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U. S. Securities and Exchange Commission
Washington, D. C. 20549
AMENDMENT NO. 1 TO
FORM 10SB/A-2
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12 (B)
OR 12 (G) OF THE SECURITIES ACT OF 1934
SDC INTERNATIONAL, INC.
(Name of Small Business Issuer in its charter)
Delaware 75-2583767
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2065 Montgomery Street
Fort Worth, Texas 76107
(Address of principal (Zip code)
executive offices)
Issuer's telephone number: (817) 738-8636
Securities to be registered under Section 12(b) of the Act:
None
Securities to be registered under Section 12(g) of the Act:
2,150,000 Common Shares, Par value $0.001
(Title of class)
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ITEM 1. DESCRIPTION OF BUSINESS
SDC International, Inc., (hereinafter referred to as the "Company") is a
Delaware corporation formed in June, 1994. It currently acts as an exclusive
distributor of Skoda engines in North, South and Central America, under an
exclusive license purchased from Skoda Diesel, a.s. ("Skoda"). Skoda products
are principally piston combustion diesel, gas, and bio-gas engines whose
applications include locomotive and stationary engines for the generation and
co-generation of electric power and complete energy for a variety of purposes.
The Company offers for sale a broad range of Skoda engines in several
sizes and capacities. To date, the Company has achieved revenue of $537,280 in
its fiscal year ended August 31, 1995 from one sale of a Skoda Diesel
generation system to the country of Peru. Its products have application in
several markets including electrical power production and co-generation
systems, locomotive engines, pump stations, direct drives for industrial
engines, oil and gas drilling equipment, and full power systems for use in
hospitals, factories, commercial and governmental facilities. The products
manufactured by Skoda and marketed by the Company are especially important in
the lesser developed countries seeking to build infrastructure sufficient to
support economic growth and development.
The Company entered into an exclusive agency agreement with Skoda dated
April 21, 1994 under which it is appointed as Skoda's exclusive agent in North
America, Central America and South America for the marketing and sale of
products of Skoda. The agreement provides that for the agreement to be not
cancelable by Skoda, sales made within the foregoing territory shall be at
least U.S.$15,000,000 per year at the close of the fifth year after execution
of the agreement.
Together with soliciting purchasers of its products, the Company's
technical personnel work closely with the potential distributors as well as
with end users, their engineers, and consultants to design the appropriate
system to best address specific needs. The Company is the intermediary between
the Skoda factory and the customer, facilitates the delivery of the equipment
by processing the necessary documentation involved in the importation of heavy
equipment, arranges customer financing and leasing of the equipment, and
arranges for proper service and technical support needed for the equipment's
operation.
Skoda, a manufacturer of heavy industrial engines and machinery, was
formed in Czechoslovakia in 1899, and is one of the founding shareholders of
the Company. Until recently privatized, Skoda was owned and controlled by the
State and, from 1945, when Czechoslovakia came under control of Russia and the
Communist Party, Skoda's products were made and distributed primarily into
communist-controlled countries in Eastern Europe and the U.S.S.R.
The emerging markets, especially those within Central and South America,
areas of the Company's primary concentration, seek electrical power systems,
generating and co-generating equipment as that offered by the Company, and the
Company believes it will remain competitive so long as its production wage
rates remain stable relative to those of its competitors, whose
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production rates are much higher. The Company believes that the current Skoda
product line matches the technical expertise and versatility of competitors,
while offering substantially lower costs. The products meet all known
regulations in the areas of its sales. The Company employs five persons, two
full-time.
The Company is dependent upon Skoda Diesel for its products. As such, the
Company faces risk of the inability to obtain products in the event of
production problems at Skoda due to labor problems, governmental regulations,
working capital deficiencies, political unrest and other problems which may
result in the inability of Skoda to fulfill orders of the Company and over
which the Company has no control. In the event Skoda was unable to fulfill the
Company's orders, it might have to suspend its business until such supply
problem was corrected by Skoda or alternative suppliers were located, none of
which can be assured. Additionally, although the Company pays Skoda in U.S.
Dollars, currency fluctuations may adversely affect the prices Skoda charges
the Company. The Company's sales are made in U.S.Dollars but currency
fluctuations may make its prices non-competitive to its customers.
There is also the potential for political instability in the Czech
Republic which may result in a loss of the Company's assets located there.
The Company was formed by Skoda Diesel, Double Seal Ring Company, Inc.,
and Worth Capital Group (subsidiary of WCG Holdings, s.a.) with the view toward
introducing and marketing the Skoda line of engines and related products in the
area of its exclusive license and, also, globally, where it holds non-exclusive
agency rights. Skoda, with a long history of quality manufacturing and
technical expertise, combined with Double Seal Ring Company, a U.S.
manufacturer of industrial piston rings which are important components of all
diesel/gas engines, and Worth Capital Group, whose business involves world wide
marketing sales and financing of a variety of products, to form SDC
International, Inc.
Double Seal Ring Company, Inc., is a privately held Texas manufacturer of
industrial piston rings. For more than eighty years, Double Seal has worked
with and supplied its products to global manufacturers and rebuilders in the
diesel and gas engine marketplace. Its customers include many of the major
U.S. industrial, co-generation facility and international petroleum
corporations. The company will be well served in its sales efforts by having
Double Seal's reputation and long standing contacts within the diesel
marketplace.
Skoda Diesel is controlled by Skoda, a.s. of the Czech Republic. The
Company has been advised that Skoda, a.s. employed 18,993 as of December 31,
1994. The sales of Skoda Diesel generating sets were U.S.$15 million in 1995
and Skoda Diesel currently employs 500.
Worth Capital Group, Inc., a subsidiary of WCG Holdings, s.a., was
incorporated in Texas in January 1990. It is a financial and technical
services company with experience in petrochemical, natural gas, steel
facilities and in international trading. More importantly, Worth and its
affiliates have conducted business in more than thirty nations and have worked
with many of the world's largest industrial corporations. Finally, Worth has
had dealings with and has
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participated in projects in conjunction with the World Bank, the Inter-American
Development Bank, the European Bank for Reconstruction and Development, the
Asia Development Bank, and others, and is currently registered with the World
Bank system.
Upon its organization, the Company acquired in exchange for 448,350 shares
of its common stock (representing approximately 21% of outstanding shares)
several hundred items of machinery and equipment which is utilized in the Skoda
factory in Prague, Czech Republic, in the manufacture of Diesel and gas-powered
generating systems. See "Item 4 - Properties". Accordingly, approximately 85%
of the Company's assets are located in the Czech Republic with the balance in
the United States. It is anticipated that all revenues will result from sales
to customers in North, South and Central America.
ITEM 2. PLAN OF OPERATION
The Company commenced operations by first analyzing and evaluating various
requests for bids on a number of projects that are seeking the type of
equipment manufactured by Skoda and sold by the Company. No bids were made by
the Company. All orders to date are through direct negotiation rather than
competitive bidding. In addition, the Company has since identified more than
100 foreign import-export distributors of diesel and gas engines that are
engaged in the marketplace of the Company. Of these, the Company has
identified 23 as potential dealers and distributors of the Company. The
Company is currently dealing with 3 such distributors in South America and
plans to add up to 12 additional distributors. Since most Diesel generating
equipment is purchased by bid and not by catalog, the Company seeks to
familiarize these distributors with its product line in an effort to generate
sales leads. Commissions would be negotiated for each order. Further, the
Company is aware that the Skoda product, while on a par with or, in some cases,
more effective than the products of its competitors, can be sold profitably but
at a lower price than those of the competitors. This favorable pricing is
largely due to the fact that Skoda's overall labor costs are less than $2.00
per hour compared to wages 10 to 15 times greater in the USA, Japan and
Germany.
During the final month of its first year of operation, the Company sold
and delivered one order for more than $500,000.00 of its product to the United
Nations Development Program in Peru and payment was received in September 1995.
The Company has firm orders for $3,475,495 from 3 customers which it expects to
deliver by in the quarter beginning September 1, 1996. Payment is by
irrevocable letter of credit..
The Company has prepared and is distributing comprehensive and technically
accurate sales and marketing materials, sales catalogues and product
description sheets. It has identified the large engineering and contracting
firms who have need for the Company's equipment, and many of these are located
in the United States. Very often, it is these large firms who select the
equipment to be used on projects in many foreign countries, and the Company
develops and will maintain close relationships with these American firms. The
Company will add staff as may be needed for sales and marketing growth, but
does not believe more than four additional staff will be needed during the next
twelve months. Sales are made by letter of credit, and there is
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no need for the Company to pay for its products until the customer pays the
Company. In the event additional capital is needed, the Company may need to
issue additional securities, either as debt and/or equity. Presently, the
Company has no debt other than for normal monthly operating overhead expenses.
By means of its exclusive license from Skoda, the Company has been able to
enter this arena with modest capital requirements but with an established
product line. The Company knows that one of the most crucial products for
third world markets is electrical power generation equipment. Realizing that
an astounding 85% of the world's population reside in developing nations, there
is a tremendous need for such equipment both to serve emerging industrial bases
as well as more demanding populations.
The Company may realize ancillary revenues by providing consulting
services to potential customers and by assisting in arranging financing for the
purchase of the Skoda products or other non-competing products and equipment.
The Company is not limited to act only in the sale and distribution of Skoda
products, and the Company is currently discussing with several other major
industrial manufacturers within Eastern Europe possible joint activities with
those companies.
The Company deals with its customer through irrevocable letters of credit
and upon receipt of payment against required customary documentation, it pays
Skoda the purchase price for the order. Accordingly, the Company does not
require capital for inventory purposes at the current time. The Company's
capital is sufficient for its marketing activities at current levels but
additional capital would allow it to undertake more substantial marketing
activities which may result in additional sales.
The Company competes primarily on the basis of lower prices charged for
comparable equipment than those of its competitors.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In September 1994, the Company issued 1,400,000 shares of its Common Stock
to its founding shareholders. Of the total 1,400,000 shares issued, 500,000
shares were issued to WCG Holdings, s.a. for $500 ($.001 per share) and 400,000
shares were issued to Double Seal Ring Company, Inc. for $400 ($.001 per
share). Also during September 1994, pursuant to the founding shareholders'
agreement, Skoda contributed machinery and equipment with an independently
certified appraised value of $4,469,064 in exchange for 448,350 shares of the
Company's common stock ($9.97 per share). Additionally, effective April 21,
1994, the Company executed an exclusive agency agreement with Skoda, pursuant
to which the Company obtained the right to act as Skoda's exclusive agent in
North, Central and South America, and as a non-exclusive agent throughout the
remainder of the world. In consideration of these rights,
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the Company issued 51,650 shares of its common stock to Skoda Diesel, a.s.
($1.25 per share). According to the appraisal and audited Financial Statements
of the Company, the machinery and equipment consists of the following types and
amounts:
<TABLE>
<S> <C>
Production machinery $1,571,362
Production equipment 1,465,372
Tools and fixtures 1,432,330
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$4,469,064
</TABLE>
The Company has made secured and unsecured short-term loans at various
terms amounting to $89,500 to non-affiliated entities of which one of the
Company's minority shareholders is an officer and shareholder. Said minority
shareholder is not an officer or director of the Company. The Board of
Directors believed that such loans represented a good investment for the
Company's temporary funds.
The machinery and equipment contributed by Skoda represents approximately
17% of Skoda's total machinery and equipment. Such machinery and equipment was
appraised by ING. Vladamir Sepna, an authorized expert named by the Czech
Ministry of Justice on June 16, 1988 under Order No. Z-2005-88. Such appraisal
included listing of each item appraised, verification of each such item from
the books and records of Skoda, physical survey of each item and an expressed
opinion as to the fair market value thereof in U.S.Dollars based upon official
exchange rate. Appraisals are not guaranties of value.
Shares eligible for future sale. 1,750,000 shares of the Company's total
outstanding shares of 2,150,000 are deemed to be "restricted securities" as
that term is defined under SEC Rule 144, in that such shares were issued and
sold by the Company in private transactions not involving a public offering
and, as such, may only be sold pursuant to an effective registration statement
under the Securities Act of 1933, in compliance with the exemption provisions
of Rule 144 or pursuant to another exemption under the Securities Act. In
general, under Rule 144, a person, including an affiliate of the Company, who
has owned restricted shares of common stock beneficially for at least two years
is entitled to sell within any three month period, a number of shares that does
not exceed the greater of 1% of the total number of outstanding shares of the
same class or if the common stock is quoted on NASDAQ, the average weekly
trading volume during the four calendar weeks preceding the sale. A person who
has not been an affiliate of the Company for at least three months immediately
preceding the sale and who has beneficially owned shares of common stock for at
least three years, is entitled to sell such shares under Rule 144 without
regard to any of the limitations described above. Sales under Rule 144 contain
certain conditions concerning the manner of sale and the availability of
current public information on the Company.
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SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this amendment to the registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
SDC INTERNATIONAL, INC.
(Registrant)
Date: September 10, 1996 By: /s/ Ronald A. Adams
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Ronald A. Adams
President
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