Back to GetFilings.com

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Canadian Rockport Homes International, Inc.

(Exact name of registrant as specified in its charter)

700 West Pender Street, Suite 507 Vancouver, B.C. Canada V6C 1G8

(604) 669-1081

(Address of principal executive office & telephone number)

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act: Common Stock, par value $.001 per share

[X]

Check whether the registrant (1) has filed all reports required to be 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.

[ ]

Check if disclosure of delinquent filers in response to Item 405 of Regulation SK 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 this Form 10-K or any amendment to this Form 10-K.

The common stock of Canadian Rockport Homes International, Inc. is not currently listed on any securities exchange, or quoted on any quotation service. There is currently no established public market for the common stock of Canadian Rockport Homes International, Inc.

At April 29, 2004 the aggregate market value of the issued and outstanding common shares held by non-affiliates of the registrant, as computed based upon the price at which the common equity was sold, was $3,953,848.

The number of shares outstanding of the registrant's common stock as of April 29, 2004 was 15,783,826.

Documents Incorporated by Reference

No (1) annual report to security holders; (2) proxy or information statement; or (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933; are incorporated by reference into any part of this Form 10-K.

I

Canadian Rockport Homes International, Inc.

Table of Contents

II

Canadian Rockport Homes International, Inc.

Business

Canadian Rockport Homes International, Inc. ("the "Company") is a Delaware corporation, which was formed on January 10, 1996 under the name Lenz Products, Inc.

In February 2001, the Company acquired all of the outstanding shares of Canadian Rockport Homes Ltd. ("CRH"), a British Columbia corporation, in exchange for 11,300,000 shares of common stock. Shortly thereafter, the corporate name was changed from Lenz Products, Inc. to Canadian Rockport Homes International, Inc. Canadian Rockport Homes International, Inc. has not generated any revenue to date and continues as a development stage corporation.

Also in February 2001, the Company acquired all of the intellectual properties owned by TWiC Housing Corporation, relating to the TWiC system for the construction of houses. In exchange for the assets acquired, the Company issued 2,000,000 shares of its common stock. TWiC is wholly owned by a shareholder and director of the Company. The Company valued the assets purchased, including patents pertaining to the TWiC System at an estimated historical cost of $10,057.

Canadian Rockport Homes International, Inc. (the Company), during fiscal year 2001 formed a subsidiary in Chile under the name Rockport Homes Chile Limitada ("RCHL"). The Chilean subsidiary was formed to enable the Company to conduct operations in Chile. In 2003, all of its assets of RCHL were transferred to RT.

During 2002, the Company acquired certain assets of 598546 BC LTD, which included 100% of the outstanding shares of 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.

Canadian Rockport Homes International, Inc. currently has three (3) subsidiaries; Canadian Rockport Homes Ltd. (CRH), Rockport Homes Chile Limitada ("RHCL"), and Rockport Trading Limitada (“RT”). CRH is a corporation formed under the laws of British Columbia, Canada and is wholly owned by Canadian Rockport Homes International, Inc. In addition, Canadian Rockport Homes International, Inc. is a 1% owner of RHCL, with the remaining 99% owned by CHR. In 2003, the Company transferred all of its assets in RHCL to RT. It is the Company’s intention for RT to own all assets in Chile, including its manufacturing facility in Lampa, Chile. The Company’s liability on the rental of its former plant located in Quilicura has been extinguished in 2004 through the dissolution of Rockport Homes Chile Limitada.

Canadian Rockport Homes International, Inc., through its subsidiaries, intends to manufacture and sell modular housing in various third-world and developing countries primarily in South America, Asia, Mexico, Africa and Eastern Europe. Currently the Company has an agreement with TWiC to construct a manufacturing facility in Chile in which the Company plans to manufacture modular housing. The Company, through its purchase of R.T., is currently building a plant on its land located in Lampa, Chile. The Company is currently negotiating a joint venture to commence the manufacturing of homes in Mexico. There is no assurance that the joint venture will be consummated or that the venture, if consummated, will be profitable.

3

Canadian Rockport Homes International, Inc.

Description of Business.

Canadian Rockport Homes International, Inc. is in the development stage with plans to manufacture and construct low cost concrete modular housing in developing nations and third-world countries. The Company’s business is based upon its exclusive ownership of the TWiC technology which has been developed in Canada over the past thirty years by TWiC Housing Corp. Canadian Rockport Homes International, Inc. is in the process of constructing its manufacturing facility in Lampa, Chile where initial operations will commence. It is the Company’s intent to complete the plant by September 2004, barring financial restraints. The estimated cost to complete the plant is $500,000. The Company is in the process of raising the funds necessary to fund the completion of the plant. However, if the amounts raised are deficient, then Management plans to finance the remaining balance needed using the property as collateral against the amount financed. The TWiC technology meets Canadian and U.S. construction standards, using an inexpensive, rapid, and consistent method of construction and application. The construction technology is applicable to low, middle, and high-end housing, as well as single homes, duplexes, row houses, multi-story buildings, hotels, schools and warehouses. However, initial product offerings will focus only on affordable housing and there is no assurance that the Company will create other residential or commercial product lines in the future.

Patents

The TWiC technology bears the United States Patent No. 5,997,792 and was filed on December 7, 1999. At present, the patent is effective and there are no pending challenges. However, United States patents are not recognized in many countries. The Company has filed patent applications in Chile, and China which are still pending.

Operations in Chile

Canadian Rockport Homes International, Inc. intends to conduct initial operations in Chile, through RT. RT is currently constructing a facility on its land located in Lampa, Chile which will house the manufacturing of the TWiC modular units. Canadian Rockport Homes International has also made initial contact with various potential Chilean customers and currently has 16 Chilean employees working on the construction of the plant and two employees working in the Company’s Chilean office. Due to treaties between Canada and Chile, there is "free trade" between the two countries. There is currently no taxation on any profits which are invested in Chile or in RT. There is a 15% flat tax on profits moved from Chile into Canada, but due to a treaty between Canada and Chile, there is no double taxation on any repatriated profits.

Patents and Proprietary Rights

The company is relying heavily upon its use of the TWiC technology successfully to carry out its plan of operations. Thus, the company has purchased TWiC technology which is patented and is taking reasonable steps to protect the technology from being copied by any third party. The U.S. Patent number is 5,997,792 and was filed on December 7, 1999

Employees

The Company currently has five (5) employees working in its Canadian office and 18 employees working in Chile as discussed above. Further, the Company’s President is providing services to the Company and is being paid through his wholly owned Corporation. The Company anticipates needing to recruit, train and manage local staff and other personnel in each third world country into which Canadian Rockport Homes International, Inc. expands, on an as needed basis.

Properties

The Company currently leases office space at 700 West Pender Street, Suites 507, Vancouver, B.C., Canada V6C 1G8. The company, through RT owns 2.5 acres of land located in Lampa, Chile where it is now building its manufacturing plant which will be utilized as offices and plant facilities in its Chilean operations. The plant and adjacent pad on which a gantry sits will utilize 50% of the acreage. Currently additional space in Chile is leased on a

4

Canadian Rockport Homes International, Inc.

month-to-month basis from which its Chilean operations are currently housed.

5

Canadian Rockport Homes International, Inc.

Legal Proceedings

Canadian Rockport Homes International, Inc. has never been in bankruptcy, receivership or any similar legal proceeding, and is not subject to any pending legal proceedings. Canadian Rockport Homes International, Inc. is not aware of any threatened legal proceedings. The foregoing is also true with respect to each officer, director and control shareholder as well as any entity owned by any officer, director and control shareholder, over the last five years.

Submission of Matters to a Vote of Security Holders

None during the period ended December 31, 2003.

Market for Common Equity and Related Stockholder Matters

Market Information

The common stock of Canadian Rockport Homes International, Inc. is not currently listed on any securities exchange, or quoted on any quotation service. There is currently no established public market for the common stock of Canadian Rockport Homes International, Inc.

Holders

Canadian Rockport Homes International, Inc. has approximately 15,677,896 shares of common stock outstanding as of December 31, 2003. Canadian Rockport Homes International, Inc. has approximately 2,382 shareholders. Canadian Rockport Homes International, Inc. has outstanding at December 31, 2003 stock options for 2,200,000 shares.

A schedule of options outstanding as of December 31, 2003 is as follows:

a)

Of the 850,000 options outstanding, the following officers and related parties hold the following:

b)

Of the 1,300,000 options outstanding, the following officers and related parties hold the following:

6

Canadian Rockport Homes International, Inc.

Dividend Policy

Canadian Rockport Homes International, Inc. has never paid dividends on its common stock and does not anticipate paying any dividends in the foreseeable future. Management anticipates that earnings will be retained to fund the company's working capital needs and expansion of the business.

Securities authorized for issuance under equity compensation plan

Recent Sales of Unregistered Securities

During 2002, the company issued 173,738 shares of its common stock through a private offering in exchange for $870,353. In addition, the Company issued 200,000 shares in exchange for certain assets of 598546 BC LTD. The shares of stock were issued in transactions we believe to be exempt from registration under Section 4(2) of the Securities Act,, The recipients of our stock were accredited investors as defined in Rule 501 of Regulation D promulgated under Section 4(2) of the Securities Act, and they took their shares for investment purposes without a view to distribution. Furthermore, they had access to information concerning our Company and our business prospects; there was no general solicitation or advertising for the purchase of our shares; and the securities are restricted pursuant to Rule 144.

During 2003, the Company issued 248,978 shares of its common stock through a private offering in exchange for $1,241,748. In addition, during the year, the Company issued 9,462 shares for consulting services valued at $47,310. The shares of stock were issued in transactions we believe to be exempt from registration under Section 4(2) of the Securities Act,, The recipients of our stock were accredited investors as defined in Rule 501 of Regulation D promulgated under Section 4(2) of the Securities Act, and they took their shares for investment purposes without a view to distribution. Furthermore, they had access to information concerning our Company and our business prospects; there was no general solicitation or advertising for the purchase of our shares; and the securities are restricted pursuant to Rule 144.

7

Canadian Rockport Homes International, Inc.

For the period from January 1, 2004 through April 29, 2004, the Company issued 105,355 shares of its common stock through a private offering in exchange for $526,775, issued 1,175 shares for consulting services valued at $5,875, and purchased 600 shares of its common stock from a shareholder for $3,000. The 600 shares were subsequently cancelled. The shares of stock were issued in transactions we believe to be exempt from registration under Section 4(2) of the Securities Act,, The recipients of our stock were accredited investors as defined in Rule 501 of Regulation D promulgated under Section 4(2) of the Securities Act, and they took their shares for investment purposes without a view to distribution. Furthermore, they had access to information concerning our Company and our business prospects; there was no general solicitation or advertising for the purchase of our shares; and the securities are restricted pursuant to Rule 144.

Selected Financial Data

Canadian Rockport Homes International, Inc. is a development stage company and has not yet commenced operations in connection with the manufacture and construction of modular concrete housing units in Chile. The company has been involved in preparing for the commencement of operations and the raising of funds for the commencement of operations, including preparation and build-out of a manufacturing facility in Lampa, Chile where initial operations may commence. The provided selected financial data is derived from the consolidated financial statements of Canadian Rockport Homes International, Inc. and its predecessors for the periods shown.

8

Canadian Rockport Homes International, Inc.

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion does not purport to be complete and should be read in conjunction with the Financial Statements and Notes thereto included in this report. This discussion contains certain forward-looking statements that involve substantial risks and uncertainties. When used in this report the words “anticipate,” believe,” “estimate,” “expect” and similar expressions as they relate to our management or us are intended to identify such forward-looking statements. Our actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements. Historical operating results are not necessarily indicative of the trends in operating results for any future period.

Results of Operations

For the fiscal year ending December 31, 2003 and 2002:

During the fiscal year ending December 31, 2003, the company was still in the construction phase of its plant in Lampa, Chile and has not generated any revenue since its inception. For 2003, the Company incurred a net operating loss of $3,346,311 as compared to its net operating loss in 2002 of $2,070,505. The $1,275,806 net increase in 2003’s net operating loss primarily relates to the charge to operations of the fair value of options granted to employees and consultants and a reduction in general and administrative expenses. The net increase in the amount of compensation relating to the granting of options in 2003 compared to 2002 was $1,949,207 ($2,282,874 in 2003 compared to $333,667 in 2002). The net decrease in general and administrative expense in 2003 as compared to 2002 was $(286,271) ($1,034,520 in 2003 and $1,320,791 in 2002).

The decrease in 2003 general and administrative expenses over 2002 expenses pertains to decreased legal and accounting expenses of $(63,669) ($72,341 in 2003 as compared to $136,010 in 2002), increased advertising of $19,817 ($38,729 in 2003 compared to $18,912 in 2002) decreased rent of $(393,384) ($103,522 in 2003 as compared to $496,906 in 2002), increased travel of $42,359 ($90,114 in 2003 as compared to $47,755 in 2002), an increase in salaries, benefits and other officer compensation of $111,751 ($378,113 in 2003 compared to $266,362), a decrease in consulting fees of $(37,561) ($125,653 in 2003 compared to $163,214 in 2002) During 2003, the Company’s president and another employee began providing services to the Company through their wholly owned corporations. The compensation paid to these corporations totaling $63,794 is included in total 2003 compensation of $378,113. Legal and accounting fees incurred in 2003 relate to normal business activity, whereas in 2002, the Company was involved in filing its registration statement in Canada. Increased salaries and related compensation relates to an increase in number of employees in 2003 as compared to 2002. Of the general and administrative expenses amounting to $1,034,520 incurred in 2003, $233,785 relates to the Company’s Chilean operations and $800,735 was incurred in the Company’s Canadian operations.

The Company incurred interest expense of $29,102 during 2003, the majority of which relates to interest accrued on a $65,657 demand loan borrowed from the two shareholders (See Note 6 to the financial statements).

9

Canadian Rockport Homes International, Inc.

For the fiscal year ending December 31, 2002 and 2001:

During the fiscal year ending December 31, 2002, the company was still in the construction phase of its plant in Chile and has not generated any revenue since its inception. For 2002, the Company incurred a net operating loss of $2,070,505 as compared to its net operating loss in 2001 of $1,475,647. The $594,858 net increase in 2002’s net operating loss primarily relates to the loss that the Company incurred on the disposal of timber and a truss plant that it received in the acquisition of Rockport Trading Limitada.. On the sale of these assets, the Company received net proceeds of $211,639. The allocation of the purchase price allocated to the assets sold totaled $570,000, thus resulting in a net loss on the disposal of these assets of $358,361. Rockport Trading was acquired through the issuance of 200,000 shares of the Company’s common stock valued at $5.00 per share. In addition to the assets sold and resulting loss, the Company also charged off to operations $30,000 that was allocated to goodwill in the purchase and had increased general and administrative expenses in 2002 over 2001 of $238,856. The increase in 2002 general and administrative expenses over 2001 expenses pertained to increased legal and accounting expenses of $104,884 ($136,010 in 2002 as compared to $31,126 in 2001), and rent $128,347 ($496,906 in 2002 as compared to $368,559). Increased professional fees in 2002 pertain to legal fees incurred in the preparation and filing of the Company’s Canadian registration statement which were charged to operations. Whereas in 2001, the cost to prepare the Company’s United States registration statement was charged to equity as an offset against the proceeds received on the sell of Company’s common stock. Rent increase in 2002 was the result of leasing additional space in Vancouver and the fact that 2002 operations included a full year of rent on the leasing if the Company’s Chilean plant as compared to including only nine-month’s of rent on the plant in 2001. Administrative expenses for 2002 were $1,320,791 as compared to $1,081,985 incurred in 2001. Of the $1,320,791 incurred in 2002, $695,079 relates to the Company’s Chilean operations and $625,712 was incurred in the Company’s Canadian operations. Of the $1,081,985 incurred in 2001, $545,453 relates to the Company’s Chilean operations and $536,532 was incurred in the Company’s Canadian operations.

The Company incurred interest expense of $28,063 during 2002, the majority of which relates to interest accrued on a $54,656 demand loan borrowed from the two shareholders (See Note 6 to the financial statements).

Chilean Operations

During 2003, the Company incurred no rental expense on its Chilean plant as compared to $423,139 incurred in 2002. Rent on an apartment maintained by the Company amounted to $12,528 in 2003 as compared to $12,726 incurred during 2002. Compensation and related expenses incurred during 2003 amounted to $107,069 as compared to $113,536, which was incurred during 2002. During 2003 the Company incurred $10,284 in legal and accounting fees as compared to $20,108 incurred during 2002. Depreciation expense on the Company’s Chilean assets during 2003 amounted to $11,881 as compared to $22,193 incurred during 2002. Travel expenses incurred during 2003 amounted to $11,786 as compared to $26,849 incurred in 2002.

During 2002, the Company incurred $423,139 in the rental of its Chilean plant as compared to $316,670 for 2001. Rent on an apartment maintained by the Company amounted to $12,726 in 2002 as compared to $11,409 incurred during 2001. Compensation and related expenses incurred during 2002 amounted to $113,536 as compared to $103,581, which was incurred during 2001. During 2002 the Company incurred $20,108 in legal and accounting fees as compared to $18,207 incurred during 2001. Depreciation expense on the Company’s Chilean assets during 2002 amounted to $22,193 as compared to $16,954 incurred during 2001. Travel expenses incurred during 2002 amounted to $26,849 as compared to $67,959 incurred in 2001.

10

Canadian Rockport Homes International, Inc.

Canadian Operations

Salaries, other compensation, and related costs for 2003 amounted to $283,126 as compared to $235,447 during 2002. Included in the $283,126 is $63,794, which was incurred for services rendered to the Company by its president and a former employee through their wholly owned corporations. Consulting fees during 2003 amounted to $65,804 as compared to $51,968 for 2002. Rent expense for 2003 amounted to $79,100 as compared to $51,968 for 2002. Advertising and promotion for 2003 amounted to $35,935 as compared to $18,912 for 2002. Legal and accounting fees charged to operations 2003 amounted to $61,255 as compared to $120,209 for 2002. Depreciation expense for 2003 amounted to $23,881 as compared to $24,967 for 2002. Telephone expense for 2003 amounted to $18,679 as compared to $16,205 for 2002. Office expense for 2003 amounted to $16,651 as compared to $16,356 for 2002.

Salaries and related costs for 2002 amounted to $235,447 as compared to $252,397 during 2001. Consulting fees during 2002 amounted to $51,968 as compared to $62,807 for 2001. Rent expense for 2002 amounted to $51,968 as compared to $40,481 for 2001. The increase in rent in 2002 relates to the Company’s leasing of an additional office space. Advertising and promotion for 2002 amounted to $18,912 as compared to $18,647 for 2001. Legal and accounting fees charged to operations 2002 amounted to $120,209 as compared to $10,817 for 2001. Depreciation expense for 2002 amounted to $17,967 as compared to $10,013 for 2001. Telephone expense for 2002 amounted to $16,205 as compared to $12,078 for 2001. Office expense for 2002 amounted to $16,356 as compared to $19,355 for the same period last year.

Liquidity and Capital Resources

During the fiscal year ending December 31, 2003, the company received proceeds of $1,241,748 through the sale of its common stock, $252 from proceeds on an insurance claim and $1,841 from its President. Of the amount received in 2003, $947,843 was used in operations, $224,653 was used in the construction of the Company’s gantry, display home, and plant, $9,375 was used to purchase furniture and equipment, $105,738 was used in the stock offerings, $1,296 was used as principal reduction in capital lease obligation, and 238 was repaid to the Company’s President. Balance of cash and cash equivalents as of December 31, 2003 was $143,718; which was a decrease in cash of $37,613 for the fiscal year.

During the fiscal year ending December 31, 2002, the company received proceeds of $870,353 through the sale of its common stock. The Company also received loans from shareholders amounting to $70,268 and also received $211,639 from the sale of its truss plant and timber. The net difference between advances to and repayments from Dr. Malone in 2002 amounted to $1,001. Of the amount received in 2002, $941,009 was used in operations, $205,812 was used in the construction of the Company’s molds and related plant, $24,401 was used to purchase furniture and equipment, $10,867 was used in the stock offerings, and $10,000 was used to acquire 5,000 shares of Company stock from a shareholder. Balance of cash and cash equivalents as of December 31, 2002 was $181,331; which was a decrease in cash and cash equivalents of $42,492 for the fiscal year.

11

Canadian Rockport Homes International, Inc.

Critical Accounting Policies

The discussion and analysis of the Company’s financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. In consultation with its Board of Directors, the Company have identified two accounting policies that it believes are key to an understanding of its financial statements. These are important accounting policies that require management’s most difficult, subjective judgments.

The first critical accounting policy relates to the accounting for costs incurred in the construction of the Company’s molds and related plant. All costs incurred in the construction of molds and plant are capitalized until completion. The molds will be depreciated over their respective lives. The costs incurred in the construction of the plant, will be depreciated over the lesser of the useful life of the plant or the term of the lease of the building housing the respective assets (if applicable).

The second critical accounting policy relates to expense recognition. All expenses are recognized at the time the respective expense was incurred.

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 may be as related 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.

12

Canadian Rockport Homes International, Inc.

Canadian Rockport Homes International, Inc.

(A Development Stage Company)

Financial Statements and Supplementary Data

Contents

13

Independent Auditors' Report

We have audited the accompanying consolidated balance sheets of Canadian Rockport Homes International, Inc., (A Development Stage Company) as of December 31, 2002 and 2003, and the related consolidated statements of operations, comprehensive loss, stockholders' equity, and cash flows, for the years ended December 31, 2001, 2002, and 2003 and for the period from the Company’s inception (May 27, 1997) through December 31, 2003. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. These 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 Canadian Rockport Homes International, Inc. as of December 31, 2002 and 2003, and the results of its operations, and its cash flows for the years ended December 31, 2001, 2002, and 2003, and for the period from Company’s inception (May 27, 1997) through December 31, 2003, in conformity with accounting principles generally accepted in the United States of America. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 11 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency, which raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 11. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

14

Canadian Rockport Homes International, Inc.

(A Development Stage Company)

Consolidated Balance Sheets

The accompanying notes are an integral part of the financial statements.

15

Canadian Rockport Homes International, Inc.

(A Development Stage Company)

Consolidated Balance Sheets

The accompanying notes are an integral part of the financial statements.

16

Canadian Rockport Homes International, Inc.

(A Development Stage Company)

Consolidated Statements of Operations and Accumulated Deficit

The accompanying notes are an integral part of the financial statements.

17

Canadian Rockport Homes International, Inc.

(A Development Stage Company)

Consolidated Statements of Comprehensive (Loss)

The accompanying notes are an integral part of the financial statements.

18

Canadian Rockport Homes International, Inc.

(A Development Stage Company)

The accompanying notes are an integral part of the financial statements.

19

Canadian Rockport Homes International, Inc.

(A Development Stage Company)

The accompanying notes are an integral part of the financial statements.

20

Canadian Rockport Homes International, Inc.

(A Development Stage Company)

The accompanying notes are an integral part of the financial statements.

21

Canadian Rockport Homes International, Inc.

(A Development Stage Company)

Consolidated Statements of Cash Flows

The accompanying notes are an integral part of the financial statements.

22

Canadian Rockport Homes International, Inc.

(A Development Stage Company)

Statements of Cash Flows

Supplemental Information:

Non-cash Investing and Financing Activities:

During 2001, the Company issued 2,000,000 shares of its common stock in exchange for patents and other intellectual properties. The property was acquired from a related party and were valued at the seller's cost basis of $10,057.

During 2001, the Company issued 100,000 shares of its common stock as partial payment towards the manufacturing costs of molds and other plant equipment. The issued shares were valued at $200,000.

During 2002, the Company issued 200,000 shares of its common stock in exchange for substantially all of the assets of 598546 B.C. Ltd. The Company valued the assets received at $1,000,000, the estimated fair market value of the shares issued. Subsequent to the acquisition, the Company sold all of the timber and a truss plant received from 598546 B.C. and recognized a loss of $358,361 on the sale. In addition, the Company charged $30,000 allocated to goodwill in the purchase to operations.

During 2003, the Company issued 9,462 shares of its common stock for services rendered in connection with its private offerings. The services were valued at $47,310, the estimated value of the shares issued.

During 2003, the Company acquired computer equipment through capitalized leases. The price of the leased equipment amounted to $8,003.

Cash Paid For:

The accompanying notes are an integral part of the financial statements.

23

Canadian Rockport Homes International, Inc.

(A Development Stage Company)

Notes To Consolidated Financial Statements

Note 1 - Business Activities and Related Risks

Canadian Rockport Homes International, Inc. (the "Company") 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 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 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. (See Note 3).

The Company maintains all of its cash deposits at two banks, one in Canada and one in Chile. The Company’s bank accounts are not insured.

Note 2 – Summary of Significant Accounting Policies

24

d. Intangible assets

Patents received from TWiC are being amortized over their respective remaining lives ranging from 11 to18 years. Amortization expense for 2001, 2002 and 2003 was $490, $644, and $669, respectively. Intangible assets consist of the following:

Estimated amortization expense for each of the next five years ended December 31, is as follows:

25

26

l. New Accounting Pronouncements

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities" (an interpretation of Accounting Research Bulletin (ARB) No. 51, Consolidated Financial Statements). Interpretation 46 addresses consolidation by business enterprises of entities to which the usual condition of consolidation described in ARB-51 does not apply. The Interpretation changes the criteria by which one company includes another entity in its consolidated financial statements. The general requirement to consolidate under ARB-51 is based on the presumption that an enterprise's financial statements should include all of the entities in which it has a controlling financial interest (i.e., majority voting interest). Interpretation 46 requires a variable interest entity to be consolidated by a company that does not have a majority voting interest, but nevertheless, is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns or both. A company that consolidates a variable interest entity is called the primary beneficiary of that entity. In December 2003 the FASB concluded to revise certain elements of FIN 46, primarily to clarify the required accounting for interests in variable interest entities. FIN-46R replaces FIN-46, that was issued in January 2003. FIN-46R exempts certain entities from its requirements and provides for special effective dates for entities that have fully or partially applied FIN-46 as of December 24, 2003. In certain situations, entities have the option of applying or continuing to apply FIN-46 for a short period of time before applying FIN-46R. In general, for all entities that were previously considered special purpose entities, FIN 46 should be applied in periods ending after December 15, 2003. Otherwise, FIN 46 is to be applied for registrants who file under Regulation SX in periods ending after March 15, 2004, and for registrants who file under Regulation SB, in periods ending after December 15, 2004. The Company does not expect the adoption to have a material impact on the Company's financial position or results of operations.

In December 2003, the FASB issued a revised SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits" which replaces the previously issued Statement. The revised Statement increases the existing disclosures for defined benefit pension plans and other defined benefit postretirement plans. However, it does not change the measurement or recognition of those plans as required under SFAS No. 87, "Employers' Accounting for Pensions," SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," and SFAS No. 106,"Employers' Accounting for Postretirement Benefits Other Than Pensions." Specifically, the revised Statement requires companies to provide additional disclosures about pension plan assets, benefit obligations, cash flows, and benefit costs of defined benefit pension plans and other defined benefit postretirement plans. Also, companies are required to provide a breakdown of plan assets by category, such as debt, equity and real estate, and to provide certain expected rates of return and target allocation percentages for these asset categories. The Company has implemented this pronouncement and has concluded that the adoption has no material impact to the financial statements.

During April 2003, the FASB issued SFAS 149 - "Amendment of Statement 133 on Derivative Instruments and Hedging Activities," effective for contracts entered into or modified after June 30, 2003, except as stated below and for hedging relationships designated after June 30, 2003. In addition, except as stated below, all provisions of this Statement should be applied prospectively. The provisions of this Statement that relate to Statement 133 Implementation Issues that have been effective for fiscal quarters that began prior to June 15, 2003, should continue to be applied in accordance with their respective effective dates. In addition, paragraphs 7(a) and 23(a), which relate to forward purchases or sales of when issued securities or other securities that do not yet exist, should be applied to both existing contracts and new contracts entered into after June 30, 2003. The Company has implemented this pronouncement and has concluded that the adoption has no material impact to the financial statements.

27

During May 2003, the FASB issued SFAS 150 - "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity," effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective for public entities at the beginning of the first interim period beginning after June 15, 2003. This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a freestanding financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. Some of the provisions of this Statement are consistent with the current definition of liabilities in FASB Concepts Statement No. 6, Elements of Financial Statements. The Company has implemented this pronouncement and has concluded that the adoption has no material impact to the financial statements.

Note 3 – Related Party Transactions

a.

On February 5, 2001, the Company acquired all of the intellectual properties owned by TWiC Housing Corporation relating to the TWiC system for the construction of houses. Included in the assets acquired were the patents pertaining to the TWiC System. In exchange for the assets acquired, the Company issued 2,000,000 shares of its common stock. Under the terms of the purchase agreement, the shares issued have restricted covenants as to when the shares are free to sell or transfer. TWiC’s is wholly owned by Harry Gordon, a shareholder and director of the Company. The Company valued the assets purchased at their estimated historical cost of $10,057. The Company is amortizing the purchase price over 18 years, the remaining life of the related patents.

Pursuant to the purchase agreement, the Company guaranteed that the market price of the shares received by TWiC will exceed $2.50 Canadian within four years from the commencement date of trading. If the shares do not reach such a price within the period, the Company will issue sufficient additional shares in order that the total number of shares issued multiplied by the highest market price of the stock during the four year period equals $5,000,000 Canadian.

b.

On January 10, 2001, the Company entered into an agreement with TWiC for the manufacturing of 32 molds and the supply of the services required to construct the Company’s Chilean plant. For these molds and services, the Company agreed to pay $1,600,000 consisting of $1,400,000 cash, and 100,000 shares of common stock valued at $2.00 per share. Under the terms of the agreement the Company is to make a $300,000 down payment and pay the remainder of the balance due in progressive draws. During the year ended December 31, 2001 , the Company paid $285,000 and issued the 100,000 shares of its common stock. The $485,000 has been included in construction in progress. No payments were made in 2002. Total amounts paid towards this agreement in 2003 were $10,315.

On June 9, 2004, this agreement was concluded and the Company and TWiC each released each other from any further obligations that they had under it.

c.

The Company and its President have made advances and repayments to each other. These advances are non-interest bearing and due upon demand. The balance due the President by the Company as of December 31, 2002 was $2,117. The balance due the Company by its President as of December 31, 2003 was $2,492.

28

d. Acquisition of Rockport Trading Limitada

In June 2002, the Company consummated its acquisition of certain assets of 598546 B.C. Ltd in exchange for 200,000 shares of its common stock. The price allocated to the assets acquired was based upon the market value of the shares issued of $5.00 per share. The assets acquired and their respective allocated values are as follows:

The timber was sold during the second quarter of 2002 for $131,329, net selling expenses resulting in a loss from the sale of $318,671. The land and building were sold during the third quarter of 2002 for $80,310, net of selling expenses resulting in a loss of $39,690.

The Company deemed the goodwill acquired to be impaired and charged the full amount to operations during the fourth quarter of 2002,

598546 B.C. Ltd. is owned by a shareholder of the Company.

Note 4 - Income Taxes

The Company is in the development stage and incurred net operating losses, therefore no provisions for income taxes have been established. As of December 31, 2003, the Company’s net operating losses totaled $7,252,781, which expire in various years through 2023.

An allowance has been provided that reduced the tax benefits accrued by the Company for these operating losses to zero as it cannot be determined when, or if, the tax benefits derived from these losses will materialize.

Note 5 - Issuances of Common Stock

During the year ended December 31, 2002, the Company issued 173,738 shares of its common stock through a private offering in exchange for $870,353. In addition, the Company issued 200,000 shares of its common stock in exchange for certain assets of 598546 BC LTD (see Note 6) During the year ended December 31, 2003, the Company issued 248,978 shares of its common stock through a private offering in exchange for $1,241,748. In addition, the Company issued 9,462 shares of common stock to various consultants relating to the Company’s private offering, The services were valued at $47,310, the estimated value of the shares issued for the services rendered, and were charged against the offering proceeds received. In addition, in 2003, the Company issued 600 shares to a consultant for marketing services. The services were valued at $3,000, the estimated value of the shares issued for the services rendered.

Note 6 - Payable to Shareholders

In April 2002, two shareholders advanced $65,657, to the Company evidenced by two promissory notes that are assessed interest at an annual rate of 8%. The notes are due on demand. Under the terms of the notes, the Company is also required to issue 5,000 shares of its common stock to each lender at the time of repayment. The Company is imputing interest on the shares to be issued at a price of $5.00 per share. The imputed interest is being charged to operations ratably over a one-year period, which Management believes to be the length of time that the loans will be outstanding. Interest charged to operations for 2002 and 2003 was $27,242 and $14,353.

29

Note 7 - Leases

The Company is a lessee of computer equipment under capital leases expiring through August 28, 2007. The equipment and respective liabilities under these leases have been recorded at the fair value of the equipment and are being amortized over the estimated useful life of the equipment. Amortization of equipment under the capital leases is included in depreciation expense.

Following is a summary of the property held under the capital lease: