10-Q 1 crh10q033104.txt CANADIAN ROCKPORT HOMES 10Q, 03.31.04 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004 [_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from to ---------- ---------- 333-62786 ------------------------ (Commission file number) CANADIAN ROCKPORT HOMES INTERNATIONAL, INC. ----------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) Delaware 98-0354610 --------------------------------- ------------------- (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 700 W. Bender Street, Suite 507 Vancouver, BC Canada V6C 1G8 ---------------------------------------- (Address of principal executive offices) (604) 669-1081 --------------------------- (Issuer's telephone number) ---------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) [X] Check whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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. [_] Check whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). The number of shares outstanding of each of the issuer's classes of common equity as of May 26, 2004 is 15,806,005 shares of Common Stock. Canadian Rockport Homes International, Inc. ------------------------------------------- Index ----- Page Number ------ PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets 3 Consolidated Statements of Operations 5 Three-Months Ended March 31, 2003 and 2004 and from the Company's inception (March 27, 1997) through March 31, 2004 Consolidated Statements of Cash Flows 6 Three-Months Ended March 31, 2003 and 2004 and from the Company's inception (March 27, 1997) through March 31, 2004 Notes to Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk 11 Item 4. Controls and Procedures 11 Part II. OTHER INFORMATION Item 1. Legal Proceedings 12 Item 2. Change in Securities and Use of Proceeds 12 Item 3. Defaults Upon Senior Securities 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information 12 Item 6. Exhibits and Reports on Form 8-K 12 SIGNATURES 13 PART I. FINANCIAL INFORMATION ------------------------------- ITEM 1. Financial Statements ------------------------------

The accompanying notes are an integral part of these consolidated financial statements. 4

The accompanying notes are an integral part of these consolidated financial statements. 5

The accompanying notes are an integral part of these consolidated financial statements. 6 Canadian Rockport Homes International, Inc. (A Development Stage Company) STATEMENTS OF CASH FLOWS -------------------------------------------------------------------------------- Supplemental Information: ------------------------- Non-cash Investing and Financing Activities: -------------------------------------------- During the first quarter of 2003, the Company issued 1,600 shares of its common stock in consideration for services rendered in connection with the Company's public offering. The issued shares were valued at $8,000. The costs attributed to the issued shares were netted against the proceeds received. During the first quarter of 2004, the Company issued 650 shares of its common stock in consideration for services rendered in connection with the Company's public offering. The issued shares were valued at $3,250. The costs attributed to the issued shares were netted against the proceeds received. Cash Paid For: --------------

The accompanying notes are an integral part of these consolidated financial statements. 7 Canadian Rockport Homes International, Inc. (a Development Stage Company) NOTES TO FINANCIAL STATEMENTS Note 1 - Summary of Significant Accounting Policies ---------------------------------------------------- Presentation ------------ In the opinion of the Company's management, the accompanying unaudited consolidated financial statements contain all adjustment (consisting of normal recurring accruals) necessary to present fairly the financial position of the Company as of March 31, 2004, and the results of its operations and cash flows for the three-month periods ended March 31, 2003 and 2004. The operating results of the Company on a quarterly basis may not be indicative of operating results for the full year. Reference should be made to Canadian Rockport Homes International, Inc.'s (the "Company") Form 10-K for the year ended December 31, 2003, for additional disclosures including a summary of the Company's accounting policies, which have not significantly changed. Business Activities and Related Risks ------------------------------------- Canadian Rockport Homes International, Inc was incorporated in Delaware on January 10, 1996 under the name, Lenz Products, Inc. The Company changed its name to Canadian Rockport Homes International, Inc. in early 2001. The Company is in the development stage as defined in FASB Statement 7 and currently has plans to manufacture and erect low cost concrete modular buildings. The Company has not paid any dividends and any dividends which may be paid in the future will depend on the financial requirements of the Company and other relevant factors. In February 2001, the Company acquired all of the outstanding shares of Canadian Rockport Homes, Ltd., ("CRH") a company incorporated in the Province of British Columbia on March 26, 1997, in exchange for issuing 11,300,000 of its common stock. For financial reporting purposes, the acquisition was treated as a reverse acquisition whereby CRH's operations continue to be reported as if it had actually been the acquirer. Assets and liabilities continue to be reported at the Acquiree's historical cost because before the reverse acquisition, the Company had nominal assets, liabilities and operations. The Company also formed a subsidiary in 2001 in Chile under the name Rockport Homes Chile Limitada ("RHCL"). The Company and CRH are the sole shareholder's of this Chilean company. In 2002, the Company acquired certain assets of 598546 BC Ltd., which included 100% of the outstanding shares of Canadian Rockport Trading Limitada, a Chilean corporation, formerly Maderas Doradas Canadienses, S.A. ("RT"). At the time of its acquisition, RT had no operations. During the year, the Company sold all of the assets of RT except for the acquired building and land on which the Company is building its Chilean plant and offices. For ease in administration and to reduce costs, the Company in 2003 decided to dissolve "RHCL" and operate its Chilean operations solely through RT which owned significantly all of the Company's Chilean assets prior to this decision being made. 8 Canadian Rockport Homes International, Inc. (a Development Stage Company) NOTES TO FINANCIAL STATEMENTS Principles of consolidation --------------------------- The accompanying financial statements include the accounts and transactions of Canadian Rockport Homes International, Inc. and its wholly owned subsidiaries, Canadian Rockport Homes, Ltd. Rockport Homes Chile Limitada and Canadian Rockport Trading, Limitada. Intercompany transactions and balances have been eliminated in consolidation. Foreign Currency Translations ----------------------------- For foreign operations whose functional currency is the local foreign currency, balance sheet accounts are translated at exchange rates in effect at the end of the year and income statement accounts are translated at average exchange rates for the year. Translation gains and losses are included as a separate component of stockholders' equity. Property and Equipment ---------------------- The cost of property and equipment is depreciated over the estimated useful lives of the related assets that range from 3 to 7 years. Depreciation is computed on the straight-line method for financial reporting purposes and for income tax reporting purposes. Depreciation expense for the three months ended March 31, 2003 and 2004 was $10,512, and $10,895, respectively. Intangible Assets ----------------- Patents are being amortized over their respective remaining lives of 18 years. Amortization expense for March 31, 2003 and 2004 were $133, and $168, respectively. Intangible assets consist of the following: March 31, 2004 Weighted Gross Net Average Intangible Accumulated Intangible Life Assets Amortization Assets (Years) ---------- ------------ ---------- -------- Patents $ 11,563 $ 1,977 $ 9,586 18 March 31, 2003 Weighted Gross Net Average Intangible Accumulated Intangible Life Assets Amortization Assets (Years) ---------- ------------ ---------- -------- Patents $ 11,505 $ 1,302 $ 10,203 18 Estimated amortization expense for each of the next five years ended March 31, is as follows: 2005 $ 674 2006 674 2007 674 2008 674 2009 674 ------- Total $ 3,370 ======= 9 Canadian Rockport Homes International, Inc. (a Development Stage Company) NOTES TO FINANCIAL STATEMENTS Net Loss Per Share ------------------ The Company adopted Statement of Financial Accounting Standards No. 128 that requires the reporting of both basic and diluted earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. In accordance with FASB 128, any anti-dilutive effects on net earnings (loss) per share are excluded. Issuances Involving Non-cash Consideration ------------------------------------------ All issuances of the Company's stock for non-cash consideration have been assigned a dollar amount equaling either the market value of the shares issued or the value of consideration received, whichever is more readily determinable. The majority of the non-cash consideration received pertains to services rendered by consultants and others. Cash and Cash Equivalents ------------------------- For purposes of the statement of cash flows, the Company considers cash and cash equivalents to include all stable, highly liquid investments with maturities of three months or less. Use of Estimates ---------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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. Income Taxes ------------ Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax bases of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled as prescribed in FASB Statement No. 109, "Accounting for Income Taxes". As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Fair Value of Financial Instruments ----------------------------------- Pursuant to SFAS No. 107, "Disclosures About Fair Value of Financial Instruments", the Company is required to estimate the fair value of all financial instruments included on its balance sheet as of March 31, 2004. The Company considers the carrying value of such amounts in the financial statements to approximate their face value. Note 2 - Accrued Compensation ------------------------------ On January 1, 2004, the Company entered into employment, consulting, and other related contracts with its management and personnel. Under the terms of these various agreements, the Company is obligated to pay on a monthly basis approximately $82,000 in compensation. Due to the Company's current cash flow requirements needed in the construction of its Chilean facility, monthly compensation currently being paid is approximately $34,000. The difference of approximately $48,000 a month is being accrued and will be paid when the Company has sufficient funds available. The terms of the contracts are for two years. 10 Canadian Rockport Homes International, Inc. ------------------------------------------- Item 2. Management's Discussion and Analysis of Financial Condition and Results -------------------------------------------------------------------------------- of Operations ------------- Results of Operations for the Three Months Ended March 31, 2004 and 2003 ------------------------------------------------------------------------ From the Company's inception, it has been in the development stage and has not commenced principal operations. During 2004, the Company is continuing the construction of its plant in Chile. General and administration costs were $473,463 and $250,171, respectively, for the three-month periods ended March 31, 2004 and 2003. Of the $473,463 incurred during the first quarter of 2004, $75,307 was incurred in the Company's Chilean operations. The remaining $398,156 pertains to costs incurred in operating its Canadian offices and general administration. Of the $250,171 incurred during 2003, $88,158 was incurred in the Company's Chilean operations. The remaining $162,013 pertains to costs incurred in operating its Canadian offices and general administration. The major expenses incurred in Chile during 2004 consisted of rent amounting to $3,756, salaries and related expenses totaling $36,601, professional fees of $4,524, office expense of $7,234, depreciation of $2,602, and telephone and utilities of $1,982. Other general expenses incurred in 2004 including operating the Company's Canadian offices consists of compensation and related costs of $281,719 (of which $145,147 has been accrued), professional fees of $19,408, depreciation expense of $8,293, rent of $18,602, telephone of $5,703, office expense of $5,587, and travel expenses of $23,498. The major expenses incurred in Chile during 2003 consisted of rent amounting to $15,862, salaries and related expenses totaling $33,201, professional fees of $2,986, and costs relating to its new facilities totaling $11,003. Other general expenses incurred in 2003 including operating the Company's Canadian offices consists of salaries and related payroll costs of $69,992, consulting fees of $16,137, advertising and promotion of $20,767, depreciation expense of $10,372, rent of $16,934, office expense of $6,295, telephone of $4,701 and travel expenses of $3,378. Liquidity and Capital Resources ------------------------------- Cash and cash equivalents as of March 31, 2004 and 2003 were $82,705 and $154,749, respectively. During the first quarter of 2004, the Company received a total of $440,992 through the sale of 88,105 shares of the Company's common stock. During the same period, the Company paid $304,863 in its operations, purchased equipment for its Canadian offices totaling $1,839, paid $157,096 towards the construction of the Chilean plant, paid $33,812 in costs associated with its public offering, and made principal payments on its equipment leases totaling $583. During the first quarter of 2003, the Company moved from its former leased facility in Chile and commenced construction of its new plant on the land previously acquired in that Country. During this three-month period, the Company received a total of $315,774 through the sale of 63,024 shares of the Company's common stock, $2,917 in commissions earned on a timber sale and $111 in interest. During the same period, the Company paid $221,098 in its operations, purchased equipment for its Canadian offices totaling $5,753, paid $41,303 on the construction of its modular display home, paid $74,121 in connection with construction of its new plant, and paid $17,932 in costs associated with its public offering. 11 Item 3. Quantitative and Qualitative Disclosures About Market Risk ------------------------------------------------------------------- Canadian Rockport Homes International, Inc. may be subject to market risk in the form of interest rate risk and foreign currency risk. Canadian Rockport Homes International, Inc. is a development stage company with limited operations to date, and neither interest rate nor foreign currency has had a material impact on such operations. The company's exposure to interest rate changes primarily relate to long-term debt used to fund future property acquisitions. Management's objective is to limit any impact of interest rate changes and may include any borrowing to be negotiated at fixed rates. Although interest rate changes have had no material affect on operations to date, management must continually evaluate such rates as manufacturing operations commence, corporate profitability is achieved, and expansion is being considered. The company may also establish lines of credit through traditional banking venues to insure liquidity during future periods of growth, and may consider fixed or variable rate bank lines consistent with any fluctuation of interest rates at the time of such growth. The company's exposure to foreign currency exchange requires continuing management attention to the stability of the countries in which operations may be planned, as well as trade relations between the selected country(s) and Canada. Both trade relations and stability as pursuant to planned operations in Chile are currently favorable. Canadian Rockport Homes International, Inc. will continue to comprehensively evaluate conditions in countries where operations are in place and where future operations are planned, and will take any measures feasible at the time to minimize foreign currency risk. Such measures may include, but are not limited to; a reduction in operations or relocating a portion of operations to a more favorable environment. Item 4. Controls and Procedures -------------------------------- Canadian Rockport Homes International, Inc. management, including the Principal Executive Officer and Principal Financial Officer, have conducted an evaluation of the effectiveness of disclosure controls and procedures pursuant to Exchange Act Rule 13a-14(c) and 15d-14(c). This evaluation was conducted within 90 days prior to the filing of this report. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the disclosure controls and procedures are effective in ensuring that all material information required to be filed in this quarterly report has been made known to them in a timely fashion. There have been no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date the Principal Executive Officer and Principal Financial Officer completed their evaluation. 12 Canadian Rockport Homes International, Inc. ------------------------------------------- Part II. OTHER INFORMATION --------------------------- Item 1. Legal Proceedings --------------------------- None Item 2. Change in Securities and Use of Proceeds -------------------------------------------------- During the three-months ended March 31, 2004, the Company received a total of $440,992 through the sale of 88,105 shares of the Company's common stock. During the same period it issued 650 shares of its common stock for services rendered in connection with its public offering, and 1,175 shares for services rendered in connection with the preparation of the Company's business plan. All shares issued for non-monetary consideration were valued at $5.00 per share. During the period from April 1, 2004 through May 26, 2004, the company issued 36,225 of its common stock in exchange for approximately $181,000 and issued 1,954 shares of its common stock for services valued at $9,770. Item 3. Defaults Upon Senior Securities ----------------------------------------- None Item 4. Submission of Matters to a Vote of Security Holders ------------------------------------------------------------- Not applicable Item 5. Other Information --------------------------- None Item 6. Exhibits and Reports on Form 8-K ------------------------------------------ Exhibits -------- Canadian Rockport Homes International, Inc. includes herewith the following: Number Description ------ ----------- 31.1 Certification of Principal Executive Officer pursuant to Section 302 31.2 Certification of Principal Accounting Officer pursuant to Section 302 32.1 Certification of Principal Executive Officer pursuant to Section 1350 32.2 Certification of Principal Accounting Officer pursuant to Section 1350 The following documents are incorporated by reference, as noted in each description, to this report: Number Description ------ ----------- 3 (a) Articles of Incorporation of the registrant (filed as Exhibit 3.1 to the registrant's Registration Statement on Form S-1 (Number 333-62786) as amended, filed October 30, 2001), and incorporated herein by reference. 3 (b) Bylaws and Amendments of the registrant (filed as Exhibit 3.5 to the registrant's Registration Statement on Form S-1 (Number 333-62786) as amended, filed October 30, 2001), and incorporated herein by reference. Reports on Form 8-K ------------------- No filings were made during the period covered by this report. 13 Canadian Rockport Homes International, Inc. ------------------------------------------- SIGNATURES ---------- Pursuant to the requirements 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. Canadian Rockport Homes International, Inc. ------------------------------------------- Registrant By: \s\ William R. Malone, CEO ----------------------------------- William R. Malone, CEO Date: July 2, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: July 2, 2004 By: \s\ William R. Malone, President ------------------------------------ William R. Malone, President and Director Date: July 2, 2004 By: \s\ Carol Laeser Treasurer ------------------------------------ Carol Laeser, Treasurer and Director Date: July 2, 2004 By: \s\ Harry Gordon, Secretary ------------------------------------ Harry Gordon, Secretary And Director Date: July 2, 2004 By: \s\ Nelson Riis, Director ------------------------------------ Nelson Riis, Director 14

CANADIAN ROCKPORT HOMES INTERNATIONAL INC 10-Q