
------- ------
Net Cash Provided by Financing Activities 1,439,210 173,017
--------- -------
Net Increase (Decrease) in Cash (15,667) 15,667
Cash - Beginning of Period 15,667 -0-
------ ---
Cash - End of Period $-0- $15,667
==== =======
Supplemental Disclosure of Non-cash Investing and Financing Activities:
The Company sold property and equipment to a stockholder for carrying value
which was used to reduce the principle of the loans from stockholder by
$22,060.
See Accompanying Notes to Financial Statements.
GT 40 North America, Inc.
Statements of Stockholders' Deficit
For the Period from September 5, 2003 (Inception) to December 31, 2004
Total
Common Stock Accumulated Stockholders'
Shares Amount Deficit Deficit
Inception (September 5, 2003) -0- $-0- $-0- $-0-
Issuance of Common Stock 100 100 -0- 100
Net Loss -0- -0- (107,808) (107,808)
---- ---- --------- ---------
Balances at December 31, 2003 100 $100 $(107,808) $(107,708)
Net Loss -0- -0- (1,355,902) (1,355,902)
---- ---- ----------- -----------
Balances at December 31, 2004 100 $100 $(1,463,710) $(1,463,610)
=== === =========== ===========
See Accompanying Notes to Financial Statements.
GT 40 North America, Inc.
Notes to Financial Statements
December 31, 2004
1. BUSINESS
GT 40 North America, Inc. (the "Company") is primarily engaged in
the design, assembly, and sale of specially constructed cars
throughout the United States of America, Canada, Mexico, and Europe.
The Company's headquarters and assembly facility are located in
Westfield, Indiana.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition - The Company recognizes revenue when the
customer accepts the product and title passes to the customer. The
Company sold one year franchise rights in 2004 and 2003 of $40,000
and $75,000, respectively, which granted the franchisees the
exclusive rights to sell the Company's motor vehicles within
specific designated areas.
Use of Estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States of America (GAAP) requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Inventories - Inventories are carried at the lower of cost or
market. The cost is determined using the average cost method. The
Company evaluates its inventory value at the end of each year to
ensure that it is carried at the lower of cost or market. This
evaluation includes an analysis of its physical inventories, a
review of potential obsolete and slow-moving stock based on
historical product sales and forecasted sales and an overall
consolidated analysis of potential excess inventory.
To the extent historical physical inventory results are not
indicative of future results and if future events affect, either
favorably or unfavorably, the salability of the Company's products
or its relationship with certain key vendors, the Company's
inventory reserves could differ significantly, resulting in either
higher or lower future inventory provisions.
Property and Equipment - Property and equipment are stated at cost
less accumulated depreciation. Depreciation is provided using the
straight-line method over the estimated useful life of the asset.
Maintenance and repairs are expensed as incurred.
Cost of Goods Sold - The components of cost of goods sold in the
accompanying statements of operations include all direct materials,
labor and overhead associated with the assembly and/or manufacturing
of the Company's products.
Impairment of Long-Lived Assets - The Company evaluates its long-
lived assets for financial impairment as events or changes in
circumstances indicate that the carrying amount of such assets may
not be recoverable. The Company evaluates the recoverability of
long-lived assets used in operations by measuring the carrying
amount of the assets against their estimated undiscounted future
cash flows. If such evaluations indicate that the future
undiscounted cash flows of certain long-lived assets are not
sufficient to recover the carrying value of such assets, the assets
are adjusted to their fair values.
GT 40 North America, Inc.
Notes to Financial Statements
December 31, 2004
Income Taxes - The Company accounts for income taxes utilizing the
asset and liability method. This approach requires the recognition
of deferred tax assets and liabilities for the expected future tax
consequences attributable to temporary differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and
tax credit carryforwards. 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. The effect on deferred tax assets and
liabilities of a change in tax rate is recognized in income in the
period that included the enactment date.
Research and Development Costs - Research and development costs are
expensed as incurred. Research and development costs totaled $18,262
for the year ended December 31, 2004 and $1,690 for the period from
September 5, 2003 (inception) to December 31, 2003.
Concentration of Credit Risk - Financial instruments which
potentially subject the Company to concentrations of credit risk
consist principally of cash. The Company places its cash with high
credit quality financial institutions. At various times throughout
2004, the Company's cash balance in its cash account held at a
financial institution was in excess of the federally insured limit.
3. INVENTORIES
Inventories consisted of the following at December 31, 2004:
Raw Materials $213,675
Work in Progress 31,450
Finished Goods 153,556
---------
$398,681
GT 40 North America, Inc.
Notes to Financial Statements
December 31, 2004
4. PROPERTY AND EQUIPMENT
Property and equipment, their estimated useful lives and related
accumulated depreciation at December 31, 2004 were as follows:
Useful Life
(Years)
-------
Shop Equipment and Fixtures 2-5 $125,325
Furniture and Office Equipment 3-10 16,139
Transportation Equipment 5 13,375
Signage 7-10 5,702
Construction in Process n/a 26,500
------
187,041
Less Accumulated Depreciation 31,159
------
$155,882
5. ACCRUED EXPENSES
The components of accrued expenses at December 31, 2004 were as
follows:
Accrued Payroll $24,531
Accrued Payroll Taxes 21,656
Other 1,011
-----
$47,198
6. INCOME TAXES
The components of deferred tax assets and liabilities at December
31, 2004 were as follows:
Deferred Tax Assets (Liabilities):
Accrued Expenses $9,962
Inventory Accounting 60,238
Property and Equipment (949)
Net Operating Loss Carryforwards 508,845
-------
578,096
Less Valuation Allowance 578,096
-------
Net Deferred Tax Assets (Liabilities) $-0-
====
The Company has recorded a full valuation allowance against its
deferred tax assets since management believes that based upon
current available objective evidence it is more likely than not that
the deferred tax asset will not be realized.
GT 40 North America, Inc.
Notes to Financial Statements
December 31, 2004
A reconciliation between the effective rate for income taxes and the
amount computed by applying the statutory Federal income tax rate to
loss from continuing operations before provision for income taxes
for the year ended December 31, 2004 and the period from September
5, 2003 (inception) to December 31, 2003 is as follows:
For the Period
From September 5
Year Ended 2003 (Inception) to
December 31, 2004 December 31, 2003
----------------- -------------------
Federal Statutory Tax (34.0)% (34.0)%
Nondeductible Expenses 0.1% 0.1%
Increase in Valuation Allowance 33.9% 33.9%
----- -----
Effective Tax Rate -0-% -0-%
==== ====
The Company utilizes a June 30 year end for Federal and state income
tax purposes. As of December 31, 2004 and 2003, the Company has net
operating loss carryforwards of approximately $1,284,000 and
$30,000, respectively. The carryforward will expire on June 30,
2024, if not utilized by that date. The Company's net operating
loss carry forwards may be subject to annual limitations, which
could reduce or defer the utilization of the losses as a result of
an ownership change as defined in Section 382 of the Internal
Revenue Code. The tax effects of the temporary differences between
reportable financial statement income and taxable income are
recognized as a deferred tax asset and liability.
7. COMMITMENTS AND CONTINGENCIES
The Company leases its offices and production facility under a non-
cancelable operating lease agreement that expires in November 2009.
The minimum future rental commitment at December 31, 2004 under this
operating lease is as follows:
Year Ending
December 31,:
- -------------
2005 $120,000
2006 $120,000
2007 $120,000
2008 $120,000
2009 $100,000
--------
$580,000
========
GT 40 North America, Inc.
Notes to Financial Statements
December 31, 2004
8. STOCKHOLDERS' EQUITY
The Company has 1,000 shares of $1.00 par value common stock
authorized of which 100 shares were issued and outstanding at
December 31, 2004.
9. RELATED PARTY TRANSACTIONS
The Company has entered into transactions with various related
parties. All loans due to stockholders and companies in which those
stockholders have interest were demand notes bearing interest at the
rate of 5%. The following balances were outstanding at December 31,
2004:
Accounts Payable - Related Parties (Stockholder) $110,239
Accounts Payable - Related Parties (Related Companies) 29,000
------
$139,239
Accrued Interest - Stockholder $29,160
Accrued Interest - Related Companies 19,323
------
$48,483
Loans from Stockholder $754,782
=======
Loans from Related Companies $835,285
=======
The following transactions occurred with related parties
during the year ended December 31, 2004 and for the period
from September 5, 2003 (inception) to December 31, 2003 and
are included in selling, general and administrative expenses
in the statements of operations:
For the Period
From September 5
Year Ended 2003 (Inception) to
December 31, 2004 December 31, 2003
----------------- -------------------
Consulting Fees Paid to Stockholders $160,961 $62,500
Engineering Fees Paid to Stockholder 103,205 -0-
------- ---
$264,166 $62,500
------- ------
For the period from October 1, 2003 through December 1, 2004, the
Company rented office and production space from a stockholder.
Total rent payments under this arrangement were $64,947 and $16,237
during the year ended December 31, 2004 and for the period from
September 5, 2003 (inception) to December 31, 2003, respectively.
Effective December 1, 2004, the Company leased office and production
space from a stockholder (see Note 7). Total rent payments under
this lease during 2004 were $10,000. In addition, the Company was
required to deposit $10,000 with the landlord. This amount
represents the rent for the last month of the lease period and is
included in other assets.
10. SUBSEQUENT EVENTS
At various dates from January 2005 through June 2005, the Company
received additional net fundings of approximately $673,000 through
additional loans from a company in which a stockholder has an
ownership interest.
On June 27, 2005, the Company entered into formal debt agreements
with the respective related parties to which the Company had
outstanding loans to consolidate the respective loans and accrued
interest due to each related party. The new agreements allow for
the converging of outstanding debt and accrued interest into common
stock of the Company at a stated price of two dollars per share.
The converging is at the option of the note holder. The respective
promissory notes each have accrued interest due on August 31, 2005
and any remaining outstanding principle and accrued interest payable
on August 31, 2006 may be converted to common stock of the Company.
On June 28, 2005, each of the holders of loans payable executed
their respective options to convert their respective outstanding
principle balances to common stock.
At the close of business on June 30, 2005, each of the Company's
three shareholders entered into a formal share swap agreement with
Legend Motors Worldwide, Inc. ("Legend"). Pursuant to the three
agreements, the Company's shareholders exchanged all of their shares
in the Company for shares of Legend. As a result of the exchanges,
the Company became a wholly-owned subsidiary of Legend.
No dealer, salesman or other
person is authorized to give any
information or to make any
representations not contained in
this prospectus in connection with
the offer made hereby, and, if
given or made, such information or
representations must not be relied
upon as having been authorized by
Legend Motors. This prospectus
does not constitute an offer to
sell or a solicitation to an offer
to buy the securities offered
hereby to any person in any state
or other jurisdiction in which such
offer or solicitation would be
unlawful. Neither the delivery of
this prospectus nor any sale made
hereunder shall, under any
circumstances, create any
implication that the information
contained herein is correct as of
any time subsequent to the date
hereof.
Until _________ __, 2005 (90 days
after the date of this prospectus)
all dealers that effect
transactions in these securities,
whether or not participating in
this offering, may be required to
deliver a prospectus . This is in
addition to the dealer's obligation
to deliver a prospectus when acting
as underwriters and with respect to
their unsold allotments or
subscriptions.
TABLE OF CONTENTS
Page
----
Prospectus Summary 3 Legend Motors Worldwide, Inc.
The Offering 4
Summary Financial Data 5
Risk Factors 6
Use of Proceeds 12
Determination of Offering Price 12
Dividend Policy 12 12,000,000 SHARES
Management's Discussion and
Analysis 13
Business 19
Management 29
Principal Shareholders 32
Selling Shareholders 33
Certain Transactions 35
Description of Securities 36
Indemnification 38 PROSPECTUS
Plan of Distribution 39
Legal Matters 40
Experts 40
Where You Can Find More
Information 41
Financial Statements F-1
August 15, 2005
PART II
-------
INFORMATION NOT REQUIRED IN PROSPECTUS
--------------------------------------
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
- ---------------------------------------------------
Article 11 of our Articles of Incorporation includes
certain provisions permitted by the Nevada Revised Statutes,
which provides for indemnification of directors and officers
against certain liabilities. Pursuant to our Articles of
Incorporation, our officers and directors are indemnified, to the
fullest extent available under Nevada Law, against expenses
actually and reasonably incurred in connection with threatened,
pending or completed proceedings, whether civil, criminal or
administrative, to which an officer or director is, was or is
threatened to be made a party by reason of the fact that he or
she is or was one of our officers, directors, employees or
agents. We may advance expenses in connection with defending any
such proceeding, provided the indemnitee undertakes to repay any
such amounts if it is later determined that he or she was not
entitled to be indemnified by us.
Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to our directors, officers
and controlling persons pursuant to the foregoing provisions or
otherwise, we have been advised that in the opinion of the SEC
such indemnification is against public policy as expressed in the
Securities Act and is therefore, unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
- ----------------------------------------------------
We estimate that expenses in connection with this
registration statement will be as follows:
SEC registration fee $ 4,237.20
Legal fees and expenses $ 50,000
Accounting fees and expenses $ 88,000
Miscellaneous $ 18,000
-------------
Total $160,237.20
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
- -------------------------------------------------
The following information is furnished with regard to all
securities sold by Legend Motors Worldwide, Inc. within the past
three years that were not registered under the Securities Act.
The issuances described hereunder were made in reliance upon the
exemptions from registration set forth in Section 4(2) of the
Securities Act relating to sales by an issuer not involving any
public offering. None of the foregoing transactions involved a
distribution or public offering.
TABLE>
Date Name # of Shares Total Price
- -----------------------------------------------------------------------------------------------
July 15, 2005 Commerce Street Venture Group, Inc. 566,740 $1,133,480
July 15, 2005 Magellan Financial Media Group, Inc. 63,750 $127,500
July 15, 2005 L. G. Hancher, Jr. & G. C. Hancher 469,220 $938,440
ITEM 27. EXHIBITS
- -----------------
Exhibit Number Description
- ------------------------------------
3.1 Amended and Restated Articles of Incorporation of
Legend Motors Worldwide, Inc.
3.2 Bylaws of Legend Motors Worldwide, Inc.
4.1 Specimen certificate of the Common Stock of
Legend Motors Worldwide, Inc.
4.2 Specimen form of Warrant
5.1 Opinion of Law Office of James G. Dodrill II,
P.A. as to legality of securities being
registered*
10.1 Employment Agreement with Vern Kauffman
10.2 Lease of Business Property entered July 1, 2005
between the Company and Lowell G. Hancher, Jr.
10.3 Lease of Business Property entered August 18,
1999 between the LA West and LA Investments LLC
10.4 Lease of Equipment entered June 23, 2000 between
LA West and Varilease Corporation
10.5 Promissory Note dated June 27, 2005 with Lowell
G. Hancher, Jr.
10.6 Promissory Note dated June 27, 2005 with Commerce
Street Venture Group
10.7 Promissory Note dated June 27, 2005 with Magellan
10.8 Share Swap Agreement between the Company and
Lowell G. Hancher, Jr.
10.9 Share Swap Agreement between the Company and
Andrew Broadley
10.10 Share Swap Agreement between the Company and
George Recentio
10.11 Share Swap Agreement between the Company and Vern
Kauffman
10.12 Share Swap Agreement between the Company and
Commerce Street Venture Group
23.1 Consent of Tedder, James, Worden & Associates,
P.A. regarding LA West.
23.2 Consent of Tedder, James, Worden & Associates, P.A.
Regarding GT40.
23.3 Consent of James G. Dodrill II, P.A. (included in
Exhibit 5.1)
* to be filed by amendment.
ITEM 28. UNDERTAKINGS
- ---------------------
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors,
officers and controlling persons of the Company pursuant to the
foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy and as expressed in
the Act and is, therefore, unenforceable.
The Company hereby undertakes to:
(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to:
i. Include any prospectus required by Section
10(a)(3) of the Securities Act;
ii. Reflect in the prospectus any facts or events
which, individually or together, represent a
fundamental change in the information in the
registration statement.
iii. Include any additional or changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act,
treat each post-effective amendment as a new registration
statement of the securities offered, and the offering of
the securities at that time to be the initial bona fide
offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at
the end of the offering.
(4) For determining any liability under the Securities
Act, treat the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of
prospectus filed by the Company under Rule 424(b)(1) or (4)
or 497(h) under the Securities Act as part of this
registration statement as of the time the Commission
declared it effective.
(5) For determining any liability under the Securities
Act, treat each post-effective amendment that contains a
form of prospectus as a new registration statement for the
securities offered in the registration statement, and that
offering of the securities at that time as the initial bona
fide offering of those securities.
(6) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 (the "Act") may be
permitted to our directors, officers and controlling
persons pursuant to the foregoing provisions, or otherwise,
we have been advised by the Securities and Exchange
Commission that such indemnification is against public
policy as expressed in the Act and is, therefore,
unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by us of expenses incurred or
paid by one of our directors, officers or controlling persons in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, we will, unless
in the opinion of our counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by us is
against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
Signatures
In accordance with the requirements of the Securities Act of
1933, the registrant certifies that it has reasonable ground to
believe that it meets all of the requirements for filing on Form
SB-2 and authorized this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the
city of LaGrange state of Indiana on August 15, 2005.
LEGEND MOTORS WORLDWIDE, INC.
By: /s/ Vern Kauffman
--------------------------
Vern Kauffman
Principal Executive Officer, President and Director
In accordance with the requirements of the Securities Act of
1933, this registration statement has been signed by the following
persons in the capacities indicated on August 15, 2005.
By: /s/ Vern Kauffman Principal Executive Officer,
-----------------------------
Vern Kauffman President and Director
By: /s/ John G. Pendl Treasurer, Principal Financial Officer
-----------------------------
John G. Pendl Principal Accounting Officer and
Director
By: /s/ L. G. Hancher, Jr. Director
-----------------------------
L. G. Hancher, Jr.
By: /s/ Joel Updike Director
-----------------------------
Joel Updike
By: /s/ Dennis Severson Director
-----------------------------
Dennis Severson