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PROSPECTUS
July 1, 2014 Offering
Contact Information
Sandi Jerome
www.DealerStar.com
1391 NW St Lucie West Blvd Suite 362
Port St Lucie, FL 34986
sandi@dealerstar.net 772-345-0785
Questions? Email sandi@dealerstar.net
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Why you are receiving this Prospectus
Do you think it is time for dealers to have control over their rising technology costs? Do you
need to diversify your portfolio? Are you frustrated by ADP, R+R, or DealerTrack as your
choices for DMS providers? You have been recommended as either a dealer or a key
individual in the automotive/truck industry with an interest in technology. DealerStar, Inc. is
offering 40% of its stock to raise $4 million in a capital under Regulation D that requires that you
be;
1) A natural person who has individual net worth, or joint net worth with the person’s
spouse, that exceeds $1 million at the time of the purchase, excluding the value of the
primary residence of such person or
2) A natural person with income exceeding $200,000 in each of the two most recent years
or joint income with a spouse exceeding $300,000 for those years and a reasonable
expectation of the same income level in the current year.
A third qualification that we’d like is that you either currently own or have owned a dealership in
the past – or have dealership clients. We will be counting on our investor(s) to provide us with
input regarding the growth and management of DealerStar. Our company will operate like a 20
group and will have the input of our dealer investors. Our dealers will be investing over the next
4-5 years a total of 4 million and we have invested the book cost value of DealerStar of 6 million
(although you'll see later in this prospectus that the market value of DealerStar is closer to 3060 million.)
$50,000 for 500 shares
$100,000 for 1,000 shares
$200,000 for 2,000 shares
The share price will most likely be higher in future years, but this 2014 charter investment
means that you can purchase the same amount of shares next year for the 2014 price (see
section 3 of the Stock Agreement at the end.) If you do qualify, then please read our prospectus
if you are interested or pass it along to another dealer that you think would be interested in
owning a portion of a DMS company and becoming one of our founding investor(s). If you
would like to be a charter investor, please print out and sign the stock agreement in the last few
pages and send your check. Easy! Any questions? Email sandi@dealerstar.net or
sandi.jerome@gmail.com. Thank you for your consideration,
Sandi Jerome
DealerStar, Inc.
sandi@dealerstar.net
www.DealerStar.com
1391 NW St Lucie West Blvd Suite 362
Port St Lucie, FL 34986 772-345-0785
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Table of Contents
PROSPECTUS .............................................................................................................. 1
What is DealerStar DMS and CRM?............................................................................ 4
The DealerStar Patent ................................................................................................. 5
The DealerStar Advantage .......................................................................................... 5
Value of DealerStar – Proceeds of the Offering ........................................................... 6
DealerStar Today......................................................................................................... 8
Balance Sheet* ........................................................................................................ 8
Income Statement*................................................................................................... 8
Cash Flow and Profit Projections* ............................................................................ 9
Why is there a Need for another DMS? ....................................................................... 9
Lipstick on the Pig .................................................................................................. 10
Structure Problem with ADP and R+R ................................................................... 10
Summary of ADP, R+R, DealerTrack/Arkona and Dominion DMSAX ....................... 10
Could you Start your Own DMS Company? .............................................................. 12
Factory Integration – the Big Challenge for an Emerging DMS .............................. 15
Factory Integration Core Items ............................................................................... 15
Factory Certification Process ................................................................................. 15
Financial Information ................................................................................................. 16
Profit Projections - Return on your Investment ....................................................... 16
DealerStar – the Difference ....................................................................................... 17
Pricing of DealerStar .............................................................................................. 17
What if DealerStar gets bought? ............................................................................ 18
Management Team.................................................................................................... 18
Sandi Jerome, Vice President and Designer.......................................................... 19
Keith Jerome, President and Lead Programmer .................................................... 20
Nadine Epstein – Director of Customer Service ..................................................... 20
Jack Ross – Manufacturer and ADP/R+R Integration ............................................ 20
Lena Washke – Accountant ................................................................................... 20
DealerStar Demo ....................................................................................................... 21
Webinars for Investors ............................................................................................... 21
References and Dealer Investors .............................................................................. 21
Charter Investors.................................................................................................... 22
STOCK SUBSCRIPTION AGREEMENT ...................................................................... 23
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PROSPECTUS SUMMARY
This summary is not complete and does not contain all of the information that may be
important to you. You should read the entire prospectus carefully, including the financial
data and related notes, before making an investment decision.
Introduction
Technology costs are now the #1 outside expense for dealerships. During the past ten
years, the purchase of CRM, reporting, scheduling and other tools to "interface" with
current deficient DMS systems that lack the technology dealers need have caused this
expense to skyrocket. DealerStar's mission is to bring technology costs down by
providing a fully integrated DMS with all the tools that dealers need to manage their
business, increase profit, and prevent fraud. Although it might be years before we can
convert YOUR dealership(s) to DealerStar (we have a long waiting list) - it might make it
less painful to stay with ADP, R+R or DealerTrack if you have a long term plan to
reduce your technology costs. We will make our investors our priority if they need help.
What is DealerStar DMS and CRM?
DealerStar is the newest Tier 1 DMS with CRM included to hit the market and the only
fully web-based DMS. DealerStar is created in PHP, JavaScript and MySQL. All the
other newer DMS systems are on a bloated slow Microsoft database - that is costly to
maintain. Other DMS companies have to pay high per user license fees to Microsoft or
IBM – but we don’t. By having both the application and database on the same open
web server, DealerStar is faster and easier to support and secure. DealerStar is mobile
enabled; Dealers can access their valuable data with any browser or mobile device;
iPad, Kindle, tablet PC, iPhone or Android. Dealers benefit by finally having a DMS that
is easy to buy, install, and access from anywhere - and best of all - a Tier 1 DMS for the
low price of a Tier 2 or Tier 3 - and designed for multi-company!
DealerStar includes everything in one low monthly
price with no upfront installation or training fee; CRM,
F&I and Desking, Service (with dispatching, Service
CRM, daily rentals and technician terminals,) Parts (with
stock orders, purchase orders) Accounting (with
intercompany transactions, banking, AR, and AP,) and
Payroll with HR --- and all with an integrated easy
reporting tool and a “Click to Excel” from most views.
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The DealerStar Patent
Although other DMS companies are claiming to be web-based (DealerTrack in
Automotive News advertisement,) we were granted a patent for a web-based DMS on
July 23, 2013. We have another pending patent that is even more extensive. It is not in
our business plan to sue the other DMS providers for royalties at this time - our goal is
to bring the best DMS possible at the best price for dealers.
Other DMS systems like DealerTrack
claim to be web-based - but we now
have the patent.
United States Patent
Jerome , et al.
8,495,487
July 23, 2013
Web-based dealership management system
Abstract
An integrated web-based dealership management system providing accounting, financial
reporting, parts and service sales tracking, vehicle and parts inventory, vehicle sales tracking,
and customer management software developed on a relational database on a web server and
with web application tools.
The DealerStar Advantage
Being a truly web-based designed DMS is a huge advantage for
us. ADP and R+R are spending millions to be mobile enabled.
Any page that we want to create a special mobile version for can
be done by checking a box in our program generator. You can use
Chrome, Firefox, Safari, or any version of Microsoft Internet
Explorer. Our software is graphical, highly integrated and uses the
same database for everything except our parts and labor
subscriptions. This makes it fast and easy to use. If you can write
a check, you can also create a parts ticket – the screens are the
same! Doing a car deal is the same type of screens as entering a repair order or
ordering parts. In my first two installations I have had the controller helping the service
manager learn our system because it was all the same.
The timing for a new DMS provider couldn’t be better. Over the past few years many
dealerships “jumped ship” from one of the very expensive Tier 1 providers like ADP and
R+R into the Tier 2 or Tier 3 market. Some thought that DealerTrack/Arkona might be
a great solution to the high cost and slow development of ADP and R+R, but after being
purchased by DealerTrack, this system has declined in support and increased in
price. Dealership employees are frustrated by the features lacking in the other Tier
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2 and Tier 3 systems. To fill the gaps, dealerships bought many 3rd party products and
the promised savings haven’t happened or other areas have suffered such as internal
controls and customer satisfaction. Productivity is extremely low in dealerships.
DealerStar appeared to be very user friendly. Plus, with your background and
knowledge of the industry, I’m sure it will be a huge success. The one thing that I
think was especially favorable to the group was the cost.
Greta-Ann Jars - Automobile Dealers Association of Greater Philadelphia
Value of DealerStar – Proceeds of the Offering
On an average, it has taken between 30-60 million
to bring a new DMS company to market. We have
done this for an amazing 6 million! How did we
accomplish this for so little money? First of all, we
built it from the ground up - instead of buying
another software product and modifying it. Next, we
used a program generator; PHP Runner that
created an very agile development environment.
Finally - when you have a DMS company run by an
accountant - you get a frugal operation. Now it is time for us to grow DealerStar. To
accomplish our next phase; getting fully factory certified and develop a support/training
team - we need capital. We have estimated that over the next 5 years, we'll need 4
million contributed by our dealer investors – owning 40%. We contributed 6 million
of the completed code, software, patent, trademark, goodwill. The first portion of
the 4 million is offered at $100 a share. We expect to raise the price to $150-$200 a
share in the next few years. Please visit the References - Investors section to see a list
of our current investors.
For those of you unfamiliar with the cost of a DMS company, I have created some cost
comparisons for you below. I’d like to say that DealerStar is worth $5 billion instead of
the 6 million that have invested. Five billion is the price Bob Brockman is asking for
R+R today and he paid 2.8 billion for it a few years ago! Let’s look some other DMS
sales;
1) $58.9 Million - DealerTrack paid 58.9 million for Arkona. At the time, we
estimated them to have about 200-350 franchised dealer clients.
2) $45 Million - ADP paid 45 million (adjusted to 56.2 million in 2012 dollars) for
DealerSolutions 13 years ago – when they had less than a dozen dealers
installed.
3) $39 Million. It took Quorum over 39 million to get their current stage.
We can also look at a cost analysis. Our software has over 26,000 “screens” or pages
and reports. Taking into account the design, programming, and testing cost of $750 a
page or report that would add up to about $19.9 million in development costs. The
database design of over 1100 tables and views would be another 1.650 million, and the
cost of trademarks, incorporation, patent applications, and the work so far on
manufacturer integration (discussed later) brings the cost value to $22.6 million.
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The third test is the earnings potential. If we reach a level of 200 dealers paying an
average of $2,500 a month, the revenue is 30 million over 5 years. Of course we plan
on reaching a level of 2,000 dealers – so you can do the math - 300 million! In
summary;
1) Based on the average of other sales $47.63 million (excluding the sale of R+R
for 2.8 billion)
2) Based on a cost to have it programmed today; $22.6 million
3) Based on earning potential of 200 dealers, $30 million
4) Our current cost - only $6 million! I can't believe it cost $640 for the Obamacare
website! Ours is 1000 times more complicated and it works!
Dealers often value companies solely on current earnings – except when they buy and
build a new franchise point. The day you open – you have no earnings, but yet it is
worth millions. DealerStar is like a new BMW or Mercedes Benz dealership; we have
the “building” completed (software done) have the BMW franchise (entrance into factory
integration programs) and the same potential for earnings that ADP, R+R and
DealerTrack/Arkona have (each about 1 billion a year.) Rather than owning the building
(software) personally and then paying us royalties in the future (like a dealer pays rent
to himself,) we transferred the value of the code, trademarks and pending patents into
DealerStar. Although we consider our current market value at 20-40 million or $200 $400 a share, we will allow the 2014 investors to purchase stock at the $100 price
and have an option in section 3 of the Stock Agreement at the end of this
prospectus to purchase the same amount in 2015 at the lower level.
The proceeds from this first offering will be used to;
1. Hire a support and programming person(s), a manufacturer integration developer
to speed up our certification process, and pay the manufacturer integration
certification fees so we can start installing faster.
2. Add a training/demonstration office– although we would like to stay a “virtual”
company for as long as possible to control costs. It would be attractive for
dealership employees to come to Florida for training and our area has a large
technology employment pool to choose from – along with no personal income tax
and low housing/office rent expense. It is our goal to add support personnel as
we add dealers.
We are proud to say that since we formally started
in business in 2007, we have filed profitable tax
returns due to our careful growth plan and ability
to earn income with consulting. We have no
accumulated loss; only the prepaid cost of
manufacturer integration as shown in the
financials in a later section. It will be years before
you’ll see us waste money on a big booth at
NADA or huge advertisements in Automotive
News. I have been able to do free “soft”
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advertising of my DMS in articles and seminars that I perform. I have a waiting list of
dealers that want DealerStar – so we won’t need to spend money on marketing for quite
some time. I will continue to write articles and perform workshops for the value of the
free promotion of DealerStar to a huge dealer database that I hope respects the ideals I
promote on efficiencies and profits. By offering 40% of our stock to dealers, we will end
up with 20 investors – we’ll be like a “20 Group!” You are receiving this because I want
you to be involved.
DMS companies have in the past gone about the process of raising money and then
farmed out the programming offshore – wasting their investor’s contributions. We did
things backwards; we started in 2001 getting the trademark and finding the right tools
and database. In 2006, we decided on the right platform and then installed it for beta
trials from 2007-2010. We are now have 25 dealerships using portions of our software
and fully installed at 2 dealerships. Our first investors so far are on DealerTrack and
we will most likely give them 50% off while we perfect the extraction and conversion of
DealerTrack/Arkona systems. We think DealerTrack's recent requirement to sign 4 year
contracts and price increases will cause many dealers to switch in the next few years.
"I think it shows professionalism and that DealerStar will fill the needs of many
dealers. I'm very excited for the launch/pilot opportunity. DealerStar will sell like
red ropes at the Super Bowl!" Director of Service and Business Development at a
Honda Dealership
DealerStar Today
As you look at our financials, you might wonder why we are doing a stock offering at this
time. It doesn’t appear that we need the money. As an accountant, I have found that the
best time to acquire the funding that you need is way before the moment you need the
funding. We also recognize that we’re very small and we need to have some help to get
through our next phase; keeping these first few installed dealers happy and developing
manufacturer integration. We have created the best DMS product and gotten it
successfully installed, tested and supported - but it is time to build our company and
plan for our future growth. We think that having dealers as our investors will help us
grow, keep prices low - and also provide a nice return for our chartered investors. We
also think they will help sell our (their) system!
Balance Sheet*
Income Statement*
* provided on request
Profit reported each year since 2006!
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Cash Flow and Profit Projections*
* provided on request
In the Cash Flow/Profit analysis, we project that DealerStar will eventually earn about 4
million a year - and this is with only 200 clients. Of course with technology multiples
exceed 15 times - this could bring the value to 60 million - or 6 times the investment.
"I wish you luck and applaud you for getting into the DMS business. You are well
respected in the automotive industry and it is about time that someone who truly
understands dealer's pains, wants, and needs develops a product that is
affordable and can work for a small dealer to a mega dealer. I wish you
success!" Ken Mannell, a former Dealership Manager/Executive from Boston, Account Manager for
R+R
In summary, we feel the amount we are contributing of DealerStar's code,
software, goodwill, trademark and patent today is worth 6 million based on the
following;
1. The software is completed, tested, and installed at dealerships; including a
former R+R client and one that was on Microsoft Dynamics and unhappy.
2. Acceptance into the exclusive GM factory integration program, Chrysler, and
have been certified on various completed STAR integration points. Completion of
these by mid-2014. Accepted into VW and KIA program and started those on
December 1st.
3. Unique, agile web-based development platform that it easy and low cost to
support with a pending patent (that could have extreme value in the future – but
we’re not counting on that today.)
4. Our ability to extract and convert data better than any other company from
existing ADP/R+R, DealerTrack/Arknoa and about 10 other systems.
5. Sandi’s extensive client database, DMS and dealership industry knowledge, and
marketing ability via articles, webinars, and seminars.
"Our cost of dealer acquisition is currently free! We have waiting list for
DealerStar-we don't have advertising or sales commission costs!"
I don’t know of any other DMS company that has more going for it other than the first 2
items. When we are at their level of installations and factory integration, they will not
have items 3-5 and we will have a considerable advantage.
Why is there a Need for another DMS?
Based on the evolution of software tools, the major 3 that have the most revenue should
have migrated to their “Next Generation DMS” that would be faster, easier to use and
cost less to support. Both ADP and R+R tried this and failed. ADP’s failure after
purchasing Dealer Solutions was quiet and the losses absorbed. On the other hand,
the failure by R+R after working with Microsoft’s John Reed (now spearheading the
Dominion DMSAX project) to develop the R+R Suite product based on Microsoft
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Dynamics was a huge loss of over 65 million, embarrassment, and the start of the
takeover by UCS of the most beloved DMS product at the time by users; R+R ERA.
This means that most of the approximately 9 major DMS systems are still 2nd
generation DMS systems built on software developed in the 1980s and 1990s.
Lipstick on the Pig
What we have today are the three old products from ADP, DealerTrack Arkona and
R+R servicing about 78% of the new franchise dealer market. ADP has put an overlay
on their product and called it either websuite or Drive. The new R+R company (former
UCS) has the UCS product Power with an overlay. They named the same overlay on
the former R+R ERA product, Ignite. All three try to tell dealers that this is their new
web-based “Windows” system, but it is just that old Pick or IBM database with an
overlay – or as I like to say in my seminars, “Lipstick on a Pig.” It is funny – one of the
older tier 2 DMS systems, Auto/Mate uses this slogan to sell their system which has an
overlay that is also “Lipstick on a Pig!”
"A DMS system from Sandi is huge - she just tells dealers which system to buy
and they buy it", former ADP sales executive with 15 years DMS experience.
Structure Problem with ADP and R+R
Even though they have put an overlay on their systems, ADP and R+R still have Pick as
the database. Pick which is the operating system, programming language and the
database (all in one) is a very “account” - or bucket type of structure. Each module;
service, parts, accounting, sales is in a separate account with their own dictionary and
security routine. A user must log into accounting, then into parts, service, etc. Fields in
Pick are multi-valued; for example a labor amount field will have 10 amounts in the field
if there are 10 lines on a repair order. Modern databases like SQL and MySQL would
have 10 lines with a single labor amount in the labor amount field. Pick has only one
field type – character, which makes data validation impossible. Date fields on these
systems can be 10/1/2012, 1-Sep12, etc. These three things make Pick slow and a
“patchwork” of a system;

•
•
Account structure – that hampers integration between modules because they
don’t share the dictionary, security, or database
Multi-value fields make report writing and data exchange difficult
Only one type of field, no validation of data and slow searches for data
Most newer Tier 2 and 3 solutions are now on Microsoft SQL which means high
licensing costs and slow performance. Only DealerStar is on MySQL which has lower
licensing costs, but the great structure of a fast modern database. It was also
completely designed – from the ground up - instead of modifying other software
products developed for another industry.
Summary of ADP, R+R, DealerTrack/Arkona and Dominion DMSAX
ADP – Old underlying technology, speed issues, mis-match of acquired technology.
Often wins the bid because the other providers don’t have the integration or multicompany features required.
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R+R –Challenge to support two major aging DMS products (ERA and UCS Power) and
force ERA users onto Power platform with Ignite overlay. Paid a lot for R+R customers
(2.8 billion) and many are unhappy or leaving.
DealerTrack/Arkona – Step-child company of DealerTrack in NY with an old platform
(the former System 36- IBM Ensign product used by EDS for Saturn dealers) and
disconnect between two divisions (NY and Utah.) Support is decreasing and prices
increasing as they cut costs. Has been winning bids from ADP and R+R by default
instead of providing a better product. All new product development is going into
DealerTrack tools instead of the core DMS that doesn’t earn as much as the “paper
pushing” business. Their latest "upgrade" - Fusion - has the objective to join their
products together to enable their sales reps to sell the DMS along with the other
DealerTrack products. A recent post on a DMS forum said, " DealerTrack is not
anywhere near the level of sophistication of RR or ADP, because of their relative
newness." I'd like to correct that statement - the DealerTrack DMS is quite old - almost
20 years old - based on technology that is over 30 years old. The DealerTrack DMS
was formally known as Arkona that started in 1992 and then purchased the Ensign
(CDMS) in 2001. The Ensign DMS, based on the IBM System 36 (later IBM AS400)
was started by Rich Holland and Blake Nielson in 1994 after working for Cars/Dyatron
from 1980 to 1994. Cars/Dyatron developed the Cars-36 system on the IBM System 36
for EDS that was installed in Saturn and GM dealerships. That system is now
terminated. I think you can connect the dots? DealerTrack DMS is an old system with
"lipstick on the pig" to make it look newer. DealerTrack purchased Arkona in 2007 for
close to 60 million. They will need to recoup that huge investment by increasing the
fees for their DMS. DealerTrack was formed in 2001 by 3 banks; Chase, AmeriCredit,
and Well Fargo to better control the flow of submission of finance contracts from
dealerships to banks. Do you want to pay for a DMS owned by bankers with the
objective to increase profits - or do you want to own your own DMS company DealerStar?
Dominion DMX/Microsoft Systems - This is not a joint venture with Microsoft - this
only a DMS using a Microsoft tool; Dynamics AX. Dominion recently purchased ACS
that is on the old Visual Fox Pro platform being terminated by Microsoft in 2015. This
purchase includes the former Infonizer MSDMS group (AVAbahn) in Ann Arbor that
ACS purchased a few years ago as a solution to their dying platform. This also includes
some of the same players (John Reed, Richard Ward) that failed to bring the R+R
Microsoft product to market and again failed with the Infonizer product as AVAbahn.
This is an “automotive” version of Dynamics AX that was created in Denmark. After
looking at the product, I know they have a long way to go; it is missing key pieces of a
DMS, a better “Americanization” of the interface, and of course, manufacturer
integration since they can’t use the same routines or certification used by the old ACS
Access program. I am sure that Dominion will need to spend millions more to get it
ready for market. Like most of the other newer Tier 2 and 3 providers that chose
Microsoft tools (MPK, Quorum, Procede, PBS, GoldenEye) Dominion DMX will be
saddled with high support costs, bloated and slow Microsoft software that was designed
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for other industries. The little Tier 2 and 3 providers; Autosoft, DPC, Jarvis, DDS
Dubuque, Adam, DealerBuilt, and Auto/Mate are all very old products that lack many of
the features that demanding dealerships need. Their old platforms and structures
prevent them from being web-based, agile, multi-dealership, and mobile enabled
without costly and slow “lipstick on the pig” tools.
Could you Start your Own DMS Company?
I knew a farmer that wanted to buy a dealership so he could get all his farm trucks at
cost. I talked him out of that idea because owning a dealership is much more
complicated than it looks. It takes many careful elements; the right product, people, and
processes to be a successful dealer. The same is true with a DMS company. Could
you borrow 6 million and pay some programmers to write something like DealerStar?
As you might have heard, the government spent $640 million for the poorly designed
website that only needs to sign up Americans for health care. Technology costs can
easily get out of hand. A DMS system is a lot more complicated than knowing someone
who has created a CRM tool, written accounting software before, or designed websites.
So many times over the years I’ve had someone discover a new accounting or CRM
product like Microsoft Dynamics, NetSuite, PeopleSoft or SAP and told me that they
plan to modify it to make a DMS. The latest one is http://www.acumatica.com. I just got
a call from someone who wants to combine this cloud software with a CRM product that
he likes and have a DMS. When we went through features of the product, it was
obvious that it wasn’t even close to what you would need to build a DMS. Both ADP
and R+R tried using “off the shelf” software and modify it but lost a lot of money; over 50
million each and caused the takeover of R+R by UCS. There are thousands of little
things that make a DMS different than other Enterprise software, but here are the big
items;


•
Factory financial statement method of reporting sale and gross profit by
department. Although a higher level financial report writer might be able to
create this section, the mapping of various sales from the integrated sales,
service and parts modules that depends on the type of customer or item being
sold – is an extremely foreign concept to most standard packages. The level of
customization is huge.
Schedules. Dealership accounting uses a complicated method of subsidiary
ledgers called “schedules.” Most standard accounting packages have just two
types; accounts receivable (people who owe us money) and payable (people we
owe.) Because most of the amounts owed and due involve around a car deal,
repair order, or parts ticket that are tied to a customer, these schedules are also
tied to a key field. Other schedules keep those amounts by either the customer
number or the stock# of the trade-in. When R+R brought out their new Suite
product based on Microsoft Dynamics, they could only run schedules at night –
the demand on the database was too great during the day. The Microsoft guy
said we’d need to improve our business practices to not require these on the fly –
instead of recognizing that we like to run schedules anytime that we want!
Separate Invoicing Systems: DMS systems have 3 main invoicing systems;
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1. Vehicle Sales and F&I which include aftermarket, reserves, insurance, doc
fees, taxes
2. Repair Orders; labor, parts, other charges like shop supplies, taxes, sublet
repairs
3. Parts Tickets; parts, other charges like freight, restocking fees
Trying to use the single invoicing system of a standard accounting package to perform
these three very distinct functions has caused converted or customized software to fail.
Most try to use the standard invoicing and inventory system for the parts inventory and
write modules to handle Repair orders and Vehicle sales. Each one of these sales
invoicing systems has a mapping to the general ledger that then sends it to the correct
sales account on the factory financial statement (required by the manufacturer’s
agreement.) For example, when the dealership sells labor on an invoice and that
invoice is going to be paid by the factory; the labor sale amount goes to warranty labor
and the parts to warranty labor parts. Even the type of labor is divided between
mechanical and body labor. Our bus dealership was on Microsoft Dynamics and their
bus inventory and parts are in the same inventory database! They have to add labor to
inventory to get it on the same invoice that they try to use for selling parts and repairs.

Integration with Sales, Service, and Parts. A fully integrated DMS combines
your contact information from a customer database, with deal amounts, and
information from the vehicle inventory database to form this “deal” that is then
stored for accounting to use to post the sale into the general ledger. A typical car
deal has about 20 entries into the accounting system and this interface prevents
someone from having to put each amount in each account manually. During the
past few years various enhancements have provided ways to increase profit;
1. Rolling back the payments to reach the customer’s budget and being
able to decide whether to get more down payment, increase the tradein value, months, rate, or lower the price of the vehicle (Desking.)
2. Providing the various options for sale like extended warranty policies
and GAP insurance in a menu format (F&I menus) so the customer
can select by the monthly payment the items they’d like to get. Most
tier 2 and 3 providers lack F&I menus and Desking features.
3. CRM. Almost all DMS providers track prospects or leads in their
systems but most can’t bring in a lead from a web provider or even the
dealership’s own website. Most outgoing emails (if available) go
through a DMS controlled server. ADP and R+R gave up trying to
make their Prospecting system work and now propose only the big
CRM product; rather their old Showroom Control module. A fullfeatured CRM product like ADP’s Drive/webCRM and R+R’s Contact
Management provides many features. A DMS system’s biggest
problem comes from the newest technology trying to communicate via
email and SMS with customers. I think CRM software is the biggest
value proposition today for a dealership and a huge deciding factor in
picking their next DMS. It helps sell cars and service. It has become
proven technology that works, although it is hard to define what CRM
13
software truly is, we have decided that to ensure our future by
including CRM with DealerStar. Rather than spending time integrating
with VinSolutions, Higher Gear, and DealerSocket, we’ll focus on
giving dealers an “all in one” solution. This is the path the ADP and
R+R has gone and we have an easier road because we put CRM in
our design from the first day. Our first technology offering was one of
the first CRM products and grew to over 200 dealerships before newer
technology overshadowed us. It was the vision of a single CRM and
DMS system that help us decide to develop DealerStar.
If you do try to squeeze a DMS into an “off the shelf” product, you might be able to
combine it with a CRM product and then use the inventory module to sell parts – but the
biggest failure will come in the lack of a service module for our industry with these
features included in DealerStar but are lacking in Tier 2 and 3 providers;
1. Dispatching. Managing the technician’s time by optimizing the dispatching of the
right job to the best qualified technician
2. Being able to quickly provide an Estimate and pricing for additional work “how
much for that brake job?”
3. Purchase orders that tie into a repair order so that a rental or sublet work isn’t
missed when the repair order is closed out. This is a feature added in the new
Drive system by ADP. As a note, when ADP does add an enhanced version of
their purchase orders, they will only enable it in the newest version – thus
creating the need to upgrade to Drive as shown in the example in the pricing
section.
4. Grid labor pricing that increases the labor rate based on the labor hours.
Standard invoicing and inventory system can normally sell parts okay, but we have 3
items in a DMS parts module that “off the shelf” product lack;
• Price escalators for both sales and ordering
• Pricing matrixes based on both the customer and source
• Notifications when special order parts arrive tied to the customer, repair order or
vehicle
Many of these items are also missing from tier 2 and 3 providers, but some of the newer
ones like Quorum and DealerStar have the advantage of better internal control of parts
quantities providing a value to the dealer of less opportunity for fraud. To summarize,
the reasons why trying to modify most existing accounting and enterprise software fails
are;
1. The need for 3 very different but integrated invoicing, sales and inventory
systems
2. Extensive subsidiary ledgers (schedules) that are controlled by a variety of key
fields that vary from dealership to dealership
3. Factory Financial statement – that reports a sale from a particular customer of a
particular type of a particular product to a specific sale and cost of sale account.
4. The interface with the factory. The next section discusses this in detail.
14
Factory Integration – the Big Challenge for an Emerging DMS
About 15 years ago, I was speaking to a group of 20 dealers and after our break, they
asked me to sit down and listen to them. They had decided at break that they were
paying a combined 20 million a year in DMS charges and thought if they gave me that
20 million, I could write them a perfect DMS based on my knowledge of the systems. I
turned them down because of the difficulty of obtaining factory certification and
developing factory integration. At that time, the manufacturers had a variety of methods
to receive and send information to dealerships and it was all very complicated. Shortly
thereafter, a group of manufacturers got together and started standardizing the process;
www.StarStandards.org. As time passed and I studied the work being done by Star
Standards, I realized that this cut the R&D costs about in half. The standard XML files
would make it easy to write the 10-15 interfaces for the over 20 manufacturers;
Factory Integration Core Items
Some manufacturers only have a handful of integration points and others have over 20
(GM.) Here are the most demanded;
1. Financial Statement - Download monthly financial statements directly to the
factory.
2. Parts Orders and Returns - Create any parts order or return and transmit it
directly to the factory, quickly and easily
3. Parts Master - Receive the monthly parts master tape, which includes current
and superseded parts numbers, from the factory
4. Warranty Download - Submit warranty claims to the factory electronically.
5. Vehicle History Inquiry – Submit the VIN# and receive back the warranty repair
history on the vehicle regardless of the servicing dealer
6. Vehicle Sales Report – Submit sales data about the customer with the ability to
do rebate submission – Submit for dealer and customer rebates
For some manufacturers it is not required to have factory integration (Chrysler) – you
can do everything on their dealer portal website. For others like Nissan, you must have
factory integration – it is the only way to submit the required financial statement. For
some dealers, not having factory integration makes it too hard to do business (entering
warranty claims manually) and for others, the advantages are too minor to warrant
paying more for a tier 1 DMS. Because these integration points already existed during
our design of DealerStar, instead of creating factory integration as a separate module,
we have put the integration points inside of the application. For example when you’re
looking for a part in our parts inventory screen, there is a button to check the factory
master or online factory availability of the part and then add it to your inventory and
order it.
Factory Certification Process
To become a certified DSP (Dealership Services Provider-term used by the factory
instead of DMS) vendor for a manufacturer, the most common steps are;
1. Apply to be part of their certification program. For GM, this was a long process for me
that involved forms, references, and a presentation to their selection committee.
Although GM had recently closed their program to any new DSPs, I was able to
15
2.
3.
4.
5.
convince them that there wasn’t an offering like ours; fully web-based, highly integrated
with CRM as part of the core, and designed with the latest software tools by a long-time
DMS expert. For us to be part of the Chrysler program it meant sending an email with a
recommendation by our first Chrysler dealer. Just because you want to develop factory
integration, doesn’t mean that the factory wants to accept you into their program.
Pick an integration point that you want to be certified for first and write your functional
specs and apply to the program. For GM, this involves working during their “windows” of
opportunity. We completed our financial statement certification, parts avail/info and
warranty claims well within the deadline.
GM has an annual fee of $25,000, the rest are usually a one-time certification fee – or
free like Chrysler. Our next certification will be VW and KIA that are a one –time fee of
$18,000 each.
Submit test data as outlined in the testing process with various scenarios.
The factory approves the format of the test data and certifies you for that application.
We are certified financial statement, warranty claims and a portion of Parts Workbench
for GM.
The following chart is the list of DSP providers in the GM certification program. You can
see that my DealerStar is the last on the list – being the last one added to the program.
Financial Information
As a knowledgeable investor, you are most likely painfully aware of how much DMS
companies charge for their services, therefore I won’t go into a discussion of our
potential client base, proforma income, and pricing – other than the section on our views
of a good pricing model. Before being purchased by UCS, R+R's annual revenue was
1.4 billion! Today, ADP's revenue exceeds 10 billion - with 1.5 billion from dealers.
Profit Projections - Return on your Investment
Financially, it doesn’t take much for a DMS company to be profitable. Take the amount
you pay ADP or R+R monthly and multiply by 12 and then by 7000 dealers – I’ll use
$9,000 a month, the average ADP or R+R billing amount;
Monthly
Annually
Total
Dealers
Annual Revenue
$
9,000
$
2,500
12
$
108,000
12
$
30,000
7000
$ 756 Million
300
$
9 Million
16
If we charge a fraction of that amount; $2500 and only reach 300 dealers – or become
only 4% as successful as ADP or R+R, that is $9 million a year in revenue –
compared to $756 Million for them. We don’t need to be greedy. We don’t even need
to make $9 million to provide a nice return to ourselves and our investors. Of course,
ADP and R+R make a lot more revenue than $756 million – estimates are over 1 billion
a year each. They also have many more sources of income other than monthly support
fees; they charge for upfront licensing, training, upgrades and conversions along with
the revenue they get from all their other services they provide. Our company has the
same potential for growth outside of providing core DMS products. DMS companies are
not like the car business that has a low net profit to sales. There are no “cost of sales”
or inventory costs for a DMS company. DMS companies are not in the hardware
business anymore – their fees are all pure profit items; software and services.
Expenses can get high; especially R&D costs, marketing, installation, and support. It is
in these areas that we have already excelled with tight management control.
DealerStar – the Difference
We think we’re the best next generation DMS! Our design was done with extensive
knowledge of the thousands of features of the various DMS systems, but with the low
cost tools of PHP/JavaScript/MySQL- compared with the high licensing fees of the other
Microsoft-based DMS systems. We used a code builder to make our modifications agile
and enable a small design team. Our only problem is that we have the lowest level of
manufacturer integration and client database at this point – but that is a plus for us
because we can still make quick changes and stay agile. I have about 7,000 dealer
clients after almost 20 years of consulting, so a built-in customer base that other
companies don’t have. They must pay high marketing and sales to acquire each new
customer. We did our beta testing at a Honda, GM, Chrysler, and Saab dealerships
from 2008-2012 and now we’ve been fully installed for over a year at a dealership after
they got a 9-day shutdown notice from R+R. We now have over 25 dealerships using
portions of DealerStar with 2 using the full system (including payroll and CRM.) We
handle each support email personally – and discuss together how to avoid the problem
in the future with better design or training. This slow careful growth will be the biggest
key to our success and customer satisfaction.
Pricing of DealerStar
I’ve spent the past 20 years helping dealers get a DMS for a lower price. Here is a
typical “upgrade price” for a dealer going to the new ADP Drive system. Although it is
for only 30 users, I often see a price that is double or 3 times as much for the same
situation. When I questioned the sales rep, he replied “sometimes they just sign and
pay and we win big!” In this example below, the dealer is not getting anything new – it
is their same old system with new “lipstick on the pig.” Dealers are frustrated at this
pricing.
17
For this reason, we charge a flat amount and add more only for manufacturer
integration or payroll. A typical DealerStar client would pay $1,000 - $2,500 for
everything – including CRM! We are still working on the pricing and will value your
input. Regardless of what we decide, we’d like to make a page on our website where
dealers can “order” the software and know exactly how much the pricing will be – rather
than using this complicated bidding procedure.
What if DealerStar gets bought?
I think we were all shocked when UCS bought R+R for 2.8 billion and that now that Bob
Brockman wants 5 billion! Automotive technology is “hot” right now for investors.
Obviously our obligation is to be profitable and if we were to get an offer of $40 million in
the next few years that would enable our investors to quadruple their investment – we’d
have to consider it. Our long term plan is find someone in our charter investor
group or future employees that could eventually buy out most of our remaining
60% stock and take over DealerStar. With no “dealer kid” ourselves, we will be
keeping our eye open for an eventual exit strategy, but our plan is not to grow a
company that would be gobbled up by another larger DMS, but to someday with the
help of our investors to take DealerStar public and make all of us very, very wealthy.
We think this product is so advanced and superior to ADP and R+R that it deserves to
be the next generation DMS – and not “killed” off in order to force the hard earned client
base to migrate back to an old legacy system.
Management Team
Having a small team has been our biggest advantage during our five years of development. We
don’t have to arrange meetings; we live and breathe DealerStar. In 2006-2007 after the
disappointing entry of Microsoft into our market, we decided to design DealerStar. Over the
past 5 years instead of wasting time building a company, hiring employees, finding offices and
raising capital, we focused on developing and testing the software and have ended up with a
small amount of debt and a fully developed DMS, built from scratch that we own 100%. In the
past 5 years the interface with the factory has greatly improved, so our delay has actually
worked to our advantage. By coming to the market at this time with Star Standards already
being adopted, we will save millions in factory integration development costs compared to our
competition. What we have already developed for Chrysler and GM integration works the same
for Ford, KIA, BMW, Honda,Toyota, etc.
Our current stock agreement restricts any one employee or officer to earn more than $144,000
a year. Currently we only pay Keith Jerome a salary of $72,000 and the rest on a contract basis
when we need the help. Sandi Jerome still earns her salary from Sandi Jerome Computer
Consulting where she does her very popular Profit Accounting Academy with Nadine. It is
also a great place to find future DealerStar customers!
18
After studying the financials of DealerTrack DMS - Arkona, I found that part of the reason why
they ended up costing close to 60 million for DealerTrack is that they would pay officer salaries
of an average of $250,000 each to at least 3 or 4 people each year. They ended up in a few
years of being 15 million in the hole. We don't want to spend our investors money that way - so
we're a lean operation until we get the revenue to match the salaries and we'd rather spend the
money investing in factory integration and other features to make our system more valuable.
Sandi Jerome, Vice President and Designer
Starting out working in the parts department when the inventory was kept on 3x5 cards, Sandi
Jerome has over 30 years experience in the automobile business. She is a CPA with a degree
in accounting, but also has the unusual combination of 3 years in F&I and another 2 years as an
assistant general manager. She has been the
fixed operations manager for parts and service
and the controller and CFO for the largest
Chevrolet and Dodge dealer in a 5-state area.
She was one of the first female F&I managers in
the country providing her with the knowledge of
the sales process, service and parts operations,
and DMS systems from being a system
administrator.
Sandi Jerome is a certified ADP consultant and
helped write the ADP certification program. She
consults and lectures on automotive business management, internal controls, and computer
utilization for NADA Management Education, CPA firms, AICPA, 20 groups, manufacturers, and
three of the major computer companies. She has been a highly rated speaker at NADA in the
past few years. Her seminar, “40 Valuable Things to Do with Your Computer System” was rated
14 out of 63 seminars. Her NADA seminar, “How to Create a Super Controller” was ranked in
the top 10. She also provides in-dealership computer training for dealers and evaluations of
their existing systems and processes. She developed CompuSelect, a computer program that
provides dealers with a computerized analysis of their computer bids and helped over 1,100
dealers pick between 20 different available DMS systems over the past 15 years. She also
developed DMS Import which downloads a dealership’s database into online storage for data
warehousing and creating marketing campaigns. She specializes in third-party interfaces and
training of R+R, ADP, UCS and most other systems for downloading accounting, service, parts,
and F&I data from remote locations and converting the data into Microsoft Excel, Access, XML
or other standard formats.
Sandi is the author of a series of self-study guides on the automobile business that is used by
CPA firms for continuing professional education. She has written reviews of tax and accounting
software for national computer magazines and two published mass market computer manuals.
She is the author of The Super Controller 1-3 Guides, Power ADP Reflection, Power R+R
ERALink, Safeguards Training Guide, Data Mining made Easy, along with a free monthly Tip email newsletter. She developed The Pay Plan Wizard – a tool for creating effective pay plans
using Excel and was the first editor of Digital Dealer magazine and still a regular contributor and
technical editor. She and noted ADP consultant, Jack Ross wrote Super Doc, Super Excel and
most recently, Expense Master for ADP, R+R and Auto/Mate.
19
Since 1995 Sand has worked as a consultant doing training, design and product consulting for
most of the major DMS and CRM companies; ADP, R+R, UCS, EDS, Auto/Mate, Quorum, ACS,
DPC, and Dealertrack/Arkona (partial list.)
Keith Jerome, President and Lead Programmer
Keith Jerome has worked in the nuclear industry for both the Department of Defense and
commercial power plants where he designed preventative maintenance programs and detailed
corrective procedures for instrument and control equipment. This involved checking each
program against NRC and manufacturer guidelines and keeping in mind technician and public
safety. He is a Visual Basic programmer who converted to PHP for this project. He has spent
the past ten years in the automotive industry teaching third parties how to interface and extract
from the various DMS systems (ADP, R+R, UCS, ACS, Arkona, Adam, Auto/Mate, etc.) and
developing CRM and accounting tools. A long time ago he spent a few years running a
dealership's leasing company. Keith and Sandi have been married for over 30 years and it is
this unusual combination of their knowledge that has led to the design of a uniform cohesive
DMS system.
Nadine Epstein – Director of Customer Service
Nadine, currently a consultant with Sandi Jerome Computer Consulting has had both small and
large company experience. After obtaining her CGA, she embarked on a career in the
Automotive and Trucking industries where she met Sandi while working at one of Sandi’s client
dealerships. She later left the dealership and began consulting -- refining her skills as a
dealership accountant and sharing what has become a passion for the Automotive and Trucking
industry. It will be her job to make sure our users know how to best use DealerStar and are
happy with DealerStar. She is great with dealers and dealership personnel. Our goal is to
obtain #1 in the NADA customer satisfaction survey with the efforts of Nadine keeping our
clients happy and recommending us to other dealers. She was a speaker at NADA in Orlando,
2013.
Jack Ross – Manufacturer and ADP/R+R Integration
Jack has been involved with automotive dealerships since 1985. Almost from the start, he
learned a hands-on approach to getting information out of the computer systems and figuring
things out so that the dealership could be more productive. Starting with learning to program an
IBM System/36, he moved on to personal computers, Lotus spreadsheet programming,
relational database programming, Microsoft Excel, Visual Basic, and ADP dealership software.
Along with ADP came the Reflection emulator that allows one to literally write programs that can
automate a great deal of manual jobs and procedures found in most dealerships, from parts to
service to car sales to accounting. He completed DealerStar’s GM and Saab integration of the
factory financial statement and XML file output way ahead of deadline and budget estimates.
He is working on the VW, Chrysler and Mitsubishi financial statements. He’s our expert (along
with Keith and Sandi) at getting the data out of ADP/R+R and converting into the format we
need.
Lena Washke – Accountant
Sandi met Lena while they were both members of the Science and Technology group in Port
Angeles. Lena was the office manager of the local plywood plant and later worked for the Port
Angeles Police department before starting her own accounting practice. Realizing the need for
an independent accountant, Sandi turned over the DealerStar books to Lena in 2007 and Lena
retains the backup contingency plan, code, software and database.
20
DealerStar Demo
http://www.dealerstarcrm.com/dshelp/login.php
username is profit and password is profit - both are lower case
I know that you might want to forward this to an employee to evaluate, so please ask
them to not share with a DMS representative or ask your current DMS to add these
features. Email me at sandi@dealerstar.net if you'd like a GoToMeeting demo or
access to our live demo/training system.
Webinars for Investors
Investor Webinar Link- email sandi@dealerstar.net if you like me to email you
these links. You can also visit www.DealerStar.com and click on the purple flower or
blue globe to download and listen.
References and Dealer Investors
Please Visit www.DealerStar.com to watch testimonial videos.
Crossway Saab
This is a smaller Vermont dealerships that had been on the R+R system for many
years. The factory integration is the Saab Financial Statement (GM,) Parts Order
upload, Warranty Claim upload, and Saab parts price list. They have been on the
system since May 2012 and have changed ownership once which required a new
company setup.
"I know I speak for Ryan and Liza when I say how fortunate we feel to have had
this opportunity working with you and Keith in providing input developing your
DMS system. I believe this system when compared to R+R and others will attract
new clients based on its content, versatility and value." "DealerStar got me off my
R+R System in 3 Days" Brad Rouleau, Dealer
Crossway Saab brad@crosswaysaab.com Phone:(802) 223-9580
Telin Transportation
This is a Chrysler school bus/ hotel shuttle van El Dorado dealership with a huge parts
and service business because their client's vehicles are on the road all day long. We
installed them over a year ago and they came from a Microsoft Dynamics system. The
advantage of having this type of dealership on DealerStar is to test how we could
handle a large multi-location location operation with a huge parts and accounts
receivable that wasn't used to a standard DMS. It required extensive training of how a
DMS operates. Their volume was a great test of our servers - they do 5,000 parts
tickets in a few months compared to our Saab dealership that does 50. The employees
use the time clock system - and service dispatching more than the Saab dealership.
We have developed for them special features that no other DMS has - for example they
sell many busses on the same PO to a school district - so we had to develop in F&I the
ability to create 1 sales invoice for 20 vehicles. This feature will be great for fleet
departments that sell to police departments, etc. Since they have so many AR
21
statements and parts and service invoices, we developed the ability to email those to
clients instead of having to mail a copy to the billing offices. We have developed our
mobile screens to enable tech to clock on and off repair orders, lookup parts available,
etc from iPhones and iPads.
"Thanks for all your hard work!" Linda Telin
"I am watching this from a far. From what I have seen and heard from Lori and Linda - you
and your team are doing a great job. All good as far as I'm concerned." Todd Telin
Telin Transportation Group, LLC
952.435.9060 Office
ltelin@telingroup.com
www.telingroup.com
"You are doing a fine job!" LORI S. KOHORST
Secretary/Treasurer
Telin Transportation Group, LLC
763.262.3312 Office
lkohorst@telingroup.com
www.telingroup.com
Charter Investors
Sandra Jerome - developer, DMS guru, CPA, certified ADP, R+R consultant
Keith Jerome, developer, programmer, data extraction expert (ADP, R+R, DT, etc.)
Duke Scott - Scott Honda
Craig Scott - Scott Honda
George Wray - Wray Ford
Nadine Epstein - Computer Consultant, Chartered Accountant
Darren Anderson - Lehmers of Concord
Mike Finnin - Finnin Ford and Finnin KIA
Ed Hutchinson - United Motors Inc (Chevrolet, Cadillac, GMC, Buick)
Do you want to join our Charter Investors in 2014? Email sandi@dealerstar.net. Visit
www.DealerStar.com for more information and hear testimonials from our dealers! Ready to
invest? Print the next few pages, sign and mail with your check.
22
STOCK SUBSCRIPTION AGREEMENT
The undersigned hereby offers to subscribe for the number of shares of Common Stock
(the “Shares”) of DealerStar, Inc. (the “Company”) set forth on the signature page of
this Subscription Agreement at a price of $100 per Share;
By execution of this Subscription Agreement, the undersigned hereby acknowledges
that the undersigned understands that the Company is relying upon the accuracy and
completeness hereof in complying with its obligations under applicable federal and state
securities laws. The undersigned further acknowledges and certifies that the
undersigned received and read the Prospectus of the Company and the undersigned is
familiar with the terms and provisions thereof.
The undersigned agrees and represents as follows:
1.
Representations, Warranties and Agreements.
The undersigned hereby represents and warrants to, and agrees with, the Company, as
follows:
(a)
That the undersigned is aware of the following:
(1)
The Shares are speculative investments which involve a
substantial degree of risk of loss by the undersigned of the undersigned's
entire investment in the Company and that the undersigned understands
and takes full cognizance of the risk factors related to the purchase of the
Shares, including, but not limited to those set forth in the Prospectus;
(2)
The Company may operate at a loss and may do so for the
foreseeable future.
(3)
There are significant restrictions on the transferability of the
Shares; the Shares will not be, and the investors will have no rights to
require that the Shares be registered under the Securities Act of 1933
(the “Act”) or any state securities laws; there is no public market for the
Shares and none is expected to develop; and, accordingly, it may not be
possible for the undersigned to liquidate the undersigned's investment in
the Company;
(4)
No federal or state agency has made any findings as to the
fairness of the terms of the offering; and
(5)
Any projections or predictions that may have been made available
to investors are based on estimates, assumptions and forecasts which
may prove to be incorrect; and no assurance is given that actual results
will correspond with the results contemplated by the various projections;
(b)
That at no time has it been explicitly or implicitly represented, guaranteed
or warranted to the undersigned by the Company, the agents and employees of
the Company, or any other person: (1) That the undersigned will or will not have
23
to remain as owner of the Shares an exact or approximate length of time;
(2) That a percentage of profit and/or amount or type of consideration will be
realized as a result of this investment; (3) That any cash dividends from
Company operations or otherwise will be made to shareholders by any specific
date or will be made at all; or (4) That any specific tax benefits will accrue as a
result of an investment in the Company;
(c)
That the undersigned is financially responsible, able to meet all
obligations hereunder, and acknowledges that this investment will be long-term
and is by nature speculative;
(d)
That the undersigned has received and carefully read and is familiar with
the Prospectus, this Subscription Agreement, and all other documents in
connection therewith, and the undersigned confirms that all documents, records
and books pertaining to the investment in the Company have been made
available to the undersigned and/or to the undersigned's personal investment, tax
and legal advisers, if such advisers were utilized by the undersigned;
(e)
That the undersigned has relied only on the information contained in the
Prospectus and that no written or oral representation or information that is in any
way inconsistent with the Prospectus and has been made or furnished to the
undersigned or to the undersigned's purchaser representative in connection with
the offering of the Shares, and if so made, has not been relied upon;
(f)
That the undersigned is capable of bearing the high degree of economic
risks and burdens of this venture including, but not limited to, the possibility of
complete loss of investment and the lack of a public market which may make it
impossible to readily liquidate the investment whenever desired;
(g)
That the undersigned is an “accredited investor” as that term is defined in
Regulation D under the Act or is otherwise a sophisticated, knowledgeable
investor (either alone or with the aid of a purchaser representative) with adequate
net worth and income for this investment;
(h)
That the undersigned has knowledge and experience in financial and
business matters (either alone or with the aid of a purchaser representative), is
capable of evaluating the merits and risks of an investment in the Company and
its proposed activities and has carefully considered the suitability of an
investment in the Company for the undersigned's particular financial situation,
and has determined that the Shares are a suitable investment;
(i)
That the offer to sell Shares was communicated to the undersigned by the
Company in such a manner that the undersigned was able to ask questions of
and receive answers from the Company concerning the terms and conditions of
this transaction and that at no time was the undersigned presented with or
solicited by any leaflet, public promotional meeting, newspaper or magazine
article, radio or television advertisement or any other form of advertising or
general solicitation;
(j)
That the Shares for which the undersigned hereby subscribes are being
acquired solely for the undersigned's own account, for investment, and are not
24
being purchased with a view to or for the resale, distribution, subdivision or
fractionalization thereof; and the undersigned agrees that such Shares will not be
sold without registration under the Act or an exemption therefrom. In furtherance
thereof, the undersigned will not sell, hypothecate or otherwise transfer the
undersigned's Shares unless the Shares are registered under the Act and
qualified under applicable state securities laws or unless, in the opinion of the
Company, an exemption from the registration requirements of the Act and such
laws is available;
(k)
That the undersigned has had prior personal or business relationships
with the Company or its affiliates, or by reason of the undersigned's business or
financial experience (either alone or with the aid of a purchaser representative),
the undersigned has the capacity to protect the undersigned's own interest in
connection with this transaction;
(l)
That the undersigned has been advised to consult with the undersigned's
own attorney regarding legal matters concerning an investment in the Company
and has done so to the extent the undersigned considers necessary;
(m)
That the undersigned certifies, under penalty of perjury, (i) that the social
security or Tax Identification Number set forth herein is correct and complete,
and (ii) that the undersigned is not subject to backup withholding either because
the undersigned has not been notified that the undersigned is subject to backup
withholding as a result of a failure to report all interest or dividends, or the
Internal Revenue Service has notified the undersigned that the undersigned is no
longer subject to backup withholding; and
(n)
That the undersigned acknowledges that the Prospectus reflects the
Company's current intentions and estimates at the current time, and as with any
developing company, the precise elements of the Company's plans can be
expected to change from time to time.
2.
Indemnification. The undersigned shall indemnify, defend and hold harmless the
Company, and any officers, employees, shareholders, partners, agents, directors or
controlling persons of the Company (collectively the “Indemnified Parties” and
individually an “Indemnified Party”) who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, against losses, liabilities and expenses of each
Indemnified Party (including attorneys' fees, judgments, fines and amounts paid in
settlement, payable as incurred) incurred by such person or entity in connection with
such action, arbitration, suit or proceeding, by reason of or arising from (i) any
misrepresentation or misstatement of facts or omission to represent or state facts made
by the undersigned, including, without limitation, the information in this Subscription
Agreement, or (ii) litigation or other proceeding brought by the undersigned against one
or more Indemnified Party wherein the Indemnified Party is the prevailing party.
3.
The Corporation agrees that the undersigned has a non-transferable option to
purchase an equal amount of shares as purchased below in 2013 on or before
12/31/2014 for the same $100 per share price. . The Corporation agrees to provide at
least 75% of reported profit in the form of cash paid dividends by April 1st of the
following year unless reported profits for each investor is less than $5,000.
25
4.
Revocation. The undersigned agrees that the undersigned may not cancel,
terminate or revoke the offer to subscribe for shares at any time and that this Agreement
shall survive the death or disability of the undersigned and shall be binding upon the
undersigned's heirs, executors, administrators, beneficiaries, successors and assigns.
5. Certain Securities Law Matters.
(a)
The Shares shall not be sold, assigned, transferred or pledged except
upon satisfaction of the conditions specified in this Section 5, which conditions
are intended to ensure compliance with the provisions of the Act. The
undersigned will cause any proposed purchaser, assignee, transferee or pledgee
of the Shares held by the undersigned to agree to take and hold such securities
subject to the provisions and conditions of this Section 5.
(b)
Each certificate representing (i) the Shares and (ii) any other securities
issued in respect of the Shares upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall (unless otherwise
permitted by the provisions of Section 5(c) below) be stamped or otherwise
imprinted with a legend substantially in the following form (in addition to any
legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION
OF COUNSEL OR OTHER EVIDENCE REASONABLY ACCEPTABLE
TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM
THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SAID ACT. ORIGINAL STOCK CERTIFICATES
WILL BE ISSUED ON JANUARY 15, 2014 AND WILL CONTAIN THE
AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND
RESTRICTING THEIR TRANSFER.
The undersigned consents to the Company making a notation on its records and
giving instructions to any transfer agent of the Shares in order to implement the
restrictions on transfer established in this Section 5.
(c)
The undersigned agrees to comply in all respects with the provisions of
this Section 5. Prior to any proposed sale, assignment, transfer or pledge of any
Shares, unless there is in effect a registration statement under the Act covering
the proposed transfer, the undersigned thereof shall give written notice to the
Company of the undersigned's intention to effect such transfer, sale, assignment
or pledge. The Company shall have first right to purchase any Shares for an
amount equal to the proposed sale price. Each such notice shall describe the
manner and circumstances of the proposed transfer, sale, assignment or pledge
in sufficient detail, and shall be accompanied, at the undersigned's expense
evidence satisfactory to the Company the effect that the proposed transfer of the
Shares may be affected without registration under the Act or applicable state
securities law.
26
6. Investor Information
The Company may only accept subscriptions from persons who meet certain suitability
standards. Therefore, I warrant that I am;
1)
A natural person who has individual net worth, or joint net worth with the person’s
spouse, that exceeds $1 million at the time of the purchase, excluding the value
of the primary residence of such person or
2)
A natural person with income exceeding $200,000 in each of the two most recent
years or joint income with a spouse exceeding $300,000 for those years and a
reasonable expectation of the same income level in the current year.
Furthermore, I am knowledgeable of the product offered by the Company (DMS –
Dealership Management Systems,) the client base of the Company (automotive, truck,
RV, motorsport, boat, bus, and motorcycle dealerships) and the major competitors (ADP,
R+R, DealerTrack/Arkona) of the Company.
7. Miscellaneous.
(a)
All notices or other communications given or made hereunder shall be in
writing and shall be delivered or mailed by registered or certified mail, return
receipt requested, postage prepaid, to the Company at the address set forth on
the instructions page hereof and to the undersigned at the address set forth on
the signature page hereof.
(b)
This Agreement shall be governed by and construed in accordance with
the laws of the State of Washington without reference to conflict of law principles.
(c)
This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof and supersedes any prior or
contemporaneous understandings, representations, warranties or agreements
(whether oral or written) and may be amended only by a writing executed by all
parties.
(d)
The undersigned acknowledges that the Company may, in its sole and
absolute discretion, accept or reject this subscription offer in whole or in part.
8.
Certification.
The undersigned represents to you that (i) the information contained herein is complete
and accurate on the date hereof and may be relied upon by you and (ii) the undersigned
will notify you immediately of any change in any of such information occurring prior to the
acceptance of the subscription and will promptly send you written confirmation of such
change. The undersigned hereby certifies that he has read and understands the
Prospectus and this Subscription Agreement.
27
IN WITNESS WHEREOF, the undersigned has executed this Subscription Agreement for the
amount of (check one)
 $50,000 for 500 shares
 $100,000 for 1,000 shares
 $200,000 for 2,000 shares
NAME OF PURCHASER (Natural Individual only) ____________________________________
$
Total Purchase Price
Signature
_____________________________
Taxpayer ID#
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT OR AN
EXEMPTION THEREFROM IS AVAILABLE.
Accepted by Company,
DealerStar, Inc.
___________________________ Date:
By: Sandra L. Jerome
Title: Vice President
Sign, and Mail with your check made out to DealerStar, Inc to:
Sandi Jerome- DealerStar
1391 NW St Lucie West Blvd #362
Port St Lucie, FL 34986
28

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