Letter from BAT.
Dear Shareholder February 2, 1999
We are now entering into the New Millennium. Anxiety is running high and environmental and energy problems are becoming more severe. Insured losses from weather related disasters exceeded $89 billion dollars in 1998, which is greater than the entire decade of storm damage in the 1980's. Thirty-two thousand people died and 300 million were displaced by these storms. The World watch Report concludes that most of the disasters are due to deforestation and climate change. Ice on top of the Northern Arctic has thinned by 13% in just one decade, with the main cause likely to be climate change. If the snow covered polar ice, one of the most reflective substances on earth, is replaced by dark, open ocean, the planet's thermostat could really go out of whack. Oil supplies, which now appear endless, are in fact rapidly being consumed. Oil industry experts (Petroconsultants, Campbell-Lawrence) estimate 850 billion barrels remain, enough for just 23 years of supply at current and future rates of consumption.
Climate change is finally beginning to affect regulatory decisions, with new C02 requirements pending for auto companies in Europe in 2005. Particulates from diesel smoke has been identified as a carcinogen and regulations are going into effect in California that result in tests and fines trucks for smoke violations and on a national level that now impact transportation emissions in underground mines. Zero Emission Vehicle (ZEV) regulations have now been finalized and at least 4% of the new cars in California, New York and Massachusetts will be electric or fuel cell powered in 2003 (65,000 vehicles). Another 6% (95,000) must either be ZEVs or earn ZEV credits from putting a much greater number of super ULEV, hybrid electric or other vehicles on the road. Alternative fuel fleet requirements now affect 90% of new utility vehicle purchases and 25-75% of local, state, and federal government fleet purchases. Environmental problems & regulatory pressures on auto companies have created a major opportunity for BAT, which has developed a wide range environmentally friendly electric, hybrid electric & super-efficient vehicle technologies and "green" fuels. The company is quickly moving from R&D to production in 1998-99 as auto companies and regulators struggle to find solutions to allow our energy and transportation infrastructure to be sustainable. BAT is ready to deliver these badly needed "environmental solutions.”
1998 was a very aggressive year for BAT. We have initiated two joint ventures (Mexico auto plant and Chinese electric bicycle production) and are completing construction of manufacturing capacity for our batteries with our joint venture in India. We started several new subsidiaries, including Southern States Power Co. and Super BAT. Southern States has formed other joint ventures (Global Fuel Cell Corporation). SSPC is the first BAT subsidiary to go public. SSPC was approved to trade publicly by NASD on 2/2/99 and is currently trading in the $3.50/share price range. Most importantly, we are now moving from R&D to manufacturing in a wide array of products including vehicles, lubricant additives, batteries and electric bicycles & scooters. A summary of BAT and an overview of the activities of the subsidiary companies are attached, (Technologies for the 2lst Century).
So how well has the company done and where is it headed? We have included some important recent releases:
· BAT Forms Joint Venture with Chinese Co. to Manufacture Electric Bikes & Scooters (1/1 5/99)
· BAT's Mexico Auto Production Expands to Third Plant in Sinaloa (1/21/99)
· BAT Subsidiary SSPC Forms Joint Venture With ANUVU to Manufacture Fuel Cell (2/2/99)
These releases provide some indication of our overall corporate strategy. BAT is using technologies it has developed over the course of eight years and name recognition achieved from world records and marketing activities to create a whole portfolio of advanced transportation and energy technologies that can provide clean energy solutions for the next century. This portfolio is being used to form strategic alliances with manufacturing & distribution partners that will allow the company to grow quickly. An example of how various technologies integrate to form a cohesive product line includes:
Fuel Cell Power Pack Consisting~ of Global Fuel Cell and UFBC "Accelerator" Battery
The Global Fuel Cell Corporation's fuel cell requires a high power battery that will provide power for acceleration in a vehicle or peak power required in stationary source applications. The ability to supply both a very advanced fuel cell and a high power battery as a package in a near term time frame from production activities of Global Fuel Cell Corp. & UFBC will be very attractive to auto & other customers.
New Composite Technology and Impact on Manufacturing~ Capital Costs. Safety & Durability
Technology now being used in auto plants in Mexico will allow production costs to drop dramatically and permit start up of a small auto plant with minimal capital investment (1000 cars/yr. for under $1 million). The resulting bodies are safe, very durable (dent-proof, rustproof, easy to fix) and lightweight, and yet have characteristics such as one-ton carrying capacity in the pickup or delivery van. At the same time, components for parts or even rolling chassis are sourced from VW or other major auto companies to insure vehicles are easy to repair and maintain.
A Complete Transportation Line Including~ Electric Vehicles. Bicycles and Scooters
The Chinese joint venture will allow for production of electric scooters and bicycles that can be added to the transportation technology portfolio and production options for manufacturing in global markets. Scooters and bicycles are the majority of the total vehicle fleet in Asia, Africa, and Latin America. New energy storage technologies will allow electric scooter range to be very competitive with gasoline scooters while eliminating one of the largest sources of urban pollution.
Super-Efficient Dolphin Pulse Charge Technology~ in Gasoline and Diesel Engines
BAT has achieved major breakthroughs in engine technology as demonstrated in track and field testing of engines in January- May of 1998. These tests confirmed fuel economies of 92-95 mpg at 40 mph, 80 mpg at 55 mph on the highway and 67 mpg in urban drive cycles in a 4-door steel production vehicle. Efforts are now focused on lab testing of engines to verify both fuel economy and emissions. Independent testing by major labs is planned in February and March that will provide data necessary for further commercialization steps. Testing is occurring on smaller diesel engines used in field tests & heavy-duty engines. Dolphin has set up it's own "Skunkworks" facility in Orange County to develop Dolphin Pulse Charge technology. Advanced engine technology will form an important cornerstone of technologies for 21st century vehicles.
The overall objective of the entire array of development and manufacturing initiatives is to have a complete portfolio of advanced technologies to enter into either production joint ventures or licensing. The more complete the package of technologies is and the more advanced the technology is compared to competitors, the more enticing it will be to both small entrepreneurial manufacturing efforts in developing countries and major auto makers in established markets. Furthermore, there are specialty niche markets (alternative fuel fleets, security vehicles, military, etc.) that can be targeted by manufacturing or license partners as a result of the total value of the portfolio of technologies.
Many of these technologies will be on display at our shareholders meeting on February 27th. We urge all shareholders to this meeting, which is scheduled for 10:00 a.m. on February 27 in San Diego, California. An announcement detailing the location and agenda is attached. We will be raffling one of our new "RHINO" vehicles to one of the lucky attendees at the meeting. You must be at the stockholders meeting to be eligible for the raffle (please visit our web site (www.baat.com) to see the new RHINO car & specifications). We will also raffle off 3 electric bicycles & six 2-year supplies of TVT super lubricant products.
We are also arranging for busing of pre-registered stockholders to our Mexican auto plant in Otay Mesa, Mexico for a tour. If you want to go on the tour you must pre-register by e-mail (Billwason@earthlink.net) or fax (619-409-9598). Please include your e-mail and /or fax and phone so that we can contact you if there are any changes or additional requirements for the Mexico tour. Be sure to bring identification to cross the border (driver's license if a US citizen, green card or passport and visa if you are not a US citizen).
Our financial reports for the period ending October 31, 1998 will be posted soon on BAT's web site and will be available at the stockholders' meeting. The year-end financial reports are currently being processed. However, since this is the first time BAT has had to integrate financial records from our Mexico operations, it has caused delays in translation. Systems are being initiated to streamline this in the future.
In all previous stockholders' meetings, our stockholders unanimously voted to keep the Board of Directors to a minimum number. This is due to the aggressive growth in the company and the need to make many decisions with short lead times. Complex board approval processes could take time and cause the loss of attractive opportunities for BAT. BAT has a small Board of Directors, but uses a large advisory staff to help the Board with technology and finance decisions. The Advisory Board is comprised of volunteers and is essential to proper management. Each of the subsidiary companies also has separate boards and advisory professionals to aid in management and policy direction. This permits rapid decision making vital to a company now in a major growth phase in a variety of industries.
After reviewing all the information contained in this annual report, I hope you will be pleased with the progress of our company. I hope to see you at the stockholders' meeting.
Very truly yours,
Joe LaStella, President |
