<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
Amendment No. 2
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
June 30, 2000
-------------------------------------------------
(Date of Report: Date of earliest event reported)
INDUSTRIAL ECOSYSTEMS, INC.
(Exact name of registrant as specified in its charter)
UTAH 0-29838 94-3200034
---------------------------- ----------------------- --------------------
(State or other jurisdiction (Commission File Number) (IRS Employer ID No.)
of incorporation)
2040 West Broadway, Bloomfield, New Mexico 87413
-------------------------------------------------------------
(Address of principal executive office)
Registrant's telephone number, including area code: (505) 632-1786
--------------
<PAGE>
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS, AND EXHIBITS
(a)(1) Financial Statements of Business Acquired.
The consolidated financial statements for ROP Merger Corp. and
Subsidiary for June 30, 2000 and December 31, 1999 and 1998 are attached
hereto.
(b)(1) Pro Forma Financial Statements.
The consolidated pro forma financial statements for Industrial
Ecosystems, Inc. and Subsidiaries for June 30, 2000 and December 31, 1999 and
1998 are attached hereto.
(c) Exhibits. The following exhibits are included as part of this report:
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunder duly authorized.
INDUSTRIAL ECOSYSTEMS, INC.
Date: October 9, 2000 /S/Tom Jarnagin, President
<PAGE>
<PAGE> 3
ROP MERGER CORP.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and December 31, 1999 and 1998
<PAGE>
<PAGE> 4
INDEPENDENT AUDITORS' REPORT
The Board of Directors
ROP Merger Corp. and Subsidiary
Kansas City, Missouri
We have audited the accompanying consolidated balance sheets of ROP Merger
Corp. and Subsidiary as of December 31, 1999 and the related consolidated
statements of operations, stockholders' equity, and cash flows for the years
ended December 31, 1999 and 1998. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated 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 consolidated financial position
of ROP Merger Corp. and Subsidiary as of December 31, 1999 and the
consolidated results of their operations and their cash flows for the years
ended December 31, 1999 and 1998, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 5 to the
consolidated financial statements, the Company has suffered recurring losses
to date, which raises substantial doubt about its ability to continue as a
going concern. Management's plans with regard to these matters are also
described in Note 5. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
HJ & Associates, LLC
Salt Lake City, Utah
September 15, 2000
<PAGE>
<PAGE> 5
ROP MERGER CORP. AND SUBSIDIARY
Consolidated Balance Sheets
ASSETS
------
June 30, December 31,
2000 1999
----------- --------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents (Note 1) $ - $ -
Accounts receivable (Note 1) 21,792 26,259
Other assets 814 819
---------- -------------
Total Current Assets 22,606 27,078
---------- ------------
PROPERTY AND EQUIPMENT (Net)(Notes 1 and 2) 871,167 925,172
---------- ------------
TOTAL ASSETS $ 893,773 $ 952,250
========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable $ 12,427 $ 35,596
Bank overdraft 26,108 1,414
Accrued expenses (Note 4) 33,882 21,317
Notes payable, related parties (Note 3) 295,000 255,000
---------- ------------
Total Current Liabilities 367,417 313,327
---------- ------------
STOCKHOLDERS' EQUITY
Common stock; 30,000 shares authorized
of $1.00 par value, 2,000 shares issued
and outstanding 2,000 2,000
Additional paid-in capital 1,613,191 1,613,191
Other comprehensive loss (59,340) (49,891)
Accumulated deficit (1,029,495) (926,377)
---------- ------------
Total Stockholders' Equity 526,356 638,923
---------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 893,773 $ 952,250
========== ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE> 6
ROP MERGER CORP. AND SUBSIDIARY
Consolidated Statements of Operations
For the
Six Months
Ended For the Years Ended
June 30, December 31,
2000 1999 1998
----------- ----------- -----------
(Unaudited)
REVENUES
Net sales $ 123,579 $ 196,924 $ 110,554
Direct costs 104,588 182,267 76,851
----------- ----------- -----------
Gross Profits 18,991 14,657 33,703
----------- ----------- -----------
EXPENSES
General and administrative 45,372 226,182 590,201
Depreciation and amortization 58,295 115,697 51,732
----------- ----------- -----------
Total Expenses 103,667 341,879 641,933
----------- ----------- -----------
Loss from Operations (84,676) (327,222) (608,230)
----------- ----------- -----------
OTHER INCOME (EXPENSE)
Other income 328 630 539
Interest income - 1,346 41,274
Interest expense (18,770) (31,105) (3,609)
----------- ----------- -----------
Total Other Income
(Expense) (18,442) (29,129) 38,204
----------- ----------- -----------
NET LOSS (103,118) (356,351) (570,026)
----------- ----------- -----------
OTHER COMPREHENSIVE INCOME
Gain (loss) on foreign currency
adjustments (9,449) (37,023) (12,868)
----------- ----------- -----------
NET COMPREHENSIVE LOSS $ (112,567) $ (393,374) $ (582,894)
=========== =========== ===========
BASIC LOSS PER SHARE $ (51.56) $ (178.18) $ (285.01)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 2,000 2,000 2,000
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE> 7
ROP MERGER CORP. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Additional Other
Common Stock Paid-In Comprehensive Accumulated
Shares Amount Capital Income Deficit
--------- --------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Balance at inception,
March 10, 1998 - $ - $ - $ - $ -
Shares issued to incorporators
for cash and equipment 2,000 2,000 1,613,191 - -
Currency translation adjustment - - - (12,868) -
Net loss for the year ended
December 31, 1998 - - - - (570,026)
--------- --------- ---------- ----------- -----------
Balance, December 31, 1998 2,000 2,000 1,613,191 (12,868) (570,026)
Currency translation adjustment - - - (37,023) -
Net loss for the year ended
December 31, 1999 - - - - (356,351)
--------- --------- ---------- ----------
Balance, December 31, 1999 2,000 2,000 1,613,191 (49,891) (926,377)
Currency translation adjustment
(unaudited) - - - (9,449) -
Net loss for the six months ended
June 30, 2000 (unaudited) - - - - (103,118)
--------- --------- ---------- ---------- ------------
Balance, June 30, 2000 (unaudited) 2,000 $ 2,000 $ 1,613,191 $ (59,340) $ (1,029,495)
========= ========= ========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE> 8
ROP MERGER CORP. AND SUBSIDIARY
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the
Six Months
Ended For the Years Ended
June 30, December 31,
2000 1999 1998
------------- ----------- ------------
(Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (103,118) $ (356,351) $ (570,026)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 58,295 115,697 51,732
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 4,467 (9,439) (16,820)
(Increase) decrease in other assets 5 6,997 (7,816)
Increase (decrease) in accounts payable (23,169) (8,053) 43,649
Increase (decrease) bank overdraft 24,694 1,414 -
Increase (decrease) in accrued expenses 12,566 11,795 9,521
------------- ----------- ----------
Net Cash (Used) by Operating Activities (26,260) (237,940) (489,760)
------------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (13,740) (67,308) (709,992)
------------- ----------- ----------
Net Cash (Used) by Investing Activities (13,740) (67,308) (709,992)
------------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash received from notes payable - related 40,000 55,000 200,000
Issuance of common stock for cash - - 1,250,000
------------- ----------- ----------
Net Cash Provided by Financing Activities 40,000 55,000 1,450,000
------------- ----------- ----------
NET INCREASE (DECREASE) IN CASH - (250,248) 250,248
CASH AT BEGINNING OF PERIOD - 250,248 -
------------- ----------- ----------
CASH AT END OF PERIOD $ - $ - $ 250,248
============= =========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID FOR:
Interest $ 6,186 $ 15,348 $ -
Income taxes $ - $ - $ -
NON-CASH FINANCING ACTIVITIES:
Contribution of fixed assets $ - $ - $ 365,191
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE> 9
ROP MERGER CORP. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
June 30, 2000 and December 31, 1999 and 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
The consolidated financial statements presented are those of ROP Merger
Corp. (ROP) and its wholly-owned subsidiary, ROP North America, Inc, (ROP,
Inc.). Collectively, they are referred to herein as the "Company".
During March 1998, a joint venture agreement was entered into by IEI Canada,
Inc. and JFJ Ecosystems, Inc. to form ROP North America, LLC (ROP, LLC). ROP,
LLC created a wholly-owned subsidiary called ROP North America, Inc. (an
Ontario corporation) which became the operating entity. On June 2, 2000,
through a Dissolution and Contribution Agreement, ROP Merger Corp. was formed
to change ROP, LLC to a corporation. The joint venture partners both
contributed their ownership interests in ROP, LLC to the newly-formed ROP
Merger Corp. for 1,000 shares of common stock each. At the same time, ROP,
LLC was dissolved. The transaction was accounted for as a recapitalization
of ROP, LLC with no adjustment to the basis of ROP, LLC's assets or
liabilities. For legal purposes, ROP Merger Corp. is the surviving entity,
with a wholly-owned subsidiary, ROP North America, Inc.
The Company was established to transform organic by-product from commercial
waste streams into livestock feed. This process is accomplished, in part,
through a liquid feed system. The Company also raises approximately 15,000
hogs under contract. In addition, the hog farm is a beta-site for the liquid
feed products.
b. Accounting Methods
The Company's consolidated financial statements are prepared using the
accrual method of accounting. The Company has elected a December 31 year end.
c. Cash and Cash Equivalents
Cash equivalents include short-term, highly liquid investments with
maturities of three months or less at the time of acquisition.
d. Basic Loss Per Share
June 30, December 31,
2000 1999 1998
----------- ----------- ------------
(Unaudited)
Loss (numerator) $ (103,118) $ (356,351) $ (570,026)
Shares (denominator) 2,000 2,000 2,000
----------- ----------- -----------
Per share amount $ (51.56) $ (178.18) $ (285.01)
=========== =========== ===========
The computations of basic loss per share of common stock are based on the
weighted average number of common shares outstanding during the period of the
consolidated financial statements.
<PAGE>
<PAGE> 10
ROP MERGER CORP. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
June 30, 2000 and December 31, 1999 and 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
e. Change in Accounting Principle
The Financial Accounting Standards Board has issued certain new standards,
including standards on earnings per share (SFAS 128), capital structure (SFAS
129), comprehensive income (SFAS 130), operating segments (SFAS 131) and
postretirement benefits (SFAS 132). The adoption of these standards did not
have a material impact on the Company's consolidated financial statements.
f. Property and Equipment
Property and equipment is recorded at cost. Major additions and improvement
are capitalized. The cost and related accumulated depreciation of equipment
retired or sold are removed from the accounts and any differences between the
undepreciated amount and the proceeds from the sale are recorded as gain or
loss on sale of equipment. Depreciation is computed using the straight-line
method over the estimated useful life of the assets as follows:
Description Estimated Useful Life
----------- ---------------------
Office equipment 5 years
Machinery and equipment 7 to 10 years
Leasehold improvements and building 10 to 15 years
g. Accounts Receivable
Accounts receivable are considered to be fully collectible and no allowance
for doubtful accounts has been recorded.
h. Provisions for Taxes
At December 31, 1999, the Company has an accumulated deficit of $926,377
which includes net operating loss carryforwards that may be offset against
future taxable income through 2019. No tax benefit has been reported in the
consolidated financial statements because the Company believes there is a 50%
or greater chance the net operating loss carryforwards will expire unused.
Accordingly, the potential tax benefits of the net operating loss
carryforwards are offset by a valuation allowance of the same amounts.
i. Principles of Consolidation
The consolidated financial statements include those of ROP Merger Corp. and
its wholly-owned subsidiary, ROP North America, Inc.
All material intercompany accounts and transactions have been eliminated.
<PAGE>
<PAGE> 11
ROP MERGER CORP. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
June 30, 2000 and December 31, 1999 and 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
j. Statement of Cash Flows
The Company's foreign subsidiary, ROP North America, Inc., uses the local
currency as its functional currency. Accordingly, assets and liabilities are
translated at year-end exchange rates, and operating statement items are
translated at average exchange rates prevailing during the year. The
resultant cumulative translation adjustments to the assets and liabilities are
recorded as a separate component of stockholders' equity. Exchange rate
adjustments resulting from foreign currency transactions are included in the
determination of net loss.
In accordance with Statement of Financial Accounting Standards No. 95,
"Statement of Cash Flows", cash flows from the Company's foreign subsidiary
are calculated based upon the local currencies. As a result, amounts related
to assets and liabilities reported on the consolidated statements of cash
flows will not necessarily agree with changes in the corresponding balances on
the balance sheets.
k. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
l. Advertising
The Company follows the policy of charging the costs of advertising to
expense as incurred.
m. Revenue Recognition
Revenue is recognized as billings are submitted to the customer. Billings
are submitted once the jobs are substantially completed.
n. Unaudited Consolidated Financial Statements
The accompanying unaudited consolidated financial statements include all of
the adjustments which, in the opinion of management, are necessary for a fair
presentation. Such adjustments are of a normal recurring nature.
<PAGE>
<PAGE> 12
ROP MERGER CORP. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
June 30, 2000 and December 31, 1999 and 1998
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at June 30, 2000 and
December 31, 1999:
June 30, December 31,
2000 1999
--------- ----------
(Unaudited)
Office equipment $ 4,990 $ 4,990
Machinery and equipment 943,031 940,546
Leasehold improvements and building 164,648 164,648
--------- ---------
1,112,669 1,110,184
Accumulated depreciation (241,502) (185,012)
--------- ---------
Net property and equipment $ 871,167 $ 925,172
========= =========
Depreciation expense for the six months ended June 30, 2000 and the years
ended December 31, 1999 and 1998 was $58,295, $115,697 and $51,732,
respectively.
NOTE 3 - NOTES PAYABLE - RELATED PARTIES
Notes payable - related parties consisted of the following at June 30, 2000
and December 31, 1999:
June 30, December 31,
2000 1999
--------- ----------
(Unaudited)
Note payable to JFJ Ecosystems, Inc.,
interest at 8.0% per annum, principal and
interest due on demand. $ 50,000 $ 50,000
Note payable to IEI Canada, Inc., interest
at 8.0% per annum, principal and interest
due on demand. 70,000 50,000
Notes payable to an individual, interest at
9.0% per annum, principal and interest
due on demand. 175,000 155,000
--------- ----------
Total Notes Payable 295,000 255,000
Less: Current Portion (295,000) (255,000)
--------- ----------
Long-Term Notes Payable $ - $ -
========= ==========
<PAGE>
<PAGE> 13
ROP MERGER CORP. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
June 30, 2000 and December 31, 1999 and 1998
NOTE 3 - NOTES PAYABLE - RELATED PARTIES (Continued)
The aggregate principle maturities of notes payable are as follows:
Year Ended
December 31, Amount
------------ ------------
2000 $ 255,000
2001 -
2002 -
2003 -
2004 -
2005 and thereafter -
------------
Total $ 255,000
============
NOTE 4 - COMMITMENTS AND CONTINGENCIES
On March 20, 1998, the Company entered into an equipment lease agreement
whereby the Company has agreed to lease one of the joint venture partners a
certain liquid feed distribution system for $4,414 per month for a term of
seven years.
NOTE 5 - GOING CONCERN
The Company's consolidated financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. The Company has incurred significant losses which
have resulted in an accumulated deficit of $926,377 at December 31, 1999, a
working capital deficit and limited internal financial resources. These
factors combined, raise substantial doubt about the Company's ability to
continue as a going concern. The accompanying consolidated financial
statements do not include any adjustments relating to the recoverability and
classification of asset carrying amounts or the amount and classification of
liabilities that might result from the outcome of this uncertainty.
<PAGE>
<PAGE> 14
INDUSTRIAL ECOSYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED PROFORMA FINANCIAL STATEMENTS
December 31, 1999
<PAGE>
<PAGE> 15
INDUSTRIAL ECOSYSTEMS, INC. AND SUBSIDIARIES
Consolidated Proforma Balance Sheet
December 31, 1999 (Unaudited)
ASSETS
Industrial Proforma
Ecosystems, ROP Merger Adjustments
Inc. and Corp. and Increase Proforma
Subsidiaries Subsidiary (Decrease) Consolidated
------------ ------------- ----------- ------------
CURRENT ASSETS
Cash and cash
equivalents $ 44,277 $ - $ - $ 44,277
Restricted cash 43,306 - - 43,306
Accounts receivable 9,902 26,259 - 36,161
Other assets 7,500 816 - 8,319
------------ ------------- ----------- ------------
Total Current Assets 104,985 27,078 - 132,063
------------ ------------- ----------- ------------
FIXED ASSETS, NET 191,884 925,172 - 1,117,056
------------ ------------- ----------- ------------
TOTAL ASSETS $ 296,869 $ 952,250 $ - $ 1,249,119
============ ============= =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 85,680 $ 35,596 $ - $ 121,276
Accrued expenses 326,346 21,317 (19,306) 328,357
Bank overdraft - 1,414 - 1,414
Notes payable -
related parties 750,000 255,000 (1,005,000) -
Notes payable -
current portion 49,458 - - 49,458
------------ ------------- ----------- ------------
Total Current
Liabilities 1,211,484 313,327 (1,024,306) 500,505
------------ ------------- ----------- ------------
LONG-TERM DEBT
Notes payable 108,266 - - 108,266
------------ ------------- ----------- ------------
Total Long-Term Debt 108,266 - - 108,266
------------ ------------- ----------- ------------
TOTAL LIABILITIES 1,319,750 313,327 (1,024,306) 608,771
------------ ------------- ----------- ------------
COMMITMENTS AND
CONTINGENCIES 582,336 - - 582,336
------------ ------------- ----------- ------------
STOCKHOLDERS' EQUITY
(DEFICIT)
Common stock:
100,000,000 shares
authorized of $0.001
par value, 58,941,613
shares issued and
outstanding 40,242 2,000 16,700 58,942
Additional paid-in
capital 21,136,268 1,613,191 957,606 23,707,065
Other comprehensive
income 26,760 (49,891) - (23,131)
Accumulated deficit (22,808,487) (926,377) 50,000 (23,684,864)
------------ ------------- ----------- ------------
Total Stockholders'
Equity (Deficit) (1,605,217) 638,923 1,024,306 (58,012)
------------ ------------- ----------- ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT) $ 296,869 $ 952,250 $ - $ 1,249,119
============ ============= =========== ============
See Summary of Assumptions and Disclosures
<PAGE>
<PAGE> 16
INDUSTRIAL ECOSYSTEMS, INC. AND SUBSIDIARIES
Consolidated Proforma Statement of Operations
For the Year Ended December 31, 1999 (Unaudited)
Industrial Proforma
Ecosystems, ROP Merger Adjustments
Inc. and Corp. and Increase Proforma
Subsidiaries Subsidiary (Decrease) Consolidated
------------ ------------- ----------- ------------
REVENUES
Net sales $ 472,865 $ 196,924 $ - $ 669,789
Direct sales 405,100 182,267 - 587,367
------------ ------------- ----------- ------------
Gross Profits 67,765 14,657 - 82,422
------------ ------------- ----------- ------------
EXPENSES
Depreciation and
amortization 97,563 115,697 - 213,260
General and
administrative 1,089,270 226,182 (55,155) 1,260,297
------------ ------------- ----------- ------------
Total Expenses 1,186,833 341,879 (55,155) 1,473,557
------------ ------------- ----------- ------------
LOSS FROM OPERATIONS (1,119,068) (327,222) 55,155 (1,391,135)
------------ ------------- ----------- ------------
OTHER INCOME (EXPENSE)
Interest income - 1,346 - 1,346
Other income 55,155 630 (55,155) 630
Loss on disposition
of assets (7,577) - - (7,577)
Interest expense (94,065) (31,105) - (125,170)
------------ ------------- ----------- ------------
Total Other Income
(Expense) (46,487) (29,129) (55,155) (130,771)
------------ ------------- ----------- ------------
NET LOSS BEFORE
EXTRAORDINARY ITEMS (1,165,555) (356,351) - (1,521,906)
------------ ------------- ----------- ------------
EXTRAORDINARY ITEMS
Debt forgiveness 350,957 - - 350,957
------------ ------------- ----------- ------------
Total Extraordinary
Items 350,957 - - 350,957
------------ ------------- ----------- ------------
NET LOSS $ (814,598) $ (356,351) $ - $ (1,170,949)
============ ============= =========== ============
See Summary of Assumptions and Disclosures
<PAGE>
<PAGE> 17
INDUSTRIAL ECOSYSTEMS, INC. AND SUBSIDIARIES
Summary of Assumptions and Disclosures
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Business Organization
The accompanying proforma financial statements are prepared to present the
acquisition of ROP Merger Corp. and Subsidiary by Industrial Ecosystems, Inc.
to aid the user in understanding the acquisition. The proforma balance sheet
is presented as though the acquisition took place on December 31, 1999 and the
statement of operations as though the acquisition took place January 1, 1999.
The financial statements presented are those of Industrial Ecosystems, Inc.
and Subsidiaries (the "Company"). The Company was incorporated in January
1994. The Company is engaged in the bioremediation business and operates
principally in New Mexico.
ROP Merger Corp. and Subsidiary (ROP) was incorporated during March 1998. The
Company was organized to transform organic by-product from commercial waste
streams into livestock feed. This process is accomplished in part, through a
liquid feed system. ROP also raises approximately 15,000 hogs under contract.
In addition, the hog farm is a beta-site for the liquid feed products.
b. Proforma Adjustments
The proforma financial statements have been prepared as though the acquisition
of ROP Merger by Industrial Ecosystems, Inc. occurred on January 1, 1999.
1) Additional paid-in capital (IEI) $ 1,604,799
Common stock (IEI) 10,392
Additional paid-in capital (ROP) (1,613,191)
Common stock (ROP) (2,000)
---------------
$ -
===============
To record the acquisition of ROP Merger Corp. and Subsidiary through issuance
of 10,392,337 shares of common stock.
2) Notes payable - related parties $ (1,005,000)
Accrued expenses (19,306)
Common stock 8,308
Additional paid-in capital 965,998
Accumulated deficit 50,000
---------------
$ -
===============
To record issuance of 8,307,593 common shares in lieu of outstanding debt and
to eliminate intercompany accounts.
3) Other income $ 55,155
General and administrative (55,155)
---------------
$ -
===============
To eliminate intercompany transactions for the year ended December 31, 1999.
<PAGE> 18
INDUSTRIAL ECOSYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED PROFORMA FINANCIAL STATEMENTS
December 31, 1998
<PAGE>
<PAGE> 19
INDUSTRIAL ECOSYSTEMS, INC. AND SUBSIDIARIES
Consolidated Proforma Balance Sheet
December 31, 1998 (Unaudited)
ASSETS
Industrial Proforma
Ecosystems, ROP Merger Adjustments
Inc. and Corp. and Increase Proforma
Subsidiaries Subsidiary (Decrease) Consolidated
------------ ------------- ----------- ------------
CURRENT ASSETS
Cash and cash
equivalents $ 12,552 $ 250,248 $ - $ 262,800
Restricted cash 40,669 - - 40,669
Accounts receivable 35,079 16,820 - 51,899
Other assets 10,740 7,816 - 18,556
------------ ------------- ----------- ------------
Total Current Assets 99,040 274,884 - 373,924
------------ ------------- ----------- ------------
FIXED ASSETS, NET 275,973 1,010,583 - 1,286,556
------------ ------------- ----------- ------------
TOTAL ASSETS $ 375,013 $ 1,285,467 $ - $ 1,660,480
============ ============= =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 356,890 $ 43,649 $ - $ 400,539
Accrued expenses 323,755 9,521 (3,609) 329,667
Unearned revenue 21,666 - - 21,666
Notes payable -
related parties 14,286 200,000 (214,286) -
Notes payable -
current portion 85,902 - - 85,902
------------ ------------- ----------- ------------
Total Current
Liabilities 802,499 253,170 (217,895) 837,774
------------ ------------- ----------- ------------
LONG-TERM DEBT
Notes payable 157,405 - - 157,405
------------ ------------- ----------- ------------
Total Long-Term Debt 157,405 - - 157,405
------------ ------------- ----------- ------------
TOTAL LIABILITIES 959,904 253,170 (217,895) 995,179
------------ ------------- ----------- ------------
COMMITMENTS AND
CONTINGENCIES 747,819 - - 747,819
------------ ------------- ----------- ------------
STOCKHOLDERS' EQUITY
(DEFICIT)
Common stock:
100,000,000 shares
authorized of $0.001
par value, 51,700,835
shares issued and
outstanding 33,001 2,000 16,700 51,701
Additional paid-in
capital 20,589,759 1,613,191 151,195 22,354,145
Other comprehensive
income 38,419 (12,868) - 25,551
Accumulated deficit (21,993,889) (570,026) 50,000 (22,513,915)
------------ ------------- ----------- ------------
Total Stockholders'
Equity (Deficit) (1,332,710) 1,032,297 217,895 (82,518)
------------ ------------- ----------- ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT) $ 375,013 $ 1,285,467 $ - $ 1,660,480
============ ============= =========== ============
See Summary of Assumptions and Disclosures
<PAGE>
<PAGE> 20
INDUSTRIAL ECOSYSTEMS, INC. AND SUBSIDIARIES
Consolidated Proforma Statement of Operations
For the Year Ended December 31, 1998 (Unaudited)
Industrial Proforma
Ecosystems, ROP Merger Adjustments
Inc. and Corp. and Increase Proforma
Subsidiaries Subsidiary (Decrease) Consolidated
------------ ------------- ----------- ------------
REVENUES
Net sales $ 626,545 $ 110,554 $ - $ 737,099
Direct sales 405,787 76,851 - 482,638
------------ ------------- ----------- ------------
Gross Profits 220,758 33,703 - 254,461
------------ ------------- ----------- ------------
EXPENSES
Bad debt expense 19,802 - - 19,802
Depreciation and
amortization 108,677 51,732 - 160,409
General and
administrative 1,586,049 590,201 (95,118) 2,081,132
------------ ------------- ----------- ------------
Total Expenses 1,714,528 641,933 (95,118) 2,261,343
------------ ------------- ----------- ------------
LOSS FROM OPERATIONS (1,493,770) (608,230) 95,118 (2,006,882)
------------ ------------- ----------- ------------
OTHER INCOME (EXPENSE)
Interest income 1,362 41,274 - 42,636
Other income 95,118 539 (95,118) 539
Loss on disposition
of assets (104,106) - - (104,106)
Loss on investment in
joint venture (353,117) - - (353,117)
Interest expense (40,236) (3,609) - 43,845
------------ ------------- ----------- ------------
Total Other Income
(Expense) (400,979) 38,204 (95,118) (457,893)
------------ ------------- ----------- ------------
NET LOSS $ (1,894,749) $ (570,026) $ - $ (2,464,775)
============ ============= =========== ============
See Summary of Assumptions and Disclosures
<PAGE>
<PAGE> 21
INDUSTRIAL ECOSYSTEMS, INC. AND SUBSIDIARIES
Summary of Assumptions and Disclosures
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Business Organization
The accompanying proforma financial statements are prepared to present the
acquisition of ROP Merger Corp. and Subsidiary by Industrial Ecosystems, Inc.
to aid the user in understanding the acquisition. The proforma balance sheet
is presented as though the acquisition took place on December 31, 1998 and the
statement of operations as though the acquisition took place January 1, 1998.
The financial statements presented are those of Industrial Ecosystems, Inc.
and Subsidiaries (the "Company"). The Company was incorporated in January
1994. The Company is engaged in the bioremediation business and operates
principally in New Mexico.
ROP Merger Corp. and Subsidiary (ROP) was incorporated during March 1998. The
Company was organized to transform organic by-product from commercial waste
streams into livestock feed. This process is accomplished in part, through a
liquid feed system. ROP also raises approximately 15,000 hogs under contract.
In addition, the hog farm is a beta-site for the liquid feed products.
b. Proforma Adjustments
The proforma financial statements have been prepared as though the acquisition
of ROP Merger by Industrial Ecosystems, Inc. occurred on January 1, 1998.
1) Additional paid-in capital (IEI) $ 1,604,799
Common stock (IEI) 10,392
Additional paid-in capital (ROP) (1,613,191)
Common stock (ROP) (2,000)
---------------
$ -
===============
To record the acquisition of ROP Merger Corp. and Subsidiary through issuance
of 10,392,337 shares of common stock.
2) Notes payable - related parties $ (214,286)
Accrued expenses (3,609)
Common stock 8,308
Additional paid-in capital 159,587
Accumulated deficit 50,000
---------------
$ -
===============
To record issuance of 8,307,593 common shares in lieu of outstanding debt and
to eliminate intercompany accounts.
3) Other income $ 95,118
General and administrative (95,118)
---------------
$ -
===============
To eliminate intercompany transactions for the year ended December 31, 1998.
<PAGE>
<PAGE> 22
INDUSTRIAL ECOSYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED PROFORMA FINANCIAL STATEMENTS
June 30, 2000
<PAGE>
<PAGE> 23
INDUSTRIAL ECOSYSTEMS, INC. AND SUBSIDIARIES
Consolidated Proforma Balance Sheet
June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
------
Industrial Proforma
Ecosystems, ROP Merger Adjustments
Inc. and Corp. and Increase Proforma
Subsidiaries Subsidiary (Decrease) Consolidated
------------ ---------- ----------- -------------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ - $ - $ - $ -
Restricted cash 43,000 - - 43,000
Accounts receivable 22,051 21,792 - 43,843
Other assets - 814 - 814
---------- ---------- ---------- -------------
Total Current Assets 65,051 22,606 - 87,657
---------- ---------- ---------- -------------
FIXED ASSETS, NET 767,164 871,167 - 1,638,331
---------- ---------- ---------- -------------
TOTAL ASSETS $ 832,215 $ 893,773 $ - $ 1,725,988
========== ========== ========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES
Accounts payable $ 84,216 $ 12,427 $ - $ 96,643
Accrued expenses 305,360 33,882 (31,887) 307,355
Bank overdraft 2,485 26,108 - 28,593
Notes payable - related parties - 295,000 (295,000) -
Notes payable - current portion 10,750 - - 10,750
--------- ---------- ---------- -------------
Total Current Liabilities 402,811 367,417 (326,887) 443,341
--------- ---------- ---------- -------------
LONG-TERM DEBT
Notes payable 107,500 - - 107,500
--------- ---------- ---------- -------------
Total Long-Term Debt 107,500 - - 107,500
--------- ---------- ---------- -------------
Total Liabilities 510,311 367,417 (326,887) 550,841
--------- ---------- ---------- -------------
COMMITMENTS AND
CONTINGENCIES 582,336 - - 582,336
--------- ---------- ---------- -------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: 100,000,000 shares
authorized of $0.001 par value,
83,300,543 shares issued and
outstanding 64,601 2,000 16,700 83,301
Additional paid-in capital 23,345,383 1,613,191 260,187 25,218,761
Prepaid services (8,333) - - (8,333)
Other comprehensive income 23,278 (59,340) - (36,062)
Accumulated deficit (23,685,361) (1,029,495) 50,000 (24,664,856)
----------- ---------- --------- -------------
Total Stockholders'
Equity (Deficit) (260,432) 526,356 326,887 592,811
----------- ---------- --------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS'
EQUITY (DEFICIT) $ 832,215 $ 893,773 $ - $ 1,725,988
=========== ========== ========= =============
</TABLE>
See Summary of Assumptions and Disclosures
<PAGE>
<PAGE> 24
INDUSTRIAL ECOSYSTEMS, INC. AND SUBSIDIARIES
Consolidated Proforma Statement of Operations
For the Six Months Ended June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Industrial Proforma
Ecosystems, ROP Merger Adjustments
Inc. and Corp. and Increase Proforma
Subsidiaries Subsidiary (Decrease) Consolidated
------------ ---------- ----------- -------------
<S> <C> <C> <C> <C>
REVENUES
Net sales $ 133,940 $ 123,579 $ - $ 257,519
Direct sales 150,107 104,588 - 254,695
------------ ---------- ----------- -------------
Gross Profits (16,167) 18,991 - 2,824
------------ ---------- ----------- -------------
EXPENSES
Depreciation and amortization 27,129 58,295 - 85,424
General and administrative 446,045 45,372 (22,205) 469,212
------------ ---------- ----------- ------------
Total Expenses 473,174 103,667 (22,205) 554,636
------------ ---------- ----------- ------------
LOSS FROM OPERATIONS (489,341) 84,676 22,205 (551,812)
------------ ---------- ----------- ------------
OTHER INCOME (EXPENSE)
Interest income - - - -
Other income 22,205 328 (22,205) 328
Impairment of goodwill (379,981) - - (379,981)
Interest expense (29,757) (18,710) - (48,527)
------------ ---------- ----------- -----------
Total Other Income (Expense) (387,533) (18,442) (22,205) (428,180)
------------ ---------- ----------- -----------
NET LOSS $ (876,874) $ (103,118) $ - $ (979,992)
============ ========== =========== ===========
</TABLE>
See Summary of Assumptions and Disclosures
<PAGE>
<PAGE> 25
INDUSTRIAL ECOSYSTEMS, INC. AND SUBSIDIARIES
Summary of Assumptions and Disclosures
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Business Organization
The accompanying proforma financial statements are prepared to present the
acquisition of ROP Merger Corp. and Subsidiary by Industrial Ecosystems, Inc. to
aid the user in understanding the acquisition. The proforma balance sheet is
presented as though the acquisition took place on June 30, 2000 and the
statement
of operations as though the acquisition took place January 1, 2000.
The financial statements presented are those of Industrial Ecosystems, Inc.
and
Subsidiaries (the "Company"). The Company was incorporated in January 1994.
The
Company is engaged in the bioremediation business and operates principally in
New
Mexico.
ROP Merger Corp. and Subsidiary (ROP) was incorporated during March 1998. The
Company was organized to transform organic by-product from commercial waste
streams into livestock feed. This process is accomplished in part, through a
liquid feed system. ROP also raises approximately 15,000 hogs under contract.
In addition, the hog farm is a beta-site for the liquid feed products.
b. Proforma Adjustments
The proforma financial statements have been prepared as though the acquisition
of ROP Merger by Industrial Ecosystems, Inc. occurred on January 1, 2000.
1) Additional paid-in capital (IEI) $ 1,604,799
Common stock (IEI) 10,392
Additional paid-in capital (ROP) (1,613,191)
Common stock (ROP) (2,000)
------------
$ -
============
To record the acquisition of ROP Merger Corp. and Subsidiary through issuance
of 10,392,337 shares of common stock.
2) Notes payable - related parties $ (295,000)
Accrued expenses (31,887)
Common stock 8,308
Additional paid-in capital 268,579
Accumulated deficit 50,000
------------
$ -
============
To record issuance of 8,307,593 common shares in lieu of outstanding debt and
to eliminate intercompany accounts.
3) Other income $ 22,205
General and administrative (22,205)
------------
$ -
============
To eliminate intercompany transactions for the six months ended June 30, 2000.
