U. S. Securities and Exchange Commission
Washington, D. C. 20549
Form 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
For the year ended August 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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.)
2701 W. Oakland Park Boulevard
Ft. Lauderdale, Florida 33311
(Address of principal (Zip code)
executive offices)
Issuer's telephone number (561) 882-9300
Securities registered under Section 12(b) of the Act:
None
Securities registered under Section 12(g) of the Act:
Common Stock, Par value $0.001
(Title of class)
<PAGE>
Check whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the past 12 months (or for such
shorter period that registration was required to file such
reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes [X] No [ ]
Check if no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and
no disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or
any amendment to this Form 10-KSB. [ ]
The aggregate market value of the voting stock on August
31, 1997 (consisting of Common Stock, $0.001 par value per
share) held by non-affiliates was approximately $2,478,968
based upon the average bid and asked prices for such Common
Stock on said date ($2.00), as reported by a market maker. On
such date, there were 2,639,484 shares of the Registrant's
Common Stock outstanding.
<PAGE>
Item 1. DESCRIPTION OF BUSINESS
SDC International, Inc., (hereinafter referred to as the
"Company") is a Delaware corporation formed in June, 1994 to
market, sell, and finance Eastern and Central European
industrial products such as diesel generators, co-generation
equipment, electric metering systems, on/off-road trucks,
tractors, and transport equipment such as buses, trolleys,
trams, and airfreight containers.
The Company currently acts as an exclusive distributor of
Skoda engines in North, South and Central America, under an
exclusive license from Skoda Interdiesel, 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.
In April 1997, the Company acquired by merger the Panamanian
company representing TATRA, a Czech truck manufacturer with ISO
certification, to market and sell TATRA products in South and
Central America. In August 1997, the Company became the
exclusive North and South American distributor of Metal Kraft,
a.s., a Czech manufacturer of metal pallets and containers
whose customers include Mercedes Benz, BMW, and Volkswagen, and
which, beginning in 1997, offers a line of airfreight cargo
containers.
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 or select the appropriate product to
best address specific needs. The Company is the intermediary
between the factories and the customers, facilitates the
delivery of the equipment by processing the necessary
documentation involved in the importation of the products,
arranges customer financing and leasing of the products, and
arranges for proper service and technical support needed for
the product's operation.
SKODA INTERDIESEL, a.s.
The Company sells a broad range of engines in several
sizes and capacities. The Company's sales of such engines in
fiscal 1997 amounted to $1,101,000. The Company's products
have application in several markets including electrical power
<PAGE>
production and co-generation systems, locomotive engines, pump
stations, direct drives for industrial engines, oil and gas
drilling equipment, and complete 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, Central and South America for
the marketing and sale of products of Skoda. The agreement
provides that for the agreement to be not cancellable by Skoda,
sales made within the foregoing territory shall be at least
$15,000,000 per year by the close of the sixth year after
execution of the agreement.
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.
Despite its domination and control by the Communists after
World War II, and through its privatization in 1991, Skoda has
maintained a high standard of technical expertise and design in
its product line. The emerging markets, especially those within
Central and South America, areas of SDC's primary marketing
concentration, seek electrical power systems, generating and
co-generating equipment as that offered by SDC, and SDC
believes it will remain competitive so long as its production
wage rates remain stable relative to those of its competitors,
whose production rates are much higher. Products of the
Company match the technical expertise and versatility of
competitors, while offering substantially lower costs. The
Company's products meet all known regulations in the areas of
its sales.
<PAGE>
TATRA, a.s.
The Company is the exclusive distributor for TATRA vehicles,
accessories and spare parts for Colombia with the right of
first refusal to become the exclusive distributor for other
countries of South and Central America. The Company became the
exclusive distributor for TATRA through the merger into the
Company of Golden Grove Business, Inc., which has held the
exclusive rights beginning May 18, 1995.
TATRA, a.s., is a Czech manufacturer of on/off-road heavy
duty trucks. The factory was founded in 1850 and in 1898 the
first truck carrying 2.5 tons of payload was manufactured. The
factory continued development and innovations of its vehicle
and today produces a truck with the an air cooled diesel engine
and a solid central backbone tube with swing half axles, both
features being unique features of the TATRA truck. The TATRA
design enables quicker passage over rough terrain with
significantly less vibration than that from more orthodox
designs. The swing half axles together with the central
backbone tube system create a stable base for a superstructure
resistant to side oscillation. The trucks are offered in 4 by
4, 6 by 6, and 8 by 8 configurations with a turbocharged eight
cylinder diesel engine with air-to-air intercooler. Engines
are manufactured by TATRA, Deutz, or Cummins Diesel. The
transmission is mechanical with a pneumatic gear shift booster,
ten forward and two reverse speeds of the TATRA design. TATRA
has ISO 9000 certification and TATRA trucks meet all EURO II
regulations.
During TATRA's peak production years of the 1980's and
early 1990's, the factory produced over 17,000 vehicles per
year. At present, TATRA produces about 3,000 vehicles
annually, which is an increase from the lowest production year
of 1995 when 2,000 trucks were produced. Historically, TATRA
sold their products domestically and exported to China, the
former Soviet Union, and Europe. The decrease in sales was
attributed to the downturn in the economy and essentially lower
demand for new trucks in the former Soviet Union and Eastern
Europe, all due to the fall of the state's Communist economy
and political system.
The TATRA factory has been struggling with a lack of
operating capital for several years and is burdened with bank
credits of more than US$120,000,000. TATRA revenues in 1997
are projected to be US$240,000,000 compared to US$120,000,000
in 1996. TATRA reported a loss of US$30,000,000 in 1996 and
expects no loss or a slight profit for 1997. This financial
<PAGE>
situation is similar to that of most other East European
manufacturers who have had to reorganize to market their
products to new markets and customers after the disintegration
of the Communist economic system..
On May 18, 1995, Golden Grove Business, Inc., ("GGB")
executed an agreement with TATRA to become an exclusive
distributor of TATRA vehicles, accessories and spare parts in
Colombia with the right of first refusal to become the
exclusive distributor for other countries in Central and South
America. Late in 1995, GGB purchased two TATRA trucks to
perform marketing tests and technical performance tests in
Colombia. GGB obtained all necessary certifications and
appropriate homologation to sell TATRA vehicles in Columbia.
Tests were completed in March 1996 and the results were then
submitted to the manufacturer. Tests confirmed the vehicles to
be marketable and suitable for sale in Colombia.
In February 1996 GGB entered into a non-exclusive
dealership agreement with MAQUIAUTOS, Ltd., a construction
equipment dealer in Bogota, Colombia, to sell and service TATRA
trucks in Colombia. In July 1996, GGB, TATRA, and MAQUIAUTOS
jointly exhibited five TATRA vehicles, including a race truck
which won the Paris-Dakar Race in 1995, in one of the largest
international exhibitions in Bogota, "XI Feria Internacional de
Bogota". After the exhibition, the trucks were further used
for demonstrations to potential customers and, thereafter, all
were sold.
In the beginning of 1997, GGB and the Company entered into
an agreement providing for the merger of GGB into the Company.
The merger closed beginning on April 24, 1997. Following the
merger, the Company has concentrated its efforts on arranging
capital to properly fund sales and marketing of TATRA products.
Metall Kraft, s.r.o.
On August 21, 1997, the Company executed an exclusive
agreement with Metall Kraft, s.r.o., a Czech manufacturer
producing metal pallets, warehouse transportation equipment,
and transport cargo containers, to market and sell all such
products in North, Central and South America.
Through privatization, the current owners of Metall Kraft
purchased in 1994 the company CSAO, a state owned company which
for several decades produced automobile and truck bodies,
repaired truck bodies and maintained a metal fabrication
<PAGE>
facility. During the same year, the company changed its name
from CSAO to Metall Kraft and began manufacturing metal
transport containers and pallets for customers such as Mercedes
Benz, BMW, Volkswagen-Skoda and Nedcar. Shortly thereafter,
Metall Kraft added the manufacturing, assembly and installation
of warehouse storage and conveyor systems for manufacturing
facilities. The Metall Kraft facility is slightly more than
300,000 square feet located in an industrial zone in the
southern region of the Czech Republic. Metall Kraft employs
150 workers and holds manufacturing quality certificate type
CZ-10200.
General
The Company is dependant upon certain foreign suppliers for its
products. As such, the Company faces risk of the inability to
obtain products in the event of production problems at these
suppliers due to labor problems, governmental regulations,
working capital deficiencies, political unrest and other
problems which may result in the inability of these suppliers
to fulfill orders of the Company and over which the Company has
no control. In the event these suppliers were unable to
fulfill the Company's orders, it might have to suspend its
business until such supply problems were corrected by the
supplier or until alternative suppliers were located, none of
which can be assured. Additionally, although the Company pays
its suppliers in U.S. Dollars, currency fluctuations may
adversely affect the prices charged by 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 in 1994 by Skoda Diesel, Double
Seal Ring Company, Inc., and Worth Capital Group (since renamed
WCG Holdings, Inc.) 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
international consulting in the areas of marketing and
<PAGE>
financing to form SDC International, Inc.
Skoda Diesel, a.s., founded in 1899 in the Czechoslovakia
and whose operations are now known as Skoda Interdiesel, a.s.,
has produced hundreds of diesel locomotives and thousands of
diesel and gas engines. Its products meet or exceed the most
demanding technical requirements. Among the shareholders of
Skoda Diesel is Skoda Plzen, a.s., one of the largest producers
of steam and turbine generating systems in the world. With
Skoda's impressive lineage and with the reputation of the Czech
Republic as one of the foremost industrial nations of the
world, the Company's sales efforts are greatly enhanced.
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.
WCG Holdings, Inc., 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, WCG and its
affiliates have conducted business in more than thirty nations
and have worked with many of the world's largest industrial
corporations. Finally, WCG has had dealings with and has
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 has been 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 the then 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 most revenues will
result from sales to customers in North, Central and South
America.
<PAGE>
Item 2. DESCRIPTION OF PROPERTY
The Company has its primary offices at 2701 West Oakland
Park Boulevard, Ft. Lauderdale, Florida 33311, where sales and
marketing functions are performed. The offices are inside a
40,000 square foot facility owned by an unrelated party. The
executive office of the Company is located in Palm Beach,
Florida. In Bolivia, the Company, through Skobol, s.a.
occupies a 6,000 square foot facility owned by an unrelated
party. The annual office rental payments of the company total
approximately $60,000, and are on a month to month basis.
The machinery and equipment of the Company consists of
several hundred pieces of production machines, tools, and
fixtures, ranging from tables to large scale milling and
grinding systems. All machinery and equipment is located
within the Skoda Interdiesel factory in the Czech Republic and
is in good working condition. A full listing of the machinery
and equipment is included in the Exhibits to the Company's
Registration Statement on Form 10-SB.
The Company believes that its existing offices and related
facilities are adequate for the foreseeable future and that,
depending on additional products and sales, similar and/or
additional offices and locations can be acquired on reasonable
terms.
Item 3. LEGAL PROCEEDINGS
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters to a vote of the
security holders during its fiscal year ending August 31, 1997.
PART II
Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock was approved on July 29,
1996 by the National Association of Securities Dealers (NASD)
<PAGE>
for trading on the Over-the-Counter Bulletin Board system.
The following table sets forth representative high closing ask
and low closing bid quotes as reported by a market maker,
during the period from July 29, 1996 through September 30,
1997. Bid quotations reflect prices between dealers, do not
include resale mark-ups, mark-downs or other fees or
commissions, and does not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
Calendar period Low bid High ask
<S> <C> <C>
July, 1996 - September, 1997 $3.00 $5.25
October, 1996 - December, 1996 2.00 5.75
January, 1997 - March, 1997 1.00 4.12
April, 1997 - June, 1997 1.25 3.625
July, 1997 - September, 1997 1.50 3.75
</TABLE>
As of August 31, 1997, there were approximately 280 holders
of record of the Company's Common Stock, although the Company
believes that there are approximately 100 additional beneficial
owners of shares of Common Stock held in street name. As of
August 31, 1997, the number of shares of Common Stock
outstanding of the Company was 2,639,484.
The Company has paid no dividends and has no present plan
to pay dividends. Payment of future dividends will be
determined from time to time by its board of directors, based
upon its future earnings (if any), financial condition, capital
requirements and other factors. The Company is not presently
subject to any contractual or similar restriction on its
present or future ability to pay such dividends.
Item 6. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1997 AS COMPARED TO THE YEAR
ENDED AUGUST 31, 1996
During most of fiscal year ending August, 1997, the
Company continued with its development plans. Orders shipped
amounted to just over $1,100,000. To date, the Company's sales
relate to those products which are large electrical generating
sets which take several months to produce and assemble. The
Company records revenue when products are shipped. Two such
orders were delivered during the year. Management believes
sales and deliveries will continue to be sporadic until a more
steady flow of orders exist.
<PAGE>
The Company consumated a merger with the Panamanian
company Golden Grove Business ("GGB"), which was the Central
and South American distributor for Czech heavy-duty truck
manufacturer TATRA. The merger agreement provided for the
acquisition of one-hundred percent of the outstanding shares of
GGB to be acquired by the Company for 48,000 shares of
restricted common stock of the Company, along with the
investment of approximately $120,000 into GGB. Additionally,
the president of GGB became the Executive Vice President and a
Director of the Company. TATRA, a.s., is a Czech manufacturer
of on/off-road heavy duty trucks. The factory was founded in
1850 and in 1898 the first truck was manufactured. The factory
continued development and innovations of its vehicle and today
produces a truck with the an air cooled diesel engine and a
solid central backbone tube with swing half axles, both
features being unique features of the TATRA truck. Engines are
manufactured by TATRA, Deutz, or Cummins Diesel. TATRA has ISO
9000 certification and TATRA trucks meet all EURO II
regulations.
During the fourth quarter of 1997, the Company established a
division known as SDC - Prague, s.r.o., in the Czech Republic.
SDC Prague plans to market and sell electrical generating and
co-generating equipment using the components of East European
manufacturers.
By the close of the fiscal year, a final agreement had been
executed with Metall Kraft, Ltd., a Czech manufacturer which
provides containers for Mercedes Benz, Volvo, BMW and other
well known companies. The agreement establishes the Company
as the exclusive distributor for Metall Kraft's newly licenses
airfreight cargo containers for all airline companies in North
and South America.
During the final month of fiscal 1997, the Company executed an
acquisition agreement with Czech trading company Motokov
International which provided for the Company's acquisition of
the Motokov subsidiary in Bolivia, Skobol, s.a. Skobol is a
thirty-seven year old distributor of Czech products within
Bolivia, and the Company plans to use this subsidiary as its
base to expand throughout that region of South America with the
other Czech products offered by the Company. The acquisition
is to close on or before November 18, 1997.
The Company has temporarily suspended its plans to sell and
<PAGE>
finance inventories of Slovakian manufacturer Krizik, a.s. In
order to proceed with such sales and financing activities, the
Company needs to arrange additional financing. In the
meantime, management has pursued other opportunities which may
result in more immediate benefit to the Company. The Company
began a Regulation D Rule 505 offering of its common stock
during 1997 which provides for raising of an additional
$750,000 maximum for the Company. The Five Year Growth Plan
was completed in August 1997 and management is exploring
different sources of additional capital and reviewing different
methods of obtaining additional capital for the Company in
order to execute its five year plan.
Market research continued and lists of potential distributors
for the Company's products were compiled and studied by
management. Updated industry reports from various United
States Embassies were received and reviewed. Marketing
brochures were prepared and distributed and technical workshops
were held at the factory of Skoda Interdiesel in Prague, Czech
Republic. The Board of Directors studied proposals and
opportunities for multilateral product trading of industrial
and consumer products between Eastern Europe, United States and
South America. Samples of the Company's products were sent to
several locations.
The Company discussed at considerable length the
possibility of acquiring Skoda Interdiesel's operations and
negotiations are continuing. Management and shareholder
control of Skoda Diesel changed in 1996, and the Company
believes that if an acquisition can be made on terms favorable
to the Company, any potential negative effects of the
management and shareholder changes of 1996 will be eliminated
and the Company could exert total control over this supplier.
Management continues to work closely with the management in
place at Skoda Interdiesel and relationships with most of the
continuing management remain very good. Discussions continue
with two other East European manufacturers of industrial
products which should be synergistic with the Company's present
products and markets. Overall, fiscal year 1997 was again less
than expected regarding sales and revenues, but fiscal 1997 was
much more than expected in terms of furthering market and
product development activities of the Company.
There can be no assurances that any of the matters
discussed above will come to fruition or will result in
positive results for the Company.
Operating expenses for 1997 were more than in operating
<PAGE>
year of 1996 due primarily to the expansion of management and
the development of additional product lines needed in order to
enhance future growth and revenues of the Company. Expense
categories such as legal, accounting, travel, and costs and
expenses for securities matters increased due to the fact that
the Company is a fully reporting 12 (g) company, due to the
planned acquisition of new product lines, the acquisition of
the TATRA distributor GGB, the planned acquisition of Skobol,
s.a., and, also, due to the extensive discussions and
negotiations in the Czech Republic regarding the possible
acquisition of Skoda Interdiesel.
Total expenses were $874,384 in 1996 and $1,183,940 in
1997, which indicates an increase of $309,556. However,
depreciation and amortization and equipment related write-offs
increase in 1997 over 1996 was $455,774. Non-cash expense
items as depreciation and amortization, the writedown/loss on
disposal of machinery and equipment values, and the payment for
additional consulting services accounted for more than sixty-
five percent (65%) of the expenses for 1997. During the fourth
quarter of 1997, expenses increased due to the increased
activity level of corporate and product acquisition plans and
related activities. The Company's net loss of $1,203,099 for
the year ended August 31, 1997 includes certain non-cash
charges as follows:
Depreciation and Amortization $ 450,129
Issuance of common stock as
consideration of services 171,250
Loss on disposal of assets 437,088
__________
TOTAL NON-CASH CHARGES $1,058,467
Accordingly, the Company's cash loss before the above charges
amounted to approximately $144,632.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used for the Company's operating activities for the
fiscal year 1997 amounted to $105,436 whereas the net cash used
for operating activities for 1996 amounted to $216,866. Net cash
provided (+) by financing activities in 1997 was $180,984 compared
to $510,542 in 1996. Net cash used (-) for investing activities
in 1997 was $60,349 compared to $343,353 in 1996. Therefore,
total cash (restricted and non-restricted) at the end of the year
1997 was $346,131 compared to $80,932 for 1996. The Company has
two bank lines of credit which provide short-term borrowings up
to $220,000. Interest on advances is payable quarterly at a fixed
rate of 4.32% The lines of credit expire October 19, 1997. The
<PAGE>
outstanding balance was $215,000 as of August 31, 1997. The lines
of credit are secured by a certificate of deposit amounting to
$250,000. During October 1997, such lines of credit were repaid.
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 and without modification, the Company will be
required to obtain additional financing or equity capital.
Management is actively exploring possible sources of additional
capital and is reviewing possible methods to obtain such
additional capital, as needed. There is no assurance that such
financing or capital will be available. The Company had positive
working capital as of August 31, 1997, of $37,614. However,
approximately $40,514 of the liabilities of the Company were due
to founding shareholders. With considering this liability as
being non-current, the Company would have a positive working
capital of approximately $78,128.
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 purchase 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.
On February 24, 1997, the Company commenced and privately offered
a second private placement memorandum pursuant to Rule 505 of
Regulation D, on a best efforts basis, of no more than 500,000
shares of common stock in a ninety-day period (before extensions)
of its $0.001 par value common stock at a price of $1.50 per share
before deducting commissions and non-accountable expenses. These
expenses aggregate up to 13% of the gross offering price which is
payable by the Company to members of the NASD, financial advisors,
purchaser representatives, and individuals legally entitled to
receive such commissions. During the year ended August 31, 1997,
the Company sold an aggregate of 190,119 shares.
On September 5, 1997, the Company established a Non-Qualified
Stock Option Plan ("The Plan") pursuant to which 750,000 shares of
common stock are reserved for issuance. The option price per
share shall be determined by the Board of Directors at the time
<PAGE>
any options are granted. The Plan is designed to serve as an
incentive for retaining qualified and competent persons who are
key employees, consultants, representatives, officers and
directors of the corporation. As of August 31, 1997, no options
had been granted.
On October 10, 1997, the Company signed a Letter of Intent with
an underwriter to proceed on a "Firm Commitment" basis with a
secondary offering of the Company's common stock and redeemable
warrants ("the Warrants"). The Company plans to offer 1,000,000
shares of common stock and 1,000,000 warrants. The 1,000,000
shares and warrants will be offered to the public at a price of
$6.00 per share and $0.125 per warrant, respectively. The total
gross offering amounts to $6,125,000. The Company, if necessary,
will effect a reverse stock split in order to complete the
secondary offering at a price of at least $6.00 per share. Each
warrant, which is redeemable within 60 months, entitles the holder
thereof to purchase one share of common stock at 120% of the
offering price of common shares. The warrant may be redeemed by
the Company at $0.10 each after the common shares have traded at
150% of the offering price of common shares for ten consecutive
days.
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.
Item 7. FINANCIAL STATEMENTS
Please see the attached Financial Statements
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE
EXCHANGE ACT
The Directors, Executive Officers, Promoters, and Control
Persons of the Company, with a brief description, are as
follows:
<PAGE>
Name Age Position
Ronald A. Adams 46 President and Director
Henry S. Green, Jr. 65 Secretary and Director
Each director was originally elected in 1994. All directors
hold office until the next annual meeting of stockholders or
until their successors are elected and qualify. Vacancies on
the Board of Directors may be filled by the remaining
directors. Officers are elected annually, and serve at the
discretion of the Board of Directors. There are no family
relationships between or among any officers or directors of the
Company.
Ronald A. Adams is the President and a Director of the Company.
From 1986 through 1996, he served as President of Worth Capital
Group and as Financial Advisor to Double Seal Ring Company and,
from 1994 to 1996, as Financial Advisor to Skoda Diesel, both
entities being among the founding shareholders of the Company.
He has been involved in providing financial and trade services
to a variety of clients within the United States, Caribbean,
Bulgaria and Czech Republic. For the 14 years prior to 1986,
Mr. Adams was Chief Executive Officer of Haltom Manufacturing
Company, engaged in manufacturing of corporate recognition
items. He attended the University of Oklahoma and graduated
from Texas Christian University, where he performed post-
graduate studies. Mr. Adams devotes substantially all of his
business time to the Company.
Henry S. Green, Jr., is the Secretary of the Company. Mr.
Green is the President of Double Seal Ring Company where he has
been employed since 1955. The company, founded in 1931,
manufactures industrial piston rings as those used in diesel
and gas generating sets, which is the product of Skoda and the
Company. He is a graduate of the Business Administration
School at Oklahoma State University and attended the United
States Naval Command School.
Due to business relationships between the Company, Skoda,
and Double Seal, of which two directors of the Company are
officers, there may be potential for conflict of interest.
The Company is aware of such potential and believes that any
transactions resulting from these relationships would be on
terms similar to those available from outside parties.
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's
officers and directors, and persons who beneficially own more
than 10% of a registered class of the Company's equity
securities, to file reports of ownership and changes in
ownership with the SEC. Officers, directors and greater than
10% shareholders are required by Exchange Act regulations to
furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms
received by it, or written representations from certain
reporting persons that no Form 5 was required for such persons,
the Company believes that, other than as disclosed below,
during the fiscal year ending August 31, 1997, all filing
requirements applicable to officers, directors and greater than
10% beneficial owners were complied with.
Item 10. EXECUTIVE COMPENSATION
The Company's President received compensation solely in
the form of management fees amounting to $72,000 during the
fiscal year. There is no other plan or non-plan executive
compensation paid and there is no contract for payment of
salary to any person. There is no directors' compensation.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table contains information as of August
31, 1997, as to the number of Shares of Common Stock which is
beneficially owned by (i) each person or entity known by the
Company to own beneficially more than 5% of the Company's
Common Stock, (ii) each person who is a Director of the
Company, and (iii) all persons as a group who are Directors
and Officers of the Company, and as to the percentage of the
outstanding Shares held by said individuals or entities. There
is only one class of security of the Company, Common Stock.
<PAGE>
<TABLE>
<CAPTION>
Title of Class: Common Equity Shares
Name and Address Number of Shares Percentage
<S> <C> <C>
Skoda Interdiesel, a.s.
Krizova 1018
150 05 Praha 5
Czech Republic 500,000 18.94
WCG Holdings, Inc.
1530 N. Lake Way
Palm Beach, FL 33480 500,000 18.94
Double Seal Ring Company, Inc.
2065 Montgomery Street
Fort Worth, TX 76107 400,000 15.15
Ronald A. Adams (2) 500,000 18.94
Henry S. Green, Jr. (3) 400,000 15.15
All Officers & Directors
as a Group (2) and (3) 900,000 34.09
</TABLE>
Footnotes:
(1) Based on 2,639,484 shares outstanding. Goes not
include 40,000 Common Stock Purchase Warrants
outstanding.
(2) Owned by WCG Holdings, Inc. Mr. Ronald A. Adams,
President of the Company, is an affiliate of WCG
Holdings, Inc.
(3) Owned by Double Seal Ring Company, Inc. and its two
major shareholders. Mr. Henry S. Green, Jr.,
Secretary of the Company, is an affiliate of Double
Seal Ring Company, Inc.
Item 12. 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 and 400,000 shares were issued
to WCG Holdings, Inc. and Double Seal Ring Company, Inc. and
were valued at par value of $.001 per share. Also during
<PAGE>
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, the Company issued
51,650 shares of its common stock to Skoda Diesel, a.s. ($1.25
per share).
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. Each of said loans have
been paid in full.
The Company has purchased items from Double Seal Ring
Company, a shareholder, and has sold these items to Skoda
Diesel, also a shareholder. Such transactions were less than
$50,000, and a gross profit was made by the Company. The
Company believes that the costs and prices for such transac-
tions were the same as those which would be afforded to non-
related parties, and that all transactions were at arms-length.
For the year ended August 31, 1997, the Company recorded
$72,000 for management fees to the Company's President. The
Company's President has served as a Financial Advisor to Skoda
and Double Seal, and is a 50% beneficial shareholder of WCG
Holdings, Inc. The Company's President has loaned $93,050 to
the Company which is non-interest bearing and due on demand.
The balance due as of August 31, 1997 is $27,036.
Effective January 1, 1997, the Company rents its executive
office on a month-to-month basis from its President with
monthly payments amounting to $3,000.
Item 13. FINANCIAL STATEMENTS AND EXHIBITS
(a) Please see the attached Financial Statements
(b) Exhibits: (filed with original filing)
(1) (Articles) Certificate of Incorporation -
incorporated by reference into Exhibit 15 (b)(1)
on Registrant's Form 10SB file number 0-27520.
<PAGE>
(2) By-Laws of the Company - incorporated by
reference into Exhibit 15 (b) (2) on Registrant's
Form 10SB file number 0-27520.
(3) Material Contracts
(a) Shareholder Agreement - incorporated by
reference into Exhibit 15 (b) (4) (a) on
Registrant's Form 10SB file number 0-27520.
(i) "Expert's Opinion-
Certified Appraisal - incorporated by
reference into Exhibit 15 (b) (4) (a) (i)
on Registrant's Form 10SB file number 0-
27520.
(ii) Bill of Sale and Transfer - incorporated
by reference into Exhibit 15 (b) (4) (a)
(ii) on Registrant's Form 10SB file number
0-27520.
(b) Exclusive Agency Agreement - incorporated by
reference into Exhibit 15 (b) (4) (b) on
Registrant's Form 10SB file number 0-27520.
(c) Agreement to Merge Golden Grove Business, Inc.
into SDC International, Inc., dated January
31, 1997 between SDC International, Inc., and
Golden Grove Business, Inc.
(d) Exclusive Agency Agreement dated August 21,
1997, between Metall Kraft, s.r.o., and SDC
International, Inc.
(e) Purchase and Sale Agreement dated 18th day of
November, 1997 between SDC International, Inc.
and Motokov International, joint stock company.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this request to be signed on its behalf by the undersigned,
thereto duly authorized.
SDC International, Inc.
(Registrant)
Date: Dec. 15, 1997 By:/s/Ronald A. Adams
Ronald A. Adams, President
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Date: Dec. 15, 1997 /s/Ronald A. Adams
Ronald A. Adams, Director
and President (Principal
Executive Officer and
Principal Financial Officer)
Date: Dec. 15, 1997 /s/Henry S. Green, Jr.
Henry S. Green, Director
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
SDC International, Inc.
We have audited the accompanying balance sheet of SDC International, Inc. (the
"Company") as of August 31, 1997 and the related statements of operations,
stockholders' equity and cash flows for the years ended August 31, 1997 and
1996. 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 audits.
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 audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of August 31,
1997, and the results of its operations and its cash flows for the years ended
August 31, 1997 and 1996 in conformity with generally accepted accounting
principles.
Scarano & Tomaro, P.C.
Syosset, New York
December 5, 1997
SDC INTERNATIONAL, INC.
FINANCIAL STATEMENTS
AUGUST 31, 1997
<PAGE>
SDC INTERNATIONAL, INC.
INDEX TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 1997 AND 1996
Page
number
Independent auditors' report F-1
Balance sheet F-2
Statements of operations F-3
Statement of stockholders' equity F-4
Statements of cash flows F-5
Notes to financial statements F-6 - F-15
<PAGE>
SDC INTERNATIONAL, INC.
BALANCE SHEET
AUGUST 31, 1997
ASSETS
Current assets:
Cash $ 15,199
Cash - restricted 330,932
Other current assets 23,778
Total current assets 369,909
Machinery and equipment, net 3,489,341
Other assets:
Exclusive agency rights, net 263,485
Customer list, net 140,625
Organization costs, net 7,643
Total other assets 411,753
Total assets $ 4,271,003
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 53,793
Accrued expenses 36,467
Notes payable 215,000
Due to officer 27,036
Total current liabilities 332,296
Commitments and contingencies (Note 9) -
Stockholders' equity:
Common stock $.001 par value,
authorized 10,000,000 shares,
issued and outstanding 2,639,484 2,639
Additional paid-in capital 6,345,643
Accumulated deficit (2,409,575)
Total stockholders' equity 3,938,707
Total liabilities and stockholders' equity $ 4,271,003
See accompanying notes to financial statements.
<PAGE>
SDC INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED AUGUST 31,
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Sales, net $ 1,128,319 $ 45,456
Cost of sales, net 697,768 36,142
Gross profit 430,551 9,314
Expenses:
Selling, general and administrative expenses 490,561 349,860
Depreciation and amortization 450,129 431,443
Management fees 72,000 72,000
Issuance of common stock as consideration for services 171,250 21,081
Total expenses 1,183,940 874,384
Loss from operations before other income (expenses)
and provision for income taxes (753,389) (865,070)
Other income (expense):
Loss on disposal of assets (437,088)
Interest income 1,707 4,913
Interest expense (14,329) -
Total other income (expense) (449,710) 4,913
Loss before provision for income taxes (1,203,099) (860,157)
Provision for income taxes - -
Net loss $ (1,203,099) $ (860,157)
Primary loss per share:
Loss from operations before other income (expenses)
and provision for income taxes $ (.32) $ (.42)
Loss before provision for income taxes $ (.50) $ (.42)
Provision for income taxes $ - $ -
Net loss $ (.50) $ (.42)
Weighted average number of shares outstanding 2,383,254 2,059,639
</TABLE>
See accompanying notes to financial statements
<PAGE>
SDC INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED AUGUST 31, 1997 AND 1996
<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 in
connection with private placement
memorandum, net of offering
costs of $177,546 278,700 278 518,926 - 519,204
Issuance of common stock in
connection with acquisition
of customer list 150,000 150 187,350 - 187,500
Issuance of common stock as
consideration for consulting
services 16,865 17 21,064 - 21,081
Net loss for the year ended
August 31, 1996 - - - (860,157) (860,157)
Balances at August 31, 1996 2,198,265 2,198 5,845,016 (1,206,476) 4,640,738
Issuance of common stock in
connection with private
placement memorandum, net
of offering costs of $28,308 195,719 196 271,747 - 271,943
Issuance of common stock in
connection with acquisition
of GGB (Note 8(d)) 48,000 48 35,952 - 36,000
Issuance of common stock as
consideration for consulting
services 197,500 197 192,928 - 193,125
Net loss for the year ended
August 31, 1997 - - - (1,203,099) (1,203,099)
Balances at August 31, 1997 2,639,484 $ 2,639 $ 6,345,643 $ (2,409,575) $ 3,938,707
</TABLE>
See accompanying notes to financial statements.
<PAGE>
SDC INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED AUGUST 31,
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,203,099) $ (860,157)
Adjustments to reconcile net loss to net
cash used for operating activities:
Loss on disposal of assets 437,088 -
Bad debt expense - 12,500
Depreciation and amortization 450,129 431,443
Common stock issued as consideration for services 171,250 21,081
Changes in operating assets and liabilities:
Decrease (increase) in security deposits 18,000 537,280
Decrease (increase) in inventories 31,310 (31,310)
Decrease (increase) in other receivables (1,903) (500)
Decrease (increase) in prepaid expense (15,291) (184)
Increase (decrease) in accounts payable 50,081 (373,189)
Increase (decrease) in accrued expenses (43,001) 46,170
Net cash used for operating activities (105,436) (216,866)
Cash flows from investing activities:
Proceeds from collection of notes receivable 62,985 -
Acquisition of exclusive agency rights (123,334) (150,000)
Acquisition of customer list - (150,000)
Purchase of machinery and equipment - (43,353)
Net cash used for investing activities (60,349) (343,353)
Cash flows from financing activities:
Proceeds from officer 13,477 106,965
Proceeds from private placement memorandum 328,558 696,750
Costs associated with private placement memorandum (28,308) (177,546)
Repayment of advances from officer (97,743) (35,195)
Investment in certificates of deposit (250,000) (80,432)
Proceeds from line of credit 229,450 -
Repayment of line of credit (14,450) -
Net cash provided by financing activities 180,984 510,542
Net increase in cash 15,199 (49,677)
Cash at beginning of period - 49,677
Cash at end of period $ 15,199 $ -
Supplemental disclosures:
Cash paid for interest $ 11,415 $ -
Cash paid for income taxes $ - $ -
Supplemental disclosures of non-cash investing activities:
Issuance of 150,000 shares of common stock for
acquisition of customer list $ - $ 187,500
Issuance of 48,000 shares of common stock in connection
with the acquisition of GGB $ 36,000 $ -
</TABLE>
See accompanying notes to financial statements.
<PAGE>
SDC INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 1997 AND 1996
NOTE 1 - ORGANIZATION
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 agency agreement acquired from Diesel, a.s. (formerly known as 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. During April 1997, the Company acquired the outstanding
common stock of Golden Grove Business, Inc., ("GGB"), a Panama Corporation.
(See Note 4c).
In September 1994, the Company issued 1,400,000 shares of its common stock to
its three founding stockholders. Of the total 1,400,000 shares issued,
500,000 and 400,000 shares were issued to WCG Holding, Inc. (formerly know as
Worth Capital Group)("Worth"), and Double Seal Ring Company ("Double"),
respectively, as founding stockholders, and 448,350 shares were issued to
Skoda as consideration for the contribution of machinery and equipment. The
machinery and equipment is located in the Czech Republic. Also during
September 1994, 51,650 shares were issued to Skoda in connection with the
purchase of the exclusive agency rights.
Skoda, one of the founding stockholders of the Company was formed in
Czechoslovakia in the year 1899 and manufactures heavy equipment and diesel
engines.
The Company's President is also a 50% shareholder of Worth.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Reclassifications
Certain reclassifications have been made to the August 31, 1996 financial
statements in order to conform to the August 31, 1997 presentation.
b) Cash and cash equivalents
For purposes of the statements of cash flows, the Company considers all highly
liquid accounts with an original maturity of three months or less as cash
equivalents. The Company at August 31, 1997 maintains its cash deposits in
accounts which are in excess of Federal Deposit Insurance Corporation ("FDIC")
limits by $150,000. The Company maintains cash deposits in foreign banks, not
covered by FDIC in the amount of $88,464.
As of August 31, 1997, the Company maintains a total of $330,932 of
restricted cash securing credit lines from a financial institution and a
performance bond for a purchase contract.
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
c) Machinery and equipment
Machinery and equipment are recorded at cost. Depreciation is computed
using the straight line method over the estimated useful lives of the assets
as follows:
Machinery and equipment 5-15 years
Computer software 3 years
Computers 5 years
Maintenance and repairs are charged to expense as incurred.
d) Exclusive agency rights
Exclusive agency rights relate to agency rights acquired from Skoda and GGB.
Such rights are being amortized on a straight-line basis over an estimated
useful life of four to five years.
e) Customer list
Customer list include payments and issuance of stock for the acquisition
of certain assets comprising of supplier and customer lists. The supplier and
customer lists are being amortized on a straight-line basis over three years
which represents the life of the management agreement in connection with the
acquisition of such assets.
f) Organizational costs
Organizational costs consist of legal and other fees incurred in the
establishment of the Company. Organizational costs are being amortized on a
straight line basis over their estimated useful lives of five years.
g) Income taxes
The Company accounts for income taxes in accordance with statement of
financial accounting standards No. 109 "Accounting for Income Taxes" which
requires the use of the "liability method" of accounting for income taxes.
Accordingly, deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax bases of assets and
liabilities, using enacted tax rates in effect for the year in which the
differences are expected to reverse. Current income taxes are based on the
respective periods taxable income for Federal and State income tax reporting
purposes.
h) Net loss per share
In calculating primary loss per share, the Company uses the weighted average
number of common stock outstanding during the respective periods.
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
i) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
j) Fair value disclosure as of August 31, 1997
The carrying value of cash, accounts payable, notes payable and accrued
expenses are a reasonable estimate of their fair value.
k) Impact of recently issued accounting standards
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount.
Statement 121 also addresses the accounting for long-lived assets that are
expected to be disposed of. The Company adopted Statement 121 for the fiscal
year beginning September 1, 1996. The Company determined that no such
impairment exists.
l) Revenue recognition
Sales are recognized when products are shipped.
NOTE 3 - MACHINERY AND EQUIPMENT
Machinery and equipment at August 31, 1997 consisted of the following:
Production machinery $ 1,571,362
Production equipment 1,436,893
Tools and fixtures 1,004,928
Computer and software 30,926
4,044,109
Less: Accumulated depreciation (554,768)
$ 3,489,341
During the year ended August 31, 1997, machinery and equipment with a book
value of $437,088 was disposed by the Company resulting in a loss on disposal
of $437,088. The Company's machinery and equipment is located in the Czech
Republic. Total depreciation expense for the years ended August 31, 1997 and
1996, amounted to $309,374 and $307,836, respectively.
<PAGE>
NOTE 4 - EXCLUSIVE AGENCY RIGHTS, NET
a) On April 21, 1994, one of the founding stockholders 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 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 sixth year after the execution of the agreement. As consideration for
the purchase of these exclusive agency rights, the Company 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 are amortized on a straight-line basis over five years. As a result,
for the years ended August 31, 1997 and 1996, the Company recorded
amortization expense of $12,912 for each year.
b) 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 terms:
South Korea
i) During the year 1997, sales to South Korea must be in the amount
of at least $2,400,000.
ii) During the year 1998, 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.
China
i) During the year 1997, sales to China must be in the amount of at
least US $3,000,000.
ii) During the year 1998, sales to China must be in the amount of at
least US $4,500,000.
iii) During the year 1999, 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 agency rights from China and Korea are amortized
on a monthly basis over (5) years. For the years ended August 31, 1997 and
1996, the company has recorded $30,000 and $22,500 in amortization expense,
respectively.
On April 18, 1996, the Company entered into an modification agreement
whereby all such sales levels were postponed for one year.
c) On April 24, 1997, the Company acquired all the issued and outstanding
common stock of GGB. GGB had acquired an exclusive agency contract with Tatra
a.s. (a Czech Republic truck manufacturer) to market and sell Tatra's
<PAGE>
products. The Company valued such agency rights at approximately $156,000
and amortized such agency rights over the estimated remaining useful life of
four years. Accordingly, for the year ended August 31, 1997, amortization
expense amounted to $13,000.
NOTE 5 - ACCRUED EXPENSES
Accrued expenses consisted of the following at August 31, 1997:
Professional fees $ 26,454
Salaries 6,908
Other 3,105
$ 36,467
NOTE 6 - NOTE PAYABLE
The Company has two bank lines-of-credit which provide short-term
borrowings up to $220,000. Interest on advances is payable quarterly at a
fixed rate of 4.32%. The lines-of-credit expire on October 19, 1997. The
outstanding balance was $215,000 as of August 31, 1997. The lines of credit
are secured by a certificate of deposit amounting to $250,000. During October
1997, such lines of credit were repaid.
NOTE 7 - INCOME TAXES
The Company has adopted Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes". Income taxes are provided for the tax
effects of transactions reported in the financial statements and consist of
taxes currently due plus deferred taxes related primarily to differences
between the financial and tax basis of assets and liabilities. The deferred
tax assets and liabilities represent the future tax return consequences of
these temporary differences, which will either be taxable or deductible when
the assets and liabilities are recovered or settled.
At August 31, 1997, the Company has net operating loss carryforwards for
tax purposes of approximately $1,581,000 expiring in the years 2009 through
2011. These carryforwards result in a deferred tax asset at August 31, 1997
of approximately $553,000 computed using a combined Federal and State
corporate tax rate of approximately 35% after accounting for the state income
tax benefit. The Company also recorded a deferred tax liability of
approximately $193,000 resulting from the differences between book and tax
differences as a result of depreciation and amortization. Accordingly, the
net deferred tax asset at August 31, 1997 is $360,000.
At August 31, 1997, a 100% valuation allowance in the amount of $360,000
has been recorded against the net deferred tax asset since management could
not determine that it was "more likely than not" that the benefit of the
deferred tax asset would be realized.
<PAGE>
NOTE 8 - STOCKHOLDERS' EQUITY
a) Confidential private placement memorandums
i) On June 1, 1995, the Company commenced and privately offered, pursuant to
rule 504 Regulation D on a best efforts basis, no more than 400,000 shares in
a twelve-month period (before extensions) of its $.001 par value common stock
at $2.50 per share before deducting discounts, commissions and non-accountable
expenses. These expenses aggregate up to 13% of the gross offering price.
During the sixteen months ended September 30, 1996, the Company sold an
aggregate of 457,000 shares. In addition, the Company authorized the issuance
of 40,000 common stock purchase warrants. 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 August 31, 1997 no warrants have been issued.
ii) On February 24, 1997, the Company commenced and privately offered
pursuant to rule 505, Regulation D, on a best efforts basis, of no more than
500,000 shares of common stock in a ninety-day period (before extentions) of
its $.001 par value common stock at $1.50 per share before deducting
discounts, commissions and non-accountable expenses. These expenses
aggregate up to 10% of the gross offering price which is payable by the
Company to members of the NASD, financial advisors, purchaser
representatives, and individuals legally entitled to receive such
commissions. During the year ended August 31, 1997, the Company sold an
aggregate of 190,119 shares.
b) Issuance of common stock for consulting services
During the years ended August 31, 1997 and 1996, in conjunction with services
provided to the Company, 197,500 and 16,865 shares of common stock were issued
to various parties, as consideration for consulting services rendered which
have been recorded based upon the estimated fair market value of said stock at
$193,125 and $21,081, respectively. During the year ended August 31, 1996,
the stock was being privately offered at $2.50 per share. The shares issued
during the year end August 31, 1996 were recorded at fifty percent (50%) of
the private offering of $2.50 per share. During the year ended August 31,
1997, shares issued for services have been valued at fifty percent (50%) of
the private placement per share price in effect at the time of issuance of
such shares.
c) Issuance of common stock for acquisition of customer list
Pursuant to a purchase agreement dated December 2, 1995 between the
Company and an unrelated party, the Company acquired certain assets comprising
of supplier and customer lists. As 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 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 management
agreement of three years. Accordingly, for the years ended August 31, 1997
and 1996, the Company recorded amortization expense amounting to $112,500 and
$84,375, respectively.
<PAGE>
NOTE 8 - STOCKHOLDERS' EQUITY (Cont'd)
d) Issuance of common stock in connection with merger
Pursuant to a merger agreement dated January 31, 1997 and consummated on
April 24, 1997 between the Company and the shareholders of Golden Grove
Business, Inc., ("GGB"), the Company acquired all of the outstanding shares of
the capital stock of GGB. GGB had acquired an exclusive agency contract with
Tatra a.s. (a truck manufacturer) for operations in Central and South America,
and the Caribbean. Such contract had a remaining life of one year with a
three year automatic renewal. As consideration, the Company contributed
approximately $120,000 of capital into GGB and issued 48,000 shares of its
$.001 par value common stock to previous shareholders in exchange for their
stock in GGB. Such stock has been assigned a value of 50% of the February,
1997 private offering price of $1.50 per share. Subsequent to the merger GGB
ceased to operate, was dissoved, and all assets and liabilities were merged
with the Company. The Company is amortizing such agency contract over an
estimated remaining life of four years. Accordingly, for the year ended
August 31, 1997, the Company recorded amortization expense amounting to
$13,000.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
a) Lease agreement
The Company leased its administrative office pursuant to signed lease
agreement commencing July 1, 1995 and expiring on June 30, 1997. Such leases
required monthly payments of $3,500. Effective December 1996, the Company
terminated this lease whereby a security deposit amounting to $18,000 was used
as part of the cancellation settlement. Effective January 1, 1997, the
Company rents its executive office on a month-to-month basis from its
President with monthly payments amounting to approximately $3,000.
Included in general and administrative expenses is rent expense which amounted
to $63,732, and $55,784 for the years ended August 31, 1997 and 1996.
b) Significant customers and vendors
For the years ended August 31, 1997 and 1996, the Company purchased 100% of
its cost of goods sold from two of its founding stockholders, Skoda and
Double.
c) Concentration of credit risk
Due to its current limited sales, the Company has a high concentration of
credit risk until such transactions are completed. The Company is actively
seeking sales outside of the United States. If such sales occur, the revenue
and subsequent collections will be subject to the fluctuations such sales
generate, both from currency and political changes. The Company's machinery
and equipment is located in the Czech Republic. The Company's primary source
of inventory is currently Skoda and Tatra and as such, it is subject to their
risks of business and their continued financial health, as well as the risks
associated with foreign businesses, both from currency and political changes.
<PAGE>
NOTE 9 - COMMITMENTS AND CONTINGENCIES (Cont'd)
d) Management agreement
On December 15, 1995 the Company and Worth entered into a management
agreement with an individual in Eastern Europe 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 compensate such individual an
amount equal to twenty-five percent (25%) of the gross profit from sales
generated by such individual in Eastern Europe. Such payments are payable
monthly after the collection of receivables from such sales. There are no
amounts currently payable under this agreement.
e) Finder's fee agreement
On May 20, 1996, the Company entered into a finder's fee agreement with
Prime Charter, Ltd ("Prime") for a period of ten years, renewable for
additional five year periods. Pursuant to such agreement, any sales to
entities introduced to the Company by Prime shall result in a finder's fee to
Prime of two percent (2%) of the gross sales price or ten percent (10%) of the
adjusted gross profit resulting from the sales. Such payments are due 45 days
after each quarter-annual calendar period. There are no amounts currently due
under this agreement.
f) Dependence on Skoda and Tatra
The Company's operations are dependent on Skoda and Tatra since Skoda is
responsible for the manufacturing of all of the Company's products and Tatra
for making available sufficient inventory. The Company faces risks of the
inability to obtain products in the event of production problems due to labor
problems, governmental regulations, working capital deficiencies, political
unrest and other problems which may result in the inability of Skoda and Tatra
to fulfill orders of the Company.
NOTE 10 - RELATED PARTY TRANSACTIONS
a) Acquisition of exclusive agency rights
In October 1995, the Company purchased the exclusive rights to market and
sell Skoda Diesel products into the countries of China and South Korea. In
consideration for these rights the Company paid Skoda $150,000.
b) Due to officer
Throughout the year, the Company's President and shareholder advances
funds to or on behalf of the Company. As of August 31, 1997 $27,036 was owed
to such officer. Such advances are non interest bearing and due on demand.
<PAGE>
c) Rent Expense
Effective January 1, 1997, the Company rents its executive office on a
month-to-month basis from its President with monthly payments amounting to
approximately $3,000.
d) Management Fees
For the years ended August 31, 1997 and 1996, the Company recorded $72,000
of management fees to its President.
NOTE 11 - FOREIGN OPERATIONS
The Company operates in two related industries, heavy equipment and
transportation sales. The majority of the Company's operations are foreign.
The information about those foreign operations for the year ended August 31,
1997, is as follows:
<TABLE>
<CAPTION>
Total
Foreign Domestic
Europe Africa Operations operations Consolidated
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers $ 658,194 $ 443,053 $ 1,101,247 $ - $ 1,101,247
Sales to affiliated customers - - - 27,072 27,072
$ 658,194 $ 443,053 $ 1,101,247 $ 27,072 $ 1,128,319
Operating profit $ 424,676 $ 5,875 $ 430,551
Depreciation and amortization $ 441,835 $ 8,294 $ 450,129
Loss on disposal of assets $ 437,088 - 437,088
Identifiable assets at August
31, 1997 $ 3,976,598 $ - $ 3,976,598
Corporate assets 294,405
Total assets at August 31, 1997 $ 4,271,003
</TABLE>
The Company had two and one major customer during the years ended August
31, 1997 and 1996, which comprised 98% and 100% of sales, respectively.
NOTE 12 - SUBSEQUENT EVENTS
a) 1997 Non-qualified stock option plan
On September 5, 1997, the Company established Non-Qualified Stock Option
Plan ("The Plan") pursuant to which 750,000 shares of common stock are reserved
for issuance. The option price per share shall be determined by the Board of
Directors at the time any options are granted. The Plan is designed to serve
as an incentive for retaining qualified and competent persons who are key
employees, consultants, representative, officers and directors of the
corporation. As of August 31, 1997, no options were granted.
<PAGE>
NOTE 12 - SUBSEQUENT EVENTS (Cont'd)
b) Letter of intent
On October 10, 1997, the Company signed a Letter of Intent with an
underwriter to proceed on a "Firm Commitment" basis with a secondary offering
of the Company's Common Stock and redeemable Warrants ("the Warrants"). The
Company will offer 1,000,000 shares of common stock and 1,000,000 Warrants.
The 1,000,000 shares and Warrants will be offered to the public at a price of
$6.00 per share and $.125 per Warrant, respectively. The total gross
offering amounts to $6,125,000.
Each Warrant, which is redeemable in 60 months, entitles the holder
thereof to purchase one share of Common Stock at 120% of the offering price of
Common shares. The warrant may be redeemed by the Company at $.10 each after
the common shares have traded at 150% of the offering price of the common
shares for 10 consecutive days.
Exhibit 13 (b) (3) (c)
AGREEMENT TO MERGE
GOLDEN GROVE BUSINESS, INC.
(a Panama corporation)
INTO
SDC INTERNATIONAL, INC.
(a Delaware corporation)
AGREEMENT OF MERGER, dated this 31st day of January, 1997, made by and
between SDC InternationaL Inc., a Delaware corporation (referred to herein as
the "SDC"), and Golden Grove Business, Inc., a corporation organized and
existing under and by virtue of the laws of the Republic of Panama (referred
to herein as the "GGB"), together being known herein as the "Parties".
WHEREAS, the Parties desire to merge into a single corporation.
WHEREAS, SDC filed its Articles of Incorporation in the office of the
Secretary of State on June 30, 1994, and has an authorized capital stock
consisting of 10,000,000 shares of Common Stock of the par value of $.001
each, of which 2,350,000 shares are currently outstanding;
WHEREAS, the principal office of SDC in the state of Delaware is located
at P.O. Box 1281, Wilmington, Delaware 19899, and the name and address of its
resident agent is Corporate Agents, Inc., P.O. Box 1281, Wilmington, Delaware
19899-1281;
WHEREAS, GGB is a corporation organized under the laws of the Republic of
Panama with its resident agent being Sucre, Arias, Castro & Reyes Attorneys,
P.O. Box 6277, Panama 5, Panama, and is an authorized dealer of TATRA products
of the Czech Republic;
WHEREAS, the total number of shares which GGB has authority to issue is
300, all of which are of one class and of no par value each, and 300 of which
are issued and outstanding;
WHEREAS, the laws of the Republic of Panama permit a merger of a
corporation of that country with and into a corporation of the State of
Delaware; and
WHEREAS, the Parties deem it advisable and to the advantage, welfare and
best interest of SDC and GGB to merge GGB into SDC pursuant to the provisions
of the laws of the Republic of Panama and the laws of the State of Delaware
upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants, agreements and
provisions hereinafter contained, the Parties agree as follows:
<PAGE>
FIRST: GGB shall merge into SDC. SDC shall be the surviving corporation.
SECOND: The Articles of Incorporation of SDC are to be and remain the
Articles of Incorporation of SDC.
THIRD: The present by-laws of the SDC are to be and remain the by-laws of
SDC.
FOURTH: The manner of converting the outstanding shares of the capital
stock of GGB into the shares of SDC shall be as follows: all of the
outstanding shares of GGB (a total of 300) shall, upon the effective date
ofthe merger, be converted into 48,000 shares of capital stock of SDC (160
shares of SDC for each one share of GOB). The shares of capital stock of SDC
shall not be converted, but each said share which is issued as of effective
date of the merger shall continue to represent one issued share of capital
stock of SDC. The currently restricted shares of SDC being issued pursuant to
this Agreement shall be included in the next subsequent registration of SDC
securities.
FIFTH: The further terms and the conditions of the merger are as follows:
A. After the merger, the Board of Directors of SDC shall be the current
Directors of SDC plus one Director named by Milota K. Srkal. Milota K. Srkal
shall retain the position and title of Vice President of Marketing and shall
execute a three year non-compete agreement with SDC.
B. The first regular meeting ofthe Board of Directors of SDC to be held
after the date when this Agreement shall become effective may be called or may
convene in the manner provided in the by-laws of SDC and may be held at the
time and place specified in the notice of the meeting.
C. The Parties shall pay all of their respective expenses of carrying this
Agreement of Merger into effect and of accomplishing the merger, and during
such time GGB agrees not to enter into any negotiations with any third party
concerning an alternative business combination to the merger proposed by this
Agreement.
D. Upon the date when this agreement shall become effective, the separate
existence of GGB shall cease, and GGB shall be merged to SDC, in accordance
with provisions of this Agreement, and SDC shall possess all the rights,
privileges, powers and franchises of GGB and all property, real, personal and
mixed, and all debts due to each of such corporations on whatever account, as
well for stock subscriptions as all other things in action or belonging to
each of the Parties shall be vested in SDC; and all property, rights and
privileges, powers and franchises and all and every other interest shall be
thereafter as effectually the property of SDC as they were of the respective
Parties, and the title to any real or personal property, whether by deed or
otherwise, vested in any of said corporations, parties hereto, shall not
revert or be in any way impaired by reason of this merger, provided that all
rights of creditors
2
<PAGE>
and all liens upon the property of any of said corporations, parties
hereto, shall be preserved unimpaired, limited in lien to the property
affected by such liens immediately prior to the time of merger, and all debts,
liabilities and duties of GGB shall thenceforth attach to the said SDC and may
be enforced against it to the same extent as if said debts, liabilities and
duties had been incurred or contracted by it.
E. If at any time SDC shall consider or be advised that any father
assignments or assurances in law or any things are necessary or desirable to
vest in said corporation, according to terms hereof, the title to any property
or rights of either of the Parties, the proper officers and directors of each
of the Parties shall and will execute and make all such proper assignments and
assurances and all things necessary or proper to vest title in such property
or rights in SDC, and otherwise to carry out the purposes of this Agreement of
Merger.
F. SDC shall provide capital to GGB in the amount of $120,000.00 to retire
its corporate debts and obligations in accordance with Exhibit "A". This
amount of $120,000.00 shall be made available by SDC upon closing. The closing
shall take place within 60 days of the execution of this Agreement. If the
closing does not occur on or before April 1,1997, either party may terminate
this Agreement.
G. GGB has disclosed all debts and liabilities Exhibit "A" and there are
no other debts or liabilities known to the officers, directors or owners of
GGB as of signing of this Agreement, other then those disclosed in the Exhibit
"A".
H. SDC may use GOB's name as the name of its Marketing Division for the
sale of TATRA products.
- SDC shall furnish or arrange financing and capital as needed
and as reasonably appropriate to assure effective marketing and sales for all
SDC products in accordance with the company's business plan.
- During the year 1997, SDC shall finance or arrange financing
for sample products to be displayed or engaged in the countries of Colombia,
Ecuador, Peru and Venezuela; and in more countries as determined by SDC.
- For each sale, 5% of the gross sales price shall be paid as a
commission by SDC and distributed at the discretion of Milota K. Srkal to be
used as a reduction in the purchase price of products to give a potential
buyer incentive, as a bonus or other incentive to salesmen, for marketing
purposes, for salary to salesmen, or otherwise.
- SDC agrees to advance reasonable and agreeable amounts to the
Marketing Division for salaries or otherwise which will be later credited
against commissions payable, if any.
3
<PAGE>
- Upon reaching sales of 30 TATRA vehicles or sales of all products
of $4,000,000 within twelve months from the effective date of this merger,
the former GGB shareholders shall receive two-year options (warrants) to
purchase 100,000 shares of SDC common stock at a price of $3.00 per share;
upon sales of 100 TATRA vehicles or sales of all products of $10,000,000
within 24 months from the effective date ofthis merger, former GGB
shareholders shall receive additional two-year options (warrants) to purchase
an additional 100,000 shares of common stock of SDC at a price of $3.00 per
share.
O. Upon this merger, the former shareholders of GGB agree not to compete
with business of SDC (the sale of generators and heavy trucks) in any way
whatsoever in any place in Central and South America and Caribbean for a
period of three years from the date of this Agreement of Merger.
SIXIH: This Agreement of Merger must be approved by the required vote
of the Directors of SDC at a special Directors' meeting upon proper notice as
required by the laws of Delaware to each Director, and if at said meeting the
votes, cast by ballot, of the necessary number of the Directors of SDC shall
be for the adoption of this Agreement, then that fact shall be set forth in a
certificate attached to the Agreement by the Secretary of SDC under its
corporate seal, and acknowledged by the President of SDC, to be the act, deed
and agreement of SDC.
This Agreement of Merger shall also be authorized, adopted and approved by the
stockholders of GOB, in accordance with the laws ofthe Republic of Panama, and
a certificate to such effect by the Secretary of GGB shall be attached to this
Agreement of Merger under its corporate seal, and the Agreement of Merger so
adopted and certified shall be signed and acknowledged by the President or
Vice President and the Secretary of GGB, and sealed under its corporate seal.
The agreement as certified and acknowledged by each ofthe Parties shall be
filed in the office of the Secretary of State of Delaware, and shall be
effective from the filing thereof in the office of the Secretary of State of
Delaware.
The Parties shall also take whatever actions are necessary to effect the
merger in the Republic of Panama.
SEVENTH: The shareholders of GGB agree to hold SDC harmless for any
and all liabilities and claims against GGB which are not identified in the
Exhibit "A".
EIGHT: GGB represents to SDC that to the best of its knowledge, there
are no actions pending against GGB, nor are there any violations, whether they
be Federal, State or Administrative agencies, threatened or commenced against
GGB, nor do the shareholders of GGB know of any pending or possible
investigations against GGB by any governmental agency or authority.
4
<PAGE>
NINTH: SDC represents to GGB that to the best of its knowledge, there
are no actions pending against SDC, no Securities Exchange Commission
violations, no state securities law violations, nor are there any violations,
whether they be Federal, State or Administrative agencies, threatened or
commenced against SDC, nor does SDC know of any pending or possible
investigations against SDC by any governmental agency or authority.
TENTH: GGB represent that:
A. GGB is a corporation in good standing within the Republic of Panama,
with offices in Fort Lauderdale, Florida and Bogota, Colombia
B. GGB is the authorized dealer of TATRA products; where TATRA is a Czech
manufacturer of heavy duty on/offroad trucks.
C. GGB holds a three year automatically renewable agreement with TATRA as
an exclusive dealer for TATRA products in Colombia with the right of first
refusal for expansion into other countries in Central and South America and
Caribbean, as further described in "TATRA Vehicles Foreign Exclusive Dealer
Sales and Service Agreement" executed by GGB and TATRA on May 18, 1995,
Exhibit "B", along with the accompanying acknowledgment and agreement executed
by TATRA and GGB allowing GGB to assign the "TATRA Vehicles Foreign Exclusive
Dealer Sales and Service Agreement" to SDC, Exhibit"C".
ELEVENTH: SDC represent that:
A. SDC is a sales agent for Diesel, a.s., formerly known and Skoda Diesel,
a.s., the Czech manufacturer of Skoda diesel and gas generating equipment, for
territories in Central and South America (except Peru).
B. SDC is a publicly traded Delaware corporation, whose stock trades on
the overthe-counter Bulletin Board system as operated by the National
Association of Securities Dealers (NASD).
C. SDC has the capabilities to obtain working capital and financing
necessary to carry out the terms of this Agreement.
TWELVE: The Parties to this Agreement acknowledge all representations
made herein, including those incorporated hereto as contained in Exhibits "A"
through "G" and each party further acknowledges that the other party is
relying upon such representations. Other then the representations made herein
and incorporated by Exhibits "A" through "G" there are no other warranties or
representations whatsoever by either party hereto.
5
<PAGE>
THIRTEEN: The closing of this merger, exchange of shares and payment
to GGB, an specified in this Agreement, shall be the effective date of merger,
and must occur within sixty days of signing this Agreement.
IN WITNESS WHEREOF, the Parties to this Agreement, pursuant to authority duly
given by their respective boards of directors, have caused these presents to
be executed by a majority of the directors of each party hereto, and the
corporate seal affixed.
SDC International, Inc.
BY:/s/Ronald A. Adams
Ronald A. Adams, President
[SEAL]
Golden Grove Business, Inc.
BY:/s/Milota K. Srkal
Milota K. Srkal, President
[SEAL]
6
EXCLUSIVE AGENCY AGREEMENT
THIS AGREEMENT is made this 21st day of August, 1997 by and between
Metall Kraft , a company organized and duly registered under the laws of Czech
Republic, address is Za Olsavkou 340 686 47 Uherske Hradiste, (hereinafter
referred to as "Company") and SDC International, Inc., a Delaware corporation
whose executive office mailing address is P.O. Box 2186, Palm Beach, Florida
33480 U.S.A. (hereinafter referred to as "Agent), with both Company and Agent
being known hereafter as the "Parties".
WHEREAS, the Company and Agent both desire to sell cargo container, pallets
and related products manufactured by or on behalf of Company; for good
consideration, it is hereby mutually agreed as follows:
1. The Company hereby appoints the Agent as its Exclusive Agent within the
geographic area of North and South America for the marketing and sale of the
products of the Company to for all customers located in said territory, based
upon the terms and conditions contained herein. Said geographic area to be
known hereinafter as the "Territory";
2. The Agent shall exercise reasonable care and skill in the performance
of his duties and shall act faithfully on behalf of the Company. The Company
shall use its best efforts to do all things reasonable and necessary to enable
the Agent to sell the products of the Company and will furnish to Agent such
information as Agent may reasonably require;
3. The Agent will forward to Company copies of all inquirers he may
receive and shall not enter into any contract on the behalf of the Company or
bind or attempt to bind the Company in any way without the written consent of
the Company. The Company shall furnish any and all inquirers for products
received from potential customers within the Territory;
4. The Company will provide Agent with catalogues, price lists, samples,
and sales literature generally necessary to enable Agent to conduct the
agency;
5. In the normal course of business under this Agreement, Agent shall
purchase products from the Company and then resell said goods to customers
within the Territory, and Agent shall retain the difference in amount Agent
paid to Company for such products and amount customer paid to Agent.
3a.The Agent shall not sell or represent products similar to the Company
products which in the nature or functions competes with the products of the
Company.
/s/ILS
<PAGE>
6. Company will indemnify, defend, and hold Agent harmless with respect to
any and all claims, suits, causes of action, costs and expenses alleging or
arising from any defective product of the Company and/or any product liability
claim made against Agent or Company;
7. Agent and Company agree that Company may extend additional agency
rights, on exclusive or non-exclusive basis, to Agency, as agreed to from time
to time by the Parties, and Agency agrees to furnish Company with any
information it possess or receives concerning the potential sales of products
of the Company.
8. All controversies arising out of or relating to this Agreement, or any
modification thereof, shall be settled by binding arbitration conducted in
English language by an arbitrator experienced in commercial disputes. In the
absence of such arbitration, this Agreement shall be construed in all respects
under the laws of Czech Republic, and for this purpose Company and Agent
hereby submit themselves to the jurisdiction of the courts of the Czech
Republic.
This Agreement is effective this date and is valid for a period of five years
hereafter.
AGREED TO BY THE PARTIES AS OF THE DATE FIRST WRITTEN ABOVE:
COMPANY: Metall Kraft
BY: /s/Ing. Libor Soska
Ing. Libor Soska, its authorized agent for the purpose of execution
of this Agreement
AGENT: SDC INTERNATIONAL, INC.
BY:/s/Milota K. Srkal
Milota K. Srkal, its authorized agent for the purpose of execution
of this Agreement
9.The Company reserves the right to participate in the meetings with the end
user and also has the right to contact directly the end user regarding
technical and quality matters. The Company also agrees not to have any
contact with the end user regarding pricing of the Company products as well as
conditions of the sale or other sales matters.
/s/ILS/s/MKS
Exhibit 13 (b) (3) (e)
Purchase and Sale Agreement
This Purchase and Sale Agreement (the "Agreement") is entered into this
18th day of November 1997 by and between SDC International, Inc., a Delaware
corporation, with its principal office located at 1530 North Lake Way, Palm
Beach, FL 33480 (,,Buyer"), and Motokov International, Joint Stock Company
with its registered office in Prague 4, Na Strzi 63, The Czech Republic,
inscribed in the Companies Register of the Regional Commercial Court in
Prague, Volume B. Inset 116 ("Seller").
RECITALS
A. Seller owns 2, 114 shares in "Bearer" name, which are all of the
issued and outstanding shares of SKOBOL Joint Stock Company, Calle Potosi 862,
P. O. BOX 2479,
La Paz, Bolivia ("the Company").
B. Seller desires to sell and Buyer desires to purchase all of the
shares of the shares of stock of the Company for the mutual consideration and
upon the terms and conditions set forth in this Agreement.
NOW, THEREFOR, in consideration of the premises, the provisions and the
respective agreements hereinafter set forth, the parties hereto hereby agree
as follows:
I. Purchase and Sale of Shares
1. 1. Agreement to Purchase and Sell. Upon the terms and subject to the
conditions set forth in this Agreement and upon the representations and
warranties made herein by each of the parties to the others, at the Closing (
as such term is hereinafter defined) Seller shall sell, grant, convey, assign,
transfer and deliver to Buyer, and Buyer shall purchase and acquire from
Seller, all of the shares of stock of the Company.
1. 2. Purchase Price. Payment. Upon the terms and subject to the
conditions set forth in this Agreement, in reliance upon the representations,
warranties, covenants and
agreements of Seller contained herein, and in exchange for 100% of the shares
of stock of the Company, Buyer shall pay to Seller the sum of USD 78,000.00.
Buyer agrees that, on the Closing Date, the sum of USD 78,000.00 shall be
credited to Seller's account # 01-01505030/0300 in Ceskoslovenska Obchodni
Banka Praha.
1. 3. Closing. The Closing of the purchase and sale of the shares as
provided herein ( the "Closing") will be at the offices ofthe Seller, at 10:00
a. m., local time, on a date selected by Buyer on or before November 30, 1997,
or at such other place or at such other date and time as Buyer and Seller may
mutually agree. Such date and time of Closing isherein referred to as the
"Closing Date".
<PAGE>
2. Representations and Warranties of Seller. Seller hereby represents
and warrants to Buyer that to the best of his knowledge:
2. 1. Existence. Good standing. Corporate. Authority. Compliance with
Law. The company is duly established, validly existing and in good standing
under the laws of Bolivia, and is inscribed in the General Directory of the
Register of Trade Joint Stock Companies under the Register Number 07-002991,
approved by the Administrative Resolution No. 189/79 of May 20, 1979, with the
social capital of 114,000 Bolivian Pesos of paid capital and authorized
capital of 3,171,000 Bolivian Pesos. The Company has all requisite corporate
power and authority to own its property and carry on its business as now
conducted. The Company is not in default with respect to any court,
governmental authority or arbitration board or tribunal to which the Company
is a party or its subject, and the Company is not in violation of any laws,
ordinances, governmental rules or regulations to which it is subject. The
Company has obtained all licenses, permits and other authorizations and has
taken all action required by any applicable laws or governmental regulations
in connection with its businesses as now conducted.
2. 2. Validity and Effect of Agreements. This Agreement constitutes,
and all agreements and documents contemplated hereby when executed and
delivered pursuant hereto for value received will constitute, the valid and
legally binding obligations of Seller enforceable in accordance with their
terms, except that enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent transferor other similar laws relating to the
enforcement of creditors right generally and general equitable principles. The
execution and delivery of this Agreement by Seller does not, and the
consummation by Seller of the transaction contemplated hereby will not, (i)
require the consent, approval or authorization of, or declaration, filling or
registration with any governmental or regulatory authority or any third party,
(ii) result in the breach of any term or provision of, or constitute a default
under, or result in the acceleration of or entitle any party to accelerate
(whether after the giving of notice or the lapse of time or both) any
obligation under, to result in the creation or imposition of any lien, charge,
pledge, security interest or other encumbrance (collectively, "Encumbrances")
upon any part of the property of the Company pursuant to any provision of any
order, judgment, arbitration award, injunction, decree, indenture, mortgage,
lease, license, lien or other agreement or instrument to which the Seller or
the Company is a party or by which either of them is bound. or (iii) violate
or conflict with any provision of the agreements, bylaws or articles of
incorporation of the Company, as amended to the date of this Agreement.
2. 3. Records. Seller has delivered or made available, or will deliver
and make available on or before Closing, to Buyer and its counsel true and
complete copies of the articles of corporation, bylaws, minutes of all
meetings of directors and shareholders and certificates reflecting all actions
taken by the directors or shareholders without a meeting and other
organizational documents of the Company and such documents are in full force
and effect at the date of this Agreement.
2. 4. Financial Records. Seller has furnished to Buyer true and
accurate financial records, including its inventory and financial statement of
the Company as of August 31, 1997, which are attached hereto and made part
here of as Exhibit "A" and Exhibit "B".
<PAGE>
2. 5. Absence of Certain Changes or Events Since the Date of the
Financial Records. Since the date of the financial records, the Company has
not:
(a) incurred any obligation or liability ( fixed or contingent), except
normal trade or business obligations incurred in the ordinary course of
business and consistent with past practice, none of which is materially
adverse, and except in connection with this Agreement and the transactions
contemplated hereby.
(b) mortgaged, pledged or subjected to any Encumbrance any of their
assets or properties (other than mechanic's, materialman's and similar
statutory liens arising in the ordinary course of business and purchase
money security interests arising as a matter of law between the date of
delivery and payment).
(c) transferred, leased or otherwise disposed of any of their assets or
properties except for fair consideration in the ordinary course of business
and consistent with past practice or, except in the ordinary course of
business and consistent with past practice, acquired any assets or properties.
(d) canceled or compromised any debt or claim, except in the ordinary
course of business and consistent with past practice,
(e) waived or released any rights of material value,
(f) transferred or granted any rights under any leases, licenses,
agreements, patents, trademarks, trade names, service marks or copyrights,
(g) made or granted any wage or salary increase applicable to any group
classification of employees generally, entered into any employment contract
with, or made any loan to, or entered into any material transaction of any
other nature with, any officer or employee,
(h) suffered any casualty loss or damage (whether or not such loss or
damage shall have been covered by insurance) which affects in any material
respect their ability to conduct business, or
<PAGE>
(i) declared any dividends or bonuses or authorized or affected any
amendment or restatement of its articles of incorporation or bylaws or taken
any steps looking to dissolution or liquidation.
2. 6. Title to Propertv. Encumbrances. The Company has good, valid
and marketable title to all of its assets which are free and clear of all
encumbrances.
2. 7. Employees. Emplovrnent Arrangements.
(a) The Company is not presently subject to any collective bargaining
agreement nor are there any known union organizing efforts underway nor are
there any claims or actions pending before the National Labor Relations Board.
The Company has not encountered any actual or threatened employee strike, work
stoppage, slowdown or lockout, or had any material adverse change in its
relations with employees, agents, customers or suppliers for the three years
prior to the date of this Agreement .
(b) The consummation of the transactions contemplated by this Agreement
will not (i) entitle any current or former employee or current or former
officer or director of the Company to severance pay, unemployment,
compensation or any other payment except as expressly provided in this
Agreement, or (ii) accelerate the time or payment of vesting or increase the
amount of compensation due any such employee, officer or director.
2.8. No Breach or Default. As would be related to the shares acquired
hereunder, the Company is not in default under any contract to which it is
party or by which it is bound, nor has any event occurred which, after the
giving of notice or the passage of time or both, would constitute a default
under any such contract. Seller has no reason to believe that the parties to
such contracts will not fulfill their obligations under any such contracts in
all material respects or are threatened with insolvency.
2. 9. Litigation. There are no claims, actions, suits, proceedings or
investigations pending or threatened before any federal, state or local court
or governmental or regulatory authority, domestic or foreign, or before any
arbitrator of any nature, brought by or against Seller or any of its officers,
directors, employees, agents or agitates involving, affecting or relating to
any acquired assets of the Company or the transactions contemplated by this
Agreement, nor does there are any facts which might reasonably be expected to
give rise to any such suit, proceeding, dispute or investigation, except for a
lawsuit related to collection of amounts due to Company, where such said amount
of liability by the Company to be no greater than USD 30,000..00 Neither the
Company nor any of its assets or properties is subject to any order, writ,
judgment, award, injunction or decree of any federal, state or local court or
governmental or regulatory authority or arbitrator, which adversely affects or
might reasonably be expected to adversely affect its respective assets,
properties, business operation, prospects, not income or financial condition
<PAGE>
or which would or might reasonably by expected to interfere with the
transactions contemplated by this Agreement.
2. 10. Guarantee and Warranty of Liabilities of Company. guarantees
and warrants to Buyer that except for payables mentioned in clause 4.10 the
liabilities of the Company, do not exceed USD 97,000.00 which is the amount of
the Company's tax liability of USD 67,000.00 and the amount of the contingent
liability of collection suit in the amount of USD 30,000.00. Seller hereby
agrees to indemnify and hold harmless Buyer from any and all other
liabilities, including product liabilities, exceeding USD 97,000 for a period
of ten years, and shall immediately and without delay pay to Buyer the amount
of any such liabilities above said USD 97,000.00.
2.11. Affiliate Contracts. "Affiliate", for the purposes of this
Agreement, shall mean any corporation or organization of which a Seller is a
partner or of which a Seller is directly or indirectly the beneficial owner of
five percent (5%) or more of any class of equity securities, a trust or other
estate in which Seller serves as grantor, trustee or in a similar fiduciary
capacity.
2. 12. Management Emplovment. Seller agrees that for a period of
three years from Closing Date, Seller, its subsidiaries or affiliates, will
not employ Mr. Josef Koci in any manner whatsoever.
2.13. No misrepresentation or Omission. No representation or warranty
by Seller in this Section 2 or in any other Section of this Agreement, or in
any certificate or other document furnished or to be furnished by Seller
pursuant hereto, contains or will contain any untrue statement of a material
fact or intentionally omits or will omit to state a material fact necessary to
make the statements contained herein or therein not misleading or will
intentionally omit to state a material fact necessary in order to provide
Buyer with accurate information as to the Company.
2.14. Survival of Representations and Warranties. All representations
and warranties by Seller in this Section 2 or in any other Section of this
Agreement, or in any certificate or other document furnished or to be
furnished by Sellers pursuant hereto, shall survive delivery by Buyer of the
consideration to be given by it hereunder and delivery by Seller of the
consideration to be given by them hereunder, and shall survive the execution
hereof and the Closing hereunder, provided, however, that no claim based on
any breach of any such warranty or any misrepresentation may be may be made by
Buyer unless written notice with respect thereto is given on or before the
fifth anniversary of the Closing Date.
<PAGE>
3. Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows:
3.1. Existence. Good Standing . Corporate Authority. Compliance with
Law. Buyer is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware. Buyer is duly licensed or
qualified to do business as a foreign corporation and is in good standing
under the laws of all other jurisdictions in which the character of the
properties owned or leased by it herein or in which the transaction of its
business makes such qualification necessary. Buyer has all requisite corporate
power and authority to own its properties and carry on its business as now
conducted. Buyer is not in default with respect to any order of any court,
governmental authority or arbitration board or tribunal to which Buyer is a
party or is subject, and the Buyer is not in violation of any laws,
ordinances, governmental rules or regulations to which it is subject. Buyer
has obtained all licenses, permits or other authorizations and has taken all
actions required by applicable laws or governmental regulations in connection
with its business as now conducted.
3. 2 Authorization. Validity and Effect of Agreements. The execution
and delivery of this Agreement and all Agreements and documents contemplated
hereby by Buyer, and the consummation by it of the transaction contemplated
hereby, have been duly authorized by all requisite corporate action. This
Agreement constitutes, and all agreements and documents contemplated hereby
when executed and delivered pursuant hereto for value received will
constitute, the valid and legally binding obligations of Buyer enforceable in
accordance with their terms, except that enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent transfer, or other similar laws
relating to the enforcement of creditors rights generally and generally and
general equitable principles. The execution and delivery of this Agreement by
Buyer does not, and the consummation by the Buyer of the transactions
contemplated hereby will not, (i) require the consent, approval or
authorization of , or declaration, filing or registration with, any
governmental or regulatory authority or any third party, (ii) result in the
breach of any term or provision of, or constitute a default under, or result
in the acceleration of or entitle any party to accelerate ( whether after the
giving of notice or the lapse of time or both) any obligation under, or result
in the creation or imposition of any Encumbrance upon any part of the property
of Buyer pursuant to any provision of, any order, judgment, arbitration award,
injunction, decree, indenture, mortgage, lease, license, lien, or other
agreement or instrument to which Buyer is a party or by which it is bound, or
(iii) violate or conflict with any provision of the bylaws or articles of
incorporation of Buyer as amended to the date of this Agreement.
3. 3. Survival of Representations and Warranties. All representations
and warranties by Buyer in this Section 3 or in any other Section of this
Agreement, or in any certificate or other document furnished or to be
furnished by Buyer pursuant hereto, shall survive delivery by Buyer of the
consideration to be given by it hereunder and delivery by Seller of the
consideration to be it hereunder and delivery by Seller of the consideration
to be given by them hereunder, and shall survive the execution hereof and the
Closing hereunder, provided, however, that no claim based on any breach of any
such warranty or any misrepresentation may be made by Seller unless written
notice with respect thereto is given on or before the fifth anniversary of the
Closing Date.
<PAGE>
4. Other Covenants and Agreements.
4.1. Indemnification. If the transaction contemplated hereby is
consummated, Seller agrees to indemnify, defend and hold harmless Buyer
against and in respect of any and all claims, demands, losses, consequential
damages, recoveries and deficiencies, including interest, penalties and
reasonable attorneys ' fees ( collectively, "Damages") that Buyer shall incur
or suffer, which arise, result from or relate to, directly, in whole or in
part,
a) any inaccuracy, intentional misrepresentation or breach of any
of the representations, warranties or agreements made herein by Seller or from
any intentional misrepresentation in or omission from any instrument furnished
or to be furnished hereunder to Buyer
b) any and all actions, suits, proceedings, claims demands,
assessments, judgments, attorneys fees, fines, costs and legal and other
expenses, incident to any of the foregoing or the enforcement by any such
means of a valid right of indemnity pursuant hereto.
If any claim for indemnification hereunder involves a third party claim,
then Seller shall have the right, at its sole cost, expense and ultimate
liability regardless of the outcome, and trough council of its choice, to
litigate, defend, settle or otherwise attempt to resolve such claim, except
that the Buyer may elect, at any time and at Buyer's sole cost, expense and
ultimate liability, regardless of the outcome, and through counsel of its
choice, to litigate, defend, settle or otherwise attempt to resolve such
claim. If Buyer so selects (for reasons other than Seller's failure of refusal
to provide a defense to such claim), then Seller shall have no obligation to
indemnify Buyer with respect to such claim, but such disposition will be
without prejudice to any other right Buyer may have to indemnification under
this Section 4, regardless of the outcome of such claim. If Seller fails to
refuse to provide a defense to a claim and Buyer has not elected to litigate,
defend, settle or otherwise attempt to resolve such claim, then Buyer may
defend against, settle or otherwise deal as to such matter in the manner it
deems appropriate and Seller shall be liable for indemnification with respect
to such matter, including without limitations, the cost of such defense, to
the extent provided in this Agreement. In any event, Buyer and Seller shall
fully cooperate with each other and their respective counsel in connection
with any such litigation, defense, settlement or other attempted resolution.
4.2. Remedies Cumulative. The remedies provided in this Section 4
shall be cumulative and shall not preclude the assertion by Buyer or any
person who controls Buyer of any other rights or the seeking of any other
remedies against Seller. Any recovery under this Section 4 shall not be
limited in any way to the amount of the total consideration paid for the
acquired assets of the Company.
<PAGE>
4.3. Conduct the Business
(a) Affirmative Covenants. On and after the date of this Agreement and until
the Closing Date or the date, if any, on which this Agreement is earlier
terminated and abandoned pursuant to Section 6 hereof (the "Termination
Date"), Seller shall cause the Company to:
(i) conduct operations according to its ordinary and usual course of
business consistent with past practice, and (ii) use its best efforts to
preserve intact its business organization and goodwill, to keep available the
services of its officers..
(ii) use its best efforts to preserve intact its business
organization and goodwill, to keep available the services of its officers and
directors, and to maintain satisfactory relationships with suppliers,
distributors, licensers, licensees, customers, employees and others having
business relationships with it.
(b) Negative Covenants. Without limiting the generality of the foregoing,
and except for actions to be taken in connection with any of the transactions
contemplated by this Agreement, without the prior written consent of Buyer,
Seller shall cause the Company not to, on or after the date of this Agreement
and until the earlier of the Closing Date or the Termination Date:
(i) merge with, consolidate with, sell its assets to or acquire
substantially all the assets or capital stock of, any other corporation or
person, or enter into any other transaction not in the ordinary and usual
course of its business.
(ii) incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or guarantee any debt
securities of others, if said indebtedness would encumber acquired assets in
any way
(iii) amend its articles of incorporation or bylaws, as amended to
the date of this Agreement, except as may be necessary to carry out this
Agreement or as required by Law.
<PAGE>
(iv) enter into any agreement or make any undertaking which could be
violated, or create obligations which could be accelerated, as a result of
changes or developments or the absence of any changes or developments, in the
acquired assets.
(v) make any material changes in its management employment
arrangements.
4.4. Access to Information and Customers. Seller shall cause the
Company to, (i) afford to Buyer and to its officers, employees, accountants,
counsel and other authorized representatives reasonable access, throughout the
period prior to the earlier of the Closing Date, or the Termination Date, to
the Company's properties, books and records. (ii) furnish to Buyer and to its
authorized representatives such additional financial and operating data and
other information as to the Company's respective business and properties as
Buyer or its authorized representatives may from to the time reasonably
request. and (iii) afford Buyer and its representatives reasonable access,
throughout the period prior to the earlier of the Closing Date or the
Termination Date, to the Company's present and potential customers, and Buyer
and its authorized representatives shall have the right to contact such
customers and conduct such due diligence investigation relating to customer
relations as Buyer deems reasonably necessary or appropriate.
4.5. Fees and Expenses. Except as otherwise specifically provided
herein, Buyer and Seller shall each pay their respective fees and expenses
including taxes, applicable, incurred in connection with the consummation of
the transactions contemplated by this Agreement, including but not limited to,
attorneys' and accountants fees incident to the negotiation, preparation and
execution of this Agreement and the consummation of the transaction provided.
4. 6. Brokerage Commission. Seller hereby represents and warrants to
Buyer, that he or it has not incurred any obligation or liability, contingent
or otherwise, to any third party for brokerage or agent's commissions or other
like payment in connection with this Agreement or the transactions
contemplated hereby.
4.7. Notification of Certain Matters. Seller shall give prompt notice
to Buyer, and Buyer shall give prompt notice to Seller of, (i) the occurrence,
or failure to occur, of any event which occurrence or failure would be likely
to cause any representation or warranty of such party contained in this
Agreement to be untrue or inaccurate in any material respect at any time from
the date of this Agreement to the Closing Date and (ii) any material failure
of Seller or of Buyer, as the case may be, or of any officer, director,
employee or agent thereof, to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement.
<PAGE>
4.8. Best Efforts. Seller agrees to use its best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
reasonably necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement. Additionally Seller agrees to
assist for period of one year from the Closing Date, without compensation, to
resolve any claims or any issues conceived prior Closing Date.
4.9. Execution of Additional Documents. Each party hereto will at any
time, and from time to after the Closing Date, upon request of the other party
hereto, execute, acknowledge and deliver all such further documents and
instruments, and take all such further action, as may be required to carry out
the intent of this Agreement, and to transfer and vest
title to the acquired assets of the Company being transferred hereunder, and
to protect the right, title and interest in and enjoyment of all of the
acquired assets of the Company sold and conveyed pursuant to this Agreement,
provided, however, that this Agreement shall be effective regardless of
whether any such additional documents are executed.
4.10. Outstanding Company's Payables
(a) In the event that Company shall be liable to pay and will make a
payment in whole or in part of the outstanding payables of USD 88.711,66
resulting from the former business relations between Company and Motokov a.s.,
Na Strzi 63, 140 62 Prague 4, Czech Republic ("Motokov") as a part of
experimental business relations with the state enterprise Zetor, the Seller
hereby agrees to indemnify and hold harmless Buyer from any and all
liabilities resulting from such obligation and shall immediately and without
delay pay to Buyer the amounts paid by the Company to Motokov.
(b) In the event that the Company shall be liable to pay and will
make a payment in whole or in part of the outstanding payables of USD
95.439,69 according invoices No. 79-05499/04, issued under order 3250/80, and
No. 79-00433/04, issued under order 3253/81, resulting from the former
business relations between Company and Motokov, the Seller hereby agrees to
indemnify and hold harmless Buyer from any and all liabilities resulting from
such obligation and shall immediately and without delay pay to Buyer the
amount paid by the Company to Motokov
5. Conditions of Closing.
5. 1. Buyer's Conditions of Closing. The obligation of Buyer to
purchase and pay for the acquired shares of the Company shall be subject to
and conditioned upon the satisfaction at the Closing of each of the following
conditions:
(a) All representations and warranties of Seller contained in this
Agreement shall be true and correct at and as of the Closing Date and Seller
shall have performed all agreements and covenants and satisfied all conditions
on its part to be performed or satisfied by the Closing Date pursuant to the
terms of this Agreement.
<PAGE>
(b) There shall have been no materials adverse change in the financial
condition, business or affairs of the Company, and the Company shall have
suffered any material loss (whether or not insured) by reason of physical
damage caused by fire, earthquake, accident or other calamity which
substantially affects the value of its assets, properties or business.
(c) Any approvals and consents from third parties and governmental
agencies required to consummate the transactions contemplated hereby shall
have been obtained.
(d) No suit, action, investigation, inquiry or other proceeding by any
governmental body or other person or legal or administrative proceeding shall
have been instituted or threatened which questions the validity or legality of
the transactions contemplated hereby.
(e) As of the Closing, there shall be no effective injunction, writ,
preliminary restraining order or any order of any nature issued by a court
competent jurisdiction directing that the transactions provided for herein or
any ofthem not be consummated as so provided or imposing any conditions on the
consummation of the transactions contemplated hereby, which is unduly
burdensome on Buyer.
5. 2. Seller s Conditions of Closing . The obligation of Seller to
sell the shares of the Company shall be subject to and conditioned upon the
satisfaction at the Closing of each of the following conditions:
(a) All representations and warranties of Buyer contained in this
Agreement shall be true and correct at and as of the Closing Date and Buyer
shall have performed all agreements and covenants and satisfied all conditions
on its part to be per formed or satisfied by the Closing Date pursuant to the
terms of this Agreement.
(b) Buyer shall have effected payment of the Purchase Price in the manner
set forth in Section 1.2 hereof
(c) No suit, action, investigation, inquiry or other proceeding by any
governmental body or other person or legal or administrative proceeding shall
have been instituted or threatened which questions the validity or legality of
the transactions contemplated hereby.
<PAGE>
(d) As of the Closing, there shall be no effective injunction, writ,
preliminary restraining order or any order of any nature issued by a court of
competent jurisdiction directing that the transactions provided for herein or
any of them not be consummated as so provided or imposing any conditions on
the consummation of the transactions contemplated hereby, which is unduly
burdensome on Seller.
6. Termination and Abandonment.
6. 1. Reasons for Termination. Anything herein or elsewhere to the
contrary not with standing, this Agreement may be terminated and abandoned at
any time after the date of this Agreement but not later than the Closing:
(a) by the mutual consent of Seller and Buyer, or
(b) by Buyer on the Closing Date if, by that date, the conditions set
forth in Section 5.1 of this Agreement shall not have been fulfilled or
waived, or
(c) by Seller on the Closing Date if, by that date, the conditions set
forth in Section 5.2 of this Agreement shall not have been fulfilled or
waived, or
(d) by Buyer at any time if there has been a material adverse change in
the business, financial condition, or results of operations of the Product
Trading Division of the Company, or
(e) by Buyer or by Seller at any time if there has been a material
breach of any representation or warranty made by the other party herein or in
any certificate or other document delivered pursuant hereto or if there has
been any failure by the other party to perform in all material respects all
obligations or to comply with all covenants on its part to be performed
hereunder.
6.2. Procedure Upon and Effect of Termination. In the event of any
termination and abandonment pursuant to Section 6.1 of this Agreement, written
notice thereof shall forthwith be given to the other party and the transaction
s contemplated by this Agreement shall thereupon be terminated and abandoned,
without further action by Buyer or Seller (except for the provisions of
Section 4.8 ), and there shall be no liability on the part of any of Seller or
Buyer or their respective officers, directors or shareholders, except for the
provisions of Section 4. 8 hereof or except for the material breach of any
representation, warranty or covenant contained herein that is within the
control of the party in breach.
<PAGE>
7. Miscellaneous.
7. 1. Notice. Any notice, consent, approval, request, demand or other
communication required or permitted hereunder must be in writing to be
effective and shall be deemed delivered and received (i) if personally
delivered or delivered by telex or telecopy with electronic confirmation, when
actually received by the party to whom sent, or (ii) if delivered by mail
(whether actually received or not), at the close of business on the third
business day next following the day when placed in the federal mail, postage
prepaid, certified or registered mail, return receipt requested, addressed as
follows:
If to Buyer: SDC International, Inc.
1530 North Lake Way
Palm Beach, FL 33480
If to Seller: Motokov International, a. s.
Na Strzi 63, Prague 4
Czech Republic
(or to such other address as either party shall specify by written notice so
given).
7. 2. Binding Effect. Benefits. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
heirs, successors, personal representatives and permitted assigns. Not with
standing anything contained in this Agreement to the contrary, nothing in this
Agreement, expressed or implied, is intended to confer on any person other
than the parties hereto or their respective heirs, successors, personal
representatives and permitted assign any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
7. 3. Entire Agreement . Modification. This Agreement, together with
the Exhibits and other documents contemplated hereby, constitutes the final
written expression of all of the agreements between the parties, and is a
complete and exclusive statement of those terms. Except as specifically
included or referred to herein, this Agreement and the Exhibits and other
documents contemplated hereby supersede all understandings and negotiations
concerning the matters specified herein. No addition to or modification of any
provision of this Agreements shall be binding upon either party unless made in
writing and signed by both parties.
7.4. Governing Law. This Agreement, and all questions relating to its
validity, interpretation, performance and enforcement shall be governed by and
construed in accordance with the laws of the Czech Republic ( exclusive of the
conflict of law provisions thereof).
7.5. Arbitration. Any dispute in connection with this Agreement
including disputes regarding breach of covenants, termination or invalidity
<PAGE>
shall be settled amicably and in friendly way by mutual negotiations. If it
fails, the disputes shall be finally settled by the International Arbitral
Centre of the Austrian Federal Economic Chamber in Viena (Internationales
Schiedsgerich' der Bundeskammer der gewerblichen Wirtschaft, 1045 Mien,
Wiedner Hauptstrasse 63, PF 190) in accordance with its Rules of Arbitration.
The arbitral tribunal shall be composed of three members. The arbitration
proceedings shall be conducted in English language. All fee and cost relating
to the Arbitration and its enforcement shall be borne by the loosing party.
The parties to the Agreement are obliged to acknowledge and execute the
judgment promptly.
7. 6. Survival. All of the terms, conditions, warranties and
representations contained in this Agreement shall survive, in accordance with
their terms, delivery by Buyer of the consideration to be given by it
hereunder and delivery by Seller of the consideration to be given by it
hereunder, and shall survive the execution hereof and the Closing hereunder.
7. 7. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the some instrument.
7. 8. Headings. Headings of the Section of this Agreement are for the
convenience of the party only, and shall be given no substantive or
interpretive effect what so ever.
7. 9. Waivers. Any party hereto may, by written notice to the other
parties hereto, (i) extend the time for the performance of any of the
obligations or other actions of the other parties under this Agreement. (ii)
waive any inaccuracies in the representations or warranties of the other
parties contained in this Agreement or in any document delivered pursuant to
this Agreement. (iii) waive compliance with any of the conditions or covenants
of the other parties contained in this Agreement, or (iv) waive performance of
any of the obligations of the other party under this Agreement. Except as
provided in the preceding sentence, no action taken pursuant to this
Agreement, including without limitation any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representation, warranties, covenants or
agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a
waiver of any prior or subsequent breach of the some or any other provision
hereunder.
7. 10. Merge of Documents. This Agreement and all agreements and
documents contemplated hereby constitute one agreement and are interdependent
upon each other in all respects.
7.11. Incorporation of Exhibits. All Exhibits attached hereto are by
this reference incorporated herein and made a part hereof for all purposes as
if fully set forth.
<PAGE>
7.12 Severability. If for any reason what so ever, any one or more
of the provision of this Agreement shall be held or deemed to be illegal,
inoperative, unenforceable or invalid as applied to any particular case or in
all cases, such circumstances shall not have the effect of rendering such
provision illegal, inoperative, unenforceable or invalid in any other case or
of rendering any of the other provisions of this Agreement inoperative,
unenforceable or invalid.
7.13. Assignability. Purchaser shall have the right to assign its
rights and delegate its obligations as Buyer under this Agreement, but upon
such assignment or delegation, Purchaser shall remain fully and completely
responsible for its obligations and duties under this Agreement.
7. 14. Drafting. The parties hereto stipulate and agree that the rule
of construction to the effect that any ambiguities are to be or may be
resolved against the drafting party shall not be employed in the
interpretation of this Agreement to favor either party against the other.
7. 15. References. The use of the words "hereof" "herein",
"hereunder", and words of similar import shall refer to this entire Agreement,
and not to any particular section, subsection, clause, or paragraph of this
Agreement, unless the contact clearly indicates otherwise.
Agreed to upon the first date written above:
SELLER: Motokov International, a. s.
By: /s/Rene KrausBY:/s/Ing Jiri Lupinek
Dr. Rene Kraus, its General ManagerIng Jiri Lupinek
BUYER: SDC International, Inc.
/s/Milota K. Srkal
Milota K. Srkal, its Executive Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Balance
Sheet, Statement of Operations, Statement of Cash Flows and Notes thereto
incorporated in Part III, Item 13. of this Form 10KSB and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<CASH> 346,131
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 369,909
<PP&E> 4,044,109
<DEPRECIATION> (554,768)
<TOTAL-ASSETS> 4,271,003
<CURRENT-LIABILITIES> 332,296
<BONDS> 0
2,639
0
<COMMON> 0
<OTHER-SE> 3,936,068
<TOTAL-LIABILITY-AND-EQUITY> 4,271,003
<SALES> 1,128,319
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<INCOME-CONTINUING> (1,203,099)
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<NET-INCOME> (1,203,099)
<EPS-PRIMARY> (0.50)
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</TABLE>
