SB-2/A 1 legsb2a2.txt LEGEND MOTORS - AMENDMENT 2 TO SB-2 Registration No. 333-127547 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM SB-2 (Amendment Number 2) 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 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 ---------------------- (1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457.
------------------------------------------------------------------------------ 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. PROPECTUS SUBJECT TO COMPLETION, DATED SEPTEMBER 30, 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 September 30, 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 21 Management 31 Principal Shareholders 34 Selling Shareholders 35 Certain Transactions 37 Description of Securities 38 Indemnification 40 Plan of Distribution 41 Legal Matters 42 Experts 42 Where You Can Find More Information 43 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 unaudited 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 unaudited Pro Forma Financial Statements and the notes therewith.
Six Months Six Months Year Ended Year Ended Ended Ended December 31, December 31, June 30, June 30, 2004 2003 2005 2004 ---- ---- ---- ---- Statement of Operations Data: Total Revenue $14,739,376 $12,173,286 $5,689,612 $8,295,074 Cost Of Goods Sold $10,813,897 $8,244,134 $3,896,410 $5,639,032 Net Income (Loss) $(872,487) $11,756 $(723,014) $246,224 Balance Sheet Data: Cash and cash equivalents $72,259 $89,562 $133,556 $189,728 Total current assets $6,996,275 $9,351,623 $6,779,224 $10,664,204 Total assets $9,357,616 $11,786,335 $9,199,386 $12,576,332 Total current liabilities $7,140,919 $9,920,569 $6,945,578 $9,627,155 Total stockholders' equity $2,140,919 $1,783,672 $2,225,633 $2,905,117 Total liabilities and stockholders' equity $9,357,616 $11,786,335 $9,199,386 $12,576,332
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 continue uninterrupted, that rationing will not be imposed or that the price of or tax on gasoline will not significantly increase in the 6 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 sustained. Although we hope to be accepted for quotations on the Over 8 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 April 28, 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. At the close of business on April 28, 2005, the Company issued 6,534,166 of its common shares and 1,987,500 of its warrants with an exercise price of four dollars each for its common shares to a private equity firm. The Company received no cash in exchange for the issuance of these shares. In exchange for the stock issuance, the private equity firm committed to paying the costs required to undertake a public offering of the Company's common stock. The Company has no obligation or intent to reimburse any costs incurred by the private equity firm. The private equity firm anticipates that it will incur costs in the amount of $230,000 in the course of the public offering process. As a result, the Company expensed consulting fees in the amount of $230,000 in April 2005. 13 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. 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 Legend Motors Worldwide, Inc., 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 at least quarterly, 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 - Six Months Ended June 30, 2005 And 2004 ----------------------------------------------------------------------- Van Conversions and Truck Modifications --------------------------------------- Total revenues for the six months ended June 30, 2005 decreased $2,395,162, or (30.2)%, to $5,534,612 from $7,929,774 for the six months ended June 30, 2004. 14 Van conversion revenues for the six months ended June 30, 2005 decreased $1,177,041, or (40.2)%, to $1,748,466 from $2,925,507 for the six months ended June 30, 2004. The decrease is primarily attributable to the overall decline in consumer demand for conversion vans and industry-wide economic conditions. Truck modification revenues for the six months ended June 30, 2005 decreased $953,146, or (22.4)%, to $3,301,132 from $4,254,278 for the six months ended June 30, 2004. The decrease is primarily attributable to industry-wide economic conditions. Other revenues for the six months ended June 30, 2005 increased $249,953, or 33.3%, to $1,000,584 from $750,631 for the six months ended June 30, 2004. This increase is primarily attributable to continued development of the Company's after market parts sales and to management's initiative to enhance its sales of OEM parts that are replaced during the Company's conversion and modification processes. Cost of goods sold for the six months ended June 30, 2005 decreased $1,564,013, or (30.0)%, to $3,656,235 from $5,220,248 for the six months ended June 30, 2004. The decrease is primarily attributable to the overall decrease in conversion and modification sales. There is also a negative affect as a result of changes in the product mix. Gross profit as a percent of revenues was 33.9% for the six months ended June 30, 2005 compared to 34.2% for the six months ended June 30, 2004. Selling, general, and administrative expenses decreased $178,984, or (9.5)%, to $1,702,576 for the six months ended June 30, 2005 from $1,881,560 for the six months ended June 30, 2004. 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 30.8% for the six months ended June 30, 2005 compared to 23.7% for the six months ended June 30, 2004. Interest income (expense), net decreased $29,978, or (20.7)%, to $(114,543) for the six months ended June 30, 2005 from $(144,521) for the six months ended June 30, 2004. Specially Constructed Vehicles ------------------------------ Total revenues for the six months ended June 30, 2005 decreased $210,300, or (57.6)%, to $155,000 from $365,300 for the six months ended June 30, 2004. Vehicle sales revenues for the six months ended June 30, 2005 decreased $170,300, or (52.4)%, to $155,000 from $325,300 for the six months ended June 30, 2004. The decrease reflects the reduced number of prototype vehicles available for sale. Franchise fee revenues for the six months ended June 30, 2005 decreased $40,000, or (100.0)%, to $-0- from $40,000 for the six months ended June 30, 2004. The decline reflects management's decision to abandon its dealer network development initiative in favor of establishing an internal sales and marketing department. 15 Cost of goods sold for the six months ended June 30, 2005 decreased $178,609, or (42.6)%, to $240,175 from $418,784 for the for the six months ended June 30, 2004. The decrease reflects the negative affect of increases in indirect labor, employee benefits and depreciation. These negative affects were offset by the positive affect of increased efficiency in the production of later prototype vehicles during 2005 as compared to the less efficient production of earlier prototype vehicles during 2004. Gross profit was $(85,175) for the six months ended June 30, 2005 as compared to $(31,691) for the for the six months ended June 30, 2004. The decrease reflects the decrease in franchise fees noted above. Selling, general, and administrative expenses increased $44,916, or 12.1%, to $415,747 for the six months ended June 30, 2005 from $370,831 for the six months ended June 30, 2004. 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 268.2% for the six months ended June 30, 2005 compared to 101.5% for the six months ended June 30, 2004. Interest income (expense), net increased $42,906, or 332.5%, to $(55,812) for the six months ended June 30, 2005 from $(12,906) for the six months ended June 30, 2004. 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. 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 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 16 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 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. 17 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 $129,301 as of June 30, 2005 compared to $180,403 as of June 30, 2003. Cash and cash equivalents were $72,197 as of December 31, 2004 compared to $73,895 as of December 31, 2003. Capital expenditures were $14,696 during the six months ended June 30, 2005 compared to $1,674 during the six months ended June 30, 2004. 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 $28,175 as of June 30, 2005 compared to $44,060 as of June 30, 2004. Long term debt was $35,607 as of December 31, 2004 compared to $82,094 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 collateralized by all the business assets of the van, truck and SUV conversion segment. The outstanding balance on the line of credit was $585,000 as of June 30, 2005 compared to $274,000 as of June 30, 2004. 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. 18 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 $4,140 as of June 30, 2005 compared to $9,325 as of June 30, 2004. Cash and cash equivalents were $0 as of December 31, 2004 compared to $15,667 as of December 31, 2003. Capital expenditures were $63,695 during the six months ended June 30, 2005 compared to $87,162 during the six months ended June 30, 2004. 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 or annual reporting period beginning after December 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. 19 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. 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 under APB Opinion 29 for exchanges of similar productive assets. The Company is required to adopt the new standard in the first interim or annual reporting 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. 20 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 21 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. 22 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 23 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 24 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 been selected for their historic appeal, established demand from our target market, and the low assembly costs. Four of the six model 25 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. 26 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 27 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 28 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. 29 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND/FINANCIAL DISCLOSURE. ------------------------------------------------------------------------- We have had no disagreements with our accountants on accounting and financial disclosure. 30 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. 31 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. 32 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(1) 2003 - - - - - - 24,999(1) 2002 - - - - - - -0-
(1) Cash consulting fees Stock Option Grants in the past fiscal year ------------------------------------------- We have not issued any grants of stock options in the past fiscal year. 33 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. 34 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% 35 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. 36 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. 37 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. 38 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 September 15, 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. 39 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. 40 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. 41 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 Legend Motors Worldwide, Inc. GT 40 North America, Inc. and LA West, Inc included in this prospectus have been so included in reliance on the reports of Tedder, James, Worden & Associates, P.A., independent accountants, given on the authority of said firm as experts in auditing and accounting. 42 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. 43 REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Legend Motors Worldwide, Inc.: We have audited the accompanying balance sheet of Legend Motors Worldwide, Inc. as of December 31, 2004, and the related statements of income, stockholders' equity, and cash flows for the period from September 14, 2004 (inception) to December 31, 2004. 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 audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 audit provides 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 Legend Motors Worldwide, Inc. as of December 31, 2004, and the results of its operations and its cash flows for the period from September 14, 2004 (inception) to December 31, 2004 in conformity with U.S. generally accepted accounting principles. /s/ Tedder, James, Worden & Associates, P.A. Orlando, Florida July 1, 2005 Legend Motors Worldwide, Inc. Balance Sheet December 31, 2004 ASSETS Current Assets: Cash $62 Interest Receivable 827 Receivable from Related Party 99,120 ------- Total Assets $100,009 ========= LIABILITIES AND STOCKHOLDERS' DEFICIT Income Taxes Payable 2 -- Total Liabilities 2 -- Stockholders' Equity: Common Stock 5 Capital in Excess of Par 99,995 Retained Earnings 7 -- Total Stockholders' Equity 100,007 -------- Total Liabilities and Stockholders' Equity $100,009 --------- See Accompanying Notes to Financial Statements. Legend Motors Worldwide, Inc. Statement of Income Period From September 14, 2004 (Inception) to December 31, 2004 ------------------ Net Sales $-0- Selling, General and Administrative Expenses 818 ---- Loss from Operations (818) Other Income: Interest Income 827 ---- Net Income Before Income Taxes 9 Income Tax Expense 2 -- Net Income $7 --- Weighted Average Shares of Common Stock Outstanding: Basic 50,000 ======= Diluted 62,500 ======= Income Per Common Share: Basic $0.00 ===== Diluted $0.00 ===== See Accompanying Notes to Financial Statements. Legend Motors Worldwide, Inc. Statement of Cash Flows Period From September 14, 2004 (Inception) to December 31, 2004 ------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net Income $7 Adjustments to Reconcile Net Income to Net Cash Used In Operating Activities: (Increase) Decrease in Assets: Interest Receivable (827) Increase (Decrease) in Liabilities: Income Taxes Payable 2 -- Net Cash Used In Operating Activities (818) ----- CASH FLOWS FROM INVESTING ACTIVITIES Net Cash Used In Investing Activities -0- --- CASH FLOWS FROM FINANCING ACTIVITIES Issuance of Common Stock and Warrants 100,000 Loan To Related Party (100,000) Payments Received on Loan to Related Party 880 ---- Net Cash Provided by Financing Activities 880 ---- Net Increase in Cash 62 Cash - Beginning of Period -0- --- Cash - End of Period $62 ---- See Accompanying Notes to Financial Statements. Legend Motors Worldwide, Inc. Statement of Stockholders' Equity For the Period from September 14, 2004 (Inception) to December 31, 2004
Capital in Total Common Stock Excess Retained Stockholders' Shares Amount Of Par Earnings Equity ------ ------ ---------- -------- ------------- Inception(September 14, 2004) -0- $-0- $-0- $-0- $-0- Issuance of Common Stock 50,000 5 99,995 -0- 100,000 Net Income -0- -0- -0- 7 7 --- ---- --- -- -- Balances at December 31, 2004 50,000 $5 $99,995 $7 $100,007 ------- --- -------- --- ---------
See Accompanying Notes to Financial Statements. Legend Motors Worldwide, Inc. Notes to Financial Statements December 31, 2004 1. BUSINESS Legend Motors Worldwide, Inc. (the "Company") is an investment holding company. At December 31, 2004 it held no investments. The Company's headquarters are located in LaGrange, Indiana. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. 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. Concentration of Credit Risk - Financial instruments which potentially subject the Company to concentrations of credit risk consist of cash. The Company places its cash with high credit quality financial institutions. 3. INCOME TAXES The Company had no deferred tax assets and liabilities at 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 period from September 14, 2004 (inception) to December 31, 2004 is as follows: For the Period From September 14, 2004 (Inception) to December 31, 2004 ------------------- Statutory Federal Tax Rate (34.0)% State and Local Taxes 5.6% Effect of Graduated Tax Rate Brackets 17.4 Effective Tax Rate 22.2% Legend Motors Worldwide, Inc. Notes to Financial Statements December 31, 2004 The Company utilizes a December 31 year end for Federal and state income tax purposes. The tax effects of the temporary differences between reportable financial statement income and taxable income are recognized as a deferred tax asset and liability. 4. STOCKHOLDERS' EQUITY The Company has 50,000,000 shares of $0.0001 par value common stock authorized, of which 50,000 shares were issued and outstanding at December 31, 2004. The Company has 20,000,000 shares of $0.0001 par value preferred stock authorized, of which no shares were issued and outstanding at December 31, 2004. 5. RELATED PARTY TRANSACTIONS The Company has extended a loan to a related company through common ownership for $100,000. The loan is a demand note bearing interest at the rate of 5%. The following balances were outstanding at December 31, 2004: Accrued Interest - Related Company 827 ==== Loan to Related Company $99,120 ======== 6. SUBSEQUENT EVENTS At the close of business on April 28, 2005, the Company entered into a separate formal share swap agreement with each of the three shareholders of GT 40 North America, Inc. (GT 40). Pursuant to the three agreements, the Company exchanged 1,847,084 of the Company's common shares for 100 shares of GT 40. As a result of the exchanges, GT 40 became a wholly-owned subsidiary of the Company. At the close of business on April 28, 2005, the Company issued 6,534,166 of its common shares to a private equity firm. The Company received no cash in exchange for the issuance of these shares. In exchange for the stock issuance, the private equity firm committed to paying the costs required to undertake a public offering of the Company's common stock. The Company has no obligation or intent to reimburse any costs incurred by the private equity firm. At the close of business on April 28, 2005, the Company issued 1,987,500 warrants with an exercise price of four dollars each for its common shares to four shareholders of the Company. Legend Motors Worldwide, Inc. Notes to Financial Statements December 31, 2004 On June 27, 2005, GT 40 entered into formal debt agreements with certain related parties through common owership to which GT 40 had outstanding loans to consolidate the respective loans and accrued interest due to each respective party. The new debt agreements allow for the converging of outstanding debt and accrued interest into common stock of GT 40 or the Company at a stated price of two dollars per share. The converging is at the option of the note holder. 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 and 1,064,710 shares were issued. On July 1, 2005, the Company entered into a formal share swap agreement with a shareholder of L.A. West, Inc. pursuant to which the Company exchanged 1,582,492 shares of the Company's common stock for 49% of the outstanding common stock of L.A. West, Inc. Also on July 1, 2005, the Company entered into a formal share swap agreement with a second shareholder of L.A. West, Inc. pursuant to which the Company exchanged 1,647,084 shares of the Company's common stock for the remaining 51% of the outstanding common stock of L.A. West, Inc. As a result of the two exchanges, L.A. West, Inc. became a wholly-owned subsidiary of the Company. On July 1, 2005, two shareholders of the Company surrendered a net total of 2,725,536 shares of the Company's common stock to the Company. These shares are held in treasury by the Company. As a result of all the subsequent events summarized in this footnote, as of July 1, 2005, the Company has 10,000,000 shares of $0.0001 par value common stock issued and outstanding and 2,000,000 warrants with an exercise price of four dollars each issued and outstanding. Legend Motors Worldwide, Inc. and Subsidiary Unaudited Financial Statements for the Six Month Perid Ending June 30, 2005 and June 20, 2004 Legend Motors Worldwide, Inc. and Subsidiary Consolidated Balance Sheet (Unaudited) Pro Forma June 30, June 30, 2005 2004 ---- ---- ASSETS Current Assets: Cash $4,255 $9,325 Inventories 464,946 509,220 Other Current Assets 2,290 500 ----- --- Total Current Assets 471,491 519,045 Property and Equipment, Net 246,840 130,208 Goodwill 1,858,043 1,858,043 Other Assets 6,424 540 ----- --- Total Assets $2,582,798 $2,507,836 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable 36,249 52,427 Accrued Interest Payable 100,315 13,493 Accrued Expenses 9,145 6,852 Customer Deposits 70,000 45,000 Payable to Related Party 232,176 86,347 Related Party Loans -0- 274,691 Loan from Stockholder -0- 615,912 --- ------- Total Liabilities 447,885 1,094,722 ------- --------- Commitments and Contingencies Stockholders' Equity: Common Stock 950 190 Capital in Excess of Par 2,523,488 1,850,145 Accumulated Deficit (389,525) (437,221) --------- --------- Total Stockholders' Equity 2,134,913 1,413,114 --------- --------- Total Liabilities and Stockholders' Equity $2,582,798 $2,507,836 ========== ========== Legend Motors Worldwide, Inc. and Subsidiary Consolidated Statements of Income (Unaudited) Pro Forma Six Months Six Months Ended June 30, Ended June 30, 2005 2004 ---- ---- Sales $155,000 $365,300 Cost of Goods Sold 240,175 418,784 ------- ------- Gross Profit (Loss) (85,175) (53,484) Selling, General and Administrative Expenses 646,394 370,831 ------- ------- Loss from Operations (731,569) (424,315) Net Interest Expense (Income) 52,703 12,906 ------ ------ Loss Before Income Taxes (784,272) (437,221) Income Tax Expense -0- -0- --- --- Net Loss $(784,272) $(437,221) ---------- ---------- Weighted Average Shares of Common Stock Outstanding: Basic 2,978,995 1,847,084 ========= ========= Diluted 3,683,277 1,847,084 ========= ========= Loss Per Common Share: Basic $(0.26) $(0.24) ======= ======= Diluted $(0.21) $(0.24) ======= ======= Legend Motors Worldwide, Inc. and Subsidiary Statements of Cash Flows (Unaudited) Pro Forma Six Months Six Months Ended June 30, Ended June 30, 2005 2004 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net Loss $(784,272) $(437,221) Adjustments to Reconcile Net Loss to Net Cash Used In Operating Activities: Depreciation 22,764 12,408 Gain on Sale of Equipment -0- (76) Issuance of Common Shares in Lieu of Cash 230,000 -0- (Increase) Decrease in Assets: Inventories (37,986) (347,752) Prepaid Expenses and Other Current Assets 3,833 22,873 Other Assets (8,519) -0- Increase (Decrease) in Liabilities: Accounts Payable (173,484) 23,665 Accounts Payable - Related Parties 104,363 61,978 Accrued Interest 53,360 12,906 Accrued Expenses (37,876) 6,852 Customer Deposits 70,000 (98,000) ------ -------- Net Cash Used In Operating Activities (557,817) (742,367) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of Property and Equipment (63,695) (87,162) Proceeds from Sale of Property and Equipment -0- 5,500 --- ----- Net Cash Used In Investing Activities (63,695) (81,662) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Loans From Stockholder (33,111) 541,912 Loans From Related Parties 658,816 275,775 ------- ------- Net Cash Provided by Financing Activities 625,705 817,687 ------- ------- Net Increase (Decrease) in Cash 4,193 (6,342) Cash - Beginning of Period 62 15,667 -- ------ Cash - End of Period $4,255 $9,325 ====== ====== Supplemental Disclosure of Non-cash Investing and Financing Activities: Four creditors of the Company's wholly-owned subsidiary exercised their respective options to convert debt obligations of the subsidiary into common shares of the Company. As a result, the subsidiary's outstanding debt was reduced by $2,129,420 and the subsidiary's capital in excess of par was increased by $2,129,420. The Company entered into a separate formal share swap agreement with each of the three shareholders of GT 40 North America, Inc. (GT 40). Pursuant to the three agreements, the Company exchanged 1,847,084 of the Company's common shares for 100 shares of GT 40. As a result of the exchanges, GT 40 became a wholly-owned subsidiary of the Company. 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. L.A. WEST, INC. UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTH PERIODS ENDING JUNE 30, 2005 AND JUNE 30, 2004 L.A. WEST, INC. BALANCE SHEET (UNAUDITED) Six Months Ended June 30, 2005 2004 ---- ---- ASSETS Current Assets: Cash $129,301 $180,403 Accounts Receivable 469,565 293,165 Inventories 5,676,368 9,094,086 Prepaid Expenses and Other Current Assets 32,499 36,150 ------- ------- Total Current Assets 6,307,733 9,603,804 Property and Equipment, Net 245,531 411,147 Other Assets 63,324 53,545 ------- ------- Total Assets $6,616,588 $10,068,496 =========== ============ LIABILITIES AND STOCKHOLDER'S EQUITY Current Liabilities: Accounts Payable $474,623 $894,533 Accrued Expenses 514,004 378,114 Current Portion of Capital Lease Obligations -0- 68,263 Current Portion of Long Term Debt 12,884 21,252 Line of Credit 585,000 274,000 Floor Plan Payable 4,911,182 7,873,221 ---------- ---------- Total Current Liabilities 6,497,693 9,509,383 Long Term Debt, Less Current Portion 28,175 44,060 ------- ------- Total Liabilities 6,525,868 9,553,443 ---------- ---------- Commitments and Contingencies Stockholder's Equity: Common Stock 1,000 1,000 Additional Paid-In Capital 30,000 30,000 Retained Earnings 59,720 484,053 ------- -------- Total Stockholder's Equity 90,720 515,053 ------- -------- Total Liabilities and Stockholder's Equity $6,616,588 $10,068,496 =========== ============ L.A. WEST, INC. STATEMENTS OF INCOME (UNAUDITED) Six Months Ended June 30, 2005 2004 ---- ---- Net Sales $5,534,612 $7,929,774 Cost of Goods Sold 3,656,235 5,220,248 ---------- ---------- Gross Profit 1,878,377 2,709,526 ---------- ---------- Operating Expenses: Selling, General and Administrative Expenses 1,702,576 1,860,441 Loss on Sale of Property and Equipment -0- 21,119 --- ------- Total Operating Expenses 1,702,576 1,881,560 ---------- ---------- Income from Operations 175,801 827,966 -------- -------- Other Income (Expenses): Interest Income 71 91 Interest Expense (114,614) (144,612) --------- --------- Total Other Expense (114,543) (144,521) --------- --------- Net Income $61,258 $683,445 ======== ========= Weighted Average Shares of Common Stock Outstanding: Basic and Diluted 100 100 ==== ==== Earnings Per Common Share: Basic and Diluted $612.58 $6,834.45 ======== ========== See Accompanying Notes to Financial Statements. L.A. WEST, INC. STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended June 30, 2005 2004 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $61,258 $683,446 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 47,256 34,355 Loss on Sale of Property and Equipment -0- 21,119 (Increase) Decrease in Assets: Accounts Receivable (189,638) (153,180) Raw Materials and Finished Goods 82,653 (247,688) Floor Planned Chassis 442,993 120,459 Prepaid Expenses and Other Current Assets 4,772 2,439 Increase (Decrease) in Liabilities: Accounts Payable (215,990) 118,243 Accrued Expenses 214,019 66,814 Floor Plan Payable (442,994) (120,459) --------- --------- Net Cash Provided by Operating Activities $4,329 $525,548 ------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Increase in Other Assets $(4,889) $(4,889) Purchases of Property and Equipment (14,696) (1,674) Proceeds from Sale of Property and Equipment -0- 800 --- ---- Net Cash Provided by (Used in) Investing Activities $(19,585) $(5,763) --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Distributions to Stockholder $(27,000) $(72,656) Net Proceeds (Repayments) on Line of Credit 147,000 (241,000) Payments on Long Term Debt (9,128) (29,805) Payments on Capital Lease Obligations (38,512) (69,816) -------- -------- Net Cash Used in Financing Activities $72,360 $(413,277) -------- ---------- Net Increase in Cash $57,104 $106,508 Cash - Beginning of Period 72,197 73,895 ------- ------- Cash - End of Period $129,301 $180,403 --------- --------- Supplemental Disclosures of Cash Flow Information: Cash Paid During the Period for Interest $107,769 $137,586 ========= ========= Cash Paid During the Period for State Taxes $4,347 $3,873 ======= ======= L.A. WEST, INC. STATEMENTS OF STOCKHOLDER'S EQUITY FOR THE SIS MONTHS ENDED JUNE 30, 2004 AND 2003
Additional Retained Common Paid in Earnings Total Stock Capital (Deficit) Equity ---------------------------------------------------- Balances at December 31, 2003 $1,000 $30,000 $(126,737) $(95,737) Net Income -0- -0- 683,446 683,446 Distributions -0- -0- (72,656) (72,656) --- --- -------- -------- Balances at June 30, 2004 $1,000 $30,000 $484,053 $515,053 ======= ======== ========= ========= Balances at December 31, 2004 $1,000 $30,000 $25,462 $56,462 Net Income -0- -0- 61,258 61,258 Distributions -0- -0- (27,000) (27,000) --- --- -------- -------- Balances at June 30, 2005 $1,000 $30,000 $59,720 $90,720 ======= ======== ======== ========
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. GT 40 North America, Inc. Unaudited Financial Statements for the Six Month Periods Ending June 30, 2005 and June 30, 2004 GT 40 North America, Inc. Balance Sheets (Unaudited) June 30, 2005 2004 ------ ------ ASSETS Current Assets: Cash $4,140 $9,325 Inventories 436,667 509,220 Prepaid Expenses and Other Current Assets 2,290 500 ------ ---- Total Current Assets 443,097 519,045 Property and Equipment, Net 205,332 130,208 Other Assets 10,890 540 ------- ---- Total Assets $659,319 $649,793 ========= ========= LIABILITIES AND STOCKHOLDERS' DEFICIT Current Liabilities: Accounts Payable $36,249 $52,427 Accounts Payable - Related Parties 330,596 86,347 Accrued Expenses 9,145 6,852 Accrued Interest 104,252 13,493 Customer Deposits 70,000 45,000 Loans From Stockholder -0- 615,912 Loans From Related Parties -0- 374,691 --- -------- Total Current Liabilities 550,242 1,194,722 -------- ---------- Commitments and Contingencies Stockholders' Deficit: Common Stock 100 100 Capital in Excess of Par 2,129,420 -0- Accumulated Deficit (2,020,443) (545,029) ----------- --------- Total Stockholders' Deficit 109,077 (544,929) -------- --------- Total Liabilities and Stockholders' Deficit $659,319 $649,793 ======== ======== GT 40 North America, Inc. Statements of Operations (Unaudited) Six Months Ended June 30, 2005 2004 ---- ----- Net Sales $155,000 $365,300 Cost of Goods Sold 240,175 418,784 -------- -------- Gross Profit (Loss) (85,175) (53,484) Selling, General and Administrative Expenses 415,747 370,831 -------- -------- Loss from Operations (500,922) (424,315) Other Income (Expense): Interest Expense (55,812) (12,906) -------- -------- Loss Before Income Taxes (556,734) (437,221) Income Tax Expense -0- -0- --- --- Net Loss $(556,734) $(437,221) ========== ========== Weighted Average Shares of Common Stock Outstanding: Basic and Diluted 100 100 ==== ==== Loss Per Common Share: Basic and Diluted $(5,567.34) $(4,372.21) ----------- ----------- GT 40 North America, Inc. Statements of Cash Flows (Unaudited) Six Months Ended June 30, 2005 2004 CASH FLOWS FROM OPERATING ACTIVITIES Net Loss $(556,734) $(437,221) Adjustments to Reconcile Net Loss to Net Cash Used In Operating Activities: Depreciation 22,764 12,408 Gain on Sale of Equipment -0- (76) (Increase) Decrease in Assets: Inventories (37,986) (347,752) Prepaid Expenses and Other Current Assets 3,833 22,873 Other Assets (8,519) -0- Increase (Decrease) in Liabilities: Accounts Payable (173,484) 23,665 Accounts Payable - Related Parties 104,363 61,978 Accrued Interest 55,769 12,906 Accrued Expenses (37,876) 6,852 Customer Deposits 70,000 (98,000) ------- -------- Net Cash Used In Operating Activities (557,870) (742,367) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of Property and Equipment (63,695) (87,162) Proceeds from Sale of Property and Equipment -0- 5,500 --- ------ Net Cash Used In Investing Activities (63,695) (81,662) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Issuance of Common Stock -0- -0- Loans From Stockholder (33,111) 541,912 Loans From Related Parties 658,816 275,775 -------- -------- Net Cash Provided by Financing Activities 625,705 817,687 -------- -------- Net Increase (Decrease) in Cash 4,140 (6,342) Cash - Beginning of Period -0- 15,667 --- ------- Cash - End of Period $4,140 $9,325 ======= ======= Supplemental Disclosure of Non-cash Investing and Financing Activities: Four stockholders of the Company exercised their respective options to convert debt obligations of the Company into common shares of the Company. As a result, the Company's outstanding loans from related parties and from stockholder was reduced by $2,129,420 and the Company's Capital in Excess of Par was increased by $2,129,420. 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 21 Management 31 Principal Shareholders 34 Selling Shareholders 35 Certain Transactions 37 Description of Securities 38 Indemnification 40 PROSPECTUS Plan of Distribution 41 Legal Matters 42 Experts 42 Where You Can Find More Information 43 Financial Statements F-1 September 30, 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 ---------------------------------------------------- At the close of business on April 28, 2005, the Company issued 6,534,166 of its common shares and 1,987,500 of its warrants with an exercise price of four dollars each for its common shares to a private equity firm. The Company received no cash in exchange for the issuance of these shares. In exchange for the stock issuance, the private equity firm committed to paying the costs required to undertake a public offering of the Company's common stock. The Company has no obligation or intent to reimburse any costs incurred by the private equity firm. The private equity firm anticipates that it will incur costs in connection with this registration statement as follows: SEC registration fee $ 4,237.20 Legal fees and expenses $125,000 Accounting fees and expenses $ 85,000 Miscellaneous $ 15,762,80 ------------- Total $230,000.00 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.
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., independent registered certified public accounting firm, regarding Legend Motors Worldwide, Inc. 23.2 Consent of Tedder, James, Worden & Associates, P.A., independent registered certified public accounting firm, regarding LA West. 23.3 Consent of Tedder, James, Worden & Associates, P.A., independent registered certified public accounting firm, regarding GT40. 23.4 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 September 30, 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 September 30, 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