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 THE QUARTERLY PERIOD ENDED MARCH 31, 2003
Commission File #000-31935
TERRA BLOCK INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation or organization)
65-0729440
(IRS Employer Identification Number)
2637 Erie Avenue, Suite 207, Cincinnati, OH 45208
(Address of principal executive offices)(Zip Code)
(513) 533-1220
(Registrant's telephone no., including area code)
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 for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Title of Class Number of Shares Outstanding: Common Stock, par value $.001 per
share 18,600,000 as of April 30, 2003.
Documents Incorporated by Reference: None
TERRA BLOCK INTERNATIONAL, INC.
FORM 10-QSB
Table of Contents
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Item 2 - Management's Discussion and Analysis or Plan of Operation
Item 3 - Controls and Procedures
PART II - OTHER INFORMATION
Item 2 - Changes in Securities and Use of Proceeds
Item 6 - Exhibits and Reports on Form 8-K
SIGNATURES
TERRA BLOCK INTERNATIONAL, INC.
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2002
TERRA BLOCK INTERNATIONAL, INC.
CONTENTS
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PAGE
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Consolidated Financial Statements
Balance Sheet 1
Statement of Operations 2
Statement of Stockholders' Equity (Deficit) 3
Statement of Cash Flows 4
Notes to Financial Statements 5-6
Terra Block International, Inc.
Consolidated Balance Sheet
March 31, 2003
ASSETS
------
Current Assets
Cash and Cash Equivalents $ 6,965
Total Current Assets 6,965
Property and Equipment, Net
Other Assets
Start Up Costs 33,408
Accumulated Amortization (1,670)
---------
31,738
TOTAL ASSETS $ 38,703
=========
LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)
---------------------------------------------
Current Liabilities
Accounts Payable $ 117,396
Notes Payable 90,000
Total Current Liabilities 207,396
---------
Total Liabilities 207,396
---------
Stockholders' Equity(Deficit)
Preferred Stock, $.001 Par Value, 1,000,000
Shares Authorized, No Shares Issued
CommonStock, $.001 Par Value, 20,000,000 10,000
Shares Authorized,10,000,000 Shares Issued
Additional Paid-In-Capital 687,296
Accumulated Deficit (865,989)
Total Stockholders Equity(Deficit) (168,693)
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 38,703
=========
<FN>
See Accompanying Notes
Page 1
Terra Block International, Inc.
Consolidated Statement of Operations
For The Three Months Ended March 31, 2003
Revenue $ 0
Cost of Sales 0
-----------
Gross Profit 0
General & Administrative 27,258
-----------
Income(Loss) from Operations (27,258)
Interest Expense 0
-----------
Income(Loss) before Taxes (27,258)
Income Taxes 0
-----------
Net Income(Loss) ($27,258)
-----------
Net Income(Loss) Per Share-Basic and Diluted ($0.003)
Weighted Average Basic Shares Outstanding 10,638,803
<FN>
See Accompanying Notes
Page 2
13
Terra Block International, Inc.
Consolidated Statement of Stockholders' Equity
For The Three Months Ended March 31, 2003
Common Stock Additional Accumulated
Shares Amount PIC Deficit Total
------------- ----------- ----------- --------- ---------
Balance at December 31, 2002 10,000,000 10,000 737,296 (838,731) ($91,435)
Purchase of L.L. Brown (50,000) (50,000)
Net Income(Loss) (27,258) ($27,258)
----------------------------------------------------------
Balance at March 31, 2003 10,000,000 10,000 687,296 (865,989) (168,693)
==========================================================
<FN>
See Accompanying Notes
Page 3
14
Terra Block International, Inc.
Consolidated Statement of Cash Flows
For The Three Months Ended March 31, 2003
Cash flows from operating activities
Net income(loss) ($27,258)
---------
Adjustments to reconcile net loss
used in operating activities
Depreciation/Amortization 1,670
Changes in assets and liabilities
Accounts payable 17,960
---------
Total adjustments 19,630
---------
Net cash provided(used)in operating
activities (7,628)
---------
Cash flows from financing activities
Net borrowings(payments) on
notes payable 55,000
Principal payments on
long-term debt
Net advances to stockholders
Net cash provided(used) by
financing activities 55,000
---------
Cash flows from investing activities
Dispositions of property & equipment
Purchases of property & equipment
Purchase of L.L. Brown (50,000)
Net cash provided(used) by investing
activities (50,000)
-------
Net increase(decrease) in cash (2,628)
Cash at beginning of period 9,593
---------
Cash at March 31 $ 6,965
=========
Supplemental disclosures of cash flow information
Cash paid during the period for interest $ 0
=========
<FN>
See Accompanying Notes
Page 4
15
Terra Block International, Inc.
Notes to Consolidated Financial Statements
March 31, 2003
NOTE 1 - ORGANIZATION
Terra Block International, Inc. ("The Company") is a Nevada Corporation that
conducts business from its headquarters in Cincinnati, Ohio. The Company was
incorporated in February 1997 and in February 2003 acquired L.L. Brown
International, Inc., a public corporation. The name of the Company was changed
from L.L. Brown International, Inc to Terra Block International, Inc.
The Company has an Exclusive Licensing Agreement and Purchase Option with Terra
Block, Inc., a Florida corporation, to make, have made, use and sell its
Licensed Products under its License Patent Rights, Trade Secret Materials and
all its existing license rights anywhere in the world.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The Consolidated financial statements include the accounts of Terra Block
Consolidated, Inc., its wholly owned subsidiary. All significant intercompany
balances and transactions have been eliminated.
FEDERAL INCOME TAX
The provisions for income taxes is recorded in accordance with Statement of
Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income
Taxes". Under the liability method of SFAS 109, deferred tax assets and
liabilities are determined based on temporary differences between financial
reporting and tax bases of assets and liabilities and have been measured using
the enacted marginal tax rates and laws that are currently in effect. The types
of significant temporary differences include depreciation.
MANAGEMENT'S ESTIMATES AND ASSUMPTIONS
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 at the date of the
financial statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 3 - NOTES PAYABLE
Promissory Notes dated October 2002 to March 2003 payable to unaffiliated
individuals of the corporation. All of the promissory notes are unsecured and
have a variety of maturity dates during 2003.
16
Terra Block International, Inc.
Notes to Consolidated Financial Statements
March 31, 2003
NOTE 4 - FEDERAL INCOME TAXES
At March 31, 2003 the Company had net operating loss carry forwards of
approximately $839,000, expiring in year 2014. The amount recorded as deferred
tax assets as of March 31, 2003 were approximately $280,000, which represents
the amount of tax benefits arising from the loss of carry forwards. Due to the
uncertainty regarding the Company's ability to generate taxable income in the
future to realize the benefit from its deferred tax assets, the Company has
established a valuation allowance of $280,000 against this deferred tax asset.
NOTE 5 - GOING CONCERN
As shown in the accompanying financial statements, the Company has a significant
accumulated deficit. The ability of the Company to continue as a going concern
is dependent upon increasing sales and on obtaining additional capital and
financing. The financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern.
NOTE 6 - START UP COST
Start up cost consist of all cost necessary to get the Company to an operational
position, including bank charges, consulting fees, office supplies, postage,
legal fees, rent, telephone and travel. Start up cost are amortized over five
(5) years using the straight line method. The start up period ended December 31,
2002.
17
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The financial statements of the company are set forth beginning on page F-1.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
OPERATION
The following discussion should be read in conjunction with our unaudited
interim financial statements and related notes thereto included in this
quarterly report and in our audited financial statements and Management's
Discussion and Analysis of Financial Condition or Plan of Operation ("MD&A")
contained in our Form 10-KSB for the year ended December 31, 2002. Certain
statements in the following MD&A are forward looking statements. Words such as
"expects", "anticipates", "estimates" and similar expressions are intended to
identify forward looking statements. Such statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
projected.
GENERAL
Terra Block International, Inc., a Nevada Corporation, (the "Company" or "Terra
Block") was formerly L.L. Brown International, Inc. ("L.L. Brown"). L.L. Brown
was originally incorporated as Smart Industries, Inc. on February 19, 1997. On
February 14, 2003, L.L. Brown entered into a Share Exchange Agreement with Terra
Block. The Agreement provides for 100% of the shares of Terra Block to be
acquired by the L.L. Brown in exchange for shares of common stock of the L.L.
Brown; for the establishment of a new Board of Directors consisting of Terra
Block directors; and, with total issued and outstanding shares of the Company
immediately after the closing of 10,000,000. The Company's former subsidiary,
LLBA has been spun off, leaving Terra Block as the sole operating subsidiary of
the Company after effecting the Agreement. The Company currently trades on the
OTC Bulletin Board under the symbol TBLK.
PLAN OF OPERATIONS
Terra Block engages in the manufacture, distribution and application of
technologically advanced building products through an exclusive licensing
agreement with Terra Block, Inc. ("TBI"). Terra Block has the exclusive right to
make, have made, use and sell TBI products anywhere in the world. The license
agreement provides the Company the rights to all patented technologies, trade
secret materials, copyrights, trademarks and all intellectual property. This
technology and expertise is referred to as the "Terra Block System" and has been
used worldwide for 23 years.
Terra Block International is comprised of 3 divisions in order to fully
capitalize on the opportunities represented by its proprietary knowledge and
expertise in manufacturing and construction using the unique Terra Block System.
1. HOUSING: Construction of affordable, efficient housing both
domestically and internationally. This is an enormous market, which,
the Terra Block System addresses effectively and profitably.
2. TERRA BLOCK ENCAPSULATED CELL STORAGE: ("TECSTOR"): Terra Block's
patented EPA approved above ground hazardous waste storage facility.
The unique properties of construction with the Terra Block System
provide an exceptional, cost effective facility for the storage and
maintenance of low and mid-level hazardous waste, the storage of which
is an enormous problem worldwide.
3. MACHINES: Manufacture and sales of its compressed earth block making
machine worldwide. TBI has sold machines worldwide for 23 years.
The Terra Block System features a line of machines developed, perfected and
patented by TBI, that manufacture Compressed Earth Blocks ("CEB's") using common
soil as the only raw material. This is accomplished by compacting the soil at
up to 460,000 lbs. of hydraulic pressure to form a rock hard construction block.
The hydraulic pressure causes the particles to bond together just like natural
materials formed under great pressure such as sandstone, limestone and diamonds.
The blocks are quick and easy to manufacture, durable and have no maintenance
requirements. Each block is rock solid and will not crumble or disintegrate
under normal wear. In addition, the blocks require no additives, are
incredibly energy efficient and are inexpensive to produce (average cost is
$0.12/each). Walls and structures built with Terra Blocks do not require
mortar. They are dry-stacked and extraordinarily strong. The final result is a
facility that is weather resistant and structurally sound, all at a much lower
cost than traditional methods of construction.
The Company's goals are to utilize the unique properties and cost effectiveness
of Compressed Earth Block ("CEB") construction to profitably become:
- The leading provider of high quality, structurally sound, low cost,
environmental friendly and durable, residential and commercial
buildings in the world.
- The leading international manufacturer of CEB construction equipment
- A provider of a revolutionary, cost effective solution to the
ever-growing problem of the storage of hazardous waste worldwide.
LIQUIDITY AND CAPITAL RESOURCES
In Note #5 to our financial statements, our independent auditors have indicated
that certain factors raise substantial doubt about our ability to continue as a
going concern.
The ability of the Company to continue as a going concern is dependent upon
increasing sales and on obtaining additional capital and financing.
The Company's strategic plan for dealing with its cash flow problems is
currently being developed, but may include additional private placements of the
Company's common stock, the abandonment of unprofitable projects and the
exchange of common stock for settlement of vendor accounts. There can be no
assurance that any of the plans developed by the Company will produce cash flows
sufficient to overcome current liquidity problems.
The Company's long-term viability as a going concern is dependent on certain key
factors, as follows:
- The Company's ability to obtain adequate sources of outside financing.
- The Company's ability to ultimately achieve adequate profitability and
cash flows necessary to sustain continuing operations.
IMPLEMENTATION OF BUSINESS STRATEGY DEPENDENT ON ADDITIONAL FINANCING
Our plan of operation calls for additional capital to facilitate growth and
support long-term development and marketing programs. It is likely that we will
seek additional financing through subsequent future public or private sales of
our securities, including equity securities, borrowing, or other sources of
third party financing. Further, the sale of equity securities would
substantially dilute our existing stockholders' interests, and borrowings from
third parties could result in our assets being pledged as collateral. Loan
terms, which would increase our debt service requirements, could restrict our
operations. There is no assurance that we can obtain financing on favorable
terms. Any such additional financing may result in significant dilution to
existing stockholders. We may also seek funding for the development and
marketing of our services through strategic partnerships and other arrangements
with investment partners. There can be no assurance, however, that such
collaborative arrangements or additional funds will be available when needed, or
on terms acceptable to us, if at all. If adequate funds are not available, we
may be required to curtail one or more of our future programs.
2003 OUTLOOK
During 2003 The Company is planning on expanding development in each of its
three divisions:
- HOUSING DEVELOPMENT AND CONSTRUCTION: The Company is working toward
developments both domestically and abroad to capitalize on its unique
construction and building system.
- MANUFACTURING AND SALES: The Company is working to develop markets
worldwide for its line of products.
- TECSTOR: The Company is working to finalize a beta site for its
patented above ground hazardous waste storage facility.
The Company has commenced operations within their three divisions with the
completion of a prototype "World House" and a "TECSTOR(TM)" in Guatemala during
March 2003.
The "World House" provides ultra low-cost housing for crisis situations such as
replacing refugee camps or shantytowns, where pricing and speed are the utmost
concerns. The World House is approximately 200 square feet and provides a clean,
dry, safe place to live for a large number of displaced families and/or
individuals as a part of a cooperative housing development. Each house can be
completed in approximately two days and costs approximately $2,500 USD, which
includes all building costs as well as the basic electricity.
The next phase of the Company's operation is to begin construction of up to five
TECSTOR facilities in Guatemala and 120 World Houses over the next nine months.
FORWARD-LOOKING INFORMATION-GENERAL
This report contains a number of forward-looking statements, which reflect the
Company's current views with respect to future events and financial performance
including statements regarding the Company's projections. These forward-looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical results or those
anticipated. In this report, the words "anticipates", "believes", "expects",
"intends", "future", "plans", "targets" and similar expressions identify
forward-looking statements. Readers are cautioned to not place undue reliance on
the forward-looking statements contained herein, which speak only as of the date
hereof. The Company undertakes no obligation to publicly revise these
forward-looking statements, to reflect events or circumstances that may
arise after the date hereof. Additionally, these statements are based on certain
assumptions that may prove to be erroneous and are subject to certain risks
including, but not limited to, the Company's dependence on limited cash
resources, and its dependence on certain key personnel within the Company.
Accordingly, actual results may differ, possibly materially, from the
predictions contained herein.
ITEM 3. CONTROLS AND PROCEDURES.
Gregory A. Pitner, President, has concluded that our disclosure controls and
procedures are appropriate and effective. He has evaluated these controls and
procedures as of a date within 90 days of the filing date of this report on Form
10-QSB. There were no significant changes in our internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
James E. Hines, Chief Financial Officer, has concluded that our disclosure
controls and procedures are appropriate and effective. He has evaluated these
controls and procedures as of a date within 90 days of the filing date of this
report on Form 10-QSB. There were no significant changes in our internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
PART II
Pursuant to the Instructions on Part II of the Form 10-QSB, Items 1, 3, and 5
are omitted.
ITEM 2. CHANGES IN SECURITIES
The Company announced a reverse split of its common stock in connection with
the Share Exchange Agreement at a ratio of 1:2, effective March 3, 2003,
or as soon thereafter as approved by the National Association of
Securities Dealers ("NASD"). The Company has also agreed not to conduct
another reverse split of its common stock for a period of at least one
year from the date of the Agreement.
Item 6. Exhibits and Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange
Act of 1934, the undersigned has duly caused this Form 10-QSB to be signed on
its behalf by the undersigned, there unto duly authorized, in the City of
Cincinnati, Ohio, on May 15, 2003.
TERRA BLOCK INTERNATIONAL, INC.
BY: /S/ GREGORY A. PITNER
-----------------------------
GREGORY A. PITNER, PRESIDENT,
CEO AND CHAIRMAN
CERTIFICATIONS
I, Gregory A. Pitner, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Terra Block
International, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed
such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and c) presented in this quarterly
report our conclusions about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions): a) all significant deficiencies in the design or operation of
internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 15, 2003
/s/ Gregory A. Pitner
- ----------------------
Gregory A. Pitner
Chief Executive Officer of Terra Block International, Inc.
I, James E. Hines, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Terra Block
International, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed
such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and c) presented in this quarterly
report our conclusions about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions): a) all significant deficiencies in the design or operation of
internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 15, 2003
/s/ James E. Hines
- ------------------
James E. Hines
Chief Financial Officer
Certification of Chief Executive Officer of Terra Block International, Inc.
- ---------------------------------------------------------------------------
pursuant to Section 906 of the Sarbanes-Oxley Act of 1992 and Section 1350 of 18
- --------------------------------------------------------------------------------
U.S.C. 63.
- ----------
I, Gregory A. Pitner, the Chief Executive Officer of Terra Block International,
Inc. hereby certify that to my knowledge, Terra Block International, Inc.
quarterly report on Form 10-QSB for the period ended
March 31, 2003, fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934 and that information contained in the
quarterly report on Form 10-QSB and the financial statements contained therein
fairly presents, in all material respects, the financial condition and results
of the operations of Terra Block International, Inc.
Date: May 15, 2003 /s/ Gregory A. Pitner
-------------------------
Gregory A. Pitner
Chief Executive Officer of
Terra Block International, Inc.
Certification of Chief Financial Officer of Terra Block International, Inc.
- ---------------------------------------------------------------------------
pursuant to Section 906 of the Sarbanes-Oxley Act of 1992 and Section 1350 of 18
- --------------------------------------------------------------------------------
U.S.C. 63.
- ----------
I, James E. Hines the Chief Financial Officer of Terra Block International, Inc.
hereby certify that to my knowledge, Terra Block International, Inc. quarterly
report on Form 10-QSB for the period ended March 31, 2003, fully complies with
the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934 and that information contained in the quarterly report on Form 10-QSB and
the financial statements contained therein fairly presents, in all material
respects, the financial condition and results of the operations of Terra Block
International, Inc.
Date: May 15, 2003 /s/ James E. Hines
---------------------
James E. Hines
Chief Financial Officer of
Terra Block International, Inc.