SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): August 16, 2000.
ISO BLOCK PRODUCTS USA, INC.
(Exact Name of Registrant as Specified in Its Charter)
Colorado 0-25810 84-1206503
(State or Other (Commission File Number) (I.R.S. Employee
Jurisdiction of Incorporation) Identification Number)
2250 North 1500 West, Ogden, Utah 84404
(Address of Principal Executive Offices, Including Zip Code)
(801) 395-2796
(Registrant's Telephone Number, Including Area Code)
ISO Block Products USA, Inc.
8037 S. Datura Street, Littleton, Colorado 80120
(Former Name or Former Address, if Changed Since Last Report)
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
Effective August 16, 2000, ISO Block Products USA, Inc. (the
"Company" or the "Registrant"), underwent a change of control in connection with
its acquisition of Cryocon, Inc., a Utah corporation ("Cryocon"), in a stock for
stock exchange, as more fully described below under Item 2. As a result of the
stock exchange, (i) persons designated by Cryocon constituted the Company's
board of directors, and (ii) the former shareholders of Cryocon became the
holders of 44,000,000 shares of the Company's common stock, out of approximately
49,000,000 shares issued and outstanding following the exchange.
Following the exchange, Robert W. Brunson, Debra Brunson,
Harry Brunson and Randy Sant, all designees of Cryocon, became directors of the
Company, and Egin Bresnig, Karin Kuhbander, and Dean Wicker resigned their
positions as directors of the Registrant. On July 20, 2000, the Company filed
with the Securities and Exchange Commission an information statement pursuant to
Rule 14f-1 under the Securities Exchange Act of 1934, as amended, which among
other things described the impending stock exchange and change of control.
Biographical information concerning the new directors is set forth in that
information statement.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 25, 2000, the Company and Cryocon entered into an
Agreement and Plan of Reorganization (the "Agreement"), providing for the
Company's purchase of all the outstanding capital stock of Cryocon in exchange
for the Company's issuance of 44,000,000 shares of its common stock to the
holders of the Cryocon shares. The share exchange is intended to qualify as a
tax-free reorganization pursuant to Sections 351 and 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended.
Further information concerning Cryocon is set forth in the
information statement filed by the Company on July 20, 2000. The Agreement and
Plan of Reorganization is filed as an exhibit to this report.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired
The audited financial statements of Cryocon Inc.,
consisting of balance sheet dated as of March 31, 2000, and statements of
operations, stockholders' equity (deficit) and cash flows for the period from
inception (October 20, 1999) through March 31, 2000, together with footnotes,
are set forth beginning at page F-1.
(b) Pro Forma Financial Information
The pro forma financial information required to be
disclosed hereunder will be filed by amendment to this initial report on form
8-K not later than 60 days after the date by which this initial report must be
filed.
(c) Exhibits
The following exhibits are included as part of this
report:
2.1 Agreement and Plan of Reorganization, dated as of April
25, 2000, by and among the Company, Cryocon Inc. and the shareholders of Cryocon
Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
ISO BLOCK PRODUCTS USA, INC.
Date: August __, 2000 By: /s/ Robert W. Brunson
--------------------------------
Name: Robert W. Brunson
Title: President
CRYOCON, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
March 31, 2000
C O N T E N T S
Independent Auditors' Report........................................... F - 3
Balance Sheet.......................................................... F - 4
Statement of Operations................................................ F - 5
Statement of Stockholders' Equity (Deficit)............................ F - 6
Statement of Cash Flows................................................ F - 8
Notes to the Financial Statements...................................... F - 9
F-2
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Stockholders of
Cryocon, Inc.
(A Development Stage Company)
Ogden, Utah
We have audited the accompanying balance sheet of Cryocon, Inc. (a development
stage company) as of March 31, 2000 and the related statements of operations,
stockholders' equity (deficit) and cash flows from inception on October 20, 1999
through March 31, 2000. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit 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 audit provides 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 Cryocon, Inc. (a development
stage company) as of March 31, 2000 and the results of its operations and its
cash flows from inception on October 20, 1999 through March 31, 2000 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 6 to the
financial statements, the Company is a development stage company with no
significant operating results to date, which raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 6. The financial statements do not include
any adjustments that might result from the outcome of the uncertainty.
HJ & Associates, LLC
Salt Lake City, Utah
July 14, 2000
F-3
CRYOCON, INC.
(A Development Stage Company)
Balance Sheet
ASSETS
------
March 31,
2000
---------
CURRENT ASSETS
Cash $ 71,771
Accounts receivable, net 12,611
-----------------
Total Current Assets 84,382
PROPERTY AND EQUIPMENT, NET (Note 2) 2,260,585
-----------------
OTHER ASSETS
Patents, trademarks and licenses, net (Note 1) 419,067
-----------------
Total Other Assets 419,067
-----------------
TOTAL ASSETS $ 2,764,034
=================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES
Accounts payable $ 75,705
Accrued expenses 80,320
Current portion long-term debt (Note 4) 2,863,149
-----------------
Total Current Liabilities 3,019,174
-----------------
LONG-TERM LIABILITIES
Note payable, related party (Note 3) 50,000
Long-term debt (Note 4) 187,291
-----------------
Total Long-Term Liabilities 237,291
-----------------
TOTAL LIABILITIES 3,256,465
-----------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: 20,000,000 shares authorized of no
par value, 11,000,000 shares issued and outstanding 577,500
Deficit accumulated during the development stage (1,069,931)
-----------------
Total Stockholders' Equity (Deficit) (492,431)
-----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 2,764,034
=================
The accompanying notes are an integral part of these financial statements.
F-4
CRYOCON, INC.
(A Development Stage Company)
Statement of Operations
From
Inception on
October 20,
1999 Through
March 31,
2000
-----------------
REVENUES
Sales $ 22,505
-----------------
COST OF SALES
Supplies and materials 6,979
-----------------
GROSS MARGIN 15,526
-----------------
EXPENSES
Advertising 53,524
Depreciation and amortization 42,299
General and administrative 963,490
-----------------
Total Expenses 1,059,313
-----------------
OPERATING LOSS (1,043,787)
-----------------
OTHER (EXPENSE)
Interest expense (26,144)
-----------------
Total Other (Expense) (26,144)
-----------------
NET LOSS $ (1,069,931)
=================
BASIC LOSS PER SHARE $ (0.31)
=================
FULLY DILUTED LOSS PER SHARE $ (0.31)
=================
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 3,472,710
=================
The accompanying notes are an integral part of these financial statements.
F-5
CRYOCON, INC.
(A Development Stage Company)
Statement of Stockholders' Equity (Deficit)
Deficit
Accumulated
Common Stock During the
-------------------------- Development
Shares Amount Stage
------ ------ -----------
Balance at inception on
October 20, 1999 - $ - $ -
Issuance of common stock to founders
for services at $0.00 per share 1,000 - -
Issuance of common stock to founders
for services at $0.00 per share 524,000 - -
Issuance of common stock to founders
for services and intangible assets at
$0.00 per share 9,700,000 - -
Issuance of common stock for services
at $0.75 per share 100,000 75,000 -
Issuance of common stock for cash
at $0.50 per share 10,000 5,000 -
Issuance of common stock for services
at $0.50 per share 5,000 2,500 -
Issuance of common stock for cash
at $0.50 per share 10,000 5,000 -
Issuance of common stock for cash
at $0.50 per share 4,000 2,000 -
Issuance of common stock for services
at $0.50 per share 16,000 8,000 -
Issuance of common stock for services
at $0.75 per share 100,000 75,000 -
Issuance of common stock for services
at $0.75 per share 500,000 375,000 -
Issuance of common stock for cash at
$1.00 per share 10,000 10,000 -
------------------ ------------------ -----------------
Balance forward 10,980,000 $ 557,500 $ -
------------------ ------------------ -----------------
The accompanying notes are an integral part of these financial statements.
F-6
CRYOCON, INC.
(A Development Stage Company)
Statement of Stockholders' Equity (Deficit) (Continued)
Deficit
Accumulated
Common Stock During the
-------------------------- Development
Shares Amount Stage
------ ------ -----------
Balance forward 10,980,000 $ 557,500 $ -
Issuance of common stock for cash
at $1.00 per share 10,000 10,000 -
Issuance of common stock for cash
at $1.00 per share 10,000 10,000 -
Net loss from inception on
October 20, 1999 through
March 31, 2000 - - (1,069,931)
------------------ ------------------ -----------------
Balance, March 31, 2000 11,000,000 $ 577,500 $ (1,069,931)
================== ================== =================
The accompanying notes are an integral part of these financial statements.
F-7
CRYOCON, INC.
(A Development Stage Company)
Statement of Cash Flows
From
Inception on
October 20,
1999 Through
March 31,
2000
-----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (1,069,931)
Adjustments to reconcile net loss to net cash used by operating
activities;
Amortization and depreciation 42,299
Common stock issued for services rendered 535,500
(Increase) decrease in:
Accounts receivable (12,611)
Accounts payable and accrued expenses 156,025
-----------------
Net Cash Used by Operating Activities (348,718)
-----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase or development of intangibles (449,000)
Equipment purchases (222,951)
Purchase of building (2,050,000)
-----------------
Net Cash (Used) by Investing Activities (2,721,951)
-----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock for cash 42,000
Issuance of notes payable 3,105,846
Payments made on notes payable (5,406)
-----------------
Net Cash Provided by Financing Activities 3,142,440
-----------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 71,771
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD -
-----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 71,771
=================
CASH PAID FOR:
Interest $ 3,944
Income taxes $ -
Schedule of Non-Cash Financing Activities:
Common stock issued for services $ 535,500
The accompanying notes are an integral part of these financial statements.
F-8
CRYOCON, INC.
(A Development Stage Company)
Notes to the Financial Statements
March 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General Information
-------------------
Cryocon, Inc. (the Company) is a privately held corporation
organized under the laws of the State of Utah in October 1999. The
Company's authorized capital stock consists of 20,000,000 shares
of common stock, with no par value, of which 11,000,000 shares
have been issued and are outstanding, and no shares of preferred
stock are authorized. All of the Company's shares have been duly
authorized, validly issued, and are fully paid and non-assessable.
The Company is engaged in the study of extremely low temperatures
and how materials react to those temperatures and treating various
materials with those temperatures to improve their
characteristics.
Revenue Recognition
-------------------
Revenue is recognized on an accrual basis when the product is
shipped.
Property and Equipment
----------------------
Property and equipment are stated at cost with depreciation and
amortization computed on the straight-line method. Property and
equipment are depreciated over the following estimated useful
lives:
Years
-----
Office furniture 5-10
Machinery and equipment 5
Building 39.5
Shop equipment 10
Patents, Trademarks and Licenses
--------------------------------
Net Book
Value
Term Cost Amortization 2000
---------------- ------------------ --------------- ----------------
Product rights 5 years $ 100,000 $ 6,666 $ 93,334
Customer lists, patents
and trademarks 5 years 349,000 23,267 325,733
---------------- ------------------ --------------- ----------------
$ 449,000 $ 29,933 $ 419,067
================== =============== ================
Product rights, customer lists, patents and trademarks have been
capitalized and amortized over five years using a straight line
method. The total amortization of production costs for the year
ended March 31, 2000 amounted to $29,933
The Company evaluates the recoverability of intangibles and
reviews the amortization period on an annual basis. Several
factors are used to evaluate intangibles, including, but not
limited to, management's plans for future operations, recent
operating results and projected, undiscounted cash flows.
F-9
CRYOCON, INC.
(A Development Stage Company)
Notes to Financial Statements
March 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Basic Loss Per Share
--------------------
For the Year Ended
March 31, 2000
-----------------------------------------------------
Loss Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- -----------------
$ (1,069,931) $ 3,472,710 $ (0.31)
================== ================== =================
Cash Flows
----------
For purposes of reporting cash flows, cash and cash equivalents
include cash on hand and cash on deposit with banks.
Income Taxes
------------
The Company's tax basis is the same as the Company's financial
statement basis. The Company has net operating loss carryforwards
of approximately $1,070,000 available to offset future federal and
state income tax through 2020. The Company has not recorded a tax
benefit attributable to the carryforwards because realization of
such has been offset by a valuation allowance for the same amount.
Production Costs
----------------
The Company classifies the costs of planning, designing and
establishing the technological feasibility of development costs
and charges those costs to expense when incurred. Costs of
maintenance and customer support are charged to expense when costs
are incurred.
Advertising
-----------
The Company follows the policy of charging the costs of
advertising to expense as incurred.
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.
F-10
CRYOCON, INC.
(A Development Stage Company)
Notes to the Financial Statements
March 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Change in Accounting Principles
-------------------------------
The Company adopted Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings Per Share" during the year ended March
31, 2000. In accordance with SFAS No. 128, diluted earnings per
share must be calculated when an entity has convertible
securities, warrants, options, and other securities that represent
potential common shares. The purpose of calculating diluted
earnings (loss) per share is to show (on a proforma basis) per
share earnings or losses assuming the exercise or conversion of
all securities that are exercisable or convertible into common
stock and that would either dilute or not affect basis of EPS.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment as of March 31, 2000 are detailed in the
following summary:
Net Book
Accumulated Value
Cost Depreciation 2000
---- ------------ ---------
Office furniture and fixtures $ 110,665 $ 1,711 $ 108,954
Machinery and equipment 103,503 1,932 101,571
Building improvements 8,783 73 8,710
Building 2,050,000 8,650 2,041,350
------------------ ------------------ ------------------
Total $ 2,272,951 $ 12,366 $ 2,260,585
================== ================== ==================
Depreciation expense is computed principally on the straight-line
method in amounts sufficient to write off the cost of depreciable
assets over their estimated useful lives. Depreciation expense for
the year ended March 31, 2000, amounted to $12,366.
NOTE 3 - NOTE PAYABLE - RELATED PARTY
Note payable to a related party as of March 31, 2000 is detailed
in the following summary:
2000
----
Note payable to CEO; with an interest rate of 10%;
unsecured; is due January 3, 2003. $ 50,000
Total related party notes payable -
Less: current portion -
Long-term portion $ 50,000
========
F-11
CRYOCON, INC.
(A Development Stage Company)
Notes to Financial Statements
March 31, 2000
NOTE 3 - RELATED PARTIES (Continued)
Maturities of the related party debenture payable are as follows:
Period ending March 31, 2001 $ -
2002 -
2003 50,000
-----------
Total $ 50,000
===========
NOTE 4 - LONG-TERM DEBT
Notes payable as of March 31, 2000 are detailed in the following
summary:
2000
----
Note payable to a company; which includes
interest at 21%; due March 2005, secured by vehicle. $ 18,847
Notes payable to a company; due
December 2006, which includes interest at 8%. 193,593
Convertible debentures to a company; due
On demand, which includes interest at 8%. 1,038,000
Note payable to a company due September 9, 2000,
interest at 8%, secured by property. 1,800,000
-------------
Total long-term debt 3,050,440
Less: current portion 2,863,149
Long-term portion $ 187,291
=============
Maturities of long-term debt are summarized below:
Period ending March 31, 2001 $ 2,863,149
2002 27,595
2003 30,325
2004 33,385
2005 36,579
2006 59,407
-------------
Total $ 3,050,440
=============
NOTE 5 - COMMON STOCK
The Company is authorized to issue 20,000,000 shares of common
stock with no par value. In November of 1999, 10,225,000 shares
were issued as founders shares to officers for the transfer of
intangible assets and services valued at predecessor cost of $-0-.
F-12
CRYOCON, INC.
(A Development Stage Company)
Notes to Financial Statements
March 31, 2000
NOTE 6 - GOING CONCERN
The Company's 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. However, the Company
does not have significant cash or other material assets, nor does
it have an established source of revenues sufficient to cover its
operating costs and to allow it to continue as a going concern. It
is the intent of the Company to acquire a publicly traded shell to
facilitate the raising of equity capital. Until that time, the
stockholders have committed to covering the operating costs of the
Company.
NOTE 7 - SUBSEQUENT EVENTS
a. Summary of Proposed Merger
The Company executed an Agreement and Plan of Reorganization dated
April 25, 2000 (the "Exchange Agreement") with ISO BLOCK Products
USA, Inc., a Colorado corporation ("ISO"), pursuant to which it is
anticipated that ISO will issue 44,000,000 shares to acquire all
of the Company's issued and outstanding common stock from the
existing holders, upon which the current shareholders of the
Company will own approximately 86% of ISO. Pursuant to the
Exchange Agreement, the existing board of ISO will resign at
closing and be replaced by the current directors of the Company.
The Exchange Agreement also contemplates that, following the
closing of ISO's acquisition of the Company, the common stock of
ISO will undergo a 1:4 reverse split in which each then
outstanding common share of ISO will be changed into 1/4th of a
share, and that ISO's corporate name will be changed to Cryocon,
Inc. Closing under the Exchange Agreement is anticipated to take
place on July 31, 2000.
b. Issuance of Further Debentures
On April 15, 2000, the Board of Directors unanimously authorized
the execution of a Securities Purchase Agreement, Convertible
Debenture and related documents with Paragon Venture Capital Fund
IV. The Agreement provided for the payment of cash in the amount
of $475,000.00. The debenture is convertible for stock immediately
following the closing of an acquisition with a publicly traded
shell for 237,500 shares of common stock.
On July 7, 2000, Cryocon executed an outline of an agreement
setting forth the terms for the issuance of a Convertible
Debenture which provides for the payment of $1,000,000; $500,000
upon the closing of an acquisition with ISO Block; and, $500,000
within 30 days of closing. The Debenture is convertible for stock
with the floor price set at $3.00/share (post the four to one
reverse split) for a total stock issuance at 333,333 shares.
The debenture is convertible for stock immediately following the
closing of an acquisition with a publicly traded shell for
1,294,600 shares of common stock.
.
F-13
EXHIBIT INDEX
Exhibit No. Description
2.1 Agreement and Plan of Reorganization, dated as of April 25, 2000, by
and among the Registrant and Cryocon.