UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended
or
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from September 1, 1997 to December 31, 1997
Commission File Number: 0-27520
SDC International, Inc.
(Exact name of registrant as specified in its charter)
Delaware 75-2583767
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2065 Montgomery Street, Ft. Worth, TX 76107
(Address of principal executive offices)(Zip Code)
(561) 882-9300
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by
section 13 or 15 (d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [xx] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Common stock, par value $.001 per share: 2,990,118 shares outstanding as of
December 31, 1997.
<PAGE> 1
SDC INTERNATIONAL, INC. AND SUBSIDIARY
INDEX
FINANCIAL STATEMENTS
Consolidated Balance Sheets December 31, 1997 (Unaudited)
and August 31, 1997 F-1
Consolidated Statements of Operations (Unaudited)
for the four months ended December 31, 1997 and 1996 F-2
Consolidated Statement of Stockholders' Equity (Unaudited)
for the four months ended December 31, 1997 F-3
Consolidated Statements of Cash Flows (Unaudited)
for the four months ended December 31, 1997 and 1996 F-4
Notes to Consolidated Financial Statements F-5 - F-17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS F-18 - F-23
<PAGE>
SDC INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
December 31, August 31,
1997 1997
ASSETS
<S> <C> <C>
Current assets:
Cash $ 104,997 $ 15,199
Cash - restricted 80,960 330,932
Accounts receivable 150,634 -
Prepaid expenses 17,528 -
Inventory 437,798 -
Other current assets - 23,778
Total current assets 791,917 369,909
Machinery and equipment, net 3,398,363 3,489,341
Other assets:
Exclusive agency rights, net 231,524 263,485
Customer list, net 103,125 140,625
Deferred offering costs 50,000 -
Organizational costs, net 6,369 7,643
Total other assets 391,018 411,753
Total assets $ 4,581,298 $ 4,271,003
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 67,639 $ 53,793
Accounts payable - related party 13,477 -
Accrued expenses 81,207 36,467
Note payable - short term 100,100 215,000
Due to officer 15,739 27,036
Total current liabilities 278,162 332,296
Excess of net assets acquired over cost, net 540,804 -
Commitments and contingencies (Note 4)
Stockholders' equity:
Common stock $.001 par value, authorized
10,000,000 shares, issued and outstanding
2,990,118 and 2,639,484 shares, respectively 2,990 2,639
Additional paid-in capital 6,853,867 6,345,643
Accumulated deficit (2,925,233) (2,409,575)
Sub-total 3,931,624 3,938,707
Deferred costs (169,292) -
Total stockholders' equity, net 3,762,332 3,938,707
Total liabilities and stockholders' equity $ 4,581,298 $ 4,271,003
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 2
SDC INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FOUR MONTHS ENDED
(UNAUDITED)
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
<S> <C> <C>
Sales $ 59,666 $ 27,072
Cost of goods sold 31,324 17,337
Gross profit 28,342 9,735
Expenses:
Selling, general and administrative 332,126 81,007
Depreciation and amortization 158,939 156,202
Stock-based consulting and compensation 38,650 -
Total expenses 529,715 237,209
Loss from operations before other income and provision
for income taxes (501,373) (227,474)
Other income (expense):
Amortization of excess of net assets acquired over costs 18,667 -
Interest income 3,707 1,005
Interest expense (22,227) -
Foreign currency exchange loss (14,270) -
Total other income (expense) (14,123) 1,005
Loss before provision for income taxes (515,496) (226,469)
Provision for income taxes 162 -
Net loss $ (515,658) $ (226,469)
Loss per common equivalent share:
Basic:
Net loss $ (.18) $ (.10)
Weighted average number of shares outstanding 2,804,064 2,198,265
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE> 3
SDC INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE FOUR MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Additional Total
Common Stock paid-in Accumulated Deferred Stockholders'
Shares Amount capital Deficit Costs Equity
<S> <C> <C> <C> <C> <C> <C>
Balances at September 1, 1997 2,639,484 $ 2,639 $ 6,345,643 $ (2,409,575) $ - $ 3,938,707
Issuance of common stock in
connection with private placement
memorandum, net of offering costs
of $36,200 185,634 186 242,064 - - 242,250
Issuance of common stock pursuant
to the 1997 Non-Qualified Stock
Option Plan 150,000 150 253,050 - (194,400) 58,800
Issuance of common stock in
connection with loan agreements 15,000 15 13,110 - (13,125) -
Amortization of deferred costs - - - - 38,233 38,233
Net loss for the four months ended
December 31, 1997 - - - (515,658) - (515,658)
Balances at December 31, 1997 2,990,118 $ 2,990 $ 6,853,867 $ (2,925,233) $ (169,292) $ 3,762,332
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
SDC INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FOUR MONTHS ENDED
(UNAUDITED)
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (515,658) $ (226,469)
Adjustments to reconcile net loss to net
cash used for operating activities:
Amortization and depreciation 189,394 156,202
Decrease (increase) in:
Accounts receivable (2,415) (23,377)
Inventory (55,220) -
Increase (decrease) in:
Accounts payable 9,742 (3,324)
Accounts payable - related party - 17,337
Accrued expenses 36,082 16,296
Net cash used for operating activities (338,075) (63,335)
Cash flows from investing activities:
Acquisition of subsidiary, net of cash acquired 35,777 -
Acquisition of customer list - 62,985
Purchase of machinery and equipment (1,864) -
Decrease (increase) in restricted cash 249,972 -
Refund of security deposit - 15,000
Net cash provided by investing activities 283,885 77,985
Cash flows from financing activities:
Proceeds from issuance of note payable - 20,000
Repayment of notes payable (109,242) -
Proceeds from sale of common stock 337,250 15,000
Costs associated with sale of common stock (36,200) -
Deferred offering costs (50,000) -
Repayment of loans from stockholder (11,297) (39,000)
Proceeds from related party 13,477 -
Net cash provided by (used for) financing
activities 143,988 (4,000)
Net increase in cash 89,798 10,650
Cash at beginning of period 15,199 (387)
Cash at end of period $ 104,997 $ 10,263
Supplemental disclosures:
Interest paid $ 16,394 $ -
Income taxes paid $ 162 $ -
Supplemental disclosure of non-cash investing activities:
Issuance of common stock for services $ 194,400 $ -
Issuance of common stock in connection with loan $ 13,125 $ -
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
SDC INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FOUR MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
NOTE 1 - ORGANIZATION
The consolidated financial statements of SDC International, Inc., ("the
Company") at December 31, 1997 include the accounts of its wholly-owned
subsidiary Skobol, s.a. after elimination of all significant intercompany
transactions and accounts. The Company was incorporated in the State of
Delaware 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. Skoda was formed in Czechoslovakia in the year 1899.
During April 1997, the Company acquired the outstanding common stock of Golden
Grove Business, Inc., ("GGB"), a Panama Corporation and subsequently dissolved
GGB. During November 1997, the Company acquired the outstanding common stock
of Skobol, s.a., ("Skobol"), a Bolivia Corporation.
The Company's machinery and equipment is located in the Czech Republic.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with instructions to Form 10-QSB for interim
and transition reporting. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, the
transition consolidated financial statements include all adjustments necessary
in order to make the consolidated financial statements not misleading. For
further information, refer to the Company's audited financial statements and
footnotes thereto at August 31, 1997, included in the Company's Form 10-KSB,
filed with the Securities and Exchange Commission.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Reclassifications
Certain reclassifications have been made to the August 31, 1997 financial
statements in order to conform to the December 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 December 31, 1997 maintains its domestic cash
deposits in accounts which are in Federal Deposit Insurance Corporation
("FDIC") insured accounts. The Company maintains cash deposits in foreign
banks, not covered by FDIC in the amount of $138,895.
<PAGE> 6
SDC INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FOUR MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
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> 7
SDC INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FOUR MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
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 December 31, 1997
The carrying value of cash, accounts payable, notes payable and accrued
expenses are a reasonable estimate of their fair value.
k) Revenue recognition
Sales are recognized when products are shipped.
NOTE 3 - MACHINERY AND EQUIPMENT
Machinery and equipment at December 31, 1997 consisted of the following:
Production machinery $ 1,573,226
Production equipment 1,436,893
Tools and fixtures 941,212
Computer and software 32,790
4,045,973
Less: Accumulated depreciation (647,611)
$ 3,398,362
During the four months ended December 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 four months ended December
31, 1997 and 1996, amounted to $309,374 and $307,836, respectively.
<PAGE> 8
SDC INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FOUR MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
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 its common stock to Skoda.
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.
On April 18, 1996, the Company entered into a modification agreement whereby
all such sales levels were postponed for one year.
As a result, for the four months ended December 31, 1997 and 1996, the Company
recorded amortization expense of $12,912 for each year.
NOTE 5 - ACQUISITIONS
a)On April 24, 1997, the Company acquired for $120,000 plus 48,000 common
shares 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 products. The Company amortized such
agency rights over the estimated remaining useful life of four years.
Accordingly, for the four months ended December 31, 1997, expense amounted to
$17,656.
<PAGE> 9
SDC INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FOUR MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
NOTE 5 - ACQUISITIONS (Cont'd)
b) On November 18, 1997, the Company acquired 100% of the common stock of
Skobol Joint Stock Company ("Skobol") from Skobol's parent, Motokov
International Joint Stock Company for $78,000. The acquisition was
retroactively effective to September 1, 1997. The acquisition was accounted
as a purchase with the results of Skobol included from the acquisition date.
Skobol is a distributor of Czech Republic products within the country of
Bolivia.
The acquisition of Skobol resulted in an excess of net assets acquired over
costs of $559,471 after application to all non current assets acquired. This
amount is being amortized on a straight-line basis over ten years from date of
acquisition. Accordingly, for the four months ended December 31, 1997,
amortization income amounted to $18,667.
NOTE 6 - ACCRUED EXPENSES
Accrued expenses consisted of the following at December 31, 1997:
Professional fees $ 34,051
Stock Commissions payable 36,200
Other 5,298
Total accrued expenses $ 75,549
NOTE 7 - NOTE PAYABLE
a) The Company had two bank lines-of-credit which provided short-term
borrowings up to $220,000. Interest on advances was payable quarterly at a
fixed rate of 4.32%. The lines-of-credit expired on October 19, 1997 and were
secured by a certificate of deposit amounting to $250,000. During October
1997, the certificate of deposit was redeemed and such lines of credit were
repaid.
b) During October 1997, the Company borrowed $100,000 from an individual
which is payable in 180 days at an interest rate of 14%. In connection with
such borrowing, the Company issued 15,000 common shares as additional
consideration. See Note 5(c). The issuance of such shares results in an
effective interest rate of 40%. As of December 31, 1997, the Company had
accrued $2,750 of interest and amortized $5,833 of deferred interest in
relation to this note.
<PAGE> 10
SDC INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FOUR MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
NOTE 8 - 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 December 31, 1997, the Company has net operating loss carry forwards for
tax purposes of approximately $1,581,000 expiring in the years 2009 through
2011. These carry forwards result in a deferred tax asset at December 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 December 31, 1997 is $360,000.
At December 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.
NOTE 9 - STOCKHOLDERS' EQUITY
a) Private Placement Memorandum
On February 24, 1997, the Company commenced and privately offered pursuant to
rule 505, Regulation D, on a best efforts basis, no more than 500,000 shares
of common stock in a ninety-day period (before extensions) of its $.001 par
value common stock at $1.50 per share before deducting discounts, commissions
and non-accountable expenses. During the four months ended December 31, 1997,
the Company sold an aggregate of 185,634 shares yielding net proceeds of
$242,250
b) 1997 Non-qualified stock option plan
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 is 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
Company. During the three months ended November 30, 1997, the Company issued
150,000 shares pursuant to the Plan. Such shares have been valued at $253,200
representing 75% of the average market value during the month of issuance as a
result of the illiquidity of the Company's stock. In connection with the
issuance of such shares, the Company recorded $58,800 as stock-based
compensation and the remaining balance amounting to $194,400 has been recorded
as deferred consulting costs to be amortized on a monthly basis over 12
months. Accordingly, for the four months ended December 31, 1997,
amortization expense amounted to $32,400.
<PAGE> 11
SDC INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FOUR MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
NOTE 9 - STOCKHOLDERS' EQUITY (Cont'd)
c) Deferred interest
In connection with the obtaining of a loan, the Company issued 15,000 shares
of common stock as additional consideration. Such shares have been recorded
at 50% of the average market value of the stock during the month of issuance
as a result of the illiquidity of the Company's stock. Accordingly, the
Company has recorded deferred interest of $13,125 which is being amortized
over the term of the loan. For the four months ended December 31, 1997,
amortized interest amounted to $5,833.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
a) Lease agreement
The Company leased its administrative office pursuant to a 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 Chief
Executive Officer with monthly payments amounting to approximately $3,000.
Included in general and administrative expenses is rent expense which amounted
to $12,541 and $23,662 for the four months ended December 31, 1997 and 1996,
respectively.
b) 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.
c) 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.
<PAGE> 12
SDC INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FOUR MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
NOTE 10 - COMMITMENTS AND CONTINGENCIES (Cont'd)
d) 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.
e) 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.
f) 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.
NOTE 11 - 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.
<PAGE> 13
SDC INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FOUR MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
NOTE 11 - RELATED PARTY TRANSACTIONS (Cont'd)
b) Due to officer
The Company's Chief Executive Officer and shareholder advances funds to or on
behalf of the Company. As of December 31, 1997, $15,739 was owed to such
officer. Such advances are non interest bearing and due on demand.
c) Rent Expense
Effective January 1, 1997, the Company rents its executive office on a month
to month basis from its Chief Executive Officer with monthly payments
amounting to approximately $3,000.
d) Management fees
For the four months ended December 31, 1997 and 1996, the Company recorded
$51,000 and $24,000, respectively, of management fees paid to its Chief
Executive Officer.
NOTE 12 - 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 four months ended
December 31, 1997, is as follows:
<TABLE>
<CAPTION>
Foreign Domestic
Operations operations Consolidated
<S> <C> <C> <C>
Sales to unaffiliated customers $ 59,666 $ - $ 59,666
Sales to affiliated customers - - -
$ 59,666 $ - $ 59,666
Operating profit $ 28,342 $ - $ 28,342
Depreciation and amortization $ 158,122 $ 817 $ 158,939
Identifiable assets at December
31, 1997 $ 4,460,354 $ - $ 4,460,354
Corporate assets 120,944
Total assets at December 31, 1997 $ 4,581,298
</TABLE>
<PAGE> 14
SDC INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FOUR MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
NOTE 12 - FOREIGN OPERATIONS (Cont'd)
The information about those foreign operations for the four months ended
December 31, 1996, is as follows:
<TABLE>
<CAPTION>
Foreign Domestic
Operations operations Consolidated
<S> <C> <C> <C>
Sales to unaffiliated customers $ - $ - $ -
Sales to affiliated customers - 27,072 27,072
$ - $ 27,072
$ 27,072
Operating profit $ - $ 9,735 $ 9,735
Depreciation and amortization $ 155,385 $ 817 $ 156,202
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 one major customer during the four months ended December
31, 1996, which comprised 100% of sales. There were no major customers during
the four months ended December 31, 1997.
NOTE 13 - EARNINGS PER SHARE
Effective September 1, 1996, the Company implemented Statement of
Financial Accounting Standards No. 128 "Earnings Per Share ("EPS") ("SFAS
#128"). The following is the reconciliation of the numerators and
denominators of the basic and diluted EPS for the four months ended December
31, 1997 and 1996:
<TABLE>
<CAPTION>
(Unaudited)
For the four months
ended December 31,
1997 1996
<S> <C> <C>
Numeric
Net (loss) income $ (515,658) $ (226,469)
Denominator:
Computation of basic EPS:
Weighted average common shares
outstanding 2,804,064 2,198,265
Basic EPS (.18) (.10)
</TABLE>
<PAGE> 15
SDC INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FOUR MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
NOTE 13 - EARNINGS PER SHARE (Cont'd)
<TABLE>
<CAPTION>
<S> <C> <C>
Computation of diluted EPS:
Weighted average common shares
outstanding 2,804,064 2,198,265
Potentially dilutive shares:
Weighted average shares issuable under
warrants (A) (A)
Weighted average shares outstanding &
available 2,804,064 2,198,265
Diluted EPS $ (.18) $ (.10)
</TABLE>
(A) In accordance with the provisions of SFAS #128 no potential dilutive
shares have been included in the computation of diluted EPS as the
Company has a loss from continuing operations.
NOTE 14 - SUBSEQUENT EVENTS
a) Private placement memorandum
During the six months ended June 30, 1998, the Company sold an aggregate of
169,001 shares in connection with its private placement memorandum (Note
9(a)), yielding net proceeds after commissions and non-accountable expenses of
$220,545.
b) 1997 Non-qualified stock option plan
During the six months ended June 30, 1998, the Company issued an aggregate of
450,000 shares pursuant to the plan (Note 9(b)). Such shares have been valued
at $621,581, representing 76% of the average market value during the month of
issuance as a result of the illiquidity of the Company's stock.
c) Stock-based consulting
During the six months ended June 30, 1998, the Company issued 140,000 shares
of restricted common stock. Such shares have been valued at $126,700
representing 50% of the average market value when issued as a result of the
illiquidity of the Company's stock and the restricted nature of the shares
issued.
d) Note payable
During June 1998, the Company repaid a short-term loan of $35,000 by issuance
of 35,000 common shares.
<PAGE> 16
SDC INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FOUR MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
NOTE 14 - SUBSEQUENT EVENTS (Cont'd)
e) Note payable
During June 1998, the Company borrowed $100,000 from a shareholder which is
payable in 90 days at an interest rate of 14% per annum. In connection with
such borrowing, the Company issued 20,000 common shares as additional
consideration. Such shares will be valued at 50% of the average market value
when issued as a result of the illiquidity of the Company's stock and the
restricted nature of the shares issued. The issuance of such shares results
in an effective interest rate of 82%.
f) Note payable
During June 1998, the Company borrowed $100,000 from a shareholder which is
payable in 180 days at an interest rate of 14% per annum. In connection with
such borrowing, the Company issued 15,000 common shares as additional
consideration. Such shares will be valued at 50% of the average market value
when issued as a result of the illiquidity of the Company's stock and the
restricted nature of the shares issued. The issuance of such shares results
in an effective interest rate of 40%.
g) Line of credit
During June 1998, the Company obtained an unsecured $500,000 line of credit
from a shareholder with an interest rate at fourteen percent (14%) per annum.
The Company may borrow from the credit line up to $35,714 in any one week.
Principal and interest are payable on December 8, 1998. If the Company is not
able to pay such principal and interest when due, the principal balance of the
line of credit and any outstanding accrued interest may be converted into
common stock at the rate of $1.00 per share.
h) Due to shareholder
During July 1998, the Chairman of the Company advanced $17,000 to the
Company. Such advances are non interest bearing and due on demand.
i) Acquisition
During July 1998, the Company entered into a letter of intent to purchase
43.5% of the Czech truck manufacturer, Tatra a.s., for approximately $13.6
million. In addition, the Company will purchase Tatra's senior secured loan
from the bank holding such note, with an approximate balance of $89.5 million,
for approximately $30 million. Both agreements are anticipated to close
September 30.
There is no assurance that the transaction will be completed since the Company
must obtain sufficient capital to complete the acquisition, thus, no pro forma
financial information has been presented. The following information is from
Tatra's audited financial statements. Tatra had sales of approximately $290
million for the year ended December 31, 1997. At December 31, 1997, Tatra had
total assets of approximately $230 million.
<PAGE> 17
SDC INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FOUR MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
NOTE 14 - SUBSEQUENT EVENTS (Cont'd)
j) Note payable
During August 1998, the Company borrowed $350,000 from a shareholder
which is payable in 180 days at an interest rate of 14% per annum. In
connection with such borrowing, the Company issued 37,500 common shares as
additional consideration. Such shares will be valued at 50% of the average
market value when issued as a result of the illiquidity of the Company's stock
and the restricted nature of the shares issued. The issuance of such shares
results in an effective interest rate of 32%.
k) Note payable
During August 1998, the Company borrowed $125,000 from each of two
shareholders which is payable in 180 days at an interest rate of 14% per
annum. In connection with such borrowing, the Company issued each shareholder
31, 250 common shares as additional consideration. Such shares will be valued
at 50% of the average market value when issued as a result of the illiquidity
of the Company's stock and the restricted nature of the shares issued. The
issuance of such shares results in an effective interest rate of 57%.
l) Inventory loans
The Company has retired $96,500 of short term inventory loans since
May 31, 1998.
<PAGE> 18
ITEM 2 - MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company is the Central and South American distributor for Czech heavy-duty
truck manufacturer TATRA. During the four months ending December 31,1997, the
company provided training at the Tatra factory for its initial service center
for service and warranty work on Tatra trucks. TATRA, a.s., is a Czech
manufacturer of on/off-road heavy 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, Detroit Diesel or Cummins Diesel. TATRA has ISO
9001 certification and TATRA trucks meet all EURO II regulations.
The Company has canceled its plans to sell and finance inventories of
Slovakian manufacturer Krizik, a.s., because the Company has developed similar
opportunities with companies with whom SDC has existing relationships and
which are located within the Czech Republic where the Company conducts most if
its business activities.
During the period ending December 31, 1997, the Company continued the
registration process of its division, 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.
During the period ending December 31, 1997, the Company began rebuilding the
inventories of its Bolivian subsidiary, SKOBOL, s.a., formerly the subsidiary
of Czech trading company Motokov International. Skobal 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 new subsidiary
provided and excess of $559,471 of net assets acquired over the cost of the
acquisition. Skobol operated at a small loss during this period as the
products are being expanded and Skobol is reintroducing itself to the
marketplace as a continuing supplier of Czech products. The subsidiary's
financial statements are consolidated with those of the Company.
At the close of the period ending December 31, 1997, the Company continued
negotiating for a possible acquisition of Skoda's's Diesel International
operations. Management and shareholder control of Diesel International
(formerly Skoda Diesel) changed in 1996, and the Company believes that if an
acquisition can be made on terms favorable to the Company, potential negative
effects of the management and shareholder changes of 1996 will be eliminated
and the Company could exert total control over this supplier. SDC management
continues to work with the management in place a Diesel International and
relationships with management are satisfactory. Discussions continue with two
other East European manufacturers of industrial products which should be
synergistic with the Company's present products and markets.
The Company concluded its Regulation D Rule 505 offering of its common stock
which provided a gross total of $740,000 for the Company. The Five Year
Growth Plan which was completed in August 1997 has been updated to reflect the
positive developments of the prior six months 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.
<PAGE> 19
ITEM 2 - MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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.
The Company has devoted substantial time and effort to negotiating and
arranging strategic alliances with major Czech manufacturers rather than
devoting its time to beginning its marketing and sales development. It is
felt that the most efficient use of time and resources will be with the proper
product mix for entering new markets. Therefore, the Company's revenues to
date are primarily the result of orders received by the Company rather than
the results of marketing efforts by the Company. The Company records revenue
when products are shipped. During the four months ending December 31, 1997,
the Company shipped $59,666 and realized a gross profit from those sales of
$28,342. These sales were made by the new subsidiary Skobol, s.a. Management
believes sales by Skobol will increase as its reorganization of its operations
is completed and new inventories are provided. However, Company sales and
shipments will continue to be sporadic until a more steady flow of orders
exist, and until the marketing efforts for larger items, such as electrical
generating sets and trucks, can come to fruition.
Operating expenses for the four months ending December 31, 1997, were more
than in the four months ending December 31, 1997, due primarily to the
expansion of management, development of additional product lines needed in
order to enhance future growth and revenues of the Company, and the continuing
negotiations for major strategic alliances which often times include paid
professional advisors such as attorneys and accountants. 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, and due to the
extensive discussions and negotiations in the Czech Republic regarding future
strategic alliances and the possible acquisition of Diesel
International.
Total expenses for the four months ending December 31, were $237,209 in 1996
and $529,715 in 1997. Non-cash expenses as deprecation and amortization and
payment for consulting services accounted for $197,589 more than thirty-seven
percent (37%) of the expenses during the four months ending December 31,
1997. During the four months ending December 31, 1997, expenses increased due
to the increased activity level of corporate and product acquisition plans and
related activities. The Company's net loss of $515,658 for the four months
ending December 31, 1997, includes certain non-cash charges as follows:
Depreciation and amortization $ 158,937
Amortization of common stock issued as
consideration of services 38,650
Total non-cash charges $ 197,589
Accordingly, the Company's cash loss before the above charges amounted to
approximately $318,069.
<PAGE> 20
ITEM 2 - MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
During the four months ending December 31, 1997, as compared to the four
months ending December 31, 1996, operating expenses were approximately
$292,506 higher. Management expects operating expenses (non-depreciation and
non-amortization), to remain at this approximate level for the near future due
to the level of negotiations and expansion discussions taking place
presently. Operating expense categories which exceeded $5,000, for the four
months period ending December 31, 1997, were; Amortization and depreciation
$158,939; Office rent $12,540; Management compensation and salary $51,000;
Travel and lodging $57,609; Consulting $80,328; Legal and accounting $20,784;
Telephone $10,046; and Consulting costs paid by issuance of stock $38,650;
Repair and maintenance $16,434; Marketing $7,263; Offices supplies $6,355;
Truck expense $7,237; and Wages $41,017. Operating expense categories which
exceeded $5,000 for the four month period ending December 31, 1996 were;
Amortization and depreciation $156,202; Office rent $23,662; Management
compensation and salary $24,000; Travel and lodging $19,305; and Capital
funding $5,697.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, the Company's working capital is $513,755. Net cash
used for the Company's operating activities for the four months ending
December 31, 1997 amounted to $338,075 whereas the net cash used for operating
activities for the period ending December 31, 1996 amounted to $63,335. Net
cash provided by (used for) financing activities in the four months ending
December 31, 1997 was $143,988 compared to $(4,000) for the four months ending
December 31, 1996. Net cash provided by (used for) investing activities
during the four months ending December 31, 1997 was $283,885 compared to
$77,985 for the period ending December 31, 1996. Therefore, total cash at the
end of the period ending December 31, 1997 was $104,997 compared to 10,263 at
the end of the four months ending December 31, 1996. At December 31, 1997,
all corporate debt amounted to $121,497.
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.
Negative cash flows from the Company's operating activities are anticipated to
continue until the Company has established its distributors within its sales
territories, nas 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 is unable to
provide needed revenues to finance its ongoing operating or if the Company
does not receive additional capital, there could be a severe adverse impact on
the Company's future operations.
<PAGE> 21
ITEM 2 - MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (Cont'd)
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 any options are granted. The Plan is designed
to serve as an incentive for retainage qualified and competent persons who are
key employees, consultants, representatives, officers and directors of the corpo
ration. As of December 31, 1997, 150,000 shares had been issued under such
Plan. See Notes to financial statements, Note 5(b).
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 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 the common shares. The warrants 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. Due to the
current progress of negotiations with potential strategic partners, this
offering is postponed by management.
The Company' 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. Although the Company maintains a bank
account in Czech currency within the Czech Republic for paying local expenses,
the amount on deposit in such account is usually small and, therefore,
fluctuation in the currency exchange rates should not have a significant
effect on the Company.
During the six months ended June 30, 1998, the Company sold an aggregate of
169,001 shares in connection with its private placement memorandum (Note
9(a)), yielding net proceeds after commissions and non-accountable expenses of
$220,545.
During the six months ended June 30, 1998, the Company issued an aggregate of
450,000 shares pursuant to the plan (Note 9(b)). Such shares have been valued
at $621,581, representing 76% of the average market value during the month of
issuance as a result of the illiquidity of the Company's stock.
During the six months ended June 30, 1998, the Company issued 140,000 shares
of restricted common stock. Such shares have been valued at $126,700
representing 50% of the average market value when issued as a result of the
illiquidity of the Company's stock and the restricted nature of the shares
issued.
During June 1998, the Company repaid a short-term loan of $35,000 by issuance
of 35,000 common shares.
<PAGE> 22
ITEM 2 - MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (Cont'd)
During June 1998, the Company borrowed $100,000 from a shareholder which is
payable in 90 days at an interest rate of 14% per annum. In connection with
such borrowing, the Company issued 20,000 common shares as additional
consideration. Such shares will be valued at 50% of the average market value
when issued as a result of the illiquidity of the Company's stock and the
restricted nature of the shares issued. The issuance of such shares results
in an effective interest rate of 82%.
During June 1998, the Company borrowed $100,000 from a shareholder which is
payable in 180 days at an interest rate of 14% per annum. In connection with
such borrowing, the Company issued 15,000 common shares as additional
consideration. Such shares will be valued at 50% of the average market value
when issued as a result of the illiquidity of the Company's stock and the
restricted nature of the shares issued. The issuance of such shares results
in an effective interest rate of 40%.
During June 1998, the Company obtained an unsecured $500,000 line of credit
from a shareholder with an interest rate at fourteen percent (14%) per annum.
The Company may borrow from the credit line up to $35,714 in any one week.
Principal and interest are payable on December 8, 1998. If the Company is not
able to pay such principal and interest when due, the principal balance of the
line of credit and any outstanding accrued interest may be converted into
common stock at the rate of $1.00 per share.
During July 1998, the Chairman of the Company advanced $17,000 to the
Company. Such advances are non interest bearing and due on demand.
During July 1998, the Company entered into a letter of intent to purchase
43.5% of the Czech truck manufacturer, Tatra a.s., for approximately $13.6
million. In addition, the Company will purchase Tatra's senior secured loan
from the bank holding such note, with an approximate balance of $89.5 million,
for approximately $30 million. Both agreements are anticipated to close
September 30.
There is no assurance that the transaction will be completed since the Company
must obtain sufficient capital to complete the acquisition, thus, no pro forma
financial information has been presented. The following information is from
Tatra's audited financial statements. Tatra had sales of approximately $290
million for the year ended December 31, 1997. At December 31, 1997, Tatra had
total assets of approximately $230 million.
During August 1998, the Company borrowed $350,000 from a shareholder which is
payable in 180 days at an interest rate of 14% per annum. In connection with
such borrowing, the Company issued 37,500 common shares as additional
consideration. Such shares will be valued at 50% of the average market value
when issued as a result of the illiquidity of the Company's stock and the
restricted nature of the shares issued. The issuance of such shares results
in an effective interest rate of 32%.
<PAGE> 23
ITEM 2 - MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (Cont'd)
During August 1998, the Company borrowed $125,000 from each of two
shareholders which is payable in 180 days at an interest rate of 14% per
annum. In connection with such borrowing, the Company issued each shareholder
31, 250 common shares as additional consideration. Such shares will be valued
at 50% of the average market value when issued as a result of the illiquidity
of the Company's stock and the restricted nature of the shares issued. The
issuance of such shares results in an effective interest rate of 57%.
The Company has retired $96,500 of short term inventory loans since May 31,
1998.
<PAGE> 24
SIGNATURES
In accordance with section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, hereunto
duly authorized.
SDC INTERNATIONAL, INC.
BY:/s/Ronald A. Adams
Ronald A. Adams, President
August 31, 1998
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacitates and on
the dates indicated.
/s/Ronald A. Adams August 31, 1998
Ronald A. Adams, Director and President
(Principal Executive Officer and Principal
Financial Officer)
/s/Henry S. Green August 31, 1998
Henry S. Green, Jr., Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains financial information extracted from Balance Sheet,
Statement of Operations, Statement of Cash Flows and Notes thereto incorporated
in Part I of this Form 10-QSB and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 104,997
<SECURITIES> 0
<RECEIVABLES> 150,634
<ALLOWANCES> 0
<INVENTORY> 437,798
<CURRENT-ASSETS> 791,917
<PP&E> 3,398,363
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,581,298
<CURRENT-LIABILITIES> 278,162
<BONDS> 0
0
0
<COMMON> 2,990
<OTHER-SE> 3,759,342
<TOTAL-LIABILITY-AND-EQUITY> 4,581,298
<SALES> 59,666
<TOTAL-REVENUES> 59,666
<CGS> 31,324
<TOTAL-COSTS> 31,324
<OTHER-EXPENSES> 529,715
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,227
<INCOME-PRETAX> (515,496)
<INCOME-TAX> 162
<INCOME-CONTINUING> (515,496)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (515,658)
<EPS-PRIMARY> (.18)
<EPS-DILUTED> 0.00
</TABLE>
