-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MgeSJA+UiILr0U9gIzW44OmDW/eRO7TLFBe3rH/fhBYj2dago3o1LIQ3emq1beXL Kp5PdqrP+hBMIBlRzcMdhA== /in/edgar/work/0001091818-00-000113/0001091818-00-000113.txt : 20001117 0001091818-00-000113.hdr.sgml : 20001117 ACCESSION NUMBER: 0001091818-00-000113 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WORLD HOMES INC CENTRAL INDEX KEY: 0000894501 STANDARD INDUSTRIAL CLASSIFICATION: [1531 ] IRS NUMBER: 870434297 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 033-55254-18 FILM NUMBER: 771648 BUSINESS ADDRESS: STREET 1: 4505 W HACIENDA AVE STREET 2: UNIT I 1 CITY: LAS VEGAS STATE: NV ZIP: 89118 BUSINESS PHONE: 7025794800 MAIL ADDRESS: STREET 1: 3098 S HIGHLAND DR STE 460 CITY: SALT LAKE CITY STATE: UT ZIP: 84106 FORMER COMPANY: FORMER CONFORMED NAME: AFFORDABLE HOMES OF AMERICA INC DATE OF NAME CHANGE: 19990518 10QSB 1 0001.txt - ------------------------------------------------------------------------------ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-QSB - ------------------------------------------------------------------------------ (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 for quarterly period ended September 30, 2000 ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE OF 1934 for the transition period from _____________ to _________________ Commission File No. 33-55254-18 AFFORDABLE HOMES OF AMERICA, INC. (exact name of Registrant as Specified in its charter) NEVADA 87-0434297 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 4505 W. Hacienda Ave. Unit I-1 Las Vegas, Nevada 89118 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code (702) 579-4888 Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all report s reuired to filed by Section 13 or 15(d) of the Securities Exchange A ct of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [x] yes []no Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained heren, and will not be contained, to the best of registrant's knowledg e, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-QSB or any amendment to this Form 10-QSB. [x] Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.
Class Outstanding as of September 30, 2000 $.001 PAR VALUE CLASS A COMMON STOCK 21,142,379 VALUE Class A Convertible Preferred Stock 428,572 VALUE Class B Convertible Preferred Stock 0
DOCUMENTS INCORPORATED BY REFERENCE Item 1. Business On March 17, 1999, Kowtow, Inc. received 100% of the common stock of Afforable Homes of America, Inc. in a merger. Additionally, Kowtow, Inc. issued 4,000,000 shares of common stock to SCS Enterprises, Inc. Trust, the sole shareholder of Affordable Homes of America, Inc. On the same date the company accepted the resignation of Krista Nielson and Sasha Belliston as Officers and Directors of the Company and elected Merle Ferguson as President, CEO and Chairman of the Board of Directors. The Company also elected Susan Donohue as Secretary and as a member of the Board of Directors. The Company changed its name to Affordable Homes of America, Inc. on March 19, 1999 and obtained a new trading symbol-AHOA. The Company restructured its common stock with a two for one forward split effective March 31, 1999. Affordable Homes of America maintains its principle offices at 4505 W. Hacienda Ave., UnitI-1, Las Vegas, Nevada 89118. The Company changed its name to Affordable Homes of America, Inc. on March 19, 1999 and obtained a new trading symbol -AHOA. The Company restructured its common stock with a two for one forward split effective March 31, 1999. Affordable Homes of America maintains its principle offices at 4505 W. Hacienda Ave., Unit I-1, Las Vegas, Nevada 89118. The Company changed its name to World Homes, Inc. on October 12, 2000 and obtained a new trading symbol - WHME. The name change will not affect this September 30, 2000 10QSB, but will affect any filings after October 12, 2000. Affordable Homes of America, Inc. is in the business of building homes for low income and first time home buyers. Founded in 1997, the focus of Affordable Homes of America is to develop and build homes for sale in the United States and international locations with little or no timber products. The Company's methods are patented and are being implemented this year. There are three methods for new home construction. These include: * Z Mix - A cementitious product that combines diatomaceous earth and used tires to create a lightweight building material that reduces the time and the cost for constructing a house. The Company currently holds the patent on Z Mix. * In-line Framing - A new method of construction that reduces the amount of wood used by one third. This reduces the cost of lumber used in construction, and thereby reduces the overall cost of the home. * Foam-Panelized Construction - This method of construction uses foam slabs covered with panels and strengthened with internal trusses. This allows for increased insulation and quick construction. All three methods (i) reduce the time and cost needed to construct the averge home, and (ii) reduce the amount of wood used in building the a verage home. Company research has shown that more Americans ages 25 t o 45 would prefer to purchase homes rather than rent. To make this option viable, the Company's homes are financed 100% by lending institutions and the monthly payments are comparable to the expense of renting. Additionally, older Americans are more inclined to move into homes that are less expensive, due to their retirement status and reduced monthly income. The Company is finishing the certification procedures necessary to sell its Z Mix products in the US. Once complete, the Company will begin sales and distribution of its products in US. The Company has been approached by several international entities to establish factories to supply Z Mix for construction. The Company is finishing the certification procedures necessary to sell its Z Mix products in the US. Once complete, the Company will begin sales and distribution of its products in US. The Company has been approached by several international entities to establish factories to supply Z Mix for construction. To date, Affordable Homes has made two (2) acquisitions: (a) On April 28, 1999, Affordable Homes acquired Composite Industries of America, Inc. the owner of a patent covering a construction material known as "Z Mix". Z Mix is a cementitious building material and can be used in a two step construction method instead of cement, dry wall or lumber. Affordable Homes believes Z Mix will enable it to build better quality homes at a lower price than if other products were used. (b) On June 28, 1999 Affordable Homes also acquired Big Mountain Construction Company which holds the exclusive right to build all the houses for the Heartland Homes development. The development is planned for the construction of 136 homes, each on an individual site. Composite Industries of America, Inc. The acquisition of Composite Industries of America, Inc. was accomplished by exchanging one share o f Afordable's common stock for two shares of Composite's common stock. All stock issued by Affordable pursuant to this acquisition is restricted. Affordable the surviving entity, owns the patents formerly owned by Composite. The patents cover a construction material call "Z Mix". Z Mix is a building material lighter than cement that can be used in home construction instead of cement, lumber or dry wall. The patented construction material is a lightweight cementitious insulating mixture with a high compression strength and thermal resistance values up to 30 to 40 times that of standard concrete. It is fire proof, insect proof, has excellent acoustical properties and is easy to clean up. Z Mix can be used for wall and roof panels and can easily by pumped for walls and floors. Z Mix makes a well insulated cost effective floor that has a slight give to it. Z Mix is excellent for gymnasium floors. This material is used for residential, light commercial and agricultural building. The composition has the unique property of being able to absorb contaminated or hazardous materials, especially petroleum based contaminants and is especially useful in cleaning up and controlling contaminants in underground storage tanks, especially in abandoned or closed service stations. Affordable also acquired the plans for a "World Home" and a "US Home" made from this material. These plans have been certified by Larson Engineering, Inc. as earthquake resistant in all four seismic regions in the world. Larson Engineering, Inc. also certified that houses built from these materials are able to withstand hurricane winds up to 150 mph. Affordable believes that use of Z Mix will permit it to construct lower cost housing at substantial less that the present cost for such housing. Z Mix can also be used in the manufacturing of utility poles, railroad ties and pallets with substantial savings in the manufacturing cost of these items. Affordable believes that the use of Z Mix will broaden its market and increase its profitability. Big Mountain Construction Company, Inc. The Company acquired Big Mountain Construction Company, Inc. for $500,000 paid in restrictive common stock in the amount of 215,983 shares. Big Mountain maintains a general contractor license and has the exclusive right to build out 136 homes for Heartland Homes Estates, an affordable housing project near Tacoma, Washington. Big Mountain's master appraisals are generally $10,000 - $12,000 higher than the selling price. This allows Big Mountain to feature 100% financing for their buyers, including VA and FHA programs. This feature will give Affordable Homes the ability to qualify more homebuyers and close more loans than their competition. Big Mountain Construction has had a presence in the entry-level and one step-up housing market for over 20 years in the State of Washington. The Company's business is not seasonal although during some snow storms on- site construction generally does not take place unless indoors. The Company uses no special raw materials and the materials it does use are available from numerous suppliers throughout the United States. Affordable Homes of America, Inc. has signed Joint Venture Agreements or strategic alliance agreements with the following companies: (a) Tristar USA of LA, Inc. and Affordable Homes signed a five-year Joint Venture Agreement on June 22, 2000. Tristar will act as the construction company and Affordable Homes will supply its proprietary Z MIX material for building affordable housing in Developing Nations, particularly in Nigeria. (b) AL NASR Trading & Industrial Corporation L.L.C. and Affordable Homes signed a three-year Joint Venture Agreement with a 25-year optional extension, on August 17, 2000. AL NASR is to provide a proposal for the establishment of a manufacturing plant for Z MIX in a Middle Eastern country and a working plan for at least four other countries in the Middle Eastern / Northern Africa area. Affordable Homes will provide its patented Z MIX material and its technical expertise in building affordable housing. (c) Quadrant Resources Corporation and Affordable Homes signed a strategic alliance agreement for the purpose of expanding the sale of Affordable Homes' patented Z MIX material for home building and manufactured products. Quadrant will bring to the Company funded transactions, saving time and money in the International Sales market. ITEM 2 PROPERTIES The Company owns no properties. The Company leases its offices located at 4505 W. Hacienda Ave. Unit I-1, Las Vegas, Nevada 89118 at an annual rent of $7,680.00. The property is leased on a month-to-month agreement. ITEM 3 LEGAL PROCEEDINGS There is no pending or threatened litigation or other legal proceedings, material or otherwise, nor any claims or assessments with respect to Affordable Homes of America, Inc. at the present time. ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to the Company security holders for a vote during the period ending September 30, 2000. ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock traded on the NASD Over-the-Counter Bulletin Board under the symbol "AHOA" until October 12, 2000, after which it is trading under the symbol "WHME". The stock has traded between $3.125 per share and $0.25 per share. There are approximately 1231 record holders of the Company's common stock. The Company has not previously declared or paid any dividends on its common stock and does not anticipate declaring any dividends in the foreseeable future ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION The following discussion and analysis of financial condition and results of operations of the Company should be read in conjunction with the Consolidated Financial Statements, including the corresponding footnotes, which is included within this report. The following discussion contains certain forward-looking statements within the meaning of Securities Act of 1933 as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, which are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from the results anticipated in those forward-looking statements. These risks and uncertainties include, but are not limited to those set forth below and the risk factors described in the Company's other filings with the Securities and Exchange Commission. Affordable Homes of America, Inc, is a homebuilding and development company in the development stage focusing on building for low-income and first-time homebuyers. The Company has and will continue to develop new building techniques and patented products that significantly reduce the overall cost and time, while maintaining or increasing the quality and integrity of new home construction. The Company's plan is to develop and build its World Home for sale outside the United States in developing nations where there is an immediate need for permanent affordable shelter. The patented Z MIX material used in the World Home provides protection from the elements; hurricanes, earthquakes, as well as being fireproof. Affordable Homes' immediate focus is to enter into licensing and/or joint venture affiliations in which it will supply its proprietary, patent- protected Z MIX material to established companies for use outside the United States in home construction and other applications such as railroad ties, utility poles and environmental remediation. The Company believes this approach to be the fastest route for the penetration into the global marketplace. The Company projects that the revenues received from licensing Z MIX technology will be recognized by the Company without incurring the usual development and labor expenses associated construction projects. Results of Operations Year ended September 30, 2000 vs. September 30, 1999 Revenues. Affordable Homes of America, Inc. is presently a development stage company. Accordingly, the Company has no revenues for the Quarter ended September 30, 2000. The Company has signed several joint vent ures and agreements and projects significant revenues for the latter part of this fiscal year. Operation Expenses. Operating expenses are comprised of General and Administrative Expenses which consists primarily of amortization of patent expense, professional fees, product development expense and office expense. Amortization expense amounted to $260,625 during the periods ended September 30, 2000 and September 30, 1999. The patent is being amortized on a straight-line basis over the remaining life of the patent (195 months as of the acquisition date, April 28, 1999). Operating expenses decreased to $518,075 for the three months ended September 30, 2000 from $1,341,847 for the three months ended September 30, 1999. The decrease in operating expenses was primarily due to professional fees which decreased to $169,987 for the three months ended September 30, 2000 from $972,773 for the three months ended September 30, 1999. Net Loss. As a result, our net loss decreased to $479,903 for the three months ended September 30, 2000 from $907,087 for the three months ended September 30, 1999. Liquidity and Capital Resources Affordable is currently a development stage company, however management projects that during the next twelve months revenue derived from one or more of the signed joint ventures, or the proceeds from a private placement which is under negotiations should be sufficient to finance the Company's working capital and capital expenditures. Although Affordable believes that the revenues projected over the next twelve months will be significant, we are presently in negotiations for a private placement for immediate funds. The Company is confident that with its product and technology, signed joint ventures and stronger balance sheet, that it will successfully complete a private placement. In the event that Affordable does not secure additional financing, the company has made provisions for working capital, for the next twelve months. ITEM 6A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company has no market risk sensitive instruments or market risk exposures. ITEM 7 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA F-1 AFFORDABLE HOMES OF AMERICA, INC. AND SUBSIDIARIES (a development stage company) CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2000 and 1999
ASSETS 2000 1999 Cash in banks $ 32,095 $ 13,436 Employee advances 68,211 55,588 Advances to Kampen and Associates, Inc. 0 99,157 Advances to Omega International, Inc. 0 224,140 Land and land development costs 0 6,760,577 Capitalized costs 48,142 0 Capitalized interest expense 0 510,702 Other assets 125,060 239,131 Deferred tax asset 2,416,105 870,088 Machinery & equipment - at cost, less accumulated depreciation of $81,542 and $55,775 as of September 30, 2000 and 1999, respectively 87,652 107,351 Patents - at cost, less accumulated amortization of $1,476,875 and $434,375 as of September 30, 2000 and 1999, respectively 15,721,224 16,763,724 Goodwill - net of accumulated amortization of $25,513 and $5,103 as of September 30, 2000 and 1999, respectively 382,684 403,094 ------- ------- TOTAL ASSETS $ 18,881,173 $ 26,046,988 ========== ==========
AFFORDABLE HOMES OF AMERICA, INC. AND SUBSIDIARIES (a development stage company) CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2000 and 1999
LIABILITIES AND STOCKHOLDERS' EQUITY 2000 1999 LIABILITIES --------- ---------- Accounts payable $ 45,812 $ 50,593 Accrued expenses 110,562 381,144 Accrued interest payable 0 238,941 Notes payable 15,159 1,873,994 Loans and advances from related parties 352,674 301,545 Auto loan 11,483 0 Deferred tax liability 5,222,835 5,569,037 Land purchase options 0 3,400,000 --------- ---------- TOTAL LIABILITIES 5,758,525 11,815,254 ========= ========== COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Convertible preferred stock class A ($.001 par value, 5,000,000 shares authorized; 428,572 shares issued and outstanding as of September 30, 2000 and 1999, respectively) 1,511,086 1,511,086 Convertible preferred stock class B ($.001 par value, 5,000,000 shares authorized; no shares issued and outstanding as of September 30, 2000 and 1999) - - Common stock ($.001 par value, 100,000,000 shares authorized, 21,142,379 shares and 18,549,402 shares issued and outstanding as of September 30, 2000 and 1999, respectively) 21,142 18,549 Additional paid-in capital 16,511,861 14,816,515 Officer loan receivable ( 128,849) 0 Deficit accumulated during the development stage ( 4,792,592) ( 2,114,416) ---------- ---------- Total Stockholders' Equity 13,122,648 14,231,734 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 18,881,173 $ 26,046,988 ========== ==========
F-2 AFFORDABLE HOMES OF AMERICA, INC. AND SUBSIDIARIES (a development stage company) CONSOLIDATED STATEMENTS OF OPERATIONS DURING THE DEVELOPMENT STAGE FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 and 1999
2000 1999 General and Administrative expenses Operating expenses $ 244,031 $ 1,087,810 Depreciation and amortization 274,044 274,037 ------- --------- Total general and administrative expenses 518,075 $ 1,361,847 ------- --------- (Loss) from operations (518,075) (1,361,847) Other income and expense ------- --------- Interest and other income 1,024 1,479 Interest expense (5,202) (6,719) (Loss) on sale of land (197,650) 0 ------- --------- Total other income and (expense) (201,828) (5,240) ------- --------- Net (loss) before income taxes (719,903) (1,367,087) ------- --------- Benefit for income taxes 240,000 460,000 ------- --------- Net (loss) $ (479,903) $ (907,087) ------- --------- Net (loss) per common share $ (0.02) $ (0.05) ------- --------- Weighted average number of shares outstanding 20,823,698 17,799,402 ========== ==========
F -3 AFFORDABLE HOMES OF AMERICA, INC. AND SUBSIDIARIES (a development stage company) CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
Deficit Convertible Convertible Common Preferred Preferred Stock Stock A Stock B .001 Par Value Shares Amount Shares Amount Shares Amount ------------- ------------- -------------- Opening balance - - July 1, 2000 428,572 $1,511,086 0 $ 0 20,417,379 $20,417 Issuance of common stock for legal and consulting services rendered 425,000 425 Issuance of common stock recorded as loan to officer to cover company expenses 300,000 300 Repayment of officer loans Reduction of officer loan for services rendered Net loss during the development stage for the three months ended September 30, 2000 ------- --------- ---- ----- ---------- ------ Closing balance - - September 30, 2000 428,572 $1,511,086 0 $ 0 21,142,379 $21,142 ======= ========= ==== ===== ========== ======
Accumulated Additional Officer during the Total Paid-in loan Development Stockholders' Capital receivable Stage Equity ---------- ---------- ----------- ------------ Opening balance - - July 1, 2000 $ 16,195,761 $(191,749) $(4,312,689) $ 13,222,826 Issuance of common stock for legal and consulting services rendered 185,300 185,725 Issuance of common stock recorded as loan to officer to cover company expenses 130,800 (131,100) 0 Repayment of officer loans 163,000 163,000 Reduction of officer loan for services rendered 31,000 31,000 Net loss during the development stage for the three months ended September 30, 2000 (479,903) (479,903) ---------- ------- --------- ---------- Closing balance - - September 30, 2000 $ 16,511,861 $(128,849) $(4,792,592) $ 13,122,648 ========== ======= ========= ==========
F -4 AFFORDABLE HOMES OF AMERICA, INC. AND SUBSIDIARIES (a development stage company) CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (continued) FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
Deficit Convertible Convertible Common Preferred Preferred Stock Stock A Stock B .001 Par Value Shares Amount Shares Amount Shares Amount ------------- ------------- -------------- Opening balance - - July 1, 1999 657,144 $2,311,086 100,000 $550,000 17,549,402 $17,549 Rescission of preferred A stock to reverse the acquisition of 100% of the common stock of Realty Center, Inc. and a 25% interest in the Heartland Homes Joint Venture (228,572) (800,000) Rescission of preferred B stock to reverse the acquisition of 100% of the common stock of M.P. Hall Enterprises, Inc. (100,000) (550,000) Issuance of common stock for legal and consulting services rendered 1,000,000 1,000 Net loss during the development stage for the three months ended September 30, 1999 ------- --------- ----- -------- ---------- ------ Closing balance - - September 30, 1999 428,572 $1,511,086 0 $ 0 18,549,402 $18,549 ======= ========= ===== ======== ========== ======
Accumulated Additional Officer during the Total Paid-in loan Development Stockholders' Capital receivable Stage Equity ---------- ---------- ----------- ------------ Opening balance - - July 1, 1999 $ 13,647,515 $ 0 $(1,207,329) $ 15,318,821 Rescission of preferred A stock to reverse the acquisition of 100% of the common stock of Realty Center, Inc. and a 25% interest in the Heartland Homes Joint Venture (800,000) Rescission of preferred B stock to reverse the acquisition of 100% of the common stock of M.P. Hall Enterprises, Inc. (550,000) Issuance of common stock for legal and consulting services rendered 1,169,000 1,170,000 Net loss during the development stage for the three months ended September 30, 1999 (907,087) (907,087) ---------- ------- --------- ---------- Closing balance - - September 30, 1999 $ 14,816,515 $ 0 $(2,114,416) $ 14,231,734 ========== ======= ========= ==========
F - 5 AFFORDABLE HOMES OF AMERICA, INC. and SUBSIDIARIES (a development stage company) CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 and 1999
2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Consolidated net (loss) from development stage operations $ (479,903) $ (907,087) ADJUSTMENTS TO RECONCILE NET LOSS FROM DEVELOPMENT STAGE OPERATIONS TO CASH USED IN OPERATING ACTIVITIES Depreciation and amortization 274,044 274,037 Benefit of deferred tax liability (86,550) (86,550) Loss on sale of land 197,650 0 Stock issued for services 185,725 1,170,000 Reduction of officer loans as repayment for services 31,000 0 (Increase) decrease in assets: Employee and other advances (788) (109,145) Other receivables 9,000 Capitalized costs (48,142) Other assets (45,000) (240,576) Deferred tax asset (153,450) (373,450) Increase (decrease) in liabilities: Accounts payable (9,212) 7,917 Accrued expenses (84,798) 735 Accrued interest payable 32,274 Total Adjustments 260,479 684,242 Net cash provided by (used in) operations (219,424) (222,845) CASH FLOWS FROM INVESTING ACTIVITIES: Equipment acquisitions ( ) (7,375) Net cash (used in) investing activities ( ) (7,375) Subtotal (219,424) (230,220) F - 6 CASH FLOWS FROM FINANCING ACTIVITIES: Advances from related parties 71,240 66,258 Repayment of officer loans 163,000 0 Repayments of loans (1,237) 0 Payments towards land purchase option (15,000) 0 Net cash from financing activities 233,003 51,258 Net Increase (decrease) in Cash in banks 13,579 (178,962) Cash in banks - Beginning of period 18,516 192,398 Cash in banks - End of period $ 32,095 $ 13,436 Supplemental Disclosure of cash flow information: Cash Paid During the Year for: Interest expense $ 5,202 $ 6,719 Income taxes $ $
F -7 NON-CASH INVESTING AND FINANCING TRANSACTIONS On July 21, 1999, Affordable issued 300,000 shares of common stock valued at $318,000 in connection with investment banking services. During the three months ended September 30, 1999, Affordable issued 1,000,000 shares of common stock valued at $1,170,000 to various individuals for legal and consulting services performed. During the three months ended September 30, 2000, Affordable issued 425,000 shares of common stock valued at $185,725 for legal and consulting services performed. On May 25, 2000, Affordable issued 327,511 shares of common stock valued at $191,749 to an officer of the company to pay specific company expenses. Accordingly, an officer loan receivable was recorded for $191,749 and was reflected as a reduction of stockholders' equity at June 30, 2000. An additional 300,000 shares valued at $131,000 was issued to the officer during the quarter ended September 30, 2000. During this quarter, the $163,000 was repaid to the company. The loan was also reduced by an additional $31,000 in exchange for services. F - 8 AFFORDABLE HOMES OF AMERICA, INC. and SUBSIDIARIES (a development stage company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 and 1999 NOTE 1 - General and Summary of Significant Accounting Policies (A) - Nature of Business Affordable Homes of America, Inc. (Affordable-Nevada), was incorporated under the laws of the state of Nevada on February 10, 1997. On March 17, 1999, Affordable-Nevada was merged into Kowtow, Inc., a non-operating public shell corporation, through exchange of 80% of the issued and outstanding shares of Kowtow's common stock for 100% of the outstanding common stock of Affordable. Kowtow, a Utah corporation, was incorporated on March 7, 1986. Kowtow's legal name was changed to Affordable Homes of America, Inc., (Affordable). The acquisition is considered to be a capital transaction, in substance equivalent to the issuance of stock by Affordable-Nevada for the net monetary assets of Kowtow, accompanied by a re-capitalization of Affordable. Common stock and additional paid-in capital have been restated to reflect the re-capitalization for all periods presented. Affordable is a development stage company primarily in the business of land development and the construction of residential houses. In addition, on April 15, 1999, Composite Industries, Inc. (Composite) was merged into Affordable. Composite, also a development stage company, was in the process of developing and commercializing a compound to be used in the construction process referred to as Z-MIX as more fully described in Note 2. Affordable's operations include its wholly owned subsidiary Big Mountain Construction Company, Inc. which is a general building contractor. During the quarter ended September 30, 1999, Affordable's operations also included Kampen associates, Inc., M.P. Hall Enterprises, Inc. and Realty Center, Inc. Operations for those three subsidiaries terminated during the quarter with the preferred stock issued to M.P. Hall and Realty Center, Inc. rescinded. Affordable's corporate headquarters are located in Las Vegas, Nevada. F - 9 (B) - Consolidated Net (Loss) per Common Share Consolidated net (loss) per common share is computed on the basis of the wighted average number of common shares and equivalents outstanding during the period. Only the weighted average number of shares of common stock outstanding was used to compute basic loss per share for the periods from September 30, 2000 and 1999 as there were no stock options, warrants, or other common stock equivalents outstanding during this period. (C) - Cash and Cash Equivalents Affordable considers all highly liquid debt instruments purchased with maturities of 90 days or less to be cash equivalents for financial statement purposes. (D) - Income Taxes No income taxes were provided during each of the fiscal years presented since Affordable incurred losses during the development stage. Normally, taxes are provided on all revenue and expense items included in the Consolidated Statements of Operations, regardless of the period in which such items are recognized for income tax purposes, except for items representing a permanent difference between pretax accounting income and taxable income. (E) - Depreciation Affordable depreciates equipment, vehicles and machinery on a straight-line basis over five to seven years for financial reporting purposes. (F) - Patents Affordable amortizes its patent rights from the date of acquisition on a straight-line basis over its remaining life of 16 years and 3 months. F - 10 (G) - Use of Estimates In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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. (H) - Basis of Presentation The accompanying consolidated balance sheets and related statements of operations during the development stage, stockholders' equity and cash flows includes the accounts of Affordable Homes of America, Inc., Kampen and Associates, Inc., Big Mountain Construction Company, Inc., Realty Center, Inc. and Composite Industries of America, Inc. as of September 30, 1999 and for the three months then ended. Significant inter-company transactions or balances have been eliminated. The financial statements include the operations of Affordable and Big Mountain only for the three months ended September 30, 2000. Note 2 - Patent Acquisition On April 28, 1999 Affordable acquired Composite Industries of America, Inc. for 6,514,270 shares of Common Stock of Affordable valued at $2.69 per share or $17,523,386. Composite Industries of America, Inc.'s most significant asset was a patent covering the construction material "Z-MIX". Z-MIX is a cementitious building material that can be used in a two-step construction method instead of cement, drywall or lumber. Affordable believes Z-MIX will enable it to build a better quality home at a lower price than if other building products were used. Management assigned a net value of $17,198,099 to the patent based upon the fair market value (the average of the closing stock prices of Affordable's common F - 11 stock two days prior to and two days after the acquisition date) of Affordable's common stock issued to acquire Composite. The gross value resulting from the application of the average fair market value less the value of all other assets acquired was discounted by 25% in recognition of the restricted nature of the stock issued as well as the fact that the common stock was thinly traded during the period encompassing the acquisition date. On June 12, 2000, Affordable signed a joint venture agreement with a major construction contractor to build affordable homes utilizing Z-MIX, with gross revenues projected to be in excess of $250,000,000. Management believes that it is appropriate to continue to carry the original cost of the patent at June 30, 2000 because the signing of the long -term contract demonstrates the patent's immediate commercial viability. Furthermore, management believes that the expected future cash flows on the long-term contracts will alone support the carrying value of the patent. The patent is being amortized on a straight-line basis over the remaining life of the patent (195 months as of the acquisition date). Amortization expense amounted to $1,042,500 and $173,750 during the years ended June 30, 2000 and 1999 respectively. Restatement During the fiscal year ended June 30, 1999, Affordable originally recorded the patent at the accumulated out-of-pocket costs incurred by Composite to secure the patent ($394,313). That cost basis was subsequently deemed to be incorrect as there was crucial information about the legal form of the transaction that was not disclosed until the current year and which mandated a different accounting treatment. Specifically, it was originally reported that Composite Industries merged into Affordable. In fact, Affordable acquired Composite by issuing 6,514,270 shares of its stock to acquire all of the shares of Composite Industries then merged. Affordable's stock issued to the shareholders of Composite for the acquisition of the patent was valued at $17,198,099. Management believes that in light of the new information and the resulting accounting ramifications that a revision was required in the financial statements. For accounting purposes, the upward adjustment of the carrying value of the patent is being reflected as a restatement of financial statements as of June 30, 2000 and 1999. The net increase in the acquisition value of the patent was recorded as an increase to paid-in capital net of deferred tax liabilities and amortization expense for 1999 was increased by $134,319 as a result of the higher cost basis. NOTE 3 - Officer loan receivable On May 25, 2000, the company issued 327,511 shares of common stock valued at $191,749 to an officer of the company as nominee for the purpose of selling the shares on the open market and using the proceeds to pay specific company expenses. Since the common stock was issued in the officer's name, the officer has a liability to the company for the value of the shares at the date of issuance. Accordingly, an officer loan receivable was recorded for $191,749 and was reflected as a reduction of stockholders' equity at June 30, 2000. An additional 300,000 shares valued at $131,000 was issued to the officer during the quarter ended September 30, 2000. During this quarter, the $163,000 was repaid to the company and the loan was reduced by an additional $31,000 for in exchange for services. F - 12 Note 4 - Acquisition of Subsidiaries Kampen and Associates, Inc. - Effective April 14, 1999, Affordable purchased 100% of the common stock of Kampen and Associates, Inc. for 428,572 convertible Class A preferred shares of Affordable valued at $3.53 per share for a total purchase price of $1,511,086. The cost basis of the net assets acquired was increased by $1,511,086 to reflect the purchase price of the company. The acquisition was treated as a purchase for financial reporting purposes. No goodwill was recognized in the transaction. The inability of Affordable to maintain current payments for the land purchase options caused Affordable to abandon its entire investment in Kampen during the fiscal year ended June 20, 2000. Composite Industries, Inc. - Composite Industries was acquired by Affordable under an agreement dated April 15, 1999 and immediately merged into Affordable. The agreement called for the conversion of 100% of the issued and outstanding shares of Composite in exchange for Affordable common stock at the rate of two shares of Composite for each share of Affordable. As of the effective date, there were 13,028,539 common shares Composite outstanding. The acquisition was treated as a purchase for financial reporting purposes. M.P. Hall Enterprises, Inc. - On April 27, 1999, Affordable acquired 100% of M.P. Hall's common stock in exchange for 100,000 shares of preferred B stock for a total purchase price of $550,000. M.P. Hall's assets consisted of land and development costs incurred to build a motel in Washington State. The acquisition was treated as a purchase for financial reporting purposes. No goodwill was recognized in the transaction. Affordable rescinded the transaction during the year ended June 30, 2000. Big Mountain Construction Company, Inc. - Effective June 28, 1999, Affordable purchased 100% of the common and preferred stock of Big Mountain Construction Company, Inc. for 215,983 restrictive common shares of Affordable valued at $2.43 per share for a total purchase price of $525,120. The acquisition was treated as a purchase for financial reporting purposes. Goodwill in the amount of $408,197 was recognized in the transaction. Goodwill is amortized on the straight-line basis over twenty years commencing July 1, 1999. Realty Center, Inc. - Effective June 28, 1999, Affordable purchased 100% of the common stock of Realty Center, Inc. for 114,286 convertible Class A preferred shares of Affordable valued at $3.50 per share for a total purchase price of $400,000. Realty Center's assets consisted of a 25% joint venture interest in a real estate development project known as Heartland Homes. Further, Affordable acquired an additional 25% interest in Heartland Homes directly by issuing an additional 114,286 shares of convertible Class A preferred stock. Immediately after Affordable's acquisition of Realty Center, Affordable transferred it's 25% in Interest in Heartland into Realty Center. The acquisition was treated as a purchase for financial reporting purposes. No goodwill was recognized in the transaction. When the anticipated financing from Eurofederal Bank, NV failed to materialize, (see Note 15) Affordable decided that it was in the best interest of all parties to rescind the transaction during the year ended June 30, 2000. Note 5 - Commitments and contingencies During the year ended June 30, 2000, Affordable issued 45,000,000 shares of common stock to Eurofederal Bank, NV as collateral on an anticipated loan and financing agreement. Funds were in fact not extended to Affordable and the stock certificates were stopped. Eurofederal Bank has stated that it will return the shares to Affordable. F - 13 Note 6 - Machinery and Equipment Machinery and equipment consists of the following as of September 30: 2000 1999 ------- ------- Machinery $ 84,640 $ 84,640 Office equipment 17,982 17,982 Furniture and fixtures 3,032 3,032 Vehicles 63,540 57,472 ------- ------- 169,194 163,126 Less Accumulated depreciation (81,542) (55,775) ------- ------- Total $ 87,652 $ 107,351 ======= ======= Depreciation expense was incurred in the amount of $8,316 and $8,309 for the three months ended September 30, 2000 and 1999 respectively, and is included in general and administrative expense. NOTE 7 - Income Taxes Affordable accounts for income taxes on the liability method, as provided by Statement of Financial Accounting Standards 109, Accounting for Income Taxes (SFAS 109). At September 30, 2000 and 1999 the income tax (benefit) was comprised of the following components: 2000 1999 ------- ------- Current - Federal $ 0 $ 0 State 0 0 ------- ------- Total current 0 0 Deferred- Federal (240,000) (460,000) State 0 0 ------- ------- Total deferred (240,000) (460,000) Total $ (240,000) $ (460,000) ======= ======= The only differing method of reporting income for tax purposes as compared to financial reporting purposes was in connection with the acquisition of patent rights for common stock. As there are no state income taxes to be considered, the income tax provision is computed at the federal statutory rate of 34% Deferred tax assets and liabilities consist of the following: 2000 1999 ------- ------- Deferred tax assets- Tax benefit of net operating loss carryovers $ 2,524,167 $ 978,150 Valuation allowance 108,062 108,062 --------- --------- $ 2,416,105 $ 870,088 Deferred tax liabilities- ========= ========= Valuation of patent $ 5,655,587 $ 5,309,385 --------- --------- $ 5,655,587 $ 5,309,385 ========= ========= The valuation allowance provided for the periods are based on management's valuation of the likelihood of realization. Management has concluded that the income tax benefit provided in the Statements of Operations During the Development Stage be limited to the amount of benefit accreted by the amount of deferred liability in connection with the non-deductible portion of the amortized patent since no other future benefit can be assured. Affordable incurred net operating losses for financial reporting purposes totaling $7,699,150 through September 30, 2000 available to offset future income for financial reporting purposes expiring in 2021. F - 14 NOTE 8 - Loans and Notes Payable The following schedule summarizes loans and notes payable by subsidiary as of June 30, 1999 and 2000:
2000 1999 ------- --------- Kampen and Associates, Inc. Cascade Land Depository included in the acquisition of Kampen and Associates, Inc. (Note 4) $ 0 $ 1,550,000 Big Mountain Construction Company, Inc. $33,000 equipment loan dated May 20, 1999 secured by excavating equipment payable at $1,664 per month including interest at 20.9% per annum with the final installment due on May 20, 2001 15,159 24,502 Construction loan dated August 11, 1998 secured by land and property with monthly payments on an interest only basis and principal due October 1, 2000 including extension at prime + 2%, currently 11.5% 0 299,492 ------- --------- Total 15,159 1,873,994 Less current maturities 15,159 1,858,835 ------- --------- Long-term portion $ 0 $ 15,159 ======= =========
F - 15 NOTE 9 - Related Party Transactions The company entered into consulting agreements with certain members of the ompany's Board of Directors and stockholders to provide services on various strategic and business issues. Total fees paid for such services by the Company either in stock or cash during each of the three months ended September 30, 2000 and 1999 amounted to $77,500 and are included in General and Administrative fees in the statement of operations. Management believes the transactions were at arm's length. The President and Chief Executive Officer has from time to time advanced funds to Affordable or one of its subsidiaries to assist with working capital requirements. As of September 30, 2000 and 1999, such funds advanced to the company amounted to $352,674 and 301,545 respectively. In addition, the joint venture construction project known as Heartland Homes advanced $53,101 to Big Mountain Construction Company, Inc. These advances are non-interest bearing and are short-term in nature. NOTE 10 - Industry Segment Information With the consolidation of operations and abandonment of certain assets, management has determined that there are no major business segments in that the company's operations are all related to the building and construction industry. Accordingly, no such operations are reported. ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not Applicable ITEM 9 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following table shows the positions held by the Company's officers and directors. The directors were appointed and will serve until the next annual meeting of the Company's stockholders, and until their successors have been elected and have qualified. The officers were appointed to their positions, and continue in such positions at the discretion of the directors. NAME AGE POSITION Merle Ferguson 54 President, CEO and Chairman of the Board Michael Schulman 44 Chief Financial Officer Susan Donohue 48 Secretary, Director Merle Ferguson founded Affordable Homes of America, Inc. in 1997 and is the President, CEO and Chairman of the Board of Directors. Prior to starting Affordable Homes Mr. Ferguson spent 22 years in the construction industry as a developer and builder. Mr. Ferguson built commercial and residential buildings in California, Oregon and Washington. Mr. Ferguson attended Yakima Valley College in Washington State with a focus in forestry. He honorably served his country with the United States Marine Corps from 1966 to 1970. This included two tours in Vietnam. For the past 7 years, Mr. Ferguson has been researching new construction products used to reduce deforestation. Some of the construction methods under development by Affordable Homes of America use no timber products. Michael Schulman joined Affordable Homes of America as Chief Financial Officer and Treasurer in June of 2000. He previously served as CFO for two publically-traded companies; FindWhat.com, a pay for position search engine and Gotham Apparel Corp, a women's apparel company. Mr. Schulman also was a CFO for International Product Options Corp. and a Controller for one of the Avnet Companies. Mr. Schulman received a Masters Degree in Finance and a Bachelor's Degree in Accounting from St. John's University and brings over 20 years of financial experience to the position. Susan Donohue is the Secretary and a Director of the Company. She was one of the two founders of Zawada Technologies, Inc. At Zawada Technologies she worked directly with Joseph Zawada on the research of the Z Mix product. Zawada Technologies merged with Composite Industries, Inc. Ms. Donohue joined Affordable Homes when Composite merged with Affordable Homes of America, Inc. Ms. Donohue attended the University of Wisconsin at Stevens Point with a focus in sociology and psychology. Ms. Donohue also attended Cardinal Stritch College of Madison, where she majored in Business Administration. ITEM 10 EXECUTIVE COMPENSATION Affordable Homes of America, Inc. does not currently pay salaries to its officers. Merle Ferguson and Susan Donohue are paid through business management services agreements with the Company. The agreements that were signed on March 19, 1999 are for a period of five years. Merle Ferguson is to be paid $150,000 per year and Susan Donohue is to be paid $60,000 per year. The compensation is for services as directors and officers, specific senior roles, consulting services with regards to corporate operations and day-to-day duties and responsibilities of running the corporate office. Michael Schulman, Chief Financial Officer has agreed to an annual compensation of $150,000 per annum effective July 1, 2000, but has not received any compensation as of this date. Any amounts not already paid to Mr. Schulman will be paid as funding becomes available to Affordable. Dr. William T. Anton is paid $3,000 monthly for foreign travel and is reimbursed for his travel expenses on behalf of the Company. Dr. Anton has traveled extensively in Europe in order to market the World Home in various countries, which include Turkey and Bulgaria. ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of September 30, 2000, information regarding the beneficial ownership of shares by each person known by the Company to own five percent or more of the outstanding shares, by each of the directors and by the officers and directors as a group.
Title of class Name and address of beneficial owner Amount of Percent of class beneficial ownership Common Stock Merle Ferguson 9,563,000 45.2% 4505 W. Hacienda Ave. # I-1 Las Vegas, Nevada 89118 Common Stock Susan Donohue 675,000 3.2% 4505 W. Hacienda Ave.#I-1 Las Vegas, Nevada 89118 Common Stock Michael Schulman 0 0.0% 250 E. 87th St. Apt. 21E New York, N.Y. 10128 All Officers as a Group and Directors 10,238,000 48.4%
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Company has entered into a consulting agreement with CS & S Enterprise, Inc. to provide general and technical building-related services, in the amount of $100,000 per year. Merle Ferguson is a director and shareholder of Affordable and also owns 100% of the stock of CS & S Enterprises, Inc. The President and Chief Executive Officer has from time to time advanced funds to Affordable or to one of its subsidiaries to assist with working capital requirements. As of September 30, 2000 and 1999, such funds advanced to the Company amounted to $352,674 and $301,545 respectively. No officer, director, nominee for election as a director, or associates of such officer, director or nominee is or has been in debt to the Company during the past fiscal year except for the following. On August 10, 2000, the Company issued 300,000 S-8 shares of common stock valued at $131,100 to an officer of the Company as nominee for the purpose of selling the shares on the open market and using the proceeds to pay specific Company expenses. Since the common stock was issued in the officer's name, the officer has a liability to the Company for the value of the shares at the date of issuance. ITEM 13 EXHIBITS, LISTS AND REPORTS ON FORM 8-K (a) Exhibits EXHIBIT NUMBER DESCRIPTION - ------- ----------- 27.0 Financial Data Schedule (b) Reports on Form 8-K. Form 8-K filed with the USSEC on October 12,2000 Items Reported: Item No.5- The Co. Changed its name to World Homes, Inc. Item No.6-Resignation of Registrant's Directors James Pratt resigns as Director Item No.7-Financial Statements, Proforma, and Exhibits; Co. amends articles of Inc. to reflect name change. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AFFORDABLE HOMES OF AMERICA, INC. Date: November 14, 2000 By: /s/ Merle Ferguson -------------- Merle Ferguson President, CEO and Director Date: November 14, 2000 By: /s/ Michael Schulman ---------------- Michael Schulman Chief Financial Officer EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S BALANCE SHEET AND STATEMENT OF OPERATIONS FOR QUARTER ENDING SEPTEMBER 30, 2000 1 3-MOS DEC-31-1999 JUL-01-2000 SEP-30-2000 32,095 0 68,211 0 2416105 2689613 17775490 (1583930) 18,881,173 5,758,525 0 0 0 21,142 (4,921,441) 18,881,173 0 0 0 518,075 (201,828) 0 (5,202) (479,903) 0 (479,903) 0 0 0 (479,903) (0.02) (0.02)
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