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 February 29, 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: 2,130,440 shares outstanding as of
February 29, 1996.
<PAGE>
SDC INTERNATIONAL, INC.
INDEX
PART 1 - FINANCIAL INFORMATION:
ITEM 1 - FINANCIAL STATEMENTS
Balance Sheets (Unaudited) February 29, 1996
and August 31, 1995 F-1
Statements of Operations (Unaudited) for the
three months ended February 29, 1996 and February 28, 1995 F-2
Statements of Operations (Unaudited) for the
six months ended February 29, 1996 and February 28, 1995 F-3
Statement of Stockholders' Equity (Unaudited) for
the six months ended February 29, 1996 F-4
Statements of Cash Flows (Unaudited) for the
six months ended February 29, 1996 and February 28, 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)
February 29, August 31,
1996 1995
ASSETS
<S> <C> <C>
Current assets:
Cash $ 62,398 $ 49,677
Accounts receivable - 537,280
Inventory 35,068 -
Prepaid expense - 6,400
Notes receivables - stockholder and related parties 61,232 77,000
Due from related party 12,500 12,500
Total current assets 171,198 682,857
Machinery and equipment, net 4,321,846 4,469,064
Exclusive agency rights, net 187,694 51,650
Customer list, net 309,375 -
Other assets 36,675 34,184
Total assets $ 5,026,788 $ 5,237,755
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable - related party $ 4,725 $ 376,900
Accrued expenses 57,310 51,549
Due to stockholder - 36,196
Total current liabilities 62,035 464,645
Commitments and contingencies (Note 5) - -
Stockholders' equity:
Common stock $.001 par value,
authorized 10,000,000 shares,
issued and outstanding 2,130,440
and 1,752,700 shares, respectively 2,130 1,753
Additional paid-in capital 5,730,203 5,117,676
Accumulated deficit (767,580) (346,319)
Total stockholders' equity 4,964,753 4,773,110
Total liabilities and stockholders' equity $ 5,026,788 $ 5,237,755
</TABLE>
See accompanying notes to financial statements.
<PAGE>
SDC INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
(UNAUDITED)
<TABLE>
<CAPTION>
February 29, February 28,
1996 1995
<S> <C> <C>
Sales $ - $ -
Cost of goods sold - -
Gross profit - -
Expenses:
Selling, general and administrative expenses 196,384 3,228
Total expenses 196,384 3,228
Loss from operations before other income and provision
for income taxes (196,384) (3,228)
Other income:
Interest income 225 -
Loss before provision for income taxes (196,159) (3,228)
Provision for income taxes - -
Net loss $ (196,159) $ (3,228)
Primary loss per share:
Loss from operations before other income & provision
for income taxes $ (.10) $ Nil
Provision for income taxes $ - $ -
Net loss $ (.10) $ Nil
Weighted average number of shares outstanding 1,956,769 1,400,000
</TABLE>
See accompanying notes to financial statements
<PAGE>
SDC INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED
(UNAUDITED)
<TABLE>
<CAPTION>
February 29, February 28,
1996 1995
<S> <C> <C>
Sales $ 12,089 $ -
Cost of goods sold 4,725 -
Gross profit 7,364 -
Expenses:
Selling, general and administrative expenses 431,285 6,456
Total expenses 431,285 6,456
Loss from operations before other income and provision
for income taxes (423,921) (6,456)
Other income:
Interest income 2,660 -
Loss before provision for income taxes (421,261) (6,456)
Provision for income taxes - -
Net loss $ (421,261) $ (6,456)
Primary loss per share:
Loss from operations before other income & provision
for income taxes $ (.22) $ Nil
Provision for income taxes $ - $ -
Net loss $ (.22) $ Nil
Weighted average number of shares outstanding 1,956,769 1,400,000
</TABLE>
See accompanying notes to financial statements
<PAGE>
SDC INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED FEBRUARY 29, 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 $143,946 227,740 227 425,177 - 425,404
Issuance of common stock in connection
with acquisition of customer list 150,000 150 187,350 - 187,500
Net loss for the six months ended
February 29, 1996 - - - (421,261) (421,261)
Balances at February 29, 1996 2,130,440 $2,130 $5,730,203 $(767,580) $4,964,753
</TABLE>
See accompanying notes to financial statements.
<PAGE>
SDC INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
(UNAUDITED)
<TABLE>
<CAPTION>
February 29, February 28,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (421,261) $ (6,456)
Adjustments to reconcile net loss to net
cash used for operating activities:
Amortization and depreciation 193,155 6,456
Changes in operating assets and liabilities:
Decrease in accounts receivable 537,280 -
(Increase) in inventory (35,068) -
Decrease in prepaid expenses 6,400 -
(Decrease) in accounts payable - related party (372,175) -
Increase in accrued expenses 5,761 -
Net cash (used for) operating activities (85,908) -
Cash flows from investing activities:
Acquisition of agency rights (150,000) -
Repayment of loans from related parties 15,768 -
Acquisition of customer list (150,000) -
Purchase of machinery and equipment (1,946) -
Other assets acquired (4,401) -
Net cash (used for) investing activities (290,579) -
Cash flows from financing activities:
Proceeds from private placement memorandum 569,350 -
Costs associated with private placement memorandum (143,946) -
Repayment of loans from stockholder (36,196) -
Net cash provided by financing activities 389,208 -
Net increase in cash 12,721 -
Cash at beginning of period 49,677 -
Cash at end of period $ 62,398 -
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>
SDC INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED FEBRUARY 29, 1996
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 six 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 $3,407 of accrued interest
and as of February 29, 1996 the note was in
default. $ 25,814
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 $1,418 of accrued interest
and as of February 29, 1996 the note was in
default. 25,418
iii) Unsecured demand note of $10,000 to a stockholder.
The note is non-interest bearing and is due on
demand. 10,000
$ 61,232
<PAGE>
SDC INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED FEBRUARY 29, 1996
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 six months ended February
29, 1996, the Company has recorded amortization expense of $3,228
and $6,456, 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>
SDC INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED FEBRUARY 29, 1996
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 six
months ended February 29, 1996 the Company has recorded $7,500 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>
SDC INTERNATIONAL, INC
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED FEBRUARY 29, 1996
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 February 29, 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 February 29, 1996
no warrants have been issued.
For the six months ended February 29, 1996 the Company sold 227,740
shares of its $.001 par value common stock resulting in net proceeds
of $425,404 after deducting offering costs of $143,946 which
includes discounts and commissions, non-accountable expenses and
other direct costs associated with the offering.
<PAGE>
SDC INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED FEBRUARY 29, 1996
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 February 29, 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 $21,000
1997 35,000
$56,000
Included in general and administrative expenses is rent expense
which amounted to $10,500 and $21,000 for the three and six months
ended February 29, 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>
SDC INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED FEBRUARY 29, 1996
NOTE 6 - RELATED PARTY TRANSACTION
a) Accounts payable
At February 29, 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 February 29,
1996 the balance amounted to $61,232, 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
February 29, 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 February 29, 1996 is $22,306 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>
SDC INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED FEBRUARY 29, 1996
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 February 29, 1996 the Company
has repaid in full the $36,096 previously advanced for working
capital.
h) Management fees
For the three months ended February 29, 1996 the Company recorded
$15,000 and $3,000, respectively, for management fees and travel
allowance to Worth, a founding stockholder. For the six months
ended February 29, 1996 the Company recorded $30,000 and $6,000
for management fees and travel allowance to Worth. 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 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For the three month period ended February 29, 1996, the Company had
no revenues. For the six month period ended February 29, 1996, the
Company had revenues of approximately $12,089. The Company remained
in its developmental stage and continued its Regulation D Rule 504
capital offering. Market research continued and three distributors
for the Company's products were appointed. Management conducted
marketing and sales meetings for the distributors in Brazil,
Colombia and Ecuador. The Board of Directors concluded its review
of present opportunities for multilateral product trading and
completed the acquisition of the Product Trading Division of Worth
Capital Group for the purpose of engaging in trade of industrial and
consumer products between Eastern Europe, United States and South
America. During its previous fiscal year, the product trading
division of Worth Capital Group had sales of approximately 1.4
million dollars, all to Eastern Europe. The consideration for the
acquisition of the customer lists, supplier lists, a management
agreement with sales personnel in Eastern Europe, and a non-compete
agreement was $150,000 and 150,000 shares of the Company's common
stock. Through this asset acquisition, the Company became the sole
distributor of Leslie's Swimming Pool Equipment in Bulgaria and
Greece, and has since shipped other products into Eastern Europe.
The Company continues to work with potential suppliers, and plans,
also, to act as a purchasing agent for Skoda Diesel components and
materials needed for the production of Skoda Diesel products.
Costs of goods sold for the six month period ended February 29,1996
was approximately 39% of sales. Management believes that Costs of
Goods Sold in the future will be a substantially higher percentage
because the limited revenue of this period was from product lines
for resale which had a very high gross margin but which will comprise
approximately 20% of the future revenues of the Company.
Operating expenses for the three month period ended February 29, 1996
were approximately $196,384, and operating expenses for the six month
period ended February 29, 1996 were approximately $431,285.
Operating expenses in the quarter ended February 29, 1996 decreased
by approximately 17% compared to operating expenses for the quarter
ended November 30, 1995. Operating expenses in the quarter ended
February 29, 1996, without including amortization and depreciation,
decreased approximately 47% compared to the same operating expenses
during the previous quarter ended November 30, 1995. Management
expects operating expenses (non-depreciation and non-amortization)
to continue to decrease once the Company completes its developmental
stage and begins the sale of products, thereby eliminating many
one-time expenses related to the research and establishment of
markets. Operating expense categories which exceeded $5,000 for the
three month period ending February 29, 1996 were: Amortization &
Depreciation $114,390; Freight $5,792; Office rent $11,695;
Compensation & Salary $18,000; Travel & lodging $20,500; and
Telephone & Facsimile $6,188. During the same six months period
ending February 28, 1995, there were no revenues and expenses were
$6,456.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used for the Company's investing activities for the six
month period ended February 29, 1996 was approximately $290,579.
Management is evaluating its current and projected cash needs
compared to its continuing financing activities to determine if
such financing activities will be sufficient to meet such needs. If
the Company continues according to its present plans, the Company
will be required will to obtain additional financing or equity
capital. There is no assurance that such financing activities or
equity capital will be available.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES (Con't.)
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 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 six month period
ended February 29, 1996 was approximately $389,208. This increase
in net cash was attributable to the issuance of common stock. The
Company collected approximately $17,500 on its Notes Receivable from
stockholders (non officer or director) during the six month period
ended February 29, 1996, and the Company expects to continue the
orderly liquidation of its Notes Receivable.
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: May 22, 1996 By:/S/Ronald A. Adams
Ronald A. Adams, President
& principal financial officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Balance
Sheet, Statement of Operations, Statements of Cash Flows and Notes thereto
incorporated in 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> 6-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> FEB-29-1996
<CASH> 62,398
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 35,068
<CURRENT-ASSETS> 171,198
<PP&E> 4,321,846
<DEPRECIATION> 193,155
<TOTAL-ASSETS> 5,026,788
<CURRENT-LIABILITIES> 62,035
<BONDS> 0
0
0
<COMMON> 5,732,333
<OTHER-SE> 4,964,753
<TOTAL-LIABILITY-AND-EQUITY> 5,026,788
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 196,384
<LOSS-PROVISION> (225)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (196,159)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (196,159)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
