U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended December 31, 1996 Commission File No. 33-30476-D
ISO BLOCK PRODUCTS USA, INC.
(Exact name of registrant as specified in its charter)
COLORADO 84-1026503
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8037 South Datura Street (303) 795-9729
Littleton, Colorado 80120 (Registrant's Telephone No. incl.
area code)
(Address of Principal's Executive
Offices)
Indicate by check mark 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 such shorter period that the
registrant was required to file such reports), and (2) has been subject
to such filing requirements for at least the past 90 days.
Yes ___ No X
The number of shares outstanding of each of the Registrant's classes of
common equity, as of February 28, 1997 are as follows:
Class of Securities Shares Outstanding
------------------- ------------------
Common Stock, No Par Value 1,480,821
Preferred Stock, No Par Value 1,448,610
ISO BLOCK PRODUCTS USA, INC.
TABLE OF CONTENTS PAGE
PART 1
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheet as of December 31, 1996....... 3
Consolidated Statement of Operations for the three month
period ended December 31, 1996.......................... 4
Consolidated Statement of Cash Flows for the three month
period ended December 31, 1996.......................... 5
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS 8
PART 2
Item 6. Exhibits and Reports on Form 8-K.......................... 11
Signatures................................................ 13
ISO BLOCK PRODUCTS USA, INC.
CONSOLIDATED COMPARATIVE BALANCE SHEET
ASSETS March 31, 1996 Dec. 31, 1996
------ -------------- -------------
Current Assets
- --------------
Cash 10,296 447,130
Note Receivable - Officer 2,000 2,000
Note Receivable - 50,000
Mortgages Receivable 1,335,624 1,328,068
Accounts Receivable - -
------------- ------------
Total Current Assets 1,347,920 1,827,198
Property & Equipment
- --------------------
Office Equipment 2,660 2,660
Less: Accumulated Depreciation (532) (1,198)
----------- ------------
Net Property & Equipment 2,128 1,462
----------- ------------
TOTAL ASSETS 1,350,048 1,828,660
----------- ------------
LIABILITIES & STOCKHOLDERS' EQUITY
----------------------------------
Current Liabilities
- -------------------
Accounts Payable 6,682 1,635
Stockholders' Equity
- ---------------------
Preferred Stock, No Par Value,
10,000,000 Shares authorized,
728,610 and 1,448,610 Shares Outstand-
ing, Respectively. 739,200 1,427,700
Common Stock, 50,000,000 Shares
Authorized, 3,185,821 and 1,480,821
Shares Outstanding, Respectively. 1,436,055 1,436,055
----------- ------------
Accumulated Deficit (831,889) (1,036,730)
----------- ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 1,350,048 1,828,660
----------- ------------
The accompanying notes are an integral part of these financial statements.
ISO BLOCK PRODUCTS USA, INC.
CONSOLIDATED COMPARATIVE STATEMENT OF OPERATIONS
For the Periods Ended December 31, 1995 and 1996
Nine Months Ended Dec. 31, Three Months Ended Dec. 31,
1995 1996 1995 1996
---- ---- ---- ----
Income
- -------
Construction Sales 463,815 123,133 154,605 -
Interest Income 1,737 24,056 579 12,540
--------- --------- --------- ---------
Total Income 465,552 147,189 155,184 12,540
Cost Of Sales
- -------------
Cost of Materials 712,443 162,128 237,481 -
Labor 70,734 62,621 23,578 -
--------- --------- --------- ---------
Total Cost of Sales 783,177 224,749 261,059 -
Gross Profit (Loss) (317,625) (77,560) (105,875) 12,540
Operating Expenses
- ------------------
General and Admin. 193,977 127,281 64,659 67,803
--------- --------- --------- ---------
Net Loss (511,602) (204,841) (170,534) (55,263)
Loss Per Common Share (.16) (.14) (.05) (.04)
Weighted Average
Shares Outstanding 3,185,821 1,480,821 3,185,821 1,480,821
The accompanying notes are an integral part of these financial statements.
ISO BLOCK PRODUCTS USA, INC.
CONSOLIDATED COMPARATIVE STATEMENT OF CASH FLOWS
For the Three Months Ended December 31, 1995 and 1996
Three Months Ended Dec. 31,
1995 1996
---- ----
Cash Flows From Operating Activities
- -------------------------------------
Net Income (Loss) (170,534) (55,263)
Depreciation - 222
Note Receivable - Officer - (50,000)
Mortgages Receivable - 2,992
Account Receivable - 121,887
Prepaid Expenses 601 -
Accounts Payable (11,645) (162,207)
---------- ----------
Net Cash Used in Operating Activities (181,578) (142,369)
Cash Flow From Investing Activities
- ------------------------------------
Purchase From Preferred Stock - -
Cash Flow From Financing Activities
- ------------------------------------
Proceeds From Preferred Stock 130,400 -
Proceeds From Common Stock - -
Write-down of Mortgage Receivable - -
Foreign Exchange Gains (Losses) 1,437 -
---------- ----------
Net Cash Provided by (Used in)
Financing Activities 131,837 -
Net Increase (Decrease) In Cash (49,741) (142,369)
- -------------------------------
Cash - Beginning of the Period 109,780 589,499
- ------------------------------ ---------- ----------
Cash - End of the Period 60,039 447,130
- ------------------------ ---------- ----------
The accompanying notes are an integral part of these financial statements.
ISO BLOCK PRODUCTS USA, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 1. Company Description.
- ------------------------------
ISO Block Products USA, Inc. ("Company") was incorporated in
the State of Colorado on April 28, 1986 under the name Champion
Computer Rentals, Inc. The Company was formed to obtain funding
from a public offering in order to engage in the sale and
leasing of computers and related equipment. As March 31, 1992,
the Company ceased those sale and leasing operations.
A change of control of the Company occurred effective March 31,
1994, in which the former officers and directors resigned and
were replaced by the current officers and directors. In
connection with this change in the members of the board, an
aggregate of 2,000,000 common shares of the Company were issued
to previously unaffiliated persons pursuant to the Company's
acquisition of all of the equity interest in and to, and all
profits of, R-S ISO-Block Produktions GmbH, a German limited
liability company ("ISO-Block GmbH").
Legal Proceedings.
-------------------
The Company and its President, Egin Bresnig, have been named as
defendants in Texas Finance Incorporated Vs ISO Block Products
USA, Inc. et al, filed in the United States District Court for
the District of Colorado, Civil Action No. 96WM-1961. The suit
alleges among other things that the plaintiff purchased
securities of the Company in reliance upon misleading statements
knowingly made by the Company, Mr. Bresnig and others, and seeks
return of the price paid for the securities plus damages under
various federal and state securities laws. The Company has not
answered the lawsuit but has instead filed a motion to dismiss
the complaint upon various grounds, including among others that
the plaintiff has sustained no damages and lacks standing to
bring the action. The Company intends to vigorously defend the
action if it does not prevail on its motion to dismiss.
Management believes that, should the action go to trial the
Company will prevail on the merits. Otherwise, the Company is
not subject to any pending or threatened legal proceedings.
Note 2. Summary of Significant Accounting Policies.
- -----------------------------------------------------
The accompanying unaudited financial statements of the Company
have been prepared on the accrual basis and in accordance with
the instructions to Form 10-QSB and do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (considered necessary for
a for a fair presentation have been included. These financial
statements should be read in conjunction with the financial
statements and notes thereto included in the Company's annual
report on Form 10-KSB for the fiscal year ended March 31, 1996.
Following is a summary of significant accounting policies.
ISO BLOCK PRODUCTS USA, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(continued)
Organization costs.
--------------------
Certain costs incurred to set up the Company are capitalized
and were amortized over five years. These costs were fully
amortized at March 31, 1994.
Income taxes.
-------------
The Company accounts for income taxes under SFAS No. 109.
Deferred income taxes result from temporary differences.
Temporary differences are differences between the tax basis of
assets and liabilities and their reported amounts in the
financial statements that will result in taxable or deductible
amounts in future years.
Foreign Currency Translation.
-----------------------------
The functional currency for the Company's operations is the
applicable local currency. The translation of the applicable
foreign currency into U.S. dollars is performed for balance
sheet accounts using current exchange rates in effect at the
balance sheet date and for revenue and expense accounts using a
weighted average rate during the period. The gains or losses
resulting from such translation are included in stockholder's
equity.
Consolidation.
--------------
The financial statements include the accounts of the Company
and its wholly owned German subsidiary, ISO-Block GmbH. All
significant intercompany balances and transactions have been
eliminated in consolidation.
Income (Loss) Per Common Share.
-------------------------------
Income (loss) per common share is based upon the weighted
average number of common shares outstanding during each period.
Options and warrants outstanding to purchase common stock are
included as common stock equivalents when dilutive.
Concentrations of Credit Risk.
-------------------------------
The Company's financial instruments that are exposed to
concentrations of credit risk consist primarily of mortgages
receivable.
Note 3.
- -------
During the fiscal year ended March 31, 1996, the Company
incurred a net loss of $682,136, and as of that date had
accumulated a deficit of $831,889. The Company had slight
operations during the third fiscal quarter covered by these
statements but incurred a loss for the quarter of $55,263.
Note 4.
- -------
Future working capital requirements are dependent on the
Company's ability to attain profitable operations and to obtain
financing or new capital as required. It is not possible at
this time to predict the outcome of future operations or whether
the necessary financing or investment can be arranged.
Item 2. Management's Discussion and Analysis or Plan of Operation
- --------------------------------------------------------------------
Background.
------------
ISO Block Products USA, Inc., is a Colorado corporation
("Company"). The Company originally was operational from
inception through March 31, 1992, and was not operational from
such date until the Company's acquisition on March 31, 1994 of
R-S ISO-Block Producktions GmbH, a German limited liability
company located in Frankenstein, Germany ("ISO-Block GmbH').
The Company has, since March 31, 1994, engaged in operations in
Germany through ISO-Block GmbH, as described below. On March 28,
1994, the Company entered into an
Agreement and Plan of Reorganization("Reorganization Agreement")
with ISO-Block GmbH, Josef Ratey, an individual, Helge Seidel,
an individual, and R-S Plus Investment Corp., A Florida
corporation ("R-S Plus"). Pursuant to the Reorganization
Agreement, on March 31, 1994, the Company purchased from Ratey
and Seidel all of the equity interest in Iso-Block GmbH, and
purchased from R-S Plus property (mortgages receivable)
heretofore contributed to ISO-Block GmbH and all R-S Plus'
rights to ISO-Block GmbH profits, all in exchange for the
issuance of an aggregate of 2,000,000 shares of the Company's
authorized but heretofore unissued stock, no par value.
In connection with these transactions under the Reorganization
Agreement, the interest owners of ISO-Block GmbH (Ratey and
Seidel) and R-S Plus (Ratey) acquired ownership of a majority of
the Company's common stock. As a result, the transaction has
been accounted for as a purchase by the Company.
Business.
----------
The first half of the business year of 1994 was occupied in
establishing the infra structure to gear up for the planned
operational activities of the German subsidiary, Iso-Block GmbH.
The Company had a very difficult time trying to raise capital to
start single-family and multi-family developmental projects as a
general contractor. The Company decided to begin building single
family custom homes at first, using the Company's proprietary
building system, before attempting larger and more aggressive
project. Not until the first fiscal quarter of 1995 was the
Company able to raise sufficient additional capital to begin
operations.
The Company had a difficult but promising start, and the wholly
owned subsidiary Iso-Block GmbH began custom home construction
in Germany in the first fiscal quarter of 1995. A
proof-of-concept home was built to demonstrate the Company's
proprietary building system, several homes were completed for
customers and others were initiated. Bigger projects were
planned, some with partial financing from local governments.
During the first fiscal quarter, 1996 the Company decided to
discontinue its European operations because of the continuing
recession in Germany and the difficulty in managing its European
subsidiaries from Denver, Colorado. Iso-Block GmbH will cease
operations in July 1996. The Company will incur dissolution
expenses in ceasing operations of its two European subsidiaries
of $166,000.
Current Business of the Company
--------------------------------
During the current fiscal year, the Company discontinued its
European operations. The Company has signed a Letter of Intent
to purchase, in an exchange of shares, Franchise Connection,
Inc. ("Franchise Connection") a strategic conglomerate of new
and emerging franchise companies and a team of franchise experts
that work together to match the aspirations of entrepreneurs
with viable analogous franchise concepts.
Franchise Connection, Inc. was incorporated in Colorado in 1996
with headquarters in Denver, Colorado. The Company plans to form
strategic partners with prospective or existing franchise
operations ("Franchisers") under which it will provide them with
marketing and sales services plus business and legal services
for an equity interest in, and/or a portion of their royalties.
It is targeting private companies that are seeking franchise
expertise or financial capacity to successfully engage in
franchising. The Company will offer comprehensive franchise
marketing and consulting services to its Franchisers companies
including operations, personnel, management, training, legal and
financial advice. In addition, Franchise Connection will assume
total responsibility for the recruitment of franchises.
On December 9, 1996 the Company sold its ISO-Block GmbH
subsidiary, including all liabilities and assets, to Big B Tex
A.G. (ch), a Swiss company domiciled in Zurich, and the Company
paid $40,000 to the buyer in addition to transferring its
ISO-Block GmbH assets. Big B Tex A.G. assumes all ISO-Block GmbH
liabilities and future contingent liabilities, if any.
Results of Operations.
----------------------
During the third fiscal quarter ended December 31, 1996, the
Company had revenues of $12,540 and engaged in limited
operations primarily those of preparation for a construction
program as general contractor in the State of Colorado in
comparison to revenues of $147,189 in the third fiscal quarter
of 1995. The Company realized a loss of $55,263 in the third
quarter of 1996 compared to a loss of $170,534 in the third
fiscal quarter of 1995. The loss realized was primarily due to
$67,803 spent for general and administrative expenses.
Liquidity and Capital Resources.
--------------------------------
The Company has total assets at the end of the third fiscal
quarter, 1996 of $1,828,660 including cash of $447,130.
Changes in and Disagreements with Accountants or Accounting and
---------------------------------------------------------------
Financial Disclosure.
---------------------
On April 29, 1996, the Company engaged R. Scott Hall, CPA, as
its independent auditor, replacing BDO Seidman L.L.P, who were
dismissed as the Company's auditors effective May 8, 1996, as
reported on Form 8-K dated such date.
The remaining balance of this page is intentionally left blank.
PART IV
Item 13. Exhibits and Reports on Form 8-K.
- -------------------------------------------
(a) Exhibits. The following exhibits are filed with this
report, except those indicated as having previously been filed
with the Securities and Exchange Commission and which are
incorporated by reference to another report, registration
statement or form. As to any shareholder of record requesting a
copy of this report, the Company will furnish any exhibit
indicated in the list below as filed with this report (not
incorporated by reference) upon payment to the Company of its
expenses in furnishing the information. References to the
"Company" mean ISO-BLOCK PRODUCTS USA, INC. (formerly named
Champion Computer Rentals, Inc.).
2.0 Plan of Acquisition, Reorganization, Arrangement, Liquidation or
- ----------------------------------------------------------------------
Succession
----------
2.1 Agreement and Plan of Reorganization dated March 28, 1994
(incorporated by reference to Exhibit 2.1 to Form 8-K dated
March 28, 1994)................................................... *
3.0 Articles and Bylaws
- ------------------------
3.1 Articles of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 to registration statement on Form S-18
of Champion Computer Rentals, Inc., file no. 33-23257-D).......... *
3.3 Bylaws of the Company (incorporated by reference to Exhibit
on Form 10-KSB for fiscal year ended 1993)........................ *
3.4 Certificate of Amendment and Restatement to Articles of
Incorporation (incorporated by reference to Exhibit 3.4 to
Form 8-K dated February 10, 1994)................................. *
3.5 Certificate of Amendment to Articles of Incorporation,
changing the Company's name to Iso-Block Products USA, Inc.
(incorporated by reference to Exhibit 2(c) to registration
statement on Form 8-A, file no. 0-25810).......................... *
3.6 Certificate of Designation Establishing Series A, Non-Voting
Convertible Preferred Stock, as filed with the Colorado
Secretary of State on May 19, 1995................................ *
3.7 Certificate of Designation Establishing Series B, Non-Voting
Convertible Preferred Stock, as filed with the Colorado
Secretary of State on May 26, 1995................................ *
3.8 Certificate of Amendment to Certificate of Designation
Establishing Series C, Non-Voting Convertible Preferred Stock,
as filed with the Colorado Secretary of State on June 26, 1995..... *
3.9 Certificate of Designation Establishing Series 1996,
Non-Voting Convertible Preferred Stock (incorporated by
reference to Exhibit 3.1 to Form 8-K dated January 24, 1997)..... *
4.0 Instruments Establishing Rights of Security Holders
- ---------------------------------------------------------
4.1 Specimen common stock certificate of the Company
(incorporated by reference to Exhibit 4.1 to registration
statement on Form S-18 of Champion Computer Rentals, Inc.,
file no. 33-23257-D)............................................... *
4.2 Specimen Series A, Non-Voting Convertible Preferred Stock
certificate........................................................ *
4.3 Specimen Series B, Non-Voting Convertible Preferred Stock
certificate ....................................................... *
4.4 Specimen Series C, Non-Voting Convertible Preferred Stock
certificate ....................................................... *
4.5 Specimen Series 1996, Non-Voting Convertible Preferred Stock
certificate ....................................................... *
10.0 Material Exhibits
- ----------------------
10.1 1993 Compensatory Stock Option Plan (incorporated by
reference to Exhibit 10.1 to Form 8-K dated February 10,
1994).............................................................. *
10.2 1993 Employee Stock Compensation Plan (incorporated by
reference to Exhibit 10.2 to Form 8-K dated February 10,
1994).............................................................. *
10.3 Settlement Agreement dated November 19, 1996 (incorporated
by reference to Exhibit 10 to Form 8-K dated November 22,
1996).............................................................. *
10.4 Stock Option dated November 19, 1996 (incorporated by
reference to Exhibit 4 to Form 8-K dated November 22,
1996).............................................................. *
10.5 Exchange Agreement and Plan of Reorganization dated
December 27, 1996 (incorporated by reference to Exhibit 2.1 to
Form 8-K dated January 24, 1997)................................... *
10.6 Employment Agreement dated December 27, 1996 (incorporated
by reference to Exhibit 10.1 to Form 8-K dated January 24,
1997).............................................................. *
* - Incorporated by reference to another registration
statement, report or document.
1 - Includes Exhibits filed as part of this Report.
(b) Reports on Form 8-K.
None.
EX-27 Financial Data Schedule
SIGNATURES
In accordance with section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant caused this Annual Report
on Form 10-KSB to be signed on its behalf by the undersigned,
thereto duly authorized individual.
Date: April 7, 1997 ISO BLOCK PRODUCTS USA, INC.
/s/ Egin Bresnig
Egin Bresnig, Chief Executive Officer
In accordance with the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates
indicated.
Name Title Date
/s/ Egin Bresnig Director, President, April 7, 1997
Egin Bresnig Chief Executive Officer
/s/ Dean Wicker Director, Secretary April 7, 1997
Dean Wicker
/s/ Johnny M. Wilson Director April 7, 1997
Johnny M. Wilson
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
10-QSB FOR THE PERIOD ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10-QSB.
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