UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities exchange Act of 1934
Date of Report (Date of earliest Event Reported) February 28, 2000
----------
Commission file Number 000-26839
WHITE ROCK ENTERPRISES, LTD.
(exact Name of Registrant as Specified in its Charter)
----------
Nevada 88-0407246
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2600 72nd Street
Urbandale, Iowa 50322
(Address of principal executive offices) (Zip Code)
(515) 331-0560
(Registrant's Executive Office Telephone Number)
<PAGE>
This filing amends (where noted in response to a particular item) Registrant's
Current Report on Form 8-K previously filed with the Securities Exchange
Commission on March 1, 2000.
ITEM 1. CHANGES IN CONTROL OF REGISTRANT:
No amendment.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS:
No amendment.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP:
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT:
Not applicable.
ITEM 5. OTHER EVENTS:
Not applicable.
ITEM 6. RESIGNATIONS OF DIRECTORS AND EXECUTIVE OFFICERS:
No amendment.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS:
Financial statements are filed herewith as follows:
PRO FORMA FINANCIAL INFORMATION
White Rock Enterprises, Ltd.
Unaudited Pro Forma Combined Balance Sheet
December 31, 1999
The following unaudited pro forma combined balance sheet as of December 31, 1999
gives effect to: (1) the completion of the proposed merger with ISES Corporation
(ISES) for aggregate consideration of 10,000,000 shares of White Rock
Enterprise, Ltd. (WHTE) common stock and 10,000 shares of convertible preferred
stock of WHTE, (2) the issuance of 2,200,000 shares of WHTE common stock to
individuals and other entities in exchange for locating the investment
opportunity and a commitment to use their best efforts to raise $2,000,000 to
fund the Company's working capital needs and general corporate purposes, and (3)
the cancellation of 5,100,000 shares of WHTE common stock and a 1.6 for 1 common
stock split by WHTE subsequent to December 31, 1999, but prior to the merger
with ISES. The proposed merger will be accounted for as a reverse acquisition of
WHTE (a "shell company") by ISES.
1
<PAGE>
The following unaudited pro forma financial data may not be indicative of what
the financial condition of WHTE would have been, had the transactions to which
such data gives effect been completed on the date assumed, not are such data
necessarily indicative of the financial condition of WHTE that may exist in the
future. The following unaudited pro forma information should be read in
conjunction with the notes thereto, the other pro forma financial statement and
notes thereto, and the historical financial statements and notes thereto of ISES
included herein and of WHTE, available in the Company's September 30, 1999 Form
10KSB and the December 31, 1999 Form 10QSB.
<TABLE>
<CAPTION>
ISES Pro Forma Pro Forma
Corp. WHTE Adjustments Combined
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ -- $ 207 $ -- $ 207
Accounts receivable 138,917 -- -- 138,917
--------- --------- --------- ---------
Total current assets 138,917 207 -- 139,124
Net equipment 15,969 -- -- 15,969
Other assets 15,260 -- -- 15,260
--------- --------- --------- ---------
Total assets $ 170,146 $ 207 $ -- $ 170,353
========= ========= ========= =========
Checks disbursed in excess
of amounts on deposit $ 685 $ -- $ -- $ 685
Accounts payable, trade 109,523 -- -- 109,523
Deferred income 9,984 -- -- 9,984
Notes payable - bank 120,000 -- -- 120,000
Note payable - shareholder 55,000 -- -- 55,000
Accrued payroll and related liabilities 105,754 -- -- 105,754
Other accrued liabilities 9,786 -- -- 9,786
--------- --------- --------- ---------
Total current liabilities 410,732 -- -- 410,732
Long-term debt 135,000 -- -- 135,000
--------- --------- --------- ---------
Total liabilities 545,732 -- -- 545,732
Common stock 1,314 8,160 (1,314)(A) 17,096
10,000 (A)
2,200 (B)
(5,100)(C)
1,836 (C)
Convertible preferred stock -- -- 10 (A) 10
Additional paid-in capital -- (2,060) (8,696)(A) (9,692)
(2,200)(B)
3,264 (C)
Retained earnings (deficit) (376,900) (5,893) -- (382,793)
--------- --------- --------- ---------
Total stockholders' equity (deficit) (375,586) 207 -- (375,379)
--------- --------- --------- ---------
Total liabilities and stockholders' equity $ 170,146 $ 207 $ -- $ 170,353
========= ========= ========= =========
</TABLE>
White Rock Enterprises, Ltd.
Unaudited Pro Forma Combined Summaries of Operations
Year Ended September 30, 1999 and Quarter Ended December 31, 1999
The following unaudited pro forma combined summary of operations for the year
ended September 30,1999 and quarter ended December 31, 1999 gives effect to the
completion of the proposed merger with ISES Corporation (ISES) as if it
2
<PAGE>
occurred on October 1, 1998 and 1999 respectively. The proposed merger will be
accounted for as a reverse acquisition of WHTE (a "shell company") by ISES.
The following unaudited pro forma financial data may not be indicative of what
the results of operations of WHTE would have been, had the transactions to which
such data gives effect been completed on the date assumed, not are such data
necessarily indicative of the results of operations of WHTE that may exist in
the future. The following unaudited pro forma information should be read in
conjunction with the notes thereto, the other pro forma financial statement and
notes thereto, and the historical financial statements and notes thereto of ISES
included herein and of WHTE, available in the Company's September 30, 1999 Form
10KSB and the December 31, 1999 Form 10QSB.
<TABLE>
<CAPTION>
ISES Pro Forma Pro Forma
Corp. WHTE Adjustments Combined
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
For the year ended September 30, 1999
Net revenue $ 652,348 $ -- $ -- $ 652,348
------------ ------------ ------------ ------------
Payroll and related benefits 495,539 -- -- 495,539
Software development and consulting 310,289 -- -- 310,289
Travel 81,275 -- -- 81,275
Administration 78,770 5,058 -- 83,828
Depreciation 4,417 -- -- 4,417
------------ ------------ ------------ ------------
Total operating expenses 970,290 5,058 -- 975,348
Other income (expense) - interest expense (10,662) -- -- (10,662)
------------ ------------ ------------ ------------
Loss before income taxes $ (328,604) $ (5,058) $ -- $ (333,662)
Income tax benefit -- -- -- --
------------ ------------ ------------ ------------
Net loss $ (328,604) $ (5,058) $ -- $ (333,662)
============ ============ ============ ============
Average shares of common outstanding (D) 17,096,000
============
Basic and diluted loss per share (D) $ (0.020)
============
<CAPTION>
ISES Pro Forma Pro Forma
Corp. WHTE Adjustments Combined
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
For the quarter ended December 31, 1999
Net revenue $ 232,056 $ -- $ -- $ 232,056
------------ ------------ ------------ ------------
Payroll and related benefits 154,427 -- 154,427
Software development and consulting 77,402 -- -- 77,402
Travel 30,045 -- -- 30,045
Administration 16,929 835 -- 17,764
Depreciation 1,500 -- -- 1,500
------------ ------------ ------------ ------------
Total operating expenses 280,303 835 -- 281,138
Other income (expense) - interest expense (4,009) -- -- (4,009)
------------ ------------ ------------ ------------
Loss before income taxes (52,256) (835) -- (53,091)
Income tax benefit -- -- -- --
------------ ------------ ------------ ------------
Net loss $ (52,256) $ (835) $ -- $ (53,091)
============ ============ ============ ============
============
Average shares of common outstanding (D) 17,096,000
============
Basic and diluted loss per share (D) $ (0.003)
============
</TABLE>
3
<PAGE>
White Rock Enterprises, Ltd.
Notes to Unaudited Pro Forma Combined Balance Sheet and Summaries of Operations
(A) To record the proposed merger with ISES for the issuance of 10,000,000
shares of common stock of WHTE and 10,000 shares of convertible preferred
stock (automatically converts to 10,000,000 shares of common stock on
February 28, 2002.
(B) To record 2,200,000 shares of WHTE common stock to be issued to other
individuals and entities in connection with the merger.
(C) To reflect the cancellation of 5,100,000 shares of WHTE common stock and a
1.6 for 1 common stock split by WHTE subsequent to December 31, 1999, but
prior to a merger with ISES.
(D) For purposes of determining pro forma basic and diluted loss per share,
17,096,000 shares of common stock were considered to be outstanding during
the periods. The 17,096,000 shares of common stock include the effects of
the proposed issuance of the 12,200,000 shares of common stock in
connection with the merger, the cancellation of 5,100,000 shares of common
stock and the 1.6 for 1 common stock split. Convertible preferred stock is
anti-dilutive and was not considered in the calculation of pro forma
diluted loss per share.
4
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders
ISES Corp.
We have audited the accompanying balance sheets of ISES Corp. as of December 31,
1999 and 1998, and the related statements of operations and retained earnings,
and cash flows for the years then ended. These 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 generally accepted auditing
standards. 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 financial statements referred to above present fairly, in
all material respects, the financial position of ISES Corp. as of December 31,
1999 and 1998, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
/S/ McGowen, Hurst, Clark & Smith, P.C.
Des Moines, Iowa
April 25, 2000
5
<PAGE>
ISES CORP.
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
ASSETS
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash $ -- $ 2,763
Accounts receivable 138,917 59,543
PROPERTY AND EQUIPMENT
Office furniture and equipment 14,681 8,532
Computer equipment 20,992 16,043
--------- ---------
Total 35,673 24,575
Less accumulated depreciation (19,704) (13,787)
--------- ---------
Net property and equipment 15,969 10,788
OTHER ASSETS 15,260 --
--------- ---------
TOTAL ASSETS $ 170,146 $ 73,094
========= =========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<S> <C> <C>
CURRENT LIABILITIES
Checks disbursed in excess of amounts on deposit $ 685 $ --
Accounts payable - trade 109,523 3,984
Deferred income 9,984 --
Notes payable - bank 120,000 --
Note payable - shareholder 55,000 --
Accrued payroll and related liabilities 105,754 16,549
Accrued interest 9,786 --
--------- ---------
Total current liabilities 410,732 20,533
LONG-TERM DEBT 135,000 --
--------- ---------
Total liabilities 545,732 20,533
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock - no par value; 100,000 authorized
shares; 1,000 shares issued and outstanding 1,314 1,314
Retained earnings (deficit) (376,900) 51,247
--------- ---------
Total stockholders' equity (deficit) (375,586) 52,561
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 170,146 $ 73,094
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
ISES CORP.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
----------- -----------
REVENUE
Consulting $ 539,654 $ 390,467
License fees 162,680 --
Maintenance agreements 9,952 --
----------- -----------
Total revenue 712,286 390,467
EXPENSES
Payroll 585,353 44,061
Payroll taxes 33,300 3,445
Employee health insurance 17,816 --
Software development and consulting 301,567 178,290
Administrative and legal 24,504 9,437
Bad debts -- 21,007
Bank fees 2,810 1,080
Dues and subscriptions 1,709 1,956
Freight and postage 2,299 940
Insurance 3,585 --
Interest 15,553 4,149
Telephone 16,375 4,067
Marketing 6,536 --
Office expense 8,815 3,892
Miscellaneous 1,559 5,350
Office rent 16,620 --
Travel 91,115 73,860
Depreciation expense 5,917 6,285
----------- -----------
Total expenses 1,135,433 357,819
----------- -----------
NET INCOME (LOSS) (423,147) 32,648
RETAINED EARNINGS - beginning of year 51,247 40,177
DISTRIBUTIONS TO SHAREHOLDERS (5,000) (21,578)
----------- -----------
RETAINED EARNINGS (DEFICIT) - end of year $ (376,900) $ 51,247
=========== ===========
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
ISES CORP.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES 1999 1998
--------- ---------
<S> <C> <C>
Net income (loss) $(423,147) $ 32,648
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
Depreciation 5,917 6,285
Change in:
Accounts receivable (79,375) 12,918
Accounts payable and accrued expenses 204,531 (8,945)
Deferred income 9,984 --
--------- ---------
Net cash provided (used) by operating activities (282,090) 42,906
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (11,098) (691)
Increase in other assets (15,260) --
--------- ---------
Net cash used by investing activities (26,358) (691)
CASH FLOWS FROM FINANCING ACTIVITIES
Checks disbursed in excess of amounts on deposit 685 --
Repayment of advances from shareholder -- (36,341)
Distributions to shareholders (5,000) (21,577)
Proceeds from notes payable and long-term debt 310,000 70,000
Repayment of notes payable and long-term debt -- (70,000)
--------- ---------
Net cash provided by financing activities 305,685 (57,918)
--------- ---------
Net decrease in cash (2,763) (15,703)
CASH, beginning of year 2,763 18,466
--------- ---------
CASH, end of year $ -- $ 2,763
========= =========
SUPPLEMENTAL DISCLOSURES
Cash paid for interest $ 5,767 $ 4,149
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS - The Company performs software development and consulting
services specializing in providing internet, broadcast, telephone and local
functionality for digital set-top boxes, in-flight entertainment and
internet applications.
PROPERTY AND EQUIPMENT - Property and equipment is recorded at cost and are
depreciated over the estimated useful lives of the assets.
CASH AND CASH EQUIVALENTS - For purposes of the statement of cash flows,
cash and cash equivalents include all highly liquid debt agreements with
original maturities of three months or less.
ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those estimates.
ADVERTISING AND MARKETING - Advertising and marketing costs are expensed as
incurred. Such costs totaled $6,536 and $5,350 for the years ending
December 31, 1999 and 1998, respectively.
REVENUE RECOGNITION - The Company has adopted the provisions of the
American Institute of Certified Public Accountants' (AICPA) Statement of
Position (SOP) 97-2, "Software Revenue Recognition," as amended by SOP
98-4, "Deferral of the Effective Date of a Provision of SOP 97-2, Software
Revenue Recognition" effective April 1, 1998. SOP 97-2 and SOP 98-4 provide
guidance on recognizing revenue on software transactions. Product revenues
primarily consist of software licenses sold. Software license fees are
recognized as revenues upon contract signing and shipment of the software.
Service revenues are derived primarily from customer support (maintenance)
agreements, and training and consulting services. Maintenance revenues,
including maintenance bundled with software license fees, are recognized
ratably over the term of the related agreements. Revenues from training and
consulting services are recognized as the services are rendered.
SOFTWARE DEVELOPMENT COSTS - Software development costs incurred prior to
technological feasibility are expensed as research and development costs.
Research and development costs totaled approximately $425,400 and $127,000
in 1999 and 1998, respectively. Production costs incurred in the production
of computer software once technological feasibility of the product to be
marketed has been established are capitalized. The Company incurred no
significant software production costs during 1999.
CONCENTRATIONS - At December 31, 1999, two of the Company's customers
accounted for eighty-eight percent of outstanding trade accounts
receivable. At December 31, 1998 two customers accounted for one-hundred
percent of outstanding trade accounts receivable. One of the Company's
customers accounted for approximately sixty-three percent of 1999 revenue
and seventy-one percent of 1998 revenue.
9
<PAGE>
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
INCOME TAXES - The Company, with consent of its stockholders, has elected
to have its income taxed as an S corporation. As an S corporation for
federal income tax purposes, stockholders are taxed on their proportionate
share of the Company's taxable income in lieu of corporate income taxes.
NOTE B - SHORT-TERM NOTES PAYABLE - BANK
The Company has a $70,000 line of credit agreement and a $50,000 note
agreement with a bank at December 31, 1999. The notes are secured by a real
estate mortgage on property owned by the shareholders, mature March 1, 2000
and bear interest at the bank's commercial base rate on the outstanding
balances.
The Company's shareholders have advanced the Company $55,000 at December
31, 1999. The advance is non-interest bearing and is due upon demand.
NOTE C - LONG-TERM DEBT
The Company has an unsecured note agreement with an outstanding balance of
$135,000 at December 31, 1999. The 9.0% note payable requires quarterly
interest payments. Quarterly principal payments of $10,385 will be required
beginning in July 2001.
Future contractual maturities are as follows:
2000 $ --
2001 20,769
2002 41,538
2003 41,538
2004 31,155
--------------
$ 135,000
==============
NOTE D - LEASES
The Company leases its office under a long-term lease agreement. The lease
requires monthly payments of $1,385 through January 2001. The lease
requires future minimum lease payments of $16,620 in 2000 and $1,385 in
2001.
NOTE E - SOFTWARE DEVELOPMENT AND CONSULTING
ISES Canada, a Canadian company with common ownership, provides software
development and consulting services to the Company. Fees paid or accrued to
ISES Canada totaled $299,603 and $147,439 in 1999 and 1998, respectively.
At December 31, 1999, accounts payable includes $48,397 due to ISES Canada.
NOTE F - SUBSEQUENT EVENT
On February 8, 2000, the Company entered into an acquisition agreement and
plan of merger with White Rock Enterprises, Ltd. (WREI) whereby all the
outstanding shares of common stock of the Company were exchanged for shares
of WREI in a transaction in which WREI is the successor corporation.
10
<PAGE>
EXHIBITS: 23.1 Independent Auditor's Consent
ITEM 8. CHANGE IN FISCAL YEAR:
Not applicable
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment No. 1 to Current Report on Form 8-K to
be signed on its behalf by the undersigned hereunto duly authorized.
WHITE ROCK ENTERPRISES, LTD.
By
-------------------------------
Dean R. Grewell, III
President
Date: May 19, 2000
11
EXHIBIT: 23.1
INDEPENDENT AUDITOR'S CONSENT
We consent to the use of our independent auditor's report, dated April 25, 2000,
on the financial statements of ISES Corp., as of and for the years ended
December 31, 1999 and 1998, appearing in the amended Form 8K of White Rock
Enterprises, Inc. filed on or about May 19, 2000.
/S/ McGowen, Hurst, Clark & Smith, P.C.
Des Moines, Iowa
May 18, 2000
