0001091818-01-500268.txt : 20011026
0001091818-01-500268.hdr.sgml : 20011026
ACCESSION NUMBER: 0001091818-01-500268
CONFORMED SUBMISSION TYPE: PRE 14C
PUBLIC DOCUMENT COUNT: 2
CONFORMED PERIOD OF REPORT: 20011019
FILED AS OF DATE: 20011019
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: PRE 14C
SEC ACT: 1934 Act
SEC FILE NUMBER: 033-55254-18
FILM NUMBER: 1762503
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
PRE 14C
1
ciai14c_101901.txt
INFORMATION STATEMENT
SCHEDULE 14C
INFORMATION STATEMENT PURSUANT TO SECTION 14 (C)
OF THE SECURITIES EXCHANGE ACT OF 1934
Check the appropriate box:
[ X ] Preliminary information statement
[ ] Definitive information statement
Confidential, for use of the Commission only (as permitted by Rule 14c-5(d)(2))
COMPOSITE INDUSTRIES OF AMERICA, INC.
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
Not Applicable.
(2) Aggregate number of securities to which transaction applies:
Not Applicable.
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined): Not Applicable.
(4) Proposed maximum aggregate value of transaction: Not Applicable.
(5) Total fee paid: Not Applicable.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a) (2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: Not Applicable.
(2) Form, Schedule or Registration Statement No. : Not Applicable.
(3) Filing Party: Not Applicable.
(4) Date Filed: Not Applicable.
COMPOSITE INDUSTRIES OF AMERICA, INC.
4505 WEST HACIENDA AVENUE, UNIT I-1
LAS VEGAS, NEVADA 89118
(702) 579-4888
__________ ___, 2001
Dear Stockholder:
This Information Statement is being provided to inform you that the
holders of a majority of the outstanding common stock of Composite Industries
of America, Inc. (the "Company") has delivered to the Company written consent
to the following action:
Authorizing an Amendment to the Company's Articles of Incorporation Increasing
the Number of Authorized Shares of the Company's Common Stock to 200,000,000
and Authorizing the Company to Issue up to 100,000,000 Shares of Preferred
Stock.
The actions taken by the holders of a majority of the outstanding
common stock will become effective twenty (20) days from the date hereof.
This Information Statement is being provided to you for information
purposes only. Your vote is not required to approve the action. This
Information Statement does not relate to an annual meeting or special meeting
in lieu of an annual meeting. You are not being asked to send a proxy and you
are requested not to send one.
Very truly yours,
/s/Merle Ferguson
--------------
Merle Ferguson
President
COMPOSITE INDUSTRIES OF AMERICA, INC.
4505 WEST HACIENDA AVENUE, UNIT I-1
LAS VEGAS, NEVADA 89118
(702) 579-4888
INFORMATION STATEMENT
This Information Statement is being mailed to the stockholders (the
"Stockholders"), of Composite Industries of America, Inc., a Nevada
corporation (the "Company"), in connection with the previous approval by the
Company's Board of Directors (the "Board of Directors") of the corporate
action referred to below and its subsequent adoption by written consent of the
majority of the Stockholders. Accordingly, all necessary corporate approvals
in connection with the matter referred to herein have been obtained and this
Information Statement is furnished solely for the purpose of informing the
Stockholders, in the manner required under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), of this corporate action before it
takes effect.
This Information Statement is first being mailed or furnished to the
Stockholders on or about __________ ___, 2001, and the transactions described
herein shall not become effective until at least 20 days thereafter.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY
AMENDMENT TO THE ARTICLES OF INCORPORATION
This Information Statement is being furnished in order to notify the
Stockholders that on or about October 3, 2001 the Company received written
consents (the "Written Consents") in lieu of a meeting of the Stockholders
from the holders of 21,867,000 shares of the common stock, par value $.001 per
share (the "Common Stock"), representing approximately 54.6% of the total
issued and outstanding shares of voting stock of the Company, adopting a
resolution approving an amendment to the Articles of Incorporation of the
Company (the "Articles of Incorporation") increasing the number of authorized
shares of Common Stock to 200,000,000 and authorizing the Company to issue
100,000,000 shares of preferred stock (the "Preferred Stock") from time to
time in one or more series (the "Amendment"). The Amendment gives the Board
of Directors the authority to fix the number of shares of any series of
Preferred Stock. It also confers upon the Board of Directors the authority to
determine or alter the voting powers, rights, preferences, privileges and
restrictions granted to or imposed upon any wholly unissued series of
Preferred Stock, and, within the limits and restrictions stated in any
resolution or resolutions of the Board of Directors originally fixing the
number of shares constituting any series, to increase or decrease the number
of shares of any such series subsequent to the issue of shares of that series.
Moreover, the Amendment provides that the holders of each series of Preferred
Stock may amend the provisions of such series of Preferred Stock without the
consent of any holders of any class of Common Stock or any other series of
Preferred Stock.
This stockholder vote satisfied the requirements of Section 78.390 of
the Nevada General Corporation Law (the "Nevada Law"), which stipulates that,
in order to adopt an amendment to the Articles of Incorporation, such
amendment must first be approved by a majority of all the votes entitled to be
cast thereon. Action by the written consent of stockholders without a meeting
is permitted by Section 78.320 of the Nevada Law.
On October 3, 2001 the Board of Directors of the Company unanimously
approved the Amendment by written consent, in accordance with Section 78.315
of the Nevada Law, and recommended that the Stockholders grant their approval
thereto.
REASONS FOR AND ADVANTAGES OF THE AMENDMENT
Management adopted the Amendment primarily because, by increasing the
number of authorized shares of Common Stock to 200,000,000 and by giving the
Board of Directors the authority to issue 100,000,000 shares of Preferred
Stock, the Company will be provided with additional shares of Common Stock and
Preferred Stock for general corporate purposes, including stock dividends and
splits, raising additional capital for the expansion of the Company's
business, issuances upon conversion of outstanding shares of Preferred Stock
which may be issued and possible future acquisitions. The Company's officers
may from time to time engage in discussions with other businesses concerning
the possible acquisition of such companies by the Company, in which the
Company may consider issuing Common Stock or Preferred Stock as part or all of
the acquisition price. The Board of Directors believes that an increase in
the total number of shares of authorized Common Stock and the ability to issue
Preferred Stock will better enable the Company to meet its future needs and
give it greater flexibility in responding quickly to business opportunities.
Furthermore, in management's opinion, underwriters and other members of the
financial services industry may be more willing and better able to assist in
capital raising programs for companies having the greater flexibility afforded
by the availability of multiple series of preferred stock, with the voting
powers, rights, preferences, privileges and restrictions of such preferred
stock to be determined from time to time by the company's board of directors
as each situation requires.
DISADVANTAGE OF THE AMENDMENT
Despite the belief of the Board of Directors as to the benefits or
advantages of the Amendment, some Stockholders may find the Amendment
disadvantageous because it may have the effect of discouraging certain
takeover attempts which are not approved by the Board of Directors. For
example, when faced with a hostile tender offer, the Board of Directors could
issue additional shares of Common Stock or Preferred Stock in order to dilute
the stock ownership of persons seeking to obtain control of the Company, or it
could create new series of Preferred Stock the holders of which must consent
to any change of control of the Company. This "anti-takeover" provision,
along with other "anti-takeover" provisions that may be adopted by the Company
in the future, could have the effect of lessening the possibility that
Stockholders of the Company would be able to receive a premium above market
value for their shares in the event of a takeover. These provisions could
also have an adverse effect on the market value of the shares of the Common
Stock. To the extent that these provisions may restrict or discourage
takeover attempts, they may render less likely a takeover opposed by the Board
of Directors and may make removal of the Board of Directors or management less
likely as well.
The Amendment is not a response to any specific effort known to
management to accumulate the Company's securities or to obtain control of the
Company by means of a merger, tender offer, solicitation in opposition to
management or otherwise. The Board of Directors has no present intention
following the Amendment to further amend the Articles of Incorporation of the
Company or the Bylaws of the Company to include any additional provisions
which might deter an unsolicited takeover attempt, other than those set forth
in this Information Statement. However, in the discharge of its fiduciary
obligations to the Stockholders, the Board of Directors may consider in the
future certain additional "anti-takeover" strategies which may enhance the
Board of Directors' ability to negotiate with an unsolicited bidder.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of October 3, 2001, certain
information with respect to the beneficial ownership of the common stock by
(1) each person known by us to beneficially own more than 5% of our
outstanding shares, (2) each of our directors, (3) each named executive
officer and (4) all of our executive officers and directors as a group.
Except as otherwise indicated, each person listed below has sole voting and
investment power with respect to the shares of common stock set forth opposite
such person's name.
Name and Address of Amount and Nature of Percent of
Beneficial Owner (1) Beneficial Ownership (2) Outstanding Shares
5% Stockholders
------------------------------ ----------- -------
Lenore Avenue LLC(3) 2,416,491(4) 6.0%
c/o Citco Trustees (Cayman)
Limited
Commercial Centre
P.O. Box 31106 SMB
Grand Cayman, Cayman Islands
Directors and Named
Executive Officers
------------------------------ ----------- -------
Merle Ferguson 14,000,000 34.9%
Susan Donohue 5,867,000 14.6%
William Morris 2,000,000 4.9%
Randy Vozka 2,205,645 5.5%
All the Officers and Directors
As a Group 24,072,645 60.08%
____________________
* Less than 1%
(1) Unless otherwise indicated, the address of each beneficial owner is
c/o Composite Industries of America, Inc., 4505 West Hacienda Avenue, Unit
I-1, Las Vegas, NV 89118.
(2) Under the rules of the SEC, a person is deemed to be the beneficial
owner of a security if such person has or shares the power to vote or direct
the voting of such security or the power to dispose or direct the disposition
of such security. A person is also deemed to be a beneficial owner of any
securities if that person has the right to acquire beneficial ownership within
60 days of the date hereof. Unless otherwise indicated by footnote, the named
entities or individuals have sole voting and investment power with respect to
the shares of common stock beneficially owned.
(3) ________ is the [Manager] of Navigator Management, Ltd., the director
and control person of Lenore Avenue LLC, and, through Navigator, has
investment control of Lenore Avenue's shares.
(4) Represents 2,202,816 shares of our common stock issuable upon
conversion of a note in the amount of $1,000,000, and 213,675 shares of our
common stock issuable upon the exercise of a warrant.
MATERIAL INCORPORATED BY REFERENCE
The following document is incorporated herein by reference: The Company's
Annual Report on Form 10-KSB for the fiscal year ended June 30, 2001.
EXHIBITS DESCRIPTION
---------- -----------
Exhibit 99 Annual Report for the fiscal year ended June 30, 2001
(for reference purposes)
EX-99
3
ciai_10ksb-101101.txt
LATEST 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