0001091818-01-500263.txt : 20011019 0001091818-01-500263.hdr.sgml : 20011019 ACCESSION NUMBER: 0001091818-01-500263 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20011012 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMPOSITE INDUSTRIES OF AMERICA INC CENTRAL INDEX KEY: 0000894501 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 870434297 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 033-55254-18 FILM NUMBER: 1757369 BUSINESS ADDRESS: STREET 1: 4505 W HACIENDA AVE STREET 2: UNIT I 1 CITY: LAS VEGAS STATE: NV ZIP: 89118 BUSINESS PHONE: 7025794888 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 FORMER COMPANY: FORMER CONFORMED NAME: WORLD HOMES INC DATE OF NAME CHANGE: 20001109 10KSB 1 ciai_10ksb-101101.txt ANNUAL REPORT =============================================================================== U.S. Securities And Exchange Commission Washington, d. C. 205549 FORM 10KSB [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from________to_________ Commission File No. 33-55254-18 COMPOSITE INDUSTRIES OF AMERICA, INC. (Formerly known as WORLD HOMES, 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 offices) (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 reports required to filed by Section 13 or 15(d) of the Securities Exchange Act 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 herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-KSB or any amendment to this Form 10-KSB. [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 June 30, 2001 ------------------------------------------------------------------------------- $.001 PAR VALUE CLASS A COMMON STOCK 22,761,396 VALUE Class A Convertible Preferred Stock 428,572 VALUE Class B Convertible Preferred Stock 0 DOCUMENTS INCORPORATED BY REFERENCE None ITEM 1. BUSINESS On March 17, 1999, Kowtow, Inc. received 100% of the common stock of Affordable 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. The Company changed its name to World Homes, Inc.(WHME) on October 10, 2000 and to Composite Industries of America, Inc. (CIAI) on August 23, 2001. Affordable Homes of America, Inc. and World Homes, Inc. are fully owned subsidiaries of the Company. Composite Industries of America maintains its principle offices at 4505 W. Hacienda Ave., Unit I-1, Las Vegas, Nevada 89118. Composite Industries of America is in the business of building homes for low income and first time home buyers. Founded in 1997, the focus of the Company 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. 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 average home, and (ii) reduce the amount of wood used in building the average home. Company research has shown that more Americans ages 25 to 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. TO DATE THE COMPANY HAS MADE TWO (2) ACQUISITIONS: (a) On April 28, 1999, the Company 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. The Company 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 the Company 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. The inability to maintain the operations of Big Mountain caused the Company to abandon its entire investment in Big Mountain in March, 2001. COMPOSITE INDUSTRIES OF AMERICA, INC. The acquisition of Composite Industries was accomplished by exchanging one share of Affordable's/World Homes' common stock for two shares of the original Composite's common stock. All stock issued by Affordable/World Homes pursuant to this acquisition was restricted. Affordable Homes/World Homes was the surviving entity and acquired the patents owned by Composite. The patents cover a construction material called "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 be 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. The Company 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. Composite Industries of America 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. The Company 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 the Company 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 abandoned its interest in Big Mountain in March of 2001 due to the inability to maintain Big Mountain's operations. 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. Composite Industries of America (Affordable Homes/World Homes) has signed Joint Venture Agreements or strategic alliance agreements with the following companies: (a) Tristar USA of LA, Inc. and the Company signed a five-year Joint Venture Agreement on June 22, 2000. Tristar will act as the construction company and Composite Industries of America 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 the Company 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. Composite Industries of America will provide its patented Z MIX material and its technical expertise in building affordable housing. 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 World Homes, 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 fiscal year ending June 30, 2001. ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock is trading on the NASD Over-the-Counter Bulletin Board under the symbol "WHME" as of June 30, 2001, (and under the symbol "CIAI" since September 4, 2001). The stock has traded between $3.125 per share and $0.14 per share. There are approximately 850 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. Composite Industries of America (Affordable Homes/World Homes) 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. Composite Industries of America's 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 June 30, 2001 vs. June 30, 2000 REVENUES. Composite Industries of America is presently a development stage company. Accordingly, the Company has no revenues for the year ended June 30, 2001. OPERATING 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 $1,092,591 and $1,096,145 during the years ended June 30, 2001 and June 30, 2000 respectively. 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 from $3,447,186 for the twelve months ended June 30, 2000 to $2,8037,266 for the twelve months ended June 30, 2001. The decrease in operating expenses was primarily due to professional fees which decreased from $1,798,321 for the twelve months ended June 30, 2000 to $1,238,660 for the twelve months ended June 30, 2001. NET LOSS. As a result, our net loss decreased from $3,105,360 for the twelve months ended June 30, 2000 to $2,740,898 for the twelve months ended June 30, 2001. LIQUIDITY AND CAPITAL RESOURCES Composite Industries of America 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 Composite Industries of America 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 the Company 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 COMPOSITE INDUSTRIES OF AMERICA, INC. and SUBSIDIARIES (F/K/A World Homes, Inc./Affordable Homes of America, Inc.) (a development stage company) INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2001 and 2000 PAGE Report of Independent Auditors 1 Consolidated Balance Sheets as of June 30, 2001 and 2000 2-3 Consolidated Statements of Operations During the Development Stage for the Years Ended June 30, 2001 and 2000 and Cumulative from February 10, 1997 (Inception) 4 Consolidated Statements of Changes in Stockholders' Equity for the Years Ended June 30, 2001 and 2000 and Cumulative from February 10, 1997 (Inception) to June 30, 1999 5-8 Consolidated Statements of Cash Flows During the Development Stage for the Years Ended June 30, 2001 and 2000 and Cumulative from February 10, 1997 (Inception) 9-11 Notes to the Consolidated Financial Statements 12-28 COMPOSITE INDUSTRIES OF AMERICA, INC. and SUBSIDIARIES (F/K/A World Homes, Inc./Affordable Homes of America, Inc.) (a development stage company) CONSOLIDATED FINANCIAL STATEMENTS and REPORT OF INDEPENDENT AUDITORS FROM FEBRUARY 10, 1997 (DATE OF INCEPTION) TO JUNE 30, 2001 and 2000 REPORT OF INDEPENDENT AUDITORS To the Board of Directors and Stockholders of Composite Industries of America, Inc. and Subsidiaries: We have audited the accompanying consolidated balance sheets of Composite Industries of America, Inc. and Subsidiaries (F/K/A World Homes, Inc./Affordable Homes of America, Inc.) (a development stage company) as of June 30, 2001 and 2000 and the related consolidated statements of operations, changes in stockholders' equity and cash flows for the years ended June 30, 2001 and 2000 and for the period from February 10, 1997 (inception) to June 30, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Composite Industries of America, Inc. and Subsidiaries as of June 30, 2001 and 2000 and the results of their operations and their cash flows for the years then ended, and from February 10, 1997 to June 30, 2001, in conformity with accounting principles generally accepted in the United States of America. North Bellmore, New York September 14, 2001 (except as to Note 20 which is as of October 3, 2001) COMPOSITE INDUSTRIES OF AMERICA, INC. and SUBSIDIARIES (F/K/A World Homes, Inc./Affordable Homes of America, Inc.) (a development stage company) CONSOLIDATED BALANCE SHEETS JUNE 30, 2001 and 2000
ASSETS 2001 2000 -------------------------------------------------------------------------------------- Cash $ 667,142 $ 18,516 Employee advances - 67,423 Land and land development costs 65,991 449,206 Capitalized interest - 44,059 Deferred tax asset 2,390,000 2,262,655 Machinery & equipment - net of accumulated depreciation of $40,232 and $73,226 as of June 30, 2001 and 2000, respectively 164,805 176,028 Patent - net of accumulated amortization of $2,258,750 and $1,216,250 as of June 30, 2001 and 2000, respectively 14,939,349 15,981,849 Goodwill - net of accumulated amortization of $20,410 as of June 30, 2000 - 387,787 ---------- ---------- TOTAL ASSETS $ 18,227,287 $ 19,387,523 ========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS COMPOSITE INDUSTRIES OF AMERICA, INC. and SUBSIDIARIES (F/K/A World Homes, Inc./Affordable Homes of America, Inc.) (a development stage company) CONSOLIDATED BALANCE SHEETS JUNE 30, 2001 and 2000
LIABILITIES AND STOCKHOLDERS' EQUITY 2001 2000 ----------------------------------------------------------------------------------------------------- LIABILITIES Accounts payable $ 3,530 $ 55,024 Accrued expenses 20,000 195,360 Accrued interest 22,313 - Loans and notes payable 133,429 323,494 Loans and advances from related parties 325,301 281,434 Convertible debenture (net of unamortized discount of $68,250 at June 30, 2001) 931,750 - Deferred tax liability 4,963,183 5,309,385 --------- --------- TOTAL LIABILITIES 6,399,506 6,164,697 --------- --------- COMMITMENTS AND CONTINGENCIES (Notes 15 and 20) STOCKHOLDERS' EQUITY Convertible preferred stock class A, (5,000,000 shares authorized; 428,572 shares issued and outstanding at June 30, 2001 and 2000) 1,511,086 1,511,086 Convertible preferred stock class B (5,000,000 shares authorized: 0 shares issued and outstanding at June 30, 2001 and 2000) - - Common stock ($.001 par value, 100,000,000 shares authorized, 22,761,396 shares issued and outstanding as of June 30, 2001; 20,417,379 shares issued and outstanding as of June 30, 2000) 22,761 20,417 Additional paid-in capital 17,347,521 16,195,761 Officer loans - ( 191,749) Deficit accumulated during the development stage ( 7,053,587) ( 4,312,689) ---------- ---------- Total Stockholders' Equity 11,827,781 13,222,826 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $18,227,287 $19,387,523 ========== ========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
COMPOSITE INDUSTRIES OF AMERICA, INC. and SUBSIDIARIES (F/K/A World Homes, Inc./Affordable Homes of America, Inc.) (a development stage company) CONSOLIDATED STATEMENTS OF OPERATIONS DURING THE DEVELOPMENT STAGE
FOR THE YEARS ENDED JUNE 30, 2001 and 2000 AND CUMULATIVE FROM FEBRUARY 10, 1997 (INCEPTION) Cumulative from Inception to 2001 2000 June 30, 2001 Operating expenses: ---------- ---------- ------------ General and administrative expenses $ 472,015 $ 552,720 $ 2,638,666 Depreciation and amortization 1,092,591 1,096,145 2,338,372 Officer and consultants' compensation 1,238,660 1,798,321 3,036,981 Total operating expenses 2,803,266 3,447,186 ( 8,014,019) (Loss) from operations (2,803,266} (3,447,186} ( 8,014,019) Other income and (expense): Interest and other income 4,865 4,453 14,068 Bad debt expense - ( 136,814) ( 136,814) Gain on sale of automobile 2,093 - 2,093 Interest expense ( 31,429) ( 33,866) ( 65,295) Net (loss) on disposition of subsidiaries ( 386,708) (1,604,166) ( 1,993,724) Total other (expense) - net ( 411,179) (1,770,393} ( 2,179,672) Net (loss) before income taxes (3,214,445) (5,217,579) (10,193,691) Benefit for income taxes 473,547 2,112,219 3,140,104 Net (loss) $( 2,740,898) $( 3,105,360) $( 7,053,587) Net (loss) per common share $( .13} $( .16} $( .49} Weighted average number of common shares outstanding 21,482,312 18,825,400 14,365,533 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
COMPOSITE INDUSTRIES OF AMERICA, INC. and SUBSIDIARIES (F/K/A World Homes, Inc./Affordable Homes of America, Inc.) (a development stage company)
Deficit Convertible Common Accumulated Preferred Stock Additional During the Total Stock A .001 Par Value Paid-in Officer Development Stockholders' Shares Amount Shares Amount Capital Loans Stage Equity -------- --------- ---------- --------- ----------- -------- ------------- ------------ Opening balance - July 1, 2000 428,572 $1,511,086 20,417,379 $ 20,417 $16,195,761 $(191,749) $( 4,312,689) $ 13,222,826 Issuance of common stock for officer's compensation 1,975,000 1,975 787,350 789,325 Issuance of common stock for legal and for consulting services rendered 90,000 90 44,910 45,000 Issuance of Common Stock through exercise of stock options 500,000 500 199,500 200,000 Issuance of stock option to consultant 120,000 120,000 Cancellation of restricted stock issued in the acquisition of Big Mountain Construction Company, Inc. ( 215,983) ( 216) ( 216) Adjustment ( 5,000) ( 5) ( 5) Officer loans converted to compensation 191,749 191,749 Net (loss) for the year ended June 30, 2001 ( 2,740,898) ( 2,740,898) -------- --------- ---------- --------- ----------- -------- ------------- ------------ Closing balance - June 30, 2001 428,572 $1,511,086 22,761,396 $ 22,761 $ 17,347,521 $ - $ ( 7,053,587) $ 11,827,781 ======== ========= ========== ========= =========== ======== ============= ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
COMPOSITE INDUSTRIES OF AMERICA, INC. and SUBSIDIARIES (F/K/A World Homes, Inc./Affordable Homes of America, Inc.) (a development stage company) CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEAR ENDED JUNE 30, 2000
Convertible Common Convertible Preferred Stock Preferred Stock A .001 Par Value Stock B Shares Amount Shares Amount Shares Amount -------- ---------- ---------- --------- -------- --------- Opening balance - July 1, 1999 657,144 $ 2,311,086 17,549,402 $ 17,549 100,000 $550,000 Rescission of Preferred A convertible 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 convertible 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 2,105,458 2,106 1,959,199 Common stock issued for equipment on May 25, 2000 135,008 135 79,925 Common stock issued in connection with investment banking services 300,000 300 317,700 Officer loans 327,511 327 191,422 Net (loss) for the year ended June 30, 2000 -------- ---------- ---------- --------- -------- --------- Closing balance - June 30, 2000 428,572 $1,511,086 20,417,379 $ 20,417 $ - $ - ======== ========== ========== ========= ======== ========= THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
COMPOSITE INDUSTRIES OF AMERICA, INC. and SUBSIDIARIES (F/K/A World Homes, Inc./Affordable Homes of America, Inc.) (a development stage company) CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEAR ENDED JUNE 30, 2000 (continued)
Deficit Accumulated Additional During the Total Paid-in Officer Development Stockholders' Capital Loans Stage Equity ----------- -------- ------------- ------------ Opening balance - July 1, 1999 $13,647,515 $ - $( 1,207,329) $ 15,318,821 Rescission of Preferred A convertible 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 convertible 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 1,961,305 Common stock issued for equipment on May 25, 2000 80,060 Common stock issued in connection with investment banking services 318,000 Officer loans (191,749) - Net (loss) for the year ended June 30, 2000 ( 3,105,360) ( 3,105,360) ----------- -------- ------------- ------------ Closing balance - June 30, 2000 $ 16,195,761 $(191,749) $( 4,312,689) $ 13,222,826 =========== ======== ============= ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
COMPOSITE INDUSTRIES OF AMERICA, INC. and SUBSIDIARIES (F/K/A World Homes, Inc./Affordable Homes of America, Inc.) (a development stage company) CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED JUNE 30, 1999 AND CUMULATIVE FROM FEBRUARY 10, 1997 (INCEPTION)
Convertible Convertible Common Preferred Preferred Stock Stock A Stock B .001 Par Value Shares Amount Shares Amount Shares Amount -------- ---------- -------- --------- ---------- --------- Initial issuance of common stock as restated to account for the 2 for 1 stock split dated March 19, 1999 $ $ 2,000,000 $ 2,000 Net (loss) during the development stage through June 30, 1998 Issuance of common stock in exchange for 100% of the common stock of Affordable- Nevada on March 17, 1999 4,000,000 4,000 Issuance of common stock to founders on March 18, 1999 250,000 250 Common stock split on a 2 for 1 basis on March 19, 1999 4,000,000 4,000 Issuance of convertible preferred A stock for the acquisition of 100% of the common stock of Kampen and Associates, Inc. on April 14, 1999 428,572 1,511,086 Issuance of common stock for the acquisition of Composite Industries, Inc. on April 28, 1999 6,514,270 6,514 -------- ---------- -------- --------- ---------- --------- Subtotal 428,572 $1,511,086 - $ - 16,764,270 $16,764 ======== ========== ======== ========= ========== ========= THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
COMPOSITE INDUSTRIES OF AMERICA, INC. and SUBSIDIARIES (F/K/A World Homes, Inc./Affordable Homes of America, Inc.) (a development stage company) CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED JUNE 30, 1999 AND CUMULATIVE FROM FEBRUARY 10, 1997 (INCEPTION)
Deficit Accumulated Additional During the Total Paid-in Development Stockholders' Capital Stage Equity ----------- ------------- ------------ Initial issuance of common stock as restated to account for the 2 for 1 stock split dated March 19, 1999 $ $ $ 2,000 Net (loss) during the development stage through June 30, 1998 ( 17,000) ( 17,000) Issuance of common stock in exchange for 100% of the common stock of Affordable- Nevada on March 17, 1999 ( 4,000) - Issuance of common stock to founders on March 18, 1999 ( 250) - Common stock split on a 2 for 1 basis on March 19, 1999 ( 4,000) - Issuance of convertible preferred A stock for the acquisition of 100% of the common stock of Kampen and Associates, Inc. on April 14, 1999 1,511,086 Issuance of common stock for the acquisition of Composite Industries, Inc. on April 28, 1999 11,792,399 11,798,913 ----------- ------------- ------------ Subtotal 11,784,149 $ ( 17,000) $ 13,294,999 =========== ============= ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
COMPOSITE INDUSTRIES OF AMERICA, INC. and SUBSIDIARIES (F/K/A World Homes, Inc./Affordable Homes of America, Inc.) (a development stage company) CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED JUNE 30, 1999 AND CUMULATIVE FROM FEBRUARY 10, 1997 (INCEPTION)(continued)
Convertible Convertible Common Preferred Preferred Stock Stock A Stock B .001 Par Value Shares Amount Shares Amount Shares Amount -------- ---------- -------- --------- ---------- --------- Balance carried forward 428,572 1,511,086 - - 16,764,270 16,764 Issuance of Preferred B convertible stock in the acquisition of M.P. Hall Enterprises, Inc. on April 27, 1999 100,000 550,000 Issuance of restricted common stock in the acquisition of Big Mountain Construction Company, Inc. on June 28, 1999 215,983 216 Issuance of preferred A stock in the acquisition of 100% of the common stock of Realty Center, Inc. and a 25% interest in the Heartland Homes Joint Venture on June 28, 1999 228,572 800,000 Issuance of common stock for services rendered and other consulting services 569,149 569 Net (loss) for the year ended June 30, 1999 -------- ---------- -------- --------- ---------- --------- Closing balance - June 30, 1999 657,144 $2,311,086 100,000 $550,000 17,549,402 $17,549 ======== ========== ======== ========= ========== ========= THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
COMPOSITE INDUSTRIES OF AMERICA, INC. and SUBSIDIARIES (F/K/A World Homes, Inc./Affordable Homes of America, Inc.) (a development stage company) CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED JUNE 30, 1999 AND CUMULATIVE FROM FEBRUARY 10, 1997 (INCEPTION)(continued)
Deficit Accumulated Additional During the Total Paid-in Development Stockholders' Capital Stage Equity ----------- ------------- ------------ Balance carried forward 11,784,149 ( 17,000) 13,294,999 Issuance of Preferred B convertible stock in the acquisition of M.P. Hall Enterprises, Inc. on April 27, 1999 550,000 Issuance of restricted common stock in the acquisition of Big Mountain Construction Company, Inc. on June 28, 1999 524,904 525,120 Issuance of preferred A stock in the acquisition of 100% of the common stock of Realty Center, Inc. and a 25% interest in the Heartland Homes Joint Venture on June 28, 1999 800,000 Issuance of common stock for services rendered and other consulting services 1,338,462 1,339,031 Net (loss) for the year ended June 30, 1999 ( 1,190,329) (1,190,329) ----------- ------------- ------------ Closing balance - June 30, 1999 $ 13,647,515 $ ( 1,207,329) $ 15,318,821 =========== ============= ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
COMPOSITE INDUSTRIES OF AMERICA, INC. and SUBSIDIARIES (F/K/A World Homes, Inc./Affordable Homes of America, Inc.) (a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2001 AND 2000 AND CUMULATIVE FROM FEBRUARY 10, 1997 (Inception) Cumulative from inception to 2001 2000 June 30, 2001 ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) $( 2,740,898) $( 3,105,360) $( 7,053,587) ADJUSTMENTS TO RECONCILE NET (LOSS) TO CASH (USED) IN OPERATING ACTIVITIES Depreciation and amortization 1,092,591 1,096,145 2,338,372 Deferred tax benefit ( 473,547) ( 2,112,219) ( 3,140,104} Stock issued for services and equipment 954,104 2,041,365 4,334,500 Officer loans converted to compensation 191,749 - 191,749 Net loss on disposition of subsidiaries 386,708 1,604,166 1,954,680 (Gain) on sale of automobile ( 2,092) - ( 2,092) (Increase) decrease in assets: Employee advances - ( 21,823) ( 67,423) Other receivables - 9,000 - Capitalized interest - 442,982 311,899 Land and development costs ( 65,991} - ( 65,991} Increase (decrease) in liabilities: Accounts payable ( 51,494} 12,348 3,530 Accrued expenses ( 175,360} 35,757 20,000 Accrued interest 22,313 ( 206,667} 22,313 ----------- ----------- ----------- Total Adjustments 1,878,981 2,901,054 5,901,433 ----------- ----------- ----------- Net cash (used) by operating activities ( 861,917} ( 204,306} ( 1,152,154) CASH FLOWS FROM INVESTING ACTIVITIES: Machinery and equipment acquisitions ( 62,337) ( 723} ( 84,925} Disposition of automobile 16,870 - 16,870 ----------- ----------- ----------- Net cash (used) by investing activities ( 45,467) ( 723} ( 68,055} ----------- ----------- ----------- Subtotal ( 907,384} ( 205,029} ( 1,220,209) CASH FLOWS FROM FINANCING ACTIVITIES: Common stock - - 2,000 Notes payable 125,000 - 125,000 Advances from (to) related parties 325,301 46,147 679,642 Issuance of convertible debenture 910,000 - 910,000 Issuance of Common Stock through exercise of stock options 200,000 - 200,000 Payments towards loans and notes payable ( 4,291) - ( 4,291) Payments towards land purchase option - ( 15,000} ( 25,000} ----------- ----------- ----------- Net cash provided by financing activities 1,556,010 31,147 1,887,351 ----------- ----------- ----------- Net increase (decrease) in cash 648,626 ( 173,882} 667,142 ----------- ----------- ----------- Cash - beginning of period 18,516 192,398 - ----------- ----------- ----------- Cash - end of period $ 667,142 $ 18,516 $ 667,142 =========== =========== =========== Supplemental Disclosure of cash flow information: Cash Paid During the Year for: Interest expense $ 31,429 $ 33,886 $ 65,315 =========== =========== =========== Income taxes $ - $ - $ - =========== =========== =========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2001 AND 2000 AND CUMULATIVE FROM FEBRUARY 10, 1997 (Inception) NON-CASH INVESTING AND FINANCING TRANSACTIONS On May 25, 2000, Composite issued 135,008 shares of common stock valued at $80,060 to purchase certain construction equipment. During the year ended June 30, 2000, Composite issued 2,105,458 shares of common stock valued at $1,961,305 to various individuals for legal and consulting services performed. Composite issued 327,511 shares of common stock issued to an officer valued at $191,749 for which payment was not received by June 30, 2000. Accordingly the officer loan was reflected as an offset to stockholders' equity in the accompanying financial statements as of June 30, 2000. During the year ended June 30, 2001, $163,000 was repaid. The balance of $28,749 was converted to compensation. In addition, $96,100 was advanced and charged to compensation during the year ended June 30, 2001. During the year ended June 30, 2001, Composite issued 90,000 shares of common stock valued at $45,000 to various individuals for legal and consulting services performed. During the year ended June 30, 2001, Composite issued 1,975,000 shares of common stock valued at $789,325. On January 30, 2001, a consultant was granted an option to purchase 375,000 shares of common stock of Composite at $0.00125 per cent per share for a total price of $469. The value of the common stock on the date of issue was $120,469 or $0.32125 per share resulting in compensation of $120,000. The stock option agreement is for a term of five years. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS COMPOSITE INDUSTRIES OF AMERICA, INC. and SUBSIDIARIES (F/K/A World Homes, Inc./Affordable Homes of America, Inc.) (a development stage company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2001 and 2000 NOTE 1 - General and Summary of Significant Accounting Policies (A) - Nature of Business Composite Industries of America, Inc. ("Composite"- formerly known as World Homes, Inc./ Affordable Homes of America, Inc.), is a development stage company primarily in the business of land development and the construction of residential houses. Composite owns the patent rights to a compound to be used in the construction process referred to as Z-MIX. The process is more fully described in Note 2. Composite's operations include its wholly owned subsidiary Big Mountain Construction Company, Inc., which is a general building contractor. During the fiscal quarter ended March 31, 2001, operations of Big Mountain terminated. Composite Industries' corporate headquarters are located in Las Vegas, Nevada. During the 2001 fiscal year, the Company underwent a name change to World Homes, Inc. The Company changed its name again to Composite Industries of America, Inc. in August 2001. (B) - Consolidated Net (Loss) per Common Share Consolidated net (loss) per common share is computed on the basis of the weighted average number of common shares 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 period from inception, to June 30, 2001 and 2000 as the inclusion of stock options are anti-dilutive. There were no stock warrants, or other common stock equivalents outstanding during this period. (C) - Income Taxes Income taxes are provided or a benefit is accrued 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. (D) - Depreciation Composite depreciates equipment, vehicles, furniture and fixtures, and machinery on a straight-line basis over five to seven years for financial reporting purposes. (E) - Patents Composite 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) - Use of Estimates In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, 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. (G) - Basis of Presentation The accompanying consolidated balance sheets and related consolidated statements of operations, stockholders' equity and cash flows during the development stage, includes the accounts of Composite Industries of America, Inc. and Big Mountain Construction Company, Inc. as of June 30, 2001. For the year ended June 30, 2000, the operations included Composite Industries of America, Inc., Kampen and Associates, Inc., and Big Mountain Construction Company, Inc. Significant inter-company transactions or balances as of and for the periods ended June 30, 2001 and 2000 have been eliminated. (H) - Reclassification Certain reclassifications have been made to the year 2000 balances to conform them to the current year's presentation. These had no effect on the year 2000 results of operations. Note 2 - Patent Acquisition On April 28, 1999, Composite Industries of America, Inc. acquired 100% of the common stock of Composite Industries, Inc. for 6,514,270 shares of Common Stock of Composite valued at $2.73 per share or $17,769,200. Composite Industries, 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. Composite 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 Composite's common stock two days prior to and two days after the acquisition date) of Composite common stock issued to acquire Composite Industries, Inc. 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, Composite signed a joint venture agreement with a major construction contractor to build homes in third world countries utilizing Z- MIX. Management believes that it is appropriate to continue to carry the cost of the patent at June 30, 2001 because the signing of the long-term contract demonstrates the patent's immediate commercial viability. Furthermore, management believes that the expected future profits and cash flows will 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). Patent amortization expense amounted to $1,042,500 in each of the years ended June 30, 2001 and 2000. Note 3 - Acquisition of Subsidiaries Kampen and Associates, Inc. - Effective April 14, 1999, Composite purchased 100% of the common stock of Kampen and Associates, Inc. for 428,572 convertible Class A preferred shares of Composite 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 Composite to maintain current payments for the land purchase options caused Composite to abandon its entire investment in Kampen during the fiscal year ended June 30, 2000. Abandonment of Land Purchase and Options The assets acquired thru the purchase of Kampen, were primarily comprised of an agreement to purchase land and improvements that was financed through an option payment agreement. On May 21, 1999, Kampen was served with a notice of foreclosure as a consequence of its default on the related obligation. As a result of this action by the creditors, Kampen filed for protection under the provisions of Chapter 11 of U.S. Bankruptcy Code on June 24, 1999. On January 14, 2000, The U.S. Bankruptcy Court required a foreclosure on the property and caused Composite to abandon its investment and the related debts. The total cost of the land, land improvements and capitalized interest amounted to $6,793,107. Total debt, including the loan from Cascade Land Depository, accrued interest and the options, amounted to $5,188,941. As a result, a net loss was incurred amounting to $1,604,166 and is included as other expense for the year ended June 30, 2000. Composite Industries, Inc. - Composite Industries, Inc. was acquired by Composite under an agreement dated on April 28, 1999 and immediately merged into Composite. The agreement called for the conversion of 100% of the issued and outstanding shares of Composite Industries, Inc. in exchange for Composite's common stock at the rate of two shares of Composite Industries, Inc. for each share of Composite. As of the effective date, there were 13,028,539 common shares of Composite Industries, Inc. outstanding. The acquisition was treated as a purchase for financial reporting purposes. M.P. Hall Enterprises, Inc. - On April 27, 1999, Composite 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. Composite rescinded the transaction during the year ended June 30, 2000. Big Mountain Construction Company, Inc. - Effective June 28, 1999, Composite purchased 100% of the common and preferred stock of Big Mountain Construction Company, Inc. for 215,983 restrictive common shares of Composite 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. The inability of Composite to maintain the operations of Big Mountain caused Composite to abandon its entire investment in Big Mountain in March, 2001. The abandonment of the entire investment in Big Mountain includes a loss on the sale of land in the amount of $197,650, a loss on disposal of equipment in the amount of $34,663, a loss on disposition of goodwill in the amount of $377, 579, and a gain on forgiveness of debt in the amount of $223,184. As a result, a net loss was incurred amounting to $386,708, and is included as other income and expense for the year ended on June 30, 2001. Realty Center, Inc. - Effective June 28, 1999, Composite purchased 100% of the common stock of Realty Center, Inc. for 114,286 convertible Class A preferred shares of Composite 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, Composite acquired an additional 25% interest in Heartland Homes directly by issuing an additional 114,286 shares of convertible Class A preferred stock. Immediately after Composite's acquisition of Realty Center, Composite transferred it's 25% 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 Euro Federal Bank, NV failed to materialize, (see Note 15) Composite decided that it was in the best interest of all parties to rescind the transaction during the year ended June 30, 2000. Allocation of the purchase price for each of the transactions follows:
Kampen and Composite M.P. Hall Big Mountain Realty Total Associates, Industries Enterprises Construction Center all Inc. Inc. Inc. Company, Inc. Inc. Companies ----------- ---------- -------- --------- -------- ----------- Assets Cash $ - $ 296,662 $ - $ 9,858 $ - $ 306,520 Employee and other advances - 234,133 - 54,600 - 288,733 Land, development and capitalized interest costs 6,668,676 885,252 516,703 - 8,070,631 Equipment (net) - 40,306 - 57,720 - 98,026 Patent 17,198,099 - - - 17,198,099 Investment in Joint Venture - - - 800,000 800,000 Goodwill - - 408,197 - 408,197 ----------- ---------- -------- --------- -------- ----------- Total $ 6,668,676 $17,769,200 $ 885,252 $1,047,078 $ 800,000 $ 27,170,206 =========== ========== ======== ========= ======== =========== Kampen and Composite M.P. Hall Big Mountain Realty Total Associates, Industries Enterprises Construction Center all Inc. Inc. Inc. Company, Inc. Inc. Companies ----------- ---------- -------- --------- -------- ----------- Liabilities Assumed and Equity Liabilities assumed $ 5,157,590 $ 5,970,287 $ 335,252 $ 521,958 $ - $ 11,985,087 Convertible Preferred stock 1,511,086 - 550,000 - 800,000 2,861,086 Common stock - 6,514 - 216 - 6,730 Additional paid- in capital - 11,792,399 - 524,904 - 12,317,303 ----------- ---------- -------- --------- -------- ----------- Total $ 6,668,676 $17,769,200 $ 885,252 $1,047,078 $ 800,000 $ 27,170,206 =========== ========== ======== ========= ======== ===========
Note 4 - Advances to Omega International, Inc. Composite had from time to time advanced funds to Omega International, Inc., an unrelated company, in the business of developing products for the construction industry. Composite advanced funds totaling $224,140 through June 30, 1999 in an effort to assist Omega in further developing its products. The notes were unsecured, due upon demand, and bore interest at 8% per annum. Interest income was recorded by Composite from April 28, 1999 to June 30, 1999 in the amount of $3,436. During the fiscal year ended June 30, 2000, Omega filed for bankruptcy protection under Chapter 7 of the U.S. Bankruptcy Code and accordingly, management concluded that the advances were not collectible and were written off. For financial statement purposes, the expense is included as a component under the caption bad debt expense. Note 5 - Machinery and Equipment Machinery and equipment consists of the following as of June 30: 2001 2000 ------- ------- Equipment and tools not placed in service $ 80,060 $ 80,060 Machinery and equipment 90,244 84,640 Office equipment 5,094 17,982 Furniture and fixtures 3,032 3,032 Vehicles 26,607 63,540 ------- ------- 205,037 249,254 Less: accumulated depreciation (40,232) (73,226) ------- ------- Total $ 164,805 $ 176,028 ======= ======= Depreciation expense was incurred in the amount of $28,424 and $33,235 for the years ended June 30, 2001 and 2000, respectively, and is included in operating expenses. NOTE 6 - Income Taxes Composite accounts for income taxes on the liability method, as provided by Statement of Financial Accounting Standards 109, Accounting for Income Taxes (SFAS 109). For the years ended June 30, 2001 and 2000 the income tax (benefit) was comprised of the following components:
2001 2000 Cumulative -------- --------- ---------- Current - Federal $ - - - State - - - -------- --------- ---------- Total current - - - Deferred-Federal (473,547) (2,112,219) (3,140,104) State - - - -------- --------- ---------- Total deferred (473,547) (2,112,219) (3,140,104) Total $ (473,547) $(2,112,219) $(3,140,104) ======== ========= ==========
The only differing method of reporting income for tax purposes as compared to financial reporting purposes was in nnection with the deferred tax liability resulting from the acquisition of patent rights described in Note 2. In addition, there is a deferred tax asset relating to the benefit provided by the net operating loss carry forward. 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: 2001 2000 Deferred tax assets- ------------- ------------- Tax benefit of net operating loss carryovers $ 2,390,000 $ 2,262,655 Valuation allowance - - ------------- ------------- $ 2,390,000 $ 2,262,655 ============= ============= Deferred tax liabilities- Patent rights acquired $ 4,963,183 $ 5,309,385 ============= ============= No valuation allowance was required for the deferred tax asset for each of the years presented because management determined that there is a strong likelihood of realization of the deferred tax asset. The deferred tax asset relates to the net operating loss carry forward. Composite incurred net operating losses for financial reporting purposes totaling $2,740,898 during 2001 available to offset future income for financial reporting purposes expiring in 2020. NOTE 7 - Loans and Notes Payable The following schedule summarizes loans and notes payable as of June 30, 2001 and 2000: 2001 2000 -------- -------- Note payable to Joseph Vozka dated January 30, 2001 secured by forms built by Precise Forms, Inc. due on demand including interest at 15% per annum $ 125,000 $ - Automobile loan dated April 11, 2000 payable at $412 per month including interest at 5.12% per annum with the final installment due on April 11, 2005 8,429 12,720 Equipment loan dated May 20, 1999 related to Big Mountain Construction Company, Inc., 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 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% at June 30, 2000 - 295,615 -------- -------- Total $ 133,429 $ 323,494 Less: current maturities $ 129,627 $ 315,065 -------- -------- Long-term portion $ 3,802 $ 8,429 ======== ========
The loans payable for the construction loan and to B ig Mountain Construction Company were written off during the year ended June 30, 2001 due to the disposition of Big Mountain Construction Company, Inc. and amounts were included under the caption net loss on disposition of subsidiaries. Interest expense for the years ended June 30, 2001 and 2000 amounted to $31,429 and $33,886, respectively. The carrying value of the Company's borrowings approximate their fair values. NOTE 8 - Related Party Transactions Composite has entered into consulting agreements with certain members of the Company's Board of Directors and stockholders to provide services on various strategic and business issues. The agreements are renewable at the discretion of management. Total fees paid for such services by the Company either in stock or cash during the years ended June 30, 2001 and 2000 were $1,154,325 (including $200,000 cash) and $1,168,375 respectively and are included in operating expenses in the consolidated statements 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 Composite or one of its subsidiaries to assist with working capital requirements. These transactions are short-term in nature. Such funds advanced to the Company amounted to $325,301 and $281,434 as of June 30, 2001 and 2000, respectively, and are carried in loans and advances from related parties. Interest related to these advances during the year ended June 30, 2000 at 8% amounted to $20,809. No interest was charged for the year ended June 30, 2001. NOTE 9 - Officer loans On May 25, 2000, Composite issued 327,511 shares of common stock in connection with its Regulation S-8 filing 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 was recorded for $191,749 and was reflected as a reduction of stockholders' equity at June 30, 2000. During the fiscal year 2001, the officer's loan in this amount was converted to compensation and expensed in the accompanying financial statements. $163,000 was repaid and the balance was expensed as officer compensation. An additional $96,100 was advanced and charged to officer compensation NOTE 10 - Concentration of Credit Risk - Cash Composite maintains its cash balances at financial institutions located in Nevada. At times, the balance may exceed federally insured limits of $100,000. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash on deposit. The fair market value of this financial instrument approximates cost. NOTE 11 - Industry Segment Information Composite's operations fall under one segment. NOTE 12 - Stockholders' Equity The Company is authorized to issue two classes of convertible preferred stock; Class A and Class B. Each share of Class A preferred is convertible to common stock at $3.50 per share. Class B preferred stock is convertible to common stock at $5.50 per share. Each class of preferred stock is authorized at 5,000,000 shares. At June 30, 2000, 428,572 shares of Class A convertible preferred stock and no shares of Class B convertible preferred stock were issued and outstanding. During 2001, 228,572 shares of class A and 100,000 shares of class B were rescinded and the acquisitions they related to were terminated. NOTE 13 - Stock Options Composite established a stock option plan during the 2001 fiscal year. In prior years, an incentive stock option plan was authorized but was cancelled on June 8, 2000 by the Board of Directors. Below is summarized the option activity for the years ended June 30, 2001 and 2000.
2001 Weighted 2000 Weighted Options Average Options Average ------- -------- --------- ------- Securities outstanding - beginning of year - 7,000,000 $0.38 Securities granted 875,000 $0.23 - Securities exercised 500,000 $0.40 - Securities cancelled - 7,000,000 $0.38 ------- -------- --------- ------- Securities outstanding - end of year 375,000 NIL - ======= ======== ========= =======
Composite issued stock options to a public relations firm in connection with an agreement signed on June 8, 2000. The stock options issued as part of the agreement expire after three years. The agreement calls for vesting of options as follows: 15,000 shares @ $1.50 per share when the stock price reaches $1.50 15,000 shares @ $2.50 per share when the stock price reaches $2.50 25,000 shares @ $3.50 per share when the stock price reaches $3.50 25,000 shares @ $4.50 per share when the stock price reaches $4.50 These options were cancelled during the fiscal year ended June 30, 2001. On January 30, 2001, a consultant was granted an option to purchase 375,000 shares of common stock at $0.00125 cent per share for a total price of $469. The value of the common stock on the date of issue was $120,469 or $0.32125 per share resulting in compensation of $120,000. The stock option agreement is for a term of five years. An officer was granted an option to purchase 500,000 shares of restricted common stock of Composite at an exercise price of $.40 per share and on June 4, 2001, he exercised the stock options and the Company received $200,000. NOTE 14 - Stock Issued For Services During the fiscal year ended June 30, 2001, the Company issued stock for services rendered by outside professionals and officers of the Company. A total of 2,065,000 shares of stock were issued and valued at $834,325. These costs are included in operating expenses in the accompanying consolidated statements of operations. NOTE 15 - Commitments and contingencies During the year ended June 30, 2000, Composite issued 45,000,000 shares of common stock to Euro Federal Bank, NV as collateral for an anticipated loan and financing agreement. No loans or financings were extended to Composite and the stock certificates were stopped. Euro Federal Bank has returned the shares to Composite Industries. Accordingly, these shares were not considered outstanding in the earnings per share calculation. Composite rents office space for its Las Vegas, Nevada headquarters on a month to month basis. Rent expense amounted to $7,680 for each of the fiscal years ended June 30, 2001 and 2000. NOTE 16 - Fair Value of Financial Instruments Estimated fair value of Composite financial instruments are as follows:
2001 2000 --------------------- -------------------- Carrying Fair Carrying Fair Amount Value Amount Value --------------------- -------------------- Cash $ 667,142 $ 667,142 $ 18,516 $ 18,516 Notes payable 125,000 125,000 310,774 310,774 Loans and advances from related parties 325,301 325,301 281,434 281,434 Automobile loan 8,429 8,429 12,720 12,720 Convertible debenture $ 931,750 $ 931,750 - - --------------------- --------------------
The fair value of the financial instruments related to debt is based on current rates at which Composite could borrow funds with similar remaining maturities. NOTE 17 - Violations of the Securities Act of 1934 On June 8, 2001, the SEC filed a complaint with the United States District Court, District of Nevada, alleging that certain press releases issued by Composite Industries, and corporate officers Merle Ferguson and Susan Donohue contained misrepresentations of material information in connection with contracted revenues and projected gross profits, operational facilities and the securing of financing. Also, the Company was cited in the complaint for issuing common stock to officers who in turn sold those shares into the market to finance Composite's current operations prior to having a registration statement in effect. The defendants, without admitting or denying the allegations set forth in the Complaint, have agreed to consent judgments permanently restraining them from committing the violations alleged in the Complaint in the future. The penalty in the amount of $120,000 was assessed personally to Ferguson which has agreed to pay and is not an obligation payable by Composite. The proposed final judgments have been submitted to the SEC's Washington office for approval and are pending. NOTE 18 - Going Concern Considerations Composite Industries has operated as a development stage enterprise since February 10, 1997, its inception and therefore has operated for over four years without generating revenues. Funds have been generated primarily by the extension of loans and advances from officers and directors and the issuance of common and preferred stock and debentures. The failure to generate revenues from operations has caused Composite to experience liquidity shortfalls from time to time. The Chairman, Merle Ferguson has pledged to continue to contribute money to keep Composite solvent during the next twelve months. Further, the Company has contracts with joint venture partners and expects to commence construction operations during fiscal year 2002. It is for these reasons that management believes that substantial doubt about Composite's ability to continue as a going concern is alleviated. NOTE 19 - Convertible Debentures On April 5, 2001, Composite issued $1,000,000 of 6% convertible debentures due April 5, 2002. The Company received proceeds of $910,000, net of a bond discount of $90,000. The bond discount is being amortized over the life of the debentures and $21,750 was amortized during 2001. The debentures are required or permitted to be repaid at the "Maturity Date" as provided thereunder and to pay interest to the holder on the aggregate unconverted and then outstanding principal amount of the debentures at the rate of 6% per annum, payable on each conversion date (date that a conversion notice is provided) and on the maturity date in cash or shares of common stock. No debentures were converted as of June 30, 2001. Interest of $14,500 was accrued on the debentures during the year ended June 30, 2001. The effective rate of interest on the debentures was 15.4% through June 30, 2001. The debenture restricts a holder from converting the debenture or receiving common stock as payment of interest to the extent such conversion or receipt of such interest payment would result in the holder beneficially owning in excess of 9.999% of the then issued and outstanding shares of common stock, including shares issuable upon conversion of, and payment of interest on, the debentures held by such holder. NOTE 20 -Subsequent Events Acquisitions: Composite acquired 100% of the common stock of MJB Towers, Inc. a California corporation in the business of acquiring and leasing telecommunication towers, in exchange for 1,000,000 shares of preferred stock. In addition, the terms of the agreement specify a bonus payment first, beginning with the first month of operations, and there is a provision for an additional bonus based on future performance. Stock Transactions: Financial Consulting Agreement On July 2, 2001, the Company issued 150,000 shares of common stock to a financial consulting firm as a "commencement bonus" under an agreement wherein the financial consultant will perform certain evaluations and analyses for the Company. Additionally, the financial consultant will be paid $3,000 (or 4,000 shares of common stock) per month for such services. The agreement term is for six months starting on May 23, 2001. These shares related to the commencement bonus have been valued at $.44 per share for a total valuation of $66,000. This will be recognized as consulting expenses over six months commencing July, 2001. Restricted Stock Issued For Consulting Services On July 11, 2001, a total of 149,385 shares of the Company's common stock were issued to two individuals for consulting services. These shares are restricted as to transferability under SEC Rule 144 for a period of one year. The shares have been valued at $.53 per share for a total valuation of $79,174. This will be recognized as consulting expense over twelve months commencing July, 2001. Corporate Officers The Company issued 17,000,000 shares of common stock to senior corporate officers on August 23, 2001. The shares were issued for future services to be rendered to the Company related to capital raising efforts, building alliances, and overall corporate strategy development. These shares are restricted as to transferability under SEC Rule 144. The trading restrictions run for a two-year period. The shares have been valued at $.33 per share for a total valuation of $5,525,000. This value reflects a discount for the two-year trading restriction as well as a discount related to the volume of shares in this transaction compared to the number of shares outstanding. Therefore, the unearned compensation of $5,525,000 related to this transaction will be amortized to compensation expense ratably over a two year period. 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 William Morris 63 Vice President of Finance, Chief Financial Officer, Treasurer Susan Donohue 48 Vice President of Operations, Secretary ------------------------------------------------------------------------------- Merle Ferguson, President, CEO and Chairman of the Board, founded Affordable Homes of America, Inc. in 1997 after a successful career in the construction industry. Mr. Ferguson's goal was to form a national construction company able to create affordable, quality homes for first-time and low-income homebuyers. Prior to starting the Company, Mr. Ferguson spent 24 years in the construction industry as a builder and real estate developer in California, Oregon and Washington States. Mr. Ferguson attended Yakima Valley College from 1964-1966 with a major in forestry and a minor in Business Management. In April of 1966, he enlisted in the United States Marine Corps, serving two tours in Vietnam, and was honorably discharged in 1970. 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 the Company use no timber products. William Morris joined Composite Industries of America as Vice President of Finance, Chief Financial Officer and Treasurer of the Board in May of 2001. Mr. Morris brings over 30 years of financial and accounting experience to the Company. The majority of the 30 years were performing the duties of Chief Financial Officer. He was the CFO for (Sony) / Superscope, Inc. and Maranatz Company, Inc., and at one time was the youngest CFO of a New York Stock Exchange company. Susan Donohue is the Vice President of Operations, and Secretary of the Board. 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/World Homes when the original Composite merged with the Company. 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 Composite Industries of America has employment agreements with its officers. Merle Ferguson and Susan Donohue are paid through business management services agreements with the Company. Merle Ferguson is paid $150,000 per year, William Morris is paid $120,000 per year and Susan Donohue is paid $60,000 per year. The compensation is for services as officers and/or directors, specific senior roles, consulting services with regards to corporate operations and day-to-day duties and responsibilities of running the corporate office. During the fiscal year ended June 30, 2001, the Company issued stock for services rendered by officers of the Company. A total of 1,195,000 shares of stock were issued and valued at $479,200. ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of June 30, 2001, 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 Amount of Percent of beneficial owner beneficial of class ownership ------------------------------------------------------------------------------- Common Stock Merle Ferguson 10,438,000 45.9% 4505 W. Hacienda Ave. #I-1 Las Vegas, Nevada 89118 Common Stock William Morris 0 0.0% 4505 W. Hacienda Ave. #I-1 Las Vegas, Nevada 89118 Common Stock Susan Donohue 775,000 3.4% 4505 W. Hacienda Ave. #I-1 Las Vegas, Nevada 89118 ------------------------------------------------------------------------------- All Officers as a Group and Directors 11,213,000 49.3% =============================================================================== ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Company has entered into a consulting agreement with certain members of the Company's Board of Directors and stockholders to provide services on various strategic and business issues. The agreements are renewable at the discretion of management. Total fees paid for such services by the Company either in stock or cash during the years ended June 30, 2001 and 2000 were $1,154,325 and $1,168,375 respectively. The President and Chief Executive Officer has from time to time advanced funds to Composite Industries of America or one of its subsidiaries to assist with working capital requirements. As of June 30, 2001 and 2000, such funds advanced to the Company amounted to $325,301 and $281,434 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 May 25, 2000, the Company issued 327,511 S-8 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 had a liability to the Company for the value of the shares at the date of issuance. During the quarter ended September 31, 2000, $163,000 was repaid to the company. The loan was reduced by an additional $31,000 in exchange for services. ITEM 13 EXHIBITS, LISTS AND REPORTS ON FORM 8-K (a) Exhibits EXHIBIT NUMBER DESCRIPTION ------- ----------- 3.1 Articles of Incorporation 3.2 Certificate Of Incorporation - Composite Industries 3.3 Amendment to Articles of Incorporation (World Homes) 3.31 Amendment to Articles of Incorporation (Composite Industries) 3.4 By-Laws 10.1 Joint Venture Agreement with Al Nasr Trading and Industrial Corp. 23.2 Consent of Pascale, Razzino, Alexanderson & Co. PLLC (b) Reports on Form 8-K. There were three reports in Form 8-K filed during the fiscal year 2001 and one 8-K filed on Aug. 24 2001 after the close of fiscal 2001 which is included as a references in this filing. 1) 8-K filed: 10-13-2000 Name Change-Item No. 5. Other Events. The Company changed its name to World Homes, Inc. on October 12, 2000. World Homes, Inc. has a new CUSIP number of 98147Q100 and a new trading symbol of WHME. 2) 8-K filed: 2-5-2001 Change of Officers-Item No. 5. Other Events. The Company hired Jon Nicolaisen as President and CEO as replacement to Merle Ferguson, who remains Chairman of the Board. The Company accepted the resignation of Michael Schulman as Chief Financial Officer and appointed Susan Donohue as interim CFO. 3) 8-K filed: 5-29-2001 Change of Officers-ITEM NO. 5. OTHER EVENTS. The Company accepted the resignation of Jon Nicolaisen as President and CEO. Merle Ferguson, Chairman of the Board, assumed the duties of President and CEO. The Company accepted the resignation of Jason Thompson as Chief Financial Officer and hired William Morris as Executive Vice-President of Finance and CFO. 4) 8-K filed: 8-24-2001 (for Reference only)-Item No. 5. Other Events. The Company changed its name to Composite Industries of America, Inc. on August 24, 2001. Composite Industries of America, Inc. has a new CUSIP number of 20461M101 and a new trading symbol of CIAI 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. Composite Industries of America, Inc. Date: October 9, 2001 By: /s/ Merle Ferguson ------------------------------ Merle Ferguson Chairman, President, and CEO Date: October 9, 2001 By: /s/ William Morris ------------------------------ William Morris Vice President of Finance CFO and Treasurer of the Board EX-3.1 3 ex3-1.txt ARTICLES OF INCORPORATION ARTICLES OF INCORPORATION OF KOWTOW, INC. Know all men by these presents; That I, the undersigned, acting as incorporator for the purpose of for forming corporation under and pursuant to the provisions of Nevada Revised Statutes 78.010 to Nevada Revised Statutes 78.090 inclusive, as amended, and certify that; ARTICLE I The name of this corporation is KOWTOW, INC.The name and post office address of the incorporator signing the Articles of Incorporation is: Krista Castleton, 3760 So, Highland Drive, Suite 300. Salt Lake City, Utah, 84106. The name and address of the first member of the First Board of Directors is: Krista Castleton, 3760 So. Highland Drive, Suite 300, SaltLake City, Utah, 84106. ARTICLE II The. Resident Agent of this corporation in Nevada shall be Nevada Corporate Services located at 1800E. Sahara, Suite 107, Las Vegas, Clark County, Nevada, 89104. Offices for the transaction of any business of the Corporation, and where meetings of the Board of Directors and of Stockholders may be held, may be established and maintained in any other part of the State of Nevada, or in any other state, territory or possession of the United States of America, or in any foreign country as the Board of Directors may, from time to time determine. ARTICLE III The nature of the business and the objects and purpose proposed to be tranacted, promoted or carriedon by the Corporation is to conduct any lawful activity in accordance with the Laws of the State of Nevada and the United States of America, including but not limited to inventing, developing, marketing, and otherwise exploiting high technology electronic communication systems, both hardware and software components, parti- cularly systems utilizing security coding and protective transmitting and receiving.To do each and everything necessary, suitable or proper for the accomplishment of any of the foregoing purposes or the attainment of any one or more of the subjects herein above enumerated, or which may at anytime appear conducive to or expedient for the protection or benefit of this Corporation, and to do such acts as fully and to the same extent as natural persons might, or could do, in any part of the world as principals,agents, partners, trustees, or otherwise, either alone or in conjunction with any other person, association or corporation. The period of duration of this Corporation is perpetual.The foregoing clauses shall be construed as powers as well as objects and purposes and the matters expressed in each clause shall, unless herein otherwise expressly provided, be in no wise limited by reference to or inference from the terms of any other clause shall he regarded as independent objects, purposes and powers and the enumeration of specific objects, purposes and powers shall not be construed to limit or restricting any manner the meaning of the general terms or the general powers of the Corporation nor shall the expression of one thing be deemed to exclude another not expressed although it be of like nature. ARTICLE IV The aggregate number of shares which the Corporation shall have author- ity to issue is 100.000,000shares, having a par value of $0.001 (one mill) per share. The stock shall be designated as Class "A" voting com- mon stock and shall have the same rights and preferences. The stock of the Corporation shall be non-assessible. Fully paid stock of this Cor- poration shall not be liable for any further call or assessment. The total capitalization of the Corporation shall be $100,000. The shares of Class "A" common stock shall not be divided into classes and may not be issued in series. ARTICLE V No stockholder of the Corporation shall, because of his ownership of s tock, have a pre-emptive or other right to purchase, subscribe for or take part of any of the notes, debentures, bonds or other securities convertible into or carrying options for warrants to purchase stock of the Corporation issued, optioned or sold by it after its incorporation, except as may be otherwise stated in these Article of Incorporation. Any part ofthe capital stock and any part of the notes, debentures, bonds, or other securities convertible into or carrying options or warranties to purchase stock of the Corporation authorized by these Articles of Incorporation or byan amended certificate duly filed may at any time be issued, optioned for sale and sold r disposed of by the Corporation pursuant to the resolution of its Board of Directors to such persons and upon such terms as mayto such Board of Directors seem proper, without first offering such stock or securities or any part thereof to existing stockholders, except as required in Article IV of these Articles of Incorporation. ARTICLE VI Each outsanding share of the class "A" common stock of the Corporation shall be entitled to one vote on each matter submitted to a vote at a meeting of the stockholders. Each shareholder shall be entitled to vote his or its shares in person or by proxy, executed in writing by such shareholder or by its duly authorized attorney in fact. At each election for directors, every shareh older entitled to vote at such election shall havethe right to vote in person or by proxy, the number of shares owned by him or it for as many pesons as thereare directors to be elected and for whose election he or it has the right to vote, but the shareholder shall haveno right, whatsoever, to accumulate his or its votes with regard to such election. ARTICLE VII The members of the governing board of this corporation shall be called directors. The Board ofDirectors shall consist of at least on (1) person. The number of directors of this corporation may, from time to time, be increased or decreased by an amendment to the By-Laws in that regard and without the necessityof amending the Articles of Incorpora tion. A majority of the Directors in office, present at any meeting of theBoard of Directors, duly called, whether regular or special, shall always constitute aquorum for the Hansactionof business, unless the By-Laws otherwise provide. Directors need not be residents of the State of Nevada or stockholders of the Corporation. ARTICLE VIII This Corporation shall have a president, a secretary, a treasurer, and a resident agent, to be chosen by the Board of Directors, any person may hold two or more offices. ARTICLE IX The capital stock of the Corporation, after the fixed consideration thereof has been paid or performed,shall not be subject to assessment, and the individual stockholders of this Corporation shall not be indi vidually liable for the debts and liabilities of the Corporation, and the Articles of Incorporation shall never be amended as to the aforesaid provisions. ARTICLE X The Board of Directors is expressly authorized: (subject to the By-Laws, if any, adopted by the Stockholders) 1) To make, alter or amend the By-Laws of the Corporation. 2) To fix the amount in cash or otherwise, to be reserved as working capital. 3) To authorize and cause to be executed mortgages and liens up on the property and franchises of the Corporation. 4) To by resolution or resolutions passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the Directors of the Corporation, which, to the extent provided in the resolution or resolutions or in the By-Laws of the Corporation, shall have and ma exercise the powers of the Board of Directors in the management of the business and affairs of the Corpora tion, and may have power to authorize the seal of the Corporation to be affixed to all papers on which the Corporation desires to place a seal. Such committee or committees shall have such name or names as may be stated in the By Laws of the Corporation or as may be determined from time to time by resolution adopted by the Board of Directors. 5) To sell, lease or exchange all of its property and assets, including its goodwill and its corporate franchises, upon such terms and condi- tions as the board deems expedient and for the best interests of the Corporation, when and as authorized by the affirmative vote of the stock- holders holding stock in theCorporation entitling them to exercise a t least a majority of the voting power given at a stockholders meeting called tor that purpose. ARTICLES XI In the absence of fraud, no contract or other transaction of the Corporation shall be affected by the fact that any of the Directors are in any way interested in, or connected with, any other party to such con- tract or transaction, or are themselves, parties to such contract or transaction, provided that this interest in any such contract or trans- action of any such director shall at any time be fully disclosed or other- wise known to the Board of Directors, and each and every person who may become a director of the Corporation is hereby relieved of any lia- bility that might otherwise exist from contracting with the Corporation for the benefit of himself or any firm, association or corporation in which he may be in any way interested. ARTICLE XII No director or officer of the Corporation shall be personally liable to the Corporation or any of its stockholders for damages for breach of fiduciary duty as a director or officer involving any act or omission of any such director or officer provided, however, that the foregoing provision shall not eliminate or limit the liability of a director or officer for acts or omissions which involve intentional misconduct, fraud or a knowing violation of law, or the payment of dividends in violation of Section 78.300 of the Nevada Revised Statutes.Any repeal or modification of this Article by the stockholders of the Corporation shall be prospective only, and shall not adversely affect any limitation on thepersonal liability of a director or office of the Corporation for a cts or omissions prior to such repeal or modification. I, the undersigned, being the incorporator hereinbefore named for the purpse of forming a corporationpursuant to the general corporation law of (the State of Nevada, do make and file these Articles of Incorporation, hereby declaring and certifying that the facts herein stated are true, and accordingly have hereunto set my hand, By /s/ Krista Castleman ---------------- Krista Castleman State of Utah ) ss) County of Salt Lake) On December 29, 1993 personally appeared before me, the undersigned, a Notary Public, Krista Castleton, known to me the person whose name is subscribed to the foregoing document and acknowledged to me that she executed the same. By /s/ DAVID R. YEAMAN --------------- DAVID R. YEAMAN Notary Public 8818 South Renegade Road Sandy, Utah 84093 CORPORATE CHARTER I, CHERYL A. LAU, Secretary of State of the State of Nevada, do here by certify that KOWTOW, INC did on the THIRTIETH day of DECEMBER, 1993 file in this office the original Articles of Incorporation; that said Articles are now on file and of record in the office of the Secretary of State of the State of Nevada, and further, that said Articles contain all the provisions required by the law of said State of Nevada. IN WITNESS WHEREOF, I have here hereunto set my hand affixed the Great Seal of State, at my office, in Carson City, Nevada, this THIRTIETH day of DECEMBER. 1993. By /s/ Cheryl A. Lau ------------------ Cheryl A. Lau Secretary of State By /s/ Kari Rhodes ----------- Kari Rhodes Deputy EX-3.2 4 ex3-2.txt CERTIFICATE OF CORPORATION SECRETARY OF STATE State of Nevada CERTIFICATE OF EXISTANCE WITH STATUS IN GOOD STANDING I, DEAN HELLER, the duty elected and qualified Nevada Secretary of State, do hereby certify that I am, by laws of said State, the custodian of the records relating to filings by corporations, limited-liability companies, limited partnerships, and limited-liability partnerships pursuant to title 7 of the Nevada Revised Statutes which are either presently in a status of good standing or were in good standing for a time period subsequent of 1976 and am the proper officer to execute this certificate. I further certify that the records of the Nevada Secretary of State, at the date of this certificate, evidence, COMPOSITE INDUSTRIES OF AMERICA, INC. as a Corporation duly organized under the laws of Nevada and existing under and by virtue of the laws of the State of Nevada since December 30, 1993, and is good standing in this state. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Great Seal of State, at my office, in Las Vegas, Nevada, on August 23, 2001. By: /s/ Dean Heller ------------- Dean Heller Secretary of State By: /s/ Angela Worwer ------------- Angela Worwer Certification Clerk EX-3.3 5 ex3-3.txt AMENDMENT TO THE ARTICLES OF INCORPORATION AMENDMENT TO THE ARTICLES OF INCORPORATION OF KOWTOW, INC. (NAME CHANGED HEREIN TO AFFORDABLE HOMES OF AMERICA, INC.) WHEREAS, there as issued by the Secretary of State a Charter constitu- ting and creating KOWTOW, INC., a corporation organized under the laws of this state with irs principal place ofbusiness in Las Vegas, Nevada, and a capital stock of One Hundred Thousand Dollars($1.00,000.00), divided into One Hundred Million (100,000.000) shares of a par value of one mill (1/10 cent) each, empowering it to engage in any activity or business not in conflict with the lawsof the State of Nevada or of the United States ofAmerica.The undersigned. President and Secretary of KOWTOW, INC. hereby certify that byresolutions duly adopted unanimously by the Board of Directors of the Company pursuant towritten action effective as of March 19. 1999; and by resolutions duly adopted by a majority of the shareholders of all classes of stock outstanding and entitled to vote thereon of the Company pursuant to written action effective as of March 19, 1999 amending the Articles of Incorporation as follows: That Article 1. be amended and changed to read as follows; Name; The name of the Corporation is AFFORDABLE HOMES OF AMERICA, INC. EX-3.31 6 ex3-31.txt AMENDMENT TO THE ARTICLES OF INCORPORATION DEAN HELLER CERTIFICATE OF Filed #C17611-93 SECRETARY OF STATE AMENDMENT August 23,2001 202 North Carson Street (PURSUANT TO NRS 78.385 and in the office of Carson City, Nevada 89701-4201 78.390) /s/ DEAN HELLER (775) 684-5708 Secretary of State Certificate of Amendment to Articles of Incorporation For Nevada Profit Corporations (Pursuant to NRS 78.385 and 78.390- After Issuance Stock) -Remit in Duplicate- 1. Name of corporation: ________World Homes, Inc.__________________________ 2. The articles have been amended as follows (provide article numbers, if available): Article I: Name: The name of the corporation is COMPOSITE INDUSTRIES OF AMERICA, INC. 3. The vote by which the stockholders holding shares in the corporation entitling them to exercise at least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the provisions of the articles of incorporation have in favor of the amendment is: _____52%____. * 4. Officer Signature (required): /s/ Susan Donahue *If any proposed amendment would alter or change any preference or any relative or other right given to any class or series of outstanding shares, then the amendment must be approved by the vote, in addition to the affirmative vote otherwise required, of the holders of shares representing a majority of the voting power of each class or series affected by the amendment regardless of limitations or restrictions on the voting power thereof. WRITTEN ACTION OF THE SHAREHOLDERS OF WORLD HOMES, INC. The undersigned shareholders, holding a majority interest of the issued and outstanding shares of Common Stock of World Homes, Inc. a Nevada corporation (the "Company"), do hereby take the following action pursuant to Section 78.320 of Nevada Statutes, on the 23rd day of August 2001. AMENDED ARTICLE OF INCORPORATION WHEREAS, the Company wishes to amend its Articles of Incorporation to change the name of the Company, THEREFORE IT IS RESOLVED, that the Articles of Incorporation of the Company be, and the same hereby, are amended pursuant to NRS 78.390 as follows: ARTICLE I NAME The name of the Company is COMPOSITE INDUSTRIES OF AMERICA, INC. RESOLVED FURTHER, that the appropriate officers of the Company are hereby authorized and directed to file the Amended Articles of Incorporation with the Secretary of State of the State of Nevada. FURTHER ACTIONS RESOLVED, that the appropriate officers of the Company are hereby authorized and directed to take and all further actions deemed or appropriate to effectuate the foregoing resolution. IN WITNESS WHEREOF, the undersigned have hereunto affixed their signature. /s/ Merle Ferguson /s/ Susan Donohue Majority Shareholder Shareholder Aug. 23, 2001 STATE OF NEVADA Secretary of State I hereby certify that this is a true and complete copy of the document filed in this office. By: /s/ DEAN HELLER ------------- DEAN HELLER Secretary of State By: /s/ Angela Warwer ------------- Angela Warwer EX-3.4 7 ex3-4.txt BYLAWS BYLAWS OF AFFORDABLE HOMES OF AMERICA, INC., a Nevada corporation ARTICLE I Section I. PRINCIPAL OFFICE The principal office shall be in the City of Las Vegas, County of Dark. State of Nevada. Section 2. OTHER OFFICES. The board of directors may at any time eslablish branch or subordinate offices at any place or places where the corporation is qualified to do business. ARTICLE II MEETINGS OF STOCKHOLDERS Section I. PLACE OF MEETINGS. Meetings of stockholders shall be held atany place within or without the State of Nevada designated by the board of directors. In the absentof any such designation, stock- holders' meetings shall be held at the principal executive office of the corporation. Section 2. ANNUAL MEETINGS. The annual meetings of stockholders shall be held at a date and time designated by the board of directors. (At such meetings, directors shabe elected and any other proper business m ay be transacted by a plurality vote of stockholders.) Section 3. SPECIAL MEETINGS. A special meeting of the stockholders, any purpose or purposes whatsoever, unless prescribed by statute or by the articles of incorporation may be called at any rime by the prpsident and shall be called by the president or secretary at therequest in writing of a majority of the board of directors, or at the request in writing of stockholders holding shares in the aggregate entitled to cast not less than a majority of the votes at any such meeting. The request shall be in writing, specifying the time of such meeting, the place which it is to be held and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the chairman of the board, the president, any vice president or the secretary of the corporation. The officer receiving such request forthwith shall cause notice to be given tothe stocfcholdcrs entitlediu vote, in accordance with the provisions of Sections 4 and 5 of this Article II, that a meeting will be held at the time requested by the person or persons calling the meeting, not less than thirty- five(35) nor more than sixty (60) days after the receipt of the request. If the notice is not given within twenty (20) days after receipt of the request, the person or persons requesting the meeting may givethe notice. Nothing contained in this paragraph of this Section 3 shall be construed as limiting,fixing or affecting the tme when a meeting of stockholders called by action of the board of directors may be held. Section 4. NOTICE QF STOCKHOLDERS' MEETINGS. All notices of meet- ings of stockholders shall be sent or otherwise given in accordance with Section 5 of this Article(I not less than ten (10) nor more than sixty (60) days before the date of the meeting being noiced.The notice shall specify the place, date and hour of the meeting and (i) in the case of a specialmeeting the general nature of the business to be transacted, or (ii) in the case of the annual meeting those matters which the board of directors, at the time of giving the notice, intends to present foraction by the stockholders. The notice of any meeting at which directors are to be elected shallinclude the name of any nominee or nominees which, at the time of the notice, management intendsto present for election.If action is proposed to be taken at any meeting for approval of (i) contracts ortransactions in which a di rector has a direct or indirect financial interest, (ii) an amendment to tearticles of incorporation, (iii) a reorganization of the corporat ion, (iv) dissolution of the corporation,or (v) a distribution to pref erred stockholders, the notice shall also state the general nature of suchproposal. Section 5. MANNER OF GTVTNG NOTICE: AFFIDAVIT OF NOTICE. Notice of any meeting of stockholders shall be given either personally or by first-class mail or telegraphicor other written communication, charges prepaid, addressed to the stockholder at the address of such stockholder appearing on the books of the corporation or given by the stockholder to the corporationfor the purpose of notice. If no such address appears on the corporation's books or is given, notice shall be deemed to have been given if sent by mail or telegram to the corporation's principal executive office, or if published at least once in a new spaper of general circulation in the county where this office is located. Prsonal delivery of any such notice to any officer of a corporation or association or to any member of a partnership shall consti tute delivery of such notice to suchcorporation, association or partnership. Notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by telegram or other means of written communication. In the event of the transfer of stock after delivery or mailing of the notice of and prior to the holding of the meeting, it shall not be necessary to deliver or mail notice of the meeting to the transferee. If any notice addressed to a stockholder ai the address of such stockh olde appearingon the books of the corporation is return ed t the corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice to the stockholder at such address, all fixture notices or reports shall be deemed to have been duly given without further mailing if the same shall be available to the stockholder upon whiten demand of the stockholder at the principal executive office of the corporation for a period of one year from the date of the giving of such notice. An affidavit of the mailing or other means of giving any notice of any stockholders' meeting shall be executed by the secretary, assistant secretary or any transfer agent of the corporation giving such notice, a ndshall be filed and maintained in the minute book of the corporation. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Section 6. The presence in person or by proxy of the holders of a majority of the shares entitled to vote at any meeting of stockholders shall constitute a quorum for the transaction of business, except as otherwise provided by statute or the articles of incorporation. The stockholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majorityof the shares required to consitute a quorum. Section 7. ADJOURNED MEETING AND NOTICE THEREOF. Any stockholders' meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of the majority of the shares represented at such meeting, either in person or by proxy, but in the absence of aquorum, no other business may he transacted at such meeting. When any meetng of stockholders, either annual or special, is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at a meeting at which the adjournment is taken. At any adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. Section 8. VOTING. Unless a record date set for voting purposes be fixed as provided in Section I of Article VII of these bylaws, only persons in whose name shares entitled to vote stand on the stock records of the corporation at the close of business on the business day next preceding the day on which notice is given (or, if notice is waived, at the close of business on the business day next preceding the day on wh ich he meeting is held) shall be entitled to vote at such meeting. Any stock-holder entitled to vote on any matter other than elections of directors or officers, may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or vote them against the proposal,but, if the stockholder fails to specify the number of sh ares such stock-holder is voting affirmatively, it will be conclusivel y presumed that the stockholders's approving vote is with respect to all shares such stockholderis entitled to vote. Such vote may be by voice vote or by ballot; provided, however, that all elections for directors must be by ballot upon demand by a stockholder at any election and before the voting begins. When a quorum is present or represented at any meeting, the vote of the holders of a majority of the stock having oting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the articles of in corporation a different vote is required in which case such express provision shall govern and control the decision of such question. Every stockholder of record of the corporation shall be entitled at each meeting of stockholders to one vote for each share of stock standing in his name on the books of the corporation. Section 9. WAIVER OF NOTICE OR CONSENT BY ABSENT STOCKHOLDERS. The transactions at any meeting of stockholders, either annual or special, however called and noticed, and wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each person entitled to vote, not present In person or by proxy, signs written waiver of notice or a consent to a holding of the meeting, or an approval of the minutes thereof. The waiver of notice or consent need not specify either the business to be transacted or the purpose of any regular or special meeting of stockholders, except that if action is taken or proposed to be taken for approval of any of those matters specified in the second paragraph of Section 4 of this Article II, the waiver of notice or consent shall state the general nature of such proposal. All such waivers, consents or approvals shall be fled with the corporate records or made a part of the minutes of the meeting. Attendance of a person at a meeting shall also constitute a waiver of notice of such meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened, and except that attendance at a meeting is not a waiver of any right to object to the consider action of matters not included in the notice if such objection is expressly made at the meeting. Section 10. STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action which may be taken at any annual or special meeting on stockholders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. All such consents shall be filed with the secretary of the corporation and shall be maintained in the corporate records. Any stockholder, giving a written consent, or the stock holder's proxy holders, or a transferee of the shares of a personal representative of the stockholder of their respective proxy holders, may revoke the consent by a writing received by the secretary of the corpo ration prior to the time that written consents of the number of shares requred to authorize the proposed action have been filed with the secretary. Section 11. PROXIES. Every person entitled to vote for directors or on any other matter shall have he right to do so either in person or by one or more agents authorized by a written proxy signed by the person and filed with the secretary of the corporation. A proxy shall be deemed signed if the stockholder's name is placed on the proxy (whether by manual signature, typewriting,telegraphic transmission or otherwise) by the stockholder or the stockholder's attorney in fact. A validly executed proxy which does not state that it is irrevocable shall continue in full force and effect unless revoked by the person executing it, prior to the vote pursuant thereto, by a writing delivered.to the corporation staling that the proxy is revoked or by a subsquent proxy executed by,or attendance at the meeting and voting i n person by the person executing the proxy; provided. however, that no such proxy shall be valid after the expiration of six (6) months from the date o(such proxy, unless coupled with an interest, or unless the person executing it specifies therein thelength of time for which it is to continue in force, which in no case shall exceed seven (7) years from the date of its execution. Subject to the above and the provisions of Section 78.355 of the NevadaGeneral Corporation Law, ay proxy duly executed is not revoked and continues in full force and effect until an instrument revoking it or a duly executed proxy bearing a later date is filed with the secretary of the corporation. Section 12. INSPECTORS OF ELECTION. Before any meeting of stockholders, the board of directors may appoint any persons other than nominees for offie to act as inspectorsof election at the meeting or its adjournmen t If no inspectors of election are appointed, the chairman of the meeti ng may, and on the request ofany stockholder or his proxy shall, appoi nt inspectors election at the meeting. The number of inspectors shall be either one (1) or three (3). If inspectors are appointed at a meeting on the request ofone or more stockholders or proxies, the holders of a majority of shares or their proxies present at the meeting shall determine whether one (1) or three (3) inspectors are to be appointed. If any person appointed as inspector fails to appear or fails or refuses to act, lhe vacancy may be filled by appointment by the board of directors before the meeting, or by the chairman at the meeting. The duties of these inspectors shall be as follows: (a) Determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies; (b) Receive votes, ballots, or consents: (c) Hear and determine all challenges and questions in any way arising in connection with the right to vote; (d) Count and tabulate all votes or consents; (e) Determine the election result; and (f) Do any other acts that may be proper to conduct the election or vote with fairness to all stockholders. ARTICLE III Section 1. POWERS. Subject to the provisions of the Nevada General Corporation Law and any limitations the articles of incorporation and these bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors. Without prejudice to such general powers, but subject to the same limitations, it ishereby expressly declared that the directors shall have the power and authority to: (a) Select and remove all officers, agents, and employees of the corporation, prescribe such powers and duties tor them as may not be inconsistent with law, with thearticles of incorporation or these bylaws, fix their compensation, and require from them security for faithfull service. (b) Change the principal executive office or the principal business office from one location to another; cause the corporation to be qualified to do business in any other state,territory, dependency, or foreign country and conduct business within or without the State; designateany place within or without the State for the holding of any stockholders' meeting, or meetings,including annual meetings; adopt, make and use a corporate seal, and prescribe the forms of certificates of stock, and alter the form of such seal and of such certificates from time to time as in their judgment they may deem best, provided that such forms shall at all times comply with the provisions of law. (c) Authorize the issuance of shares of stock of the corporation from time to time, upon such terms as may be lawful, in consideration of money paid, labor done or services actually rendered, debts or securities cancelled tangible or intangible property actually received. (d) Borrow money and incur indebtedness for the purpose of the corporation, and cause to be executed and delivered therefor, in the corporate name, pronussoiynoies, bonds, debentures, deeds of trust, mortgages, pledges, hypothecations. or other evidences of debt and securities therefore. Section 2. NUMBER OF DIRECTORS. The authorized number of directors shall be no fewer than three (3) nor more than ten (10). The exact number of authorized directors shall be set by resolution ofthe board of directors, within the limits specified above. The maximum or minimum number of directors cannot be changed, nor can a fixed number be substituted for the maximum and minimum numbers, except by duly adopted amendment to this bylaw duly approvedby a majority of the outstanding shares entitled to vote. Sections 3. QUALIFICATION. ELECTION AND TERM OF OFFICE OF DIRECTORS.Diretors shall be elected at each annual meeting of the stockholders to hold office until the next annual meeting, but if any such annual meeting is not held or the directors are not elected at any annual meeting, the directors may be elected at any special meeting of stockholders held for that purpose, or at the next annual peering of stockholders held thereafter. Each director,including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified or until his earlier resignation or removal or his office has been declared vacant in the manner provided in these bylaws. Directors need not be stockholders. Section 4. RESIGNATION AND REMOVAL QF DIRECTORS. Any director may resign effective upon giving written notice to the chairman of the board, the president, the secretary or the board of directors of the corporation, unless the notice specifies a later time for the effective- ness of such resignation, in which case such resignation shall be effective at the time specified. Unless such resignation specifies other- wise, its acceptance by the corporation shall not be necessary to make it effective. The board of directors may declare vacant the office of a director who has been declared of unsound mind by an order of a court or convicted of a felony. Any or all of the directors may be removed without cause of such removal is approved by the affirmative vote of a majority of the outstanding shares entitled to vote. No reduction of the authorized number of directors shall have the effect of removing any director before his term of office expires. Section 5. VACANCIES. Vacancies in the board of directors, may be filled by majority of the remaining directors, though less than a quorum, or by a sole remaining director.Each director so elected shall hold office until the next annual meeting of the stockholders and until a successor has been elected and qualified. A vacancy in the board of directors exists as to any authorized position of directors which is not then filled by a duly elected director, whether caused by death, resignation, removal,increase in the authorized number of directors or otherwise. The stockholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors, but any such election by written consent shall require the consent of a majority of the outstanding shares entitled to vote. If the resignation of a director is effective at a future time, the board of directors may elect a successor to take office when the resignation becomes effective. If after the filling of any vacancy by the directors, the directors then in office who have been elected by the stockholders shall constitute less than a majority of the directors then in office, any holder or holders of an aggregate of five percent or more of the total number of shares at the time outstanding having the right to vote for such directors may call a special meeting of the stockholders to elect the entire board. The term of office of any director_not elected by the stockholders shall terminate upon the election of a successor. Section . PLACE OF MERTINGS. Regular meetings of the board of direct or shall be held at any place within or without the State of Nevada that has been designated from time to time by resolution of the board. In the absence of such designation, regular meetings shall be held at the principal executive office of the corporation. Special meetings of the board shall be held at any place within or without the State of Nevada that has been designated in the notice of the meeting or, if not stated in the notice or there is not notice, at the principal executive office of the corporation.Any meeting, regular or special, may be held by conference telephone or similar communication equipment, so long as all directors participating in such meeting can hear one another, and all such directors shall be deemed to be present in person at such meeting. Section 7. ANNUAL MEETINGS. Immediately following each annual meeting of stockholders, the board of directors shall hold a regular meeting for the purpose of transaction o other business. Notice of this meeting shall not be required. Section 8. OTHER REGULAR MEETINGS. Other regular meetings of the board of directors shall be held without call at such time as shall from time to time be fixed by the board of directors. Such regular meetings may be held without notice, provided the notice of any change in the time of any such meetings shall be given to all of the directors. Notice e of a change in the determination of the time shall be given to each d director in the same manner as notice for special meetings of the board of directors. Section 9. SPECIAL MEETINGS. Special meetings of the board of direcors for my purpose or purposes may be called at any time by the chairman of the hoard or the preside;or any vice president or the secretary or any two directors. Notice of the time and place of special meetings shall be delivered personally or telephone to each director or sent by first-class mail or telegram, charges prepaid, addressed to each director at his or her address as it is shown upon the records of the corporation. In case such notice is mailed, it shall be deposited in the United States mail at least four (4) days prior to the time of the holding of the meeting. In case such notice is delivered personally, or by telephone or telegram, it shall be delivered personally or by telephone or to the telegraph company at least forty-eight (48)hours prior to th e tie of the holding of the meeting. Any oral notice given personally or bytelephone may be communicated to either the director or to a pers on at the office of the director whLhe person giving the notice has re ason to believe will promptly communicate it to the director. The notice need not specie the purpose of the meeting nor the place if the meeting is to be held at the principal executive office of the corporation. Section 10. QUORUM. A majority of the authorized number of directors shallconstilute a quorum tor the transaction of business, except to adjourn as hereinafter provided. Everyact or decision done or made by a majority of the directors present at a meeting duly held at whicha quorum is present shall be regarded oa the act of the board of directors, subject to the provisionsof Section 78.140 of the Nevada General Colpo ration Law (approval of contracts or transactions inwhich a director h as adirect or indirect material financial interest). Section 78.125 (a ppointment ofcommittees), and Section 78.751 (indemnification of direc tors). A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for such meeting. Section 11 - WAIVER OF NOTICE, the transactions of any meeting of the oardof directors, however called and noticed or wherever held. sh all be as valid as though had at a meeting duly held after regular call and notice if a quorum be present and if, either before or afterthe meeting, each of the directors not present signs a written waiver of notice, a consent to holding the meeting or an approval of the minutes thereof. The waiver of notice of consent need not specifythe purpose of the meeting. All such waivers, consents and approvals shall be filed with thecorporate records or made a part of the minutes of the meeting. Notice of a meeting shall also be deemed given to any director who attends The meeting without protesting, prior thereto or at its commencement, the lack of notice to such director. Section 12. ADJOURNMENT. A majority of the directors present, whether or not constituting a quorum, may adjourn any meeting to another time and place. Section 13. NOTICE OF ADJOURNMENT. Notice of the time and place of holding an adjourned meeting need not be given, unless the meeting is adjourned for more thantwenty-four (24) hours, in which case notice of such time and place shall be given prior to the time of the adjourned meeting, in the manner specified in Section 8 of this Article III, to the directors whowere not present at the time of the adjournment. Section 14. ACTION WITHOUT MEETING. Any action required orpermt to be taken by the board of directors may be taken without a meeting, if all members of the boashall individually or collectively consent in writing to such action. Such action by written consentshall have the same force and effect as a unanimous vote of the board of directors. Such written consent or consents shall be filed with the minutes of the proceedings of the board. Section 15. FEES AND COMPENSATION OF DIRECTORS. Directors a members of committees may receive such compensation, if any, for their services, and suchreimbursement of expenses, as may be fixed or determined by resolution of the board of directorsNothing herein contained shall be construed to preclude any director from serving the corporationin any other capacity as an officer, agent, employee, or otherwise, and receiving compensationsuch services. Members of special or sanding committees may be allowed like compensationattending committee meetings. ARTICLE IV COMMITTEES Section I. COMMITTEES OF DIRECTORS. The board of directors may resoluton adopted by a majority of the authorized number of directors, designate one or more committees, each consisting of one or more directors, to serve at the pleasure of the board. The board may designate one or more directors as alternate members of any committees, who may replace any absent member at any meeting of the committee. Any such committee, to the extent provided in the resolution of the board, shall have all the authority of the board, except with regard to: (a) the approval of any action which, under the Nevada General Corporation Law, also requires stockholders' approval or approval of the outstanding shares; (b) the filing of vacancies on the board of directors or in any committees; (c) the fixing of compensation of die directors for serving on the board or on any committee; (d) the amendment or repeal of bylaws or the adoption of new bylaws; (e) the amendment or repeal of any resolution of the board of directors which by its express terms is not so amendable or repealable; (f) a distribution to the stockholders of the corporation, except at a rate or in a periodic amount or within a price range determined by the board of directors; or (g) the appointment of any other committees of the board of directors or the members thereof. Section 2. MEETINGS AND ACTION BY COMMITTEES. Meetings and action of committees shall be governed by, and held and taken in accordance with the provisions of Article III, Sections 6 (place of meetings), 8 (regular meetings), 9 (special meetings and notice),10 (quorum), II (waiver of notice),12 (adjournment), 13 (notice of adjournment) and 14 (action without meeting), with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members, except that the time or regular meetings of committees shall by resolutions of the board of directors and notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent. The committees shall keep regular minutes of their proceedings and report the same to the board when board when required. ARTICLE V OFFICERS Section I. OFFICERS. The officers of the corporation shall be a president, a secretary and a treasurer. The corporation may also have, at the discretion of the board of directors,a chairman of the board, one or more vice presidents, one or more assistant secretaries, one or more assistant treasurers, and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article V. Any two or more offices may be held by the same person. Section 2. ELECTION OF OFFICERS. The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 3 or Section 5 of this same person. Article V, shall be chosen by the board of directors, and each shall serve at the pleasure of the board subject to the rights, if any, of an officer under any contract of employment. The board of directors at its first meeting after each annual meeting of stockholders shall choose a president, a vice president, a secretary and a treasurer, none of whom need be a member of the board. The salaries of all officers and agents of the corporation shall be fixed by the board of directors. Section 3. SUBORDINATE OFFICERS. ETC. The board of directors may appoint, and may empower the president to appoint, such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as a re provided in the bylaws or as the board of directors may from time t o time determine. Section 4. REMOVAL AND RESIGNATION OF OFFICERS. the corporation shall hold office until their successors are chosen and qualify. Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the board of directors, at any regular or special meeting thereof, or, except in case of an officer chosen by the board of directors, by any officer upon whom such power or removal maybe conferred by the board of directors. Any officer may resign at any time by giving written notice to the corporation. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Any such resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party. Section 5. VACANCIES IN OFFICES. A vacancy in any office because death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these bylaws for regular appointments to such office. Section 6. CHAIRMAN OF THE BOARD. The chairman of the board, if such an officer be elected, shall, if present, preside at meetings of the board of directors and exercise and perform such other powers and duties as may be from time to time assigned to him by the board of directors or prescribed by the bylaws. If there is no president, the chairman of the board shall in addition be the chief executive officer of the corporation and shall have the powers and duties prescribed in Section 7 of this Article V. Section 7. PRESIDENT. Subject to such supervisory powers, if any, as may be given by the board of directors to the chairman of the board, if there be such an officer, the president shall be the chief executive officer of the corporation and shall, subject to the control of the board of directors, have general supervision, direction and control of the business and the officers of the corporation. He shall preside at all meetings of the stockholder and, in the absence of the chairman of the board, of if there be none, at all meetings of the board of directors. He shall have the general powers and duties of management usually vested in the office of president of a corporation, and shall have such other powers and duties as may be prescribed by the board of directors or the bylaws. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. Section 8. VICE PRESIDENTS. In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, advice president designated by the board of directors, shall perform all the duties of the president, and when so acting shall have all the powers of, and be subject to a the restrictions upon, the president.The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors or the bylaws, the president or the chairman of the board. Section 9. SECRETARY. The secretary shall attend all meetings of the board of directors and all meetings of the stockholders and shall record, keep or cause to be kept, at the principal executive office or such other place as the board of directors may order, a book of minutes of all meetings of directors, committees of directors and stockholders, with the time and place of holding, whether regular or special, and, if special, how authorized, the notice thereof given, the names of those present at directors' and committee meetings, the number of shares present or represented at stockholders' meetings, and the proceedings thereof. The secretary shall keep, or cause to be kept, at the principal executive office or at the office of the corporation's transfer agent or registrar, as determined by resolution of the board of directors, a share register, or a duplicate share register, showing the names of all stock holders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation. The secretary shall give, or cause to be given, notice of all meetings of stockholders and of the board of directors required by the bylaws or by law to be given, and he shall keep the seal of the corporation in safe custody, as may be prescribed by the board of directors or by the bylaws. Section 10. TREASURER. The treasurer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings and shares. The Books of account shall at all reasonable times be open to inspection by any director. The treasurer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the board of directors. He shall disburse the funds of the corporation as may be ordered by the board of directors, shall render to the president and directors, whenever they request it, an account of all of his transactions as treasurer and of the financial condition of the corporation, and shall have other powers and perform such other duties as may be prescribed by the board of directors or the bylaws. If required by the board of directors, the treasurer shall give the corporation a bonding such sum and with such surely or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. ARTICLE VI INDEMNIFICATION OF DIRECTORS. OFFICERS, EMPLOYEES, AND OTHER AGENTS Section 1. ACTIONS OTHER THAN BY THE CORPORATION. The corporation may indemnify any person 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, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees,judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, has no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful. Section 2. ACTIONS BY THE CORPRATION. The corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys' fees, actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals there from, to be liable to the corporation or for amounts to be paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper. Section 3. SUCCESSFUL DEFENSE. To the extent that a director, office, employee or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections I and 2, or in defense of any claim, issue or matter therein, he must be indemnified by the corporation against expenses, including attorneys' fees actually and reasonably incurred by him in connection with the defense. Section 4. REQUIRED APPROVAL Any indemnification under Sections I and 2, unless ordered by a court or advanced pursuant to Section 5, must be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances. The determination must be made: (a) By the stockholders; (b) By the board of directors by majority vote e of a quorum consisting of directors who were not parties to the act, suitor proceeding; (c) If a majority vote of a quorum consisting of directors who were not parties to the act. suit or proceeding so orders, by independent legal counsel in a written opinion; (d) If a quorum consisting of directors who were not parties to the act, suit or proceeding cannot be obtained, by independent legal counsel in a written opinion. Section 5. ADVANCE OF EXPENSES The articles of incorporation, bylaws or an agreement made by the corporation may provide that the expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by corporation as they are incurred and in advance of the final disposition of the action, suit proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of compitent jurisdicton that he is not entitled be indemnified by the corporation. The provisions of this section do not affect any rights to advancement of expenses to which corporate personnel other than directors or officers may be entitled under any contract or otherwise bylaw. (a) Does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the articles of incorporation or any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, for either an action in his official capacity or an action in another capacity while holding his office, except that indemnification, unless ordered by a court pursuant to Section 2 or for the advancement of expenses Section 6. OTHER RIGHTS. The indemnification and advancement of expenses authorized in or ordered by a court pursuant to the Article VI: made pursuant to Section 5, may not be made to or on behalf of any director or officer if a final adjudication establishes that his acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action. (b) Continues for a person who has ceased to be a director, officer, employee or agent and inures to the benefit of the heirs, executors and administrators of such person. Section 7. INSURANCE. The corporation may purchase and maintain insurance on behalf of ay person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise for any liability asserted against him and incurred by him in any such capacity, or arising out f his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of his Article VI. Section 8. RELIANCE ON PROVISIONS. Each person who shall act as authorized representative of the corporation shall be deemed to be doing so in reliance upon the rights of indemnification provided by this Article. Section 9. SEVERABILTY. If any of the provisions of this Article are held be invalid or unenforceable, this Article shall be construed a s if it did not contain such invalid unenforceable provision and the remaining provisions of this Article shall remain in full force and effect Section 10. RETROACTIVE EFFECT. To the extent permitted by applicable law,the rights and powers granted pursuant to this Article VI shall apply to acts and actions occurring in progress prior to its adoption by the board of directors. ARTICLE VII RECORDS AND BOOKS Section 1. MAINTENANCE OF SHARE REGISTER. The corporation shall keep at its principal executive office, or at die office of its transfer agent or registrar, if either appointed and as determined by resolution of the board of directors, a record of its stockholders, giving the names and addresses of all stockholders and the number and class of shares held by each stockholder. Section 2. MAINTENANCE OF BYLAWS. The cuiporaHon shall keep at its principal executive office, or if its principal executive office is not in this State at its principal business office in this State, the ori- ginal or a copy of the bylaws as amended to date, which shall be open to inspection by the stockholders at all reasonable times during office hours. If the principal executive office of the corporation is outside this state and the corporation has no principal business office in this state, the secretary shall, upon the written request of any stockholder, furnish to such stockholder a copy of the bylaws as amended to date. Section3. MAINTENANCE OF OTHER CORPORATE RECORDS. The accounting books and records and minutes of proceedings of the stockholders and the board of directors and any committee or committees of the board of directors shall be kept at such place or places designated by the board of directors, or, in the absence of such designation, at the principal executive office of the corporation. The minutes shall be kept in written form and the accounting books and records shall be kept either in written form or in any other form capable of being converted into written form. Every director shall have the absolute right at any reasonable time to inspect and copy all books, records and documents of every kind and to inspect the physical properties of this corporation and any subsidiary of this corporation. Such inspection by a director may b made in person or by agent or attorney and the right of inspection includes the right to copy and make extracts. The foregoing rights of inspection shall extend to the records of each subsidiary of the corporation. Section 4. ANNUAL REPORT TO STOCKHOLDERS. Nothing herein shall be interpreted as prohibiting the board of directors from issuing any annual or other periodic reports the stockholders of the corporation as they deem appropriate. Section 5. FINANCIAL STATEMENTS. A copy of any annual financial statement and any income statement of the corporation for each quarterly period of each fiscal year and any accompanying balance sheet of the corporation as of the end of each such period, that has been prepared by the corporation shall be kept on file in the principal executive office of the corporation for twelve (12) months. Section 6. ANNUAL LIST OF DIRECTORS. OFFICERS AND RESIDE AGENT. The corporation shall, on or before June 30 of each year, file with the Secretary of State of Nevada, on the prescribed form, a list of its officers and directors and a designate of its resident agent in Nevada. ARTICLE VIII GENERAL CORPORATE MATTERS Section 1. RECORD DATE. For purposes of determining the stockholders entitled to notice of any meeting or to vote or entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days prior to the date of any such meeting nor more than sixty (60)days prior to any other action, and in such case only stockholders of record on the date so fixed are entitled to notice and to vote or to receive the dividend, distribution or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date fixed as aforesaid, except as otherwise provided in the Nevada General Corporation Law. If the board of directors docs not so fix record date: (a) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held. (b) The record date tor determining stockholders entitled to give consent to corporate action in writing without a meeting, when no prior action by the board has been taken,shall be the day on which the first written consent is given. (c) The record date for determining stockholders for any other purposes shall be at the close of business on the day on which the board ad opts the resolution relating thereto,or the sixtieth (60th) day prior to the date of such other action, whichever is later. Section 2. CLOSING OF TRANSFER BOOKS. The directors may prescribed period not exceeding sixty (60) days prior to any meeting of the stockholders during which no transfer of stock on the books of the corpora- tion may be made, or my fix a date not more than sixty (60) days prior to the holding of any such meeting as the day as of which stockholders entitled to notice of and to vote at such meeting shall be determined; and only stockholders of record on such day shall be entitled to notice or to vote at such meeting. Section 3. REGISTERED STOCKHOLDERS. The corporation shall entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as other wise provided by the laws of Nevada. Section 4. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness, issued in the name of or payable to the corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the board of directors. Section 5. CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXCUTED. The board of directors, except as in the bylaws otherwise provided, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in tin;name of and on behalf of the corporation, and such authority may be general or confined to specific instances; and, unless so authorized or ratified by the board of directors or within the agency power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or to any amount. Section 6. STOCK CERTIFICATES. A certificate or certificates for shares of the capital stock of the corporation shall be issued to each stockholder when any such shares are partly paid, and the board of directors may authorize the issuance of certificates or shares as partly paid provided that such certificates shall state the amount of the consideration to be paid therefor and the amount paid thereon. All certificates shall be signed in the name of the corporation by the president or vice president and by the treasurer or a assistant treasurer or the secretary or any assistant secretary, certifying the number of shares and the class or series of shares owned by the stockholder. When the corporation is authorized to issue shares of more than one class or more than one series of any class, there shall be set forth upon the face or back of the certificate, or the certificate shall have a statement that the corporation will furnish to any stockholders upon request and without charge, a full or summary statement of the designations, preferences and relatives, participating optional or other special rights of the various classes of stock or series there of and the qualifications, limitations or restrictions of such rights, and,if the corporation shall be authorized to issue only special stock, such certificate must set forth in full or summarize the rights of the holders of such stock. Any or all of the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it maybe issued by the corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue. No new certificate for shares shall be issued in place of any certificate theretofore issued unless the latter is surrendered and cancelled at the same time; provided, however, that a new certificate may be issued without the surrender and cancellation of the old certificate if the certificate theretofore issued is alleged to have been lost, stolen or destroyed. In case of any such allegedly lost, stolen or destroyed certificate, the corporation may require the owner thereof or the legal representative of such owner to give the corporation a bond (or other adequate security) sufficient to indemnify it against any claim that may be made against it (including any expense or liability) on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. Section 7. DIVIDENDS. Dividends upon the capital stock of the corporaton, subject to the provisions of the articles of incorporation, if any, may be declared by the board of directors at any regular or special meeting pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the articles of incorporation. Before payment of any dividend, there may be act aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserves in the manner in which it was created. Section 8. FISCAL YEAR. the fiscal year of the corporation shall be fixed by resolution of the board of directors. Section 9. SEAL. The corporate seal shall have inscribed thereon the name or the corporation, the year of its incorporation and the words "Corporate Seal, Nevada." Section 10. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The chairman of the board, the president, or any vice president, or any other person authorized by resolution of the board of directors by any of the foregoing designated officers, is authorized to vote on behalf of the corporation any and all shares of any other corporation or corporations, foreign or domestic, standing in the name of the corporation. The authority herein granted to said officers to vote or represent on behalf of the corporation any and all shares held by the corporation in any other corporation or corporations may be exercised by any such officer in person or by any person authorized to do so by proxy duly executed by said officer. Section 11. CONSTRUCTION AND DEFINITIONS. Unless the context requires otherwise, the general provisions, rules of constructiOn, and definitions in the Nevada GeneralCorporation Law shall govern the construction of the bylaws. Without limiting the generality of the foregoing, the singular number includes the plural, the plural number includes the singular, and the term "person" includes both a corporation and a natural person. ARTICLE IX AMENDMENTS Section 1. AMENDMENT BY STOCKHOLDERS. New bylaws may be adopted or these bylaws may be amended or repealed by the affirmative vote of a majority of the outstanding shares entitled to vote, or by the written assent of stockholders entitled to vote such shares, except as otherwise provided by law or by the articles of incorporation. Section 2. AMENDMENT BY DIRECTORS. Subject to the rights of the stocholders as provided in Section I of this Article, bylaws may be adopted, amended or repealed by the board of directors. CERTIFICATE OF SECRETARY I, the undersigned, do hereby certify: I. That I am the duly elected and acting secretary of AFFORDABLE HOMES OF AMERICA, INC., a Nevada corporation; and 2. That the foregoing Amended and Restated Bylaws, comprising twenty (20) pages, constitute the Bylaws of said corporation as duly adopted and approved by the board of directors of said corporation by a Unanimous Written Consent dated as of October ___, 1997 and duly adopted and approved by the stockholders of said corporation at a special meeting held on October ___, 1997. IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of said corporation this ____________ day of October, 1997. By /s/ Jim Matthews ------------ Jim Matthews Secretary EX-10.1 8 ex10-1.txt JOINT VENTURE AGREEMENT JOINT VENTURE AGREEMENT WITH AL NASAR TRADING & INDUSTRIAL CORPORATION August 15, 2000 JOINT VENTURE AGREEMENT This Joint Venture Agreement (the Agreement or This Agreement) is entered into this August 14 , 2000 by and between Affordable Homes of America, Inc, hereinafter referred to as AHOA, a Nevada Corporation whose principle place of business is 4505 W. Hacienda Ave. Unit I-1, Las Vegas, Nevada, USA and AL Nasar Trading & Industrial Corporation, LLC, hereinafter referred to as ALNASR, a corporation registered in the Kingdom of Saudi Arabia (registration no. 3) whose principal place of business is Adam Khashoggi Vila, Al Washem Street, Murabba's District, Riyadh, Kingdom of Saudi Arabia. WHEREAS A. AHOA is the holder of two United States of America patents (number 5,782,970 and 5,852,077), the patents being issued for the manufactur ing of a protected new and unique building material hereinafter refer red to as the product; B. AHOA has through extensive research and experience, developed low c ost, rapidly produced housing models which meet minimum building stan dards for the construction of homes in the United States and in many, if not all foreign countries. C. AHOA is now capable and ready to offer the product and associated home building expertise to a joint venture partner, specifically ALNASR to introduce, market and sell the product in the Kingdom of Saudi Arabia and in other countries mutually selected by ALNASR and AHOA. D. Furthermore, AHOA is now capable and ready to (a) provide full complete technical assistance in the establishment of plants to manufacture the product and (b) provide all the necessary expertise required to build and market low cost homes in accordance with models created by AHOA AND WHERAS A. ALNASR has the experience and contacts necessary to (a) market the product in the countries selected in the Middle East and Northern Africa and (b) create the infrastructure necessary for AHOA to build manufacturing plants for products where feasible. B. ALNASR possesses the professional network which will work diligently towards obtaining various permits and licenses as required, both for the introduction of the product in the countries selected and for the introduction of the product in the countries selected and for the establishment of factories to construct manufacturing facilities in line with this agreement; C. Furthermore, ALNASR now desires to utilize its experience, expertise and network to ensure the success of low cost housing models by bidding for housing projects in countries selected at the very earliest opportunity to this signing of this agreement. NOW THEREFORE, In consideration of one United States Dollar (US$1.00) receipt of which is hereby acknowledged and the mutual promises and warranties contained herein, AHOA and ALNASR hereby agree as follows: MARKETING AND PRODUCTION, LOW COST HOUSING 1. AHOA and ALNASR agree to the formation of two corporations called Affordable Homes (Middle East), Inc., the said corporations, unless otherwise agreed upon to be (a) a Canadian (British Columbia) and (b) a United States of America (Nevada) corporation respectively; 2. AHOA and ALNASR will each hold 50% of the Canadian and US corporation ( the "JV Corporations") respectively 3. AHOA and ALNASR understand that each of the JV corporations will be obliged to form alliances, partnerships or even JV agreements with third parties depending upon the individual requirements and project mechanics in each country: 4. AHOA will hereby grant the JV corporation the exclusive rights to (a) introduce and market the product in various countries selected and (b) construct manufacturing and production facilities to produce the product in the said countries selected and furthermore, unless there are fundamental reasons to the contrary AHOA agrees to transfer such exclusive rights to any alliances, partnerships or JV undertaken with third parties in any particular country. 5. AHOA will also grant the JV corporation the exclusive right, jointly, with other parties or on their own accords, to bid on low cost housing contracts in countries selected using AHOA's product and technical support. 6. AHOA warrants and guarantees that the product is feasible and further warrants that all technical information provided to ALNASR isaccurate and will be accurate at all times to the best of AHOA management 7. AHOA warrants that the product is viable building product and is one which can be produced and used at a cost substantially less that the cost of normally existing wood or concrete based housing materials 8. AHOA warrants that is engineer and technicians will be available for on site presentations, reviews and studies in the countries selected to assist ALNASR in any of its efforts envisaged in this Agreement 9. ALNASR agrees to use its best efforts to introduce, market and sell the product in countries selected and further agrees that the first country will be selected within 7 business days of the signing of this Agreement 10. ALNASR agrees that it will arrange for the preparation and submission of competitive bids which will be based on the use of the product (either via local production or via exports) to produce low cost housing in the country of countries selected. 11. ALNASR may provide, as its own contribution towards the Joint Ventures envisaged herein, land or buildings and such land or buildings will be acceptable to AHOA, if (a) they are deemed suitable for the furtherance of the objectives of the joint venture and (b) they are valued as per recognized local or international standards; 12. Each party will have equal representation of the Board of Directors of the corporation (per 1) unless such representation needs to be altered due to locally prevailing regulations in which case both parties shall arrive at mutually acceptance representations; COSTS, FEES, EXPENSES & ORGANIZATION 13. Further to a Letter of Intent dated August 07, 2000, AHOA and ALNASR have made their initial contributions of $US 25,000.00 (United States Dollars Twenty Five Thousand only) each towards preliminary expenses designed to identify the precise nature of opportunities for the product in all countries in the Middle East and in certain countries forming the Northern Africa. 14. AHOA and ALNASR hereby, agree form this juncture, to operate the agreement only through the JV Corporations (per 1); 15. AHOA and ALNASR hereby agree that both parties will contribute a specified amount towards their share of initial capitalization of the corporations in such a manner that preliminary travel cost, legal fees and other expenditures are accounted for prior to formal capitalization pursuant to the actual implementation of country specific joint ventures for production, marketing and bidding purposes. 16. AHOA and ALNASR hereby agree to appoint Ms. Allison Eaton, President of Africa Resources Corporation, Vancouver, as Secretary of the Canadian corporation and AHOA appointee as Secretary of the US Corporation for the primary purpose of maintaining and preparing books, records, timetables, timelines and expense budgets; 17. AHOA and ALNASR hereby agree to appoint Mr. Stephen Nemerqut as General Counsel for purposes envisaged in this Agreement; IMMEDIATE OBJECTIVES 18. ALNASR, will, within 7 business days of the signing of this Agreement, provide written confirmation of a least one country chosen for immediate implementation of the objectives of the Joint Venture with AHOA, namely to produce and manufacture the product and, further more, to promote low cost housing projects; 19. ALNASR will within 7 business days of the signing of this Agreement, provide a plan of action for a least four other countries where such plan will be implemented depending upon the level of resources available to AHOA; 20. ALNASR and AHOA will cause the formation of the corporations (per 1) with immediate effect so that the Secretaries of the Corporations can prepare and formalize books, records, and budgets in line with the objectives of the Agreement; 21. In order to fund the JV, and to complete other obligations under the Agreement, AHOA will immediately conduct a private placement financing in which cause AHOA will be actively assisted by Africa Resource Corporation and by ALNASR; 22. ALNASR hereby agrees to make all arrangements, in conjunction with Africa Resources, to enable AHOA to complete the targeted private placement for a sum expected to be for a minimum of $7.00 million and for a maximum of $15 million with the overriding provision that the bulk of the proceed excluding certain operating and working capital costs agreed upon, will be utilized to fund AHOA's share in the joint venture and/or joint ventures envisaged therein; 23. ALNASR is aware that shares issued as a consequence of the private placement by AHOA will be restricted shares (either Rule 144 or Reg,'S') and such shares may remain restricted for trading in the US either for a period of 12 months from the date of the issuance or pending AHOA effecting the appropriate registration of the securities issued; GENERAL 24. It is explicitly understood by ALNSAR that AHOA's near term and longer term participation, especially in the manufacture of the product in one or more countries, is reliant upon the success of the private placement (per 22) and a failure to satisfactorily complete the private placement will make it impossible for AHOA to meet the forthcoming commitments as outlined in this Agreement; 25. The term of the Agreement shall be for a period of three (3) years with and automatic renewal for twenty five (25) years if a minimum of US$ 100,000,000.00 (United States Dollars One Hundred Million) of actual construction value is achieved within three years where such construction value will be the aggregate of construction expenditures in one or more countries designated by ALNASR;26. Since the representation on the Board of Directors (per 1) shall be equally split between AHOA and ALNASR, any stalemate in voting- despite the best efforts of both parties- will be submitted to an independent Arbitrator selected from the American Arbitrator Association in which case the Arbitrator's decision will be final; 27. This agreement may be terminated for any of the following reasons: a. By mutual consent of both parties b. By the failure of ALNASR to secure necessary licenses permits and other related arrangements in at least 1 country over a period of 12 months form the date of signing this Agreement. c. By the failure of ALNASR to forward a comprehensive plan of action for the JV corporations within 12 months from the date of signing this Agreement; d. By the failure of AHOA to complete the private placement envisaged herein within 6 months from the date of signing this Agreement; e. By the failure of AHOA to demonstrate adequately that the product meets with all necessary minimum requirements and furthermore, to prove that the low cost housing model is reality; 28. The Agreement may be amended at any time provided that any amended agreement is in writing, signed by both parties and clearly referenced; 29. All timetables of timelines mentioned herein and appearing as the duties of any of the parties to the Agreement may be extended with the written consent of both parties to the agreement and the parties concerned hereby agree that certain requirements or provisions may be waived provided that such waiver is mutually agreed in writing 30. Address for notices and other communications: AHOA Affordable Homes of America, Inc 4505 W. Hacienda Ave. Unit I-1 Las Vegas, NV #702-579-4888 Fax#-702-579-4833 e-mail:info@affordahome.com AL NASR Trading & Industrial Corporation LLC Adnan Khashoggi Villa Al Washem Street Murabba's District Riyadh, Kingdom of Saudi Arabia Telephone: 1-9661-402-7888 Fax:1-9661-402-8577 31. The Agreement is the final written expression and the complete and exclusive statement of the parties namely AHOA and ALNASR. It super- sedes any and all other agreements (and letters of intent as the case may be) written or oral between the parties and alterations or amendments hereinafter must only be with the written and mutual content of AHOA and ALNASR: 32. The Agreement, and its terms and conditions, shall be govern by the laws prevailing in the State of Nevada or laws in other jurisdictions if and when applicable; 33. In the event that any pan of the Agreement is determined invalid by a court of competent jurisdiction, such determination shall not effect the validity of the remaining portion of the Agreement: 34. Both parties agree that, within the framework of the Agreement, certain commission and/or finder's fees will be payable to Charlesbridge Holdings (Europe) Corporation/Africa Reiources Corporation and to The Aiegis Group and that the said commissions and fees will be negotiated separately and will form part of a separate aereement. SIGNED AND ACCEPTED DATED: 08/15/2000 For AFFFORDABLE HOMES OF AMERICA, INC. By: /s/ Merle Ferguson -------------- Merle Ferguson President FOR AL NASR TRADING AND INDUSTRIAL CORPORATION, LLC By /s/ ADNAN KHASHOGGI --------------- ADNAN KHASHOGGI DIRECTOR EX-23.2 9 ex23-2.txt CONSENT OF INDEPENDENT AUDITORS CONSENT OF INDEPENDENT AUDITORS We consent to the use in this form 10KSB Annual Report pursuant to section 13 or 15 (d) of the Securities Exchange Act of 1934 Composite Industries Of America, Inc. (F/K/A World Homes, Inc./Affordable Homes Of America, Inc. and Subsidiaries) of our report dated September 14, 2001 (except as to note 20 which is as of October 3, 2001) By: /s/ Pascale, Razzino, Alexanderson & Co., PLLC ------------------------------------------ Pascale, Razzino, Alexanderson & Co., PLLC North Bellmore, New York 11710 October 9, 2001