UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[xx] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-27520
SDC International, Inc.
(Exact name of registrant as specified 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 executive offices) (Zip Code)
(817) 738-8636
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by
section 13 or 15 (d) of the Exchange Act during the past 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 [xx] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Common stock, par value $.001 per share: 2,175,400 shares outstanding as of
May 31, 1996.
<PAGE>
SDC INTERNATIONAL, INC.
INDEX
PART 1 - FINANCIAL INFORMATION:
ITEM 1 - FINANCIAL STATEMENTS
Balance Sheets (Unaudited) May 31, 1996
and August 31, 1995 F-1
Statements of Operations (Unaudited) for the
three months ended May 31, 1996 and 1995 F-2
Statements of Operations (Unaudited) for the
nine months ended May 31, 1996 and 1995 F-3
Statement of Stockholders' Equity (Unaudited) for
the nine months ended May 31, 1996 F-4
Statements of Cash Flows (Unaudited) for the
nine months ended May 31, 1996 and 1995 F-5
Notes to Financial Statements F-6 - F-12
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS F-13 - F-14
PART II - OTHER INFORMATION F-15
<PAGE>
SDC INTERNATIONAL, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
May 31, August 31,
1996 1995
ASSETS
<S> <C> <C>
Current assets:
Cash $ 34,136 $ 49,677
Accounts receivable - 537,280
Inventory 39,409 -
Prepaid expense - 6,400
Notes receivables - stockholder and related parties 62,392 77,000
Due from related party 12,500 12,500
Total current assets 148,437 682,857
Machinery and equipment, net 4,247,264 4,469,064
Exclusive agency rights, net 176,966 51,650
Customer list, net 281,250 -
Other assets 35,720 34,184
Total assets $ 4,889,637 $ 5,237,755
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable - related party $ 4,725 $ 376,900
Accrued expenses 42,691 51,549
Due to stockholder - 36,196
Total current liabilities 47,416 464,645
Commitments and contingencies (Note 5) - -
Stockholders' equity:
Common stock $.001 par value, authorized 10,000,000 shares,
issued and outstanding 2,175,400 and 1,752,700 shares, respectively 2,175 1,753
Additional paid-in capital 5,811,458 5,117,676
Accumulated deficit (971,412) (346,319)
Total stockholders' equity 4,842,221 4,773,110
Total liabilities and stockholders' equity $ 4,889,637 $ 5,237,755
</TABLE>
See accompanying notes to financial statements.
<PAGE>
SDC INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MAY 31,
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Sales $ 33,367 $ -
Cost of goods sold 28,350 -
Gross profit 5,017 -
Selling, general and administrative expenses 210,009 109,281
Loss from operations before other income and provision
for income taxes (204,992) (109,281)
Other income:
Interest income 1,160 -
Loss before provision for income taxes (203,832) (109,281)
Provision for income taxes - -
Net loss $ (203,832) $ (109,281)
Primary loss per share:
Loss from operations before other income and provision
for income taxes $ (.10) $ (.08)
Provision for income taxes $ - $ -
Net loss $ (.10) $ (.08)
Weighted average number of shares outstanding 2,019,769 1,410,120
</TABLE>
See accompanying notes to financial statements
<PAGE>
SDC INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MAY 31,
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Sales $ 45,456 $ -
Cost of goods sold 33,075 -
Gross profit 12,381 -
Selling, general and administrative expenses 641,294 115,737
Loss from operations before other income and provision
for income taxes (628,913) (115,737)
Other income:
Interest income 3,820 -
Loss before provision for income taxes (625,093) (115,737)
Provision for income taxes - -
Net loss $ (625,093) $ (115,737)
Primary loss per share:
Loss from operations before other income and provision
for income taxes $ (.31) $ (.08)
Provision for income taxes $ - $ -
Net loss $ (.31) $ (.08)
Weighted average number of shares outstanding 2,019,769 1,410,120
</TABLE>
See accompanying notes to financial statements
<PAGE>
SDC INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED MAY 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Additional Total
Common Stock paid-in Accumulated Stockholders'
Shares Amount capital Deficit Equity
<S> <C> <C> <C> <C> <C>
Balances at September 1, 1995 1,752,700 $ 1,753 $ 5,117,676 $ (346,319) $ 4,773,110
Issuance of common stock with private
placement memorandum net of offering
cost $175,046 272,700 272 506,432 - 506,704
Issuance of common stock in connection
with acquisition of customer list 150,000 150 187,350 - 187,500
Net loss for the nine months ended
May 31, 1996 - - - (625,093) (625,093)
Balances at May 31, 1996 2,175,400 $ 2,175 $ 5,811,458 $ (971,412) $ 4,842,221
</TABLE>
See accompanying notes to financial statements.
<PAGE>
SDC INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MAY 31,
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (625,093) $ (115,737)
Adjustments to reconcile net loss to net
cash used for operating activities:
Amortization and depreciation 307,545 11,594
Changes in operating assets and liabilities:
Decrease in accounts receivable 537,280 -
(Increase) in inventory (39,409) -
Decrease in prepaid expenses 6,400 -
(Decrease) in accounts payable - related party (372,175) -
(Decrease) increase in accrued expenses (8,858) 34,280
Net cash (used for) operating activities (194,310) (69,863)
Cash flows from investing activities:
Advances to related parties - (12,500)
Acquisition of exclusive agency rights (150,000) -
Loans to related parties - (34,850)
Repayment of loans from related parties 14,608 -
Acquisition of customer list (150,000) -
Purchase of machinery and equipment (1,946) -
Other assets acquired (4,401) (37,107)
Net cash (used for) investing activities (291,739) (84,457)
Cash flows from financing activities:
Loan from related party - 7,100
Proceeds from private placement memorandum 681,750 225,900
Costs associated with private placement memorandum (175,046) (60,174)
Repayment of loans from stockholder (36,196) -
Net cash provided by financing activities 470,508 172,826
Net decrease in cash (15,541) 18,506
Cash at beginning of period 49,677 -
Cash at end of period $ 34,136 $ 18,506
Supplemental disclosure of non-cash investing activities:
Issuance of 51,650 shares of common stock for consideration
of exclusive agency rights $ - $ 64,563
Issuance of 448,350 shares of common stock in
connection with contribution of machinery and equipment $ - $ 4,469,064
Issuance of 150,000 shares of common stock for
acquisition of customer list $ 187,500 $ -
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NOTE 1 - GENERAL
SDC International, Inc. ("the Company") was incorporated in the
state of Delaware on June 30, 1994 for the purpose of developing
and marketing an exclusive license acquired from Skoda Diesel a.s.
("Skoda") to sell a broad range of Skoda's products which are
primarily comprised of piston combustion diesel engines whose
applications include locomotive and stationary engines for the
generation and co-generation of electric power.
In September 1994, the Company issued 1,400,000 shares of its common
stock to its three founding shareholders. Of the total 1,400,000
shares issued, 500,000 and 400,000 shares were issued to Worth
Capital Group Holding ("Worth"), Double Seal Ring Company ("Double"),
respectively, as founding shareholders, and 448,350 shares were
issued to Skoda as consideration for the contribution of machinery
and equipment. Also in September 1994, 51,650 shares were issued to
Skoda in connection with the purchase of the exclusive agency rights.
The machinery and equipment is located in the Czech Republic. Skoda,
one of the founding shareholders of the Company was formed in
Czechoslovakia in the year 1899 and manufactures heavy equipment and
diesel engines.
The accompanying unaudited financial statements have been prepared
in accordance with generally accepted accounting principles for
interim financial information and with instructions to Form 10-QSB.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management the
interim financial statements include all adjustments necessary in
order to make the financial statements not misleading. The results
of operations for the three and nine months ended are not necessarily
indicative of the results to be expected for the full year. For
further information, refer to the Company's audited financial
statements and footnotes thereto at August 31, 1995, included in the
Company's Form 10-SB, filed with the Securities and Exchange
Commission.
NOTE 2 - NOTES RECEIVABLE - STOCKHOLDER AND RELATED PARTIES
From February 1995 to August 1995, the Company has made various loans
to a stockholder and to entities whereby such stockholder is an
Officer/Director with the following terms:
i) Secured demand note of $40,000 to an entity dated
February 1995, bearing interest at 10% per annum.
The note is secured by 60,000 shares of the debtor's
common stock and is due on or before February 8, 1996.
The balance includes $3,967 of accrued interest and
as of February 29, 1996 the note was in default. $ 26,374
ii) Unsecured demand note of $24,000 to an entity dated
April 1995. The note bears interest at 10% per annum
and is due on February 28, 1996. The balance includes
$2,018 of accrued interest and as of February 29, 1996
the note was in default. 26,018
iii) Unsecured demand note of $10,000 to a stockholder. The
note is non-interest bearing and is due on demand. 10,000
$ 62,392
<PAGE>
NOTE 2 - NOTES RECEIVABLE - STOCKHOLDER AND RELATED PARTIES (Cont'd)
As of May 31, 1996, no allowance has been established for such notes
since all notes are considered fully collectible.
NOTE 3 - EXCLUSIVE AGENCY RIGHTS, NET
On April 21, 1994, one of the founding shareholders executed an
exclusive agency representation letter agreement as agent of the
Company with Skoda pursuant to which the Company was appointed as
Skoda's exclusive sales agent in North, South and Central America
with the exception of the country of Peru. In connection with this
agreement, the Company is obligated to furnish Skoda with all
inquiries from potential purchasers and may not execute any contracts
or other agreements on Skoda's behalf without its written consent.
Skoda must provide the Company with all information and materials
normally associated with the sales effort, including catalogues,
product literature and descriptions, price lists and the technical
expertise and consultation of its staff, if necessary.
In order for the Company to maintain its exclusivity, it must
generate annual gross sales within the territory of at least
$15,000,000 at the close of the fifth year (April, 1999) after the
execution of the agreement. As consideration for the purchase of
these exclusive agency rights, the Company has issued 51,650 shares
of it's common stock to Skoda. Such stock has been assigned a value
of 50% of the private offering per share price of $2.50.
Accordingly, the Company has valued such exclusive agency rights at
$64,563 (51,650 x $1.25) which will be amortized on a monthly basis
over five (5) years. For the three and nine months ended May 31,
1996, the Company has recorded amortization expense of $3,228 and
$9,684, respectively.
In October 1995 the Company purchased the exclusive rights to market
and sell Skoda Diesel products into the countries of China and South
Korea based upon the following term:
South Korea
i. During the year 1996, sales to South Korea must be in the amount
of at least $2,400,000.
ii. During the year 1997, sales to South Korea must be in the amount
of at least $3,600,000.
iii. Each year thereafter, sales to South Korea must be in the amount
of at least $5,000,000.
The Company paid Skoda a one-time fee of $50,000 for the acquisition
of such exclusive rights.
<PAGE>
NOTE 3 - EXCLUSIVE AGENCY RIGHTS, NET (Cont'd)
China
i. During the year 1996, sales to China must be in the amount of at
least US $3,000,000.
ii. During the year 1997, sales to China must be in the amount of at
least US $ 4,500,000.
iii. During the year 1998, sales to China must be in the amount of at
least US $6,000,000.
The Company paid Skoda a one-time fee of $100,000 for the acquisition
of such exclusive rights.
The newly acquired agency rights from China and Korea will be
amortized on a monthly basis over (5) five years. For the nine
months ended May 31, 1996 the Company has recorded $15,000 in
amortization expense.
NOTE 4 - STOCKHOLDERS' EQUITY
a) Issuance of common stock for services
In conjunction with services provided to the Company, 180,000
shares of common stock were issued to various parties, during
July 1995 as consideration for consulting services rendered.
At the time of issuance, the stock was being privately offered
at $2.50 per share pursuant to the Company's private placement
memorandum. Such shares have been recorded at an assigned
value equal to fifty percent (50%) of the private offering of
$2.50 per share.
In connection with recording the above transactions,
additional paid-in capital has been increased by $224,820
which represents the excess of the fair market value of the
related stock issued over par.
b) Issuance of common stock for contribution of machinery and
equipment
During September 1994, pursuant to the founding stockholder's
agreement, Skoda simultaneously contributed machinery and
equipment with an appraised value of $4,469,064 in exchange
for 448,350 shares of the Company's common stock. As a
result, the Company increased additional paid-in capital by
$4,468,616 which represents the excess of the assigned value
of the machinery and equipment over the par value of the
common stock.
<PAGE>
NOTE 4 - STOCKHOLDERS' EQUITY (Cont'd)
c) Issuance of common stock for exclusive agency rights
During September 1994, the Company issued 51,650 shares of its
$.001 par value common stock to one of its founding
shareholders, Skoda, as consideration for the Company
obtaining the rights to act as an exclusive sales agent in
North, South and Central America except for Peru. Such shares
have been assigned a value of 50% (fifty percent) of the
private offering share price of $2.50 per share. Accordingly,
the Company has valued such rights at $64,563 (51,650 x $1.25)
which will be amortized on a monthly basis over five (5)
years. The Company has recorded amortization expense of
$3,228 for the three months ended May 31, 1996.
d) Confidential private placement memorandum
On June 1, 1995, the Company commenced and privately offered
on a best efforts basis 400,000 shares of its $.001 par value
common stock at $2.50 per share before deducting discounts and
commissions and non-accountable expenses aggregating up to 13%
of the gross offering price which is payable by the Company to
members of the National Association of Securities Dealers,
Inc. ("NASD"), financial advisors, purchaser representatives,
and individuals legally entitled to receive such commissions.
Such offering of securities was for a period of sixty (60)
days unless extended by the Company for additional thirty (30)
day extensions. As of August 31, 1995 the Company sold
172,700 shares resulting in gross proceeds of $431,750 before
expenses of $71,848 which includes discounts and commissions,
non-accountable expenses and other direct costs associated
with the offering. The Company has elected to extend this
offering.
In addition to above, the Company has authorized the issuance
of 40,000 common stock purchase warrants to be sold to NASD
members who may offer and sell the Company's shares. Each
warrant will entitle the register holder to purchase one (1)
share of common stock at $3.00 per share subject to adjustment
for a period of three (3) years beginning April 1, 1996. As
of May 31, 1996 no warrants have been issued.
For the nine months ended May 31, 1996 the Company sold
272,700 shares of its $.001 par value common stock resulting
in net proceeds of $506,704 after deducting offering costs of
$175,046 which includes discounts and commissions, non-
accountable expenses and other direct costs associated with
the offering.
<PAGE>
NOTE 4 - STOCKHOLDERS' EQUITY (Cont'd)
e) Issuance of common stock for acquisition of assets
Pursuant to a purchase agreement dated December 2, 1995
between the Company and Worth, the Company acquired certain
assets comprising of supplier lists, customer lists,
accounts, records, and sample inventories necessary for the
operations of Worth's Product Trading Division.
As for consideration for such assets, the Company paid
$150,000 and issued 150,000 shares of its $.001 par value
common stock. Such stock has been assigned a value of 50% of
the private offering per share price of $2.50. Accordingly,
the Company has valued such assets at a total of $337,500
comprising of $150,000 in cash and $187,500 of common stock.
Management has elected to amortize such assets over the life
of the non-competition agreement of three years. (See Note
6j for additional information). Accordingly, for the three
months ended May 31, 1996 the Company has recorded
amortization expense amounting to $28,125.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
a) Lease agreement
The Company leases its administrative office pursuant to
signed lease agreement commencing July 1, 1995 and expiring
on June 30, 1997. Such leases require monthly payments of
$3,500. Prior to July 1, 1995 the Company maintained its
administrative office on a month to month basis, free of
charge at the office of Worth. Worth is an entity which the
President of the Company is also a 50% shareholder.
Years ended August 31,
1996 $ 10,500
1997 35,000
$ 45,500
Included in general and administrative expenses is rent
expense which amounted to $10,500 and $31,500 for the three
and nine months ended May 31, 1996, respectively.
b) Management agreement
On December 15, 1995 the Company and Worth entered into a
management agreement with an individual for a period of
three years. Pursuant to such agreement, the individual
shall devote such time, attention and efforts to management
services as may be reasonably required by the Company and
Worth. The Company and Worth will pay such individual an
amount equal to twenty-five percent (25%) of the gross
profit from sales made by the Company. Such payments are
payable monthly after the collection of receivables from
said sales.
<PAGE>
NOTE 6 - RELATED PARTY TRANSACTION
a) Accounts payable
At May 31, 1996, the Company had accounts payable totalling
$4,725 which was due to Skoda, one of its founding
stockholder.
b) Notes receivables - Stockholder and related parties
From February 1995 to August 1995, the Company made loans at
various terms (See Note 2 for additional information). As of
May 31, 1996 the balance amounted to $62,392, inclusive of
accrued interest, to a shareholder and to entities which such
shareholder is also an officer. Said shareholder is not an
officer or director of the Company.
c) Due from related party
During April and May 1995, the Company advanced a total of
$12,500 to an entity which a stockholder of the Company is
also an officer. Said shareholder is not an officer or
director of the Company. Such loan is non interest bearing
and it is due on demand. As of May 31, 1996, such advances
have not been repaid.
d) Acquisition of machinery and equipment
During September 1994, pursuant to the Company's founding
shareholder's agreement, Skoda contributed machinery and
equipment with an appraised value of $4,469,064 in exchange
for 448,350 shares of the Company's common stock.
e) Acquisition of exclusive agency rights
On April 21, 1994, the Company executed an exclusive agency
agreement with one of its founding shareholders, Skoda,
pursuant to which the Company obtained the right to act as
Skoda's exclusive sales agent in North, South and Central
America with the exception of the country of Peru. In
consideration for the purchase of these rights, the Company
issued 51,650 shares of it's common stock to Skoda.
During October 1995 the Company executed another exclusive
agency agreement with Skoda pursuant to which the Company
obtained the rights to act as Skoda's agent in China and
Korea. In consideration for the purchase of these rights,
the Company paid Skoda $150,000. (See Note 3 for
additional information).
f) Accrued expenses
Included in accrued expenses at May 31, 1996 is $19,354 of
management services which are owed to an affiliate of the
Company's President and Secretary and $23,338 which
represents the balance due an affiliate for the purchase of
it's customer list.
<PAGE>
NOTE 6 - RELATED PARTY TRANSACTION (Cont'd)
g) Due to stockholder
Pursuant to the founding shareholder agreement entered on
April 21, 1994, Double had agreed to advance funds to the
Company for working capital not to exceed $50,000. As
of May 31, 1996 the Company has repaid in full the $36,096
previously advanced for working capital.
h) Management fees
For the three months and nine ended May 31, 1996 the Company
recorded $15,000 and $45,000 respectively for management fees
and travel allowance to Worth, a founding stockholder. The
Company's President and Secretary is a 50% shareholder of
Worth.
i) Acquisition of assets
Pursuant to a purchase agreement dated December 2, 1995
between the Company and Worth, the Company acquired certain
assets comprising of supplier lists, customer lists, accounts,
records, and sample inventories necessary for the operations
of Worth's Product Trading Division.
j) Non-competition agreement
On December 15, 1995, the Company entered into a non-
competition agreement with Worth. Pursuant to such agreement,
Worth shall not engage in any business in competition with the
business carried on by the Company for a period of three years.
As compensation for its agreement not to compete, Worth shall
be paid a fee of $10 in addition to other consideration
payable under the purchase agreement as discussed above.
<PAGE>
ITEM 2 - MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OPERATIONS
For the three month period ended May 31, 1996, the Company reported revenues of
$33,367. For the nine month period ended May 31, 1996, the company had revenues
of approximately $45,456. The Company has received conditional orders from
Skoda customers totalling almost $3,000,000; however, these orders may not be
shipped prior to the Company's year end of August 31, 1996. The Company has
posted $80,000 of performance bonds for orders received. Discussions have been
made and are continuing with sources for export and sales financing which could
help the Company develop its markets and customers. The Company is discussing
with Skoda, a.s., the Czech company which controls Skods Diesel, possibilities
of expanding markets and products with those of Skods, a.s., a large
engineering and manufacturing conglomerate whose revenues exceed one billion
US dollars annually. Due to theses and other potential changes and
circumstance, the Company elects to issue no operating projections at this
time.
The Company is awaiting notification from the Securities and Exchange
Commission that it has reach the "no comment" stage regarding eh Company's
registration statement Form 10SB. Also, two member firms of the National
Association of Securities Dealers ("NASD") have filed Form 211's with the NASD
requesting that the shares of common stock of the company be allowed to trade
on the Bulletin Board under approval of the NASD. The NASD has reported to
these two member firms that the Company should receive its "no comment" letter
from the SEC before it can begin trading its shares on the Bulletin Board
market.
There can be no assurances that any of the matters discussed above will result
in positive results for the Company.
Costs of goods sold for the three month period ended May 31, 1996 was
approximately 84% of sales. Costs of goods sold for the nine month period
ending May 31, 1996 was approximately 73% of sales. Management believes that
costs of goods sold in the future may be a lower percentage if the company is
able to attain a more stable and favorable product mix.
Operating expenses for the three month period ended May 31, 1996 were
approximately $210,000, and operating expenses for the nine month period ended
May 31, 1996, were approximately $641,000,. Operating expenses in the quarter
ended May 31, 1996, without including amortization and depreciation, decreased
approximately 4% compared to the same operating expenses during the previous
two quarter ending February 29, 1996. Management expects operating expenses
(non-depreciation and non-amortization) to continue to decrease as one-time or
extraordinary expenses are reduced. Operating expense categories which
exceeded $5,000 for the three month period ending May 31, 1996 were;
Amortization & Depreciation $114,390; Freight $5,537; Office rent $14,818;
Compensation & Salary $18,000; Travel & lodging $13,487; Telephone & Facsimile
$9,554; legal and Accounting $15,879; and Marketing $8,779.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES)
Net cash used for the Company's operating activities for the nine month period
ended May 31, 1996 was approximately $194,310. Net cash used for the
Company's investing activities for the nine month period ended May 31, 1996
was approximately $291,739. Management is evaluating its current and
projected cash needs to determine if its current financial situation will be
sufficient to meet such needs. If the Company continues according to its
present plans, the company will be required to obtain additional financing
equity capital. There is no assurance that such financing or equity capital
will be available.
Negative cash flows from the company's operating activities are anticipated to
continue until the company has established its distributors within its sales
territories, has received and shipped orders, and has collected payment for
such orders. The company may encounter difficulties in financing the purchases
of inventory necessary to complete orders. The company acknowledges that there
can be no assurance that it will be able to obtain capital or financing until
the time of such payment is received or that such capital or financing will be
available. In the event the Company is unable to provide needed revenues to
finance its ongoing operations or if the Company does not receive additional
capital, there could be a severe adverse impact on the Company's future
operations.
Net cash provided by financing activities for the nine month period ended May
31, 1996 was approximately $470,508. This increase in net cash was
attributable to the issuance of common stock. During the second quarter, the
Company collected approximately $17,500 on its Notes Receivable of
approximately $89,000 from stockholders (non officer or director), but there
is no assurance that the company will be able to collect the balance of
approximately $72,000.
The Company's products are sold in US dollars and the Company does not believe
currency exchange rates or current inflation rates will have a significant
effect on sales or profitability.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings:
None
ITEM 2 - Changes in Securities:
None
ITEM 3 - Defaults Upon Senior Securities:
None
ITEM 4 - Submission of Matters to a Vote of Security Holders:
None
ITEM 5 - Other Information:
None
ITEM 6 - Exhibits and Reports on Form 8-K:
None
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SDC INTERNATIONAL, INC.
(Registrant)
Date: July 19, 1996 BY: /S/Ronald A. Adams
Ronald A. Adams, President
and principal financial
officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Balance
Sheets, Statements of Operations, Statement of Stockholders' Equity and
Statements of Cash Flows and Notes thereto incorporated Part I, Item 1 of this
Form 10-QSB and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> MAY-31-1996
<CASH> 34,136
<SECURITIES> 0
<RECEIVABLES> 62,392
<ALLOWANCES> 0
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0
0
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</TABLE>
