UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 18, 2003
(February 14, 2003)
Terra Block International, Inc.
---------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 000-31935 65-0729440
- ---------------------------- ---------------- ----------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) file number) Identification No.)
2637 Erie Avenue, Suite 207
Cincinnati, OH 45208
- ---------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (513) 533-1220
N/A
--------------------------------------------------------
(Former name or former address, if changes since last report)
Copy of Communications to:
Donald F. Mintmire
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
Phone: (561) 832-5696
Fax: (561) 659-5371
This Form 8-K/A amends the Form 8-K filed on March 3, 2003 by Terra Block
International, Inc., a Nevada corporation formerly known as L.L. Brown
International, Inc. The purpose of this amendment to Form 8-K is to provide
financial statements and the pro forma financial information for Terra Block
Consolidated, Inc., a Nevada corporation, as required by Item 7 of Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired.
Pursuant to the requirements of Regulation S-X 210.3.05(b), the following are
audited financial statements of Terra Block Consolidated, Inc., a Nevada
corporation, for the period ending December 31, 2002. The registrant acquired
all of the outstanding capital stock of such entity on February 14, 2003.
Terra Block Consolidated, Inc.
Balance Sheet-Start Up
December 31, 2002
Terra Block Consolidated, Inc.
CONTENTS
Page
Financial Statement
Auditors' Report ............................................................F-1
Balance Sheet ...............................................................F-2
Notes to Financial Statement.................................................F-3
Melton & Co., P.C.
____________________________
Certified Public Accountants
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Terra Block Consolidated, Inc.
Cincinnati, Ohio
We have audited the accompanying balance sheet-start up of Terra Block
Consolidated, Inc. as of December 31, 2002. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. 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 statement referred to above present fairly, in all
material respects the financial position of Terra Block Consolidated, Inc. as of
December 31, 2002.
/s/ Andrew I. Melton
- ------------------------
Andrew I. Melton, CPA
Managing Partner
February 27, 2003
F-1
Terra Block Consolidated, Inc.
Balance Sheet-Start Up
December 31, 2002
ASSETS
Current
Assets
Cash $ 9,593
---------------
Total Current Assets 9,593
Start Up Cost 33,408
---------------
TOTAL ASSETS $ 43,001
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes Payable 35,000
Stockholders' Equity
Capital Stock 8,001
---------------
Total Stockholders Equity 8,001
---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 43,001
===============
See Accompanying Notes
F-2
Tara Block Consolidated, Inc.
Notes to Financial Statement
December 31, 2002
Note 1 - Organization
Tara Block Consolidated, Inc. ("The Company") is a Nevada Corporation that
conducts business from its headquarters in Cincinnati, Ohio. The Company was
incorporated in May 2002.
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 financial statement, currently, only includes the accounts of Terra Block
Consolidated, Inc.
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 will be amortized over
five(5) years using the straight line method.
Note 3 - Subsequent Event
Subsequent to the balance sheet date, the Company acquired L. L. Brown
International, Inc., a public corporation.
Note 4 - Notes Payable
Promissory notes dated October 2002 payable to officers of
the corporation. Due in April 2003 $ 35,000
=========
F-3
Terra Block International, Inc.
Consolidated Pro Forma Financial Statements
December 31, 2002
Terra Block International, Inc.
CONTENTS
Page
Consolidated Pro Forma Financial Statements
Auditors' Report ............................................................F-4
Balance Sheet ...............................................................F-5
Statement of Operations......................................................F-6
Statement of Stockholders' Equity (Deficit)..................................F-7
Statement of Cash Flows......................................................F-8
Notes to Financial Statements................................................F-9
Melton & Co., P.C.
____________________________
Certified Public Accountants
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Terra Block International,Inc.
Cincinnati, Ohio
We have audited the accompanying pro forma consolidated balance sheet of Terra
Block International, Inc. as of December 31, 2002 and the related pro forma
consolidated statements of operations, stockholders equity(deficit) and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
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 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 pro forma consolidated financial statements referred to
above present fairly, in all material respects the consolidated financial
position of Terra Block International, Inc., as it would have appeared, as of
December 31, 2002 and the consolidated results of its operations and its cash
flows, as they would have appeared, for the year then ended in conformity with
generally accepted accounting principles.
The accompanying pro forma financial statements have been prepared assuming that
the company will continue as a going concern. As discussed in note 10 to the
financial statements, the Company has experienced significant operating losses.
The Company's financial position and operating results 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 10. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Andrew I. Melton
- ------------------------
Andrew I. Melton, CPA
Managing Partner
February 28, 2003
F-4
Terra Block International, Inc.
Consolidated Pro Forma Balance Sheet
December 31, 2002
L.L. Brown Terra Block Acquisition Terra Block
International, Consolidated, Adjustments International,
Inc. Inc. Inc.
--------------- --------------- ------------- -----------------
ASSETS
Cash and Cash Equivalents $ 0 $ 9,593 $ 9,593 $ 9,593
Accounts Receivable, Net 87,582 (87,582) 0
Inventory 34,043 (34,043) 0
Deposits 7,260 (7,260) 0
---------------- --------------- ----------------
Total Current Assets 128,885 9,593 9,593
25,078 (25,078) 0
Start Up Costs 33,408 33,408 33,408
Due From Stockholders 31,982 (31,982) 0
---------------- --------------- ----------------
$ 185,945 $ 43,001 43,001
================ =============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)
Bank Overdrafts 22,773 22,773 0
Accounts Payable 271,015 171,579 99,436
Notes Payable 9,525 9,525 0
Accrued Payroll and Business Taxes 64,932 64,932 0
Current Maturities of Long Term Debt 24,023 35,000 (10,977) 35,000
---------------- --------------- ----------------
Total Current Liabilities 392,268 35,000 134,436
---------------- --------------- ----------------
17,140 17,140 0
---------------- --------------- ----------------
Total Liabilities 409,408 35,000 134,436
---------------- --------------- ----------------
Preferred Stock, $.001 Par Value, 1,000,000
Shares Authorized, No Shares Issued
Common Stock, $.001 Par Value, 20,000,000
Shares Authorized, 10,638,803 Shares Issued 10,640 640 10,000
CommonStock, $.001 Par Value, 50,000,000
Shares Authorized,10,000,000 Shares Issued
Additional Paid-In-Capital 604,628 (132,668) 737,296
Accumulated Deficit (838,731) (838,731)
Capital Stock 8,001
Total Stockholders Equity(Deficit) (223,463) 8,001 (91,435)
---------------- --------------- ----------------
$ 185,945 $ 43,001 $ 0 $ 43,001
================ =============== ================
See accompanying notes
F-5
Terra Block International, Inc.
Consolidated Pro Forma Statement of Operations
For The Year Ended December 31, 2002
L.L. Brown Terra Block Acquisition Terra Block
International, Consolidated, Adjustments International,
Inc. Inc. Inc.
--------------- --------------- ------------- -----------------
Revenue $ 525,966 $ 525,966
Cost of Sales 159,212 159,212
---------------- ---------------- ----------------
Gross Profit 366,754 366,754
General & Administrative 307,602 307,602
---------------- ---------------- ----------------
Income(Loss) from Operations 59,152 59,152
Interest Expense 7,204 7,204
---------------- ---------------- ----------------
Income(Loss) before Taxes 51,948 51,948
Income Taxes 0 0
---------------- ---------------- ----------------
Net Income(Loss) $ 51,948 $ 51,948
================ ================ ================
Net Income(Loss) Per Share-Basic and Diluted $ 0.005 $ 0.005
Weighted Average Basic Shares Outstanding 10,638,803 10,638,803
See accompanying notes
F-6
Terra Block International, Inc.
Consolidated Pro Forma Statement of Stockholders' Equity
For The Year Ended December 31, 2002
Common Stock Additional Accumulated
Shares Amount PIC Deficit Total
---------------- ------------ --------------- ----------------- -------------------
Balance at December 31, 2001 10,638,803 10,640 604,628 (890,679) ($275,411)
Net Effect of Acquisition (638,803) (640) 132,668 132,028
Net Income(Loss) 51,948 $51,948
-----------------------------------------------------------------------------------
Balance at December 31, 2002 10,000,000 10,000 737,296 (838,731) (91,435)
===================================================================================
See accompanying notes
F-7
Terra Block International, Inc.
Consolidated Pro Forma Statement of Cash Flows
For The Years Ended December 31, 2002
L.L. Brown Terra Block Acquisition Terra Block
International Consolidated, Adjustments International,
Inc. Inc.
----------------- ----------------- ------------- -----------------
Cash flows from operating activities
Net income(loss) $ 51,948 $ 51,948
----------------- ----------------- -----------------
Adjustments to reconcile net loss
used in operating activities
Depreciation 12,047 12,047
Stock issued in lieu of cash compensation
Changes in assets and liabilities
Accounts receivable (60,263) (60,263)
Inventory 6,952 6,952
Deposits 594 594
Accounts payable 432 432
Accrued liabilities 9,457 9,457
----------------- ----------------- -----------------
Total adjustments (30,781) (30,781)
----------------- ----------------- -----------------
Net cash provided(used)in operating
activities 21,167 21,167
----------------- ----------------- -----------------
Cash flows from financing activities
Proceeds from long-term debt
Proceeds from common stock
Bank overdrafts 22,773 22,773
Net borrowings(payments) on
notes payable
Principal payments on
long-term debt (32,989) (32,989)
Net advances to stockholders (22,586) (22,586)
----------------- ----------------- -----------------
Net cash provided(used) by
financing activities (32,802) (32,802)
----------------- ----------------- -----------------
Cash flows from investing activities
Dispositions of property & equipment
Purchases of property & equipment
Net cash provided(used) by investing
activities 0 0
----------------- ----------------- -----------------
Net increase(decrease) in cash (11,635) (11,635)
Cash at beginning of period 11,635 11,635
----------------- ----------------- -----------------
Cash at December 31 $ 0 $ 0
================= ================= =================
Supplemental disclosures
of cash flow information
Cash paid during the period for interest $ 7,203 $ 7,203
================= =================
See accompanying notes
F-8
Terra Block International, Inc.
Notes to Consolidated Pro Forma Financial Statements
December 31, 2002
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 May 2002 and has 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.
L. L. Brown International, Inc. was incorporated in February 1997 as Smart
Industries, Inc., and changed its name to L.L. Brown International, Inc., in
March 1998.
In March 1998, L.L. Brown International, Inc. acquired 100 percent of the issued
and outstanding shares of the common stock of L.L. Brown & Associates, Inc., a
Washington corporation, by issuing 8,900,000 shares of its stock.
L.L. Brown International, Inc. is an educational corporation that designs
curriculum and programs which are intended to teach people how to make positive
changes in their lives. It sells materials and delivers seminars to
corporations, nonprofit organizations, universities, welfare agencies, school
districts, and youth service agencies throughout the United States.
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.
Accounts Receivable
Accounts receivable consists primarily of trade receivables, bad debts allowance
is accrued at 1% of net sales.
Inventories
Inventories consist of printed and audio/visual materials developed by the
Company and are stated at the lower cost or market based on the first-in,
first-out method.
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.
F-9
Terra Block International, Inc.
Notes to Consolidated Pro Forma Financial Statements
December 31, 2002
Property and equipment
Property is stated at historical cost as detailed in Note 3. Major expenditures
for property and those that substantially increase the useful lives of property
are capitalized. Property is depreciated using the straight-line method over the
estimated useful lives of the assets, ranging between five and seven years.
Leased Property is stated at the lower of the present value of future minimum
lease payments or fair value of the property. Leased property is depreciated on
a straight-line basis over the shorter of the lease term or the estimated useful
lives ranging between five and seven years. Amortization of assets held under
capital leases is included in depreciation expense.
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.
Revenue Recognition
The Company recognizes revenue at the time of shipment of product to its
customers or completion of services provided.
Stock-based Compensation
The Company has chosen to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", and related Interpretations and to
elect the disclosure option of SFAS No. 123, "Accounting for Stock-Based
Compensation". Accordingly, compensation costs for stock options issued to
employees is measured as the excess, if any, of the quoted market price of the
Company's stock at the date of the grant over the amount an employee must pay to
acquire the stock.
Note 3 -- Property and Equipment
The following is a summary of property and equipment, at cost:
Office Equipment $ 72,072
Furniture & Fixtures 39,758
Vehicles 42,775
Leasehold Improvements 6,227
---------
$ 160,832
Less: Accumulated Depreciation (135,754)
---------
$ 25,078
=========
F-10
Terra Block International, Inc.
Notes to Consolidated Pro Forma Financial Statements
December 31, 2002
Note 4 - Notes Payable
The company is oligated under a demand note payable to a
bank on which interest accrues at 9.75%. The note is secured
by substantially all trade receivables, inventory and
equipment. $ 9,525
Promissory notes dated October 2002 payable to officers of
the corporation. Due April 2003. 35,000
------------
$ 44,525
============
Note 5 - Long-term Debt
Long-term debt consists of the following:
Lease payable to Renton Lincoln in monthly installments of
$543, with balloon payment of $18,227 at the end of 36
months, secured by an automobile. 23,657
Note payable to a bank payable in monthly installments of
$3,207 including interest at 9.75%, secured by substantially
all trade receivables, inventory and equipment. 17,506
------------
41,163
Less current maturities (24,023)
------------
Long-term debt, less current maturities $ 17,140
============
F-11
Terra Block International, Inc.
Notes to Consolidated Forma Financial Statements
December 31, 2002
Note 6 - Advertising
Advertising costs are charged to operations when incurred, which amounted to
$-0- for 2002.
Note 7 - Federal Income Taxes
At December 31, 2002 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 December 31, 2002 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 8 - Commitments
The Company leases its administrative offices and certain equipment under
operation leases expiring in 2003. The Company is obligated for minimum
non-cancelable rental payments under the lease through its term as follows:
Year ended Dec. 30, 2003 55,920
-------------------------------------
$ 55,920
Note 9 - Related Party Transactions
The Company had advances of $31,982 to the Vice President as of December 31,
2002. Additionally, the Company has several promissory notes with officers(see
note 4).
Note 10 - Going Concern
As shown in the accompanying financial statements, the Company has incurred
continuing losses the recent years of operations. 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 11 - 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.
F-12
(c) Exhibits
Exhibit No. Description
- ------------ ----------------------------------------------------------
2.1 [1] Share Exchange Agreement between L.L. Brown International, Inc. and LL Brown
& Associates, Inc. dated March 14, 1998.
2.2 [8] Share Exchange Agreement between L.L. Brown International, Inc. and Terra Block
Consolidated, Inc. dated February 14, 2003.
3.(i).1 [1] Articles of Incorporation of Smart Industries, Inc. filed February 19, 1997.
3.(i).2 [1] Certificate of Amendment of Articles of Incorporation changing name to L.L. Brown
International, Inc. filed March 24, 1998.
3.(i).3 [8] Certificate of Amendment of Articles of Incorporation changing name to Terra
Block International, Inc. filed February 19, 2003.
3.(ii).1 [1] Bylaws of Smart Industries, Inc.
4.1 [1] Form of Private Placement Offering of 1,600,000 common shares at $0.01 per share
dated February 1997.
4.2 [1] Form of Private Placement Offering of 500,000 common shares at $1.00 per share
dated April 1998.
4.3 [1] Renumbered as Exhibit 10.12.
5.1 [6] Opinion of Mintmire & Associates.
10.1 [1] Consulting Agreement between Neil Rand of Corporate Imaging and L.L. Brown
dated March 2, 1998.
10.2 [1] Renumbered as Exhibit 2.1.
10.3 [1] Agreement between Steven Mundahl and Lester L. Brown to assist in writing
auto-biography, dated September 1998.
10.4 [1] Production Agreement between KBDI and Lester Brown dated September 1998.
10.5 [1] Standard Industrial Lease between L.L. Brown and Cook Inlet Region, Inc. dated
January 1999.
10.6 [1] Service Contract between L.L. Brown and the County of Washtenaw, dated
January 2000.
10.7 [1] Agreement between L.L. Brown and Kern County for an Independent Thinking
Skills Training for CalWorks Participants, dated May 2000.
10.8 [1] Client Service Contract between L.L. Brown and the State of Washington
Department of Social and Health Services, dated June 2000.
19
10.9 [1] Non-Circumvention/Finder's Fee Agreement between L.L. Brown and David
Penney & Associates, dated September 2000.
10.10 [2] Service Agreement between the Company and CWA District 7 dated December 5,
2000.
10.11 [2] Service Agreement between the Company and Arizona, AFLCIO dated January 29,
2001.
10.12 [1] Promissory Note between L.L. Brown and KeyBank National Association in the
amount of $126,104.00 dated October 1998.
10.13 [6] L.L. Brown International, Inc. Year 2002 Employee/Consultant Stock Compensation
Plan
10.14 [7] Agreement between the Company and the Seminole Tribe of Florida dated August 30,
2001.
10.15 [7] Agreement between the Company and Capital Research Group, Inc., dated January
17, 2002.
10.16 [8] Exclusive License Agreement between Terra Block, Inc., a Florida corporation and
Terra Block Consolidated, Inc., a Nevada corporation dated June 1, 2002.
11.1 [3] Statement re: computation of per share earnings.
16.1 [4] Letter on change of certifying accountant pursuant to Regulation SK Section
304(a)(3).
16.2 [5] Letter on change of certifying accountant pursuant to Regulation SK Section
304(a)(3).
23.1 [6] Consent of George Stewart, CPA
23.2 [6] Consent of Mintmire & Associates (contained in the opinion filed as Exhibit 5.1
hereof).
- --------------------------------------
[1] Previously filed as an exhibit to the Company's Registration Statement on
Form 10SB on November 13, 2000.
[2] Previously filed as an exhibit to the Company's Annual Report on Form 10KSB
n March 21, 2001.
[3] Previously filed as an exhibit to the Company's First Amended Registration
Statement on Form 10SB on April 5, 2001.
[4] Previously filed as an exhibit to the Company's Current Report on Form 8K
on August 17, 2001.
[5] Previously filed as an exhibit to the Company's amended Current Report on
Form 8K on August 27, 2001.
[6] Previously filed as an exhibit to the Company's Registration Statement on
Form S-8 on January 25, 2002.
[7] Previously filed as an exhibit to the Company's Annual Report on Form 10KSB
on March 29, 2002.
[8] Previously filed as an exhibit to the Company's Current Report on Form 8K
on March 3, 2003.
* Filed Herewith.
20
(d) A report on Form 8-K was filed on August 17, 2001 to disclose a change
in the Registrant's Certifying Accountant. On August 27, 2001, the Registrant
filed an amended Current Report on Form 8-K to disclose additional information
regarding the change of accountants at the request of the Commission. A report
on Form 8-K was filed on March 3, 2003 to disclose a change of control of the
Registrant.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
Terra Block International, Inc.
---------------------------
(Registrant)
Date: March 18, 2003
By: /s/ Gregory A. Pitner
----------------------------------------------
Gregory A. Pitner, President, CEO and Chairman
By: /s/ James E. Hines
----------------------------------------------
James E. Hines, Vice-President, CFO and Director
By: /s/ Michael A. Gross
----------------------------------------------
Michael A. Gross, COO and Director
21