United States
Securities and Exchange Commission
Washington, D. C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
For the quarterly period ended September 30, 2000
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.)
777 S. Flagler Suite 800W
W. Palm Beach, Florida 33401
---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
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)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 5(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 [ ]
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: 9,922,383 shares outstanding as
of September 30, 2000.
<PAGE>
SDC INTERNATIONAL, INC. and SUBSIDIARY INDEX
PART 1 - FINANCIAL INFORMATION:
ITEM 1 - CONDOLIDATED BALANCE SHEETS
Condensed Consolidated Balance Sheet (Unaudited)
September 30, 2000 F-1
Condensed Consolidated Statements of Operations
(Unaudited) for the three months ended September 30, 2000
and September 30, 1999 F-2
Condensed Consolidated Statements of Operations
(Unaudited) for the nine months ended September 30, 2000
and September 30, 1999 F-3
Condensed Consolidated Statements of Stockholders'
(Deficiency) (Unaudited) for the nine months ended
September 30, 2000 F-4
Consolidated Statements of Cash Flows (Unaudited)
for the nine months ended September 30, 2000 and
September 30, 1999 F-5
Notes to Consolidated Financial Statements F-6 - F-7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8
PART II - OTHER INFORMATION 12
SIGNATURES 13
<PAGE>
SDC INTERNATIONAL, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheet
September 30,
2000
-------------
ASSETS
Current assets:
Cash $ 96,222
Inventory 22,906
Note receivable - current portion 50,000
-------------
Total current assets 169,128
Machinery and equipment, net 3,953
Cash - restricted 81,243
Note receivable - non-current portion 100,000
-------------
$ 354,324
=============
LIABILITIES
Current liabilities:
Due to related parties, including accrued
interest of $68,813 $ 637,485
-------------
Commitments
STOCKHOLDERS' DEFICIENCY
Common stock $.001 par value, 10,000,000
shares authorized, 9,922,383 shares
issued and outstanding 9,922
Additional paid-in capital 17,457,790
Accumulated deficit (17,750,873)
-------------
(283,161)
-------------
$ 354,324
=============
See notes to condensed consolidated financial statements
F-1
<PAGE>
SDC INTERNATIONAL, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
September 30, September 30,
2000 1999
------------- -------------
<S> <C> <C>
Sales $ 52,486
Cost of sales 57,605
--------------
Gross loss (5,119)
--------------
Expenses:
Selling, general and administrative,
including $105,703 and $412,500
paid by issuance of stock $ 381,201 641,235
Depreciation and amortization 400 12,358
------------- -------------
Total expenses 381,601 653,593
------------- -------------
Loss from operations before interest
expense (381,601) (658,712)
Interest expense including amortization
of debt discount (61,425) (152,419)
------------- -------------
Loss from continuing operations (443,026) (811,131)
Loss from operations of discontinued
subsidiary (44,042)
------------- -------------
Net loss $ (443,026) $ (855,173)
============= =============
Net loss per share - Basic and diluted:
Loss from continuing operations $ (0.05) $ (0.11)
Loss from operations of discontinued
subsidiary 0.00 (0.01)
------- -------
Net loss $ (0.05) $ (0.12)
======= =======
Weighted average shares outstanding 9,537,000 7,201,000
========= =========
</TABLE>
See notes to condensed consolidated financial statements
F-2
<PAGE>
SDC INTERNATIONAL, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
2000 1999
------------- -------------
<S> <C> <C>
Sales $ 70,240 $ 169,472
Cost of sales 67,078 182,004
------------- -------------
Gross profit (loss) 3,162 (12,532)
------------- -------------
Expenses:
Selling, general and administrative,
including $105,703 and $1,773,171
paid by issuance of stock 980,501 2,570,032
Depreciation and amortization 1,200 37,074
------------- -------------
Total expenses 981,701 2,607,106
------------- -------------
Loss from operations before interest
expense (978,539) (2,619,638)
Interest expense including amortization
of debt discount (515,098) (578,714)
------------- -------------
Loss from continuing operations (1,493,637) (3,198,352)
Gain on sale of discontinued subsidiary 98,278 0
Loss from operations of discontinued
subsidiary (24,416) (120,729)
------------- -------------
Net loss $ (1,419,775) $ (3,319,081)
============= =============
Net loss per share - Basic and diluted:
Loss from continuing operations $ (0.17) $ (0.50)
Income (loss) from discontinued operations 0.01 (0.02)
------- -------
Net loss $ (0.16) $ (0.52)
======= =======
Weighted average shares outstanding 9,007,000 6,317,000
========= =========
</TABLE>
See notes to condensed consolidated financial statements
F-3
<PAGE>
SDC INTERNATIONAL, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Stockholders' Deficiency
Nine Months Ended September 30, 2000
<TABLE>
<CAPTION>
Accumulated
Foreign
Common Stock Additional Common Currency
Par Paid-in Shares Accumulated Translation
Shares Value Capital Payable Deficit Adjustment Totals
--------- -------- ------------ ---------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1999 7,745,004 $ 7,745 $ 14,504,770 $ 918,224 $(16,331,098) $ 24,224 $ (876,135)
Issuance of common stock in
connection with loan
agreements 235,000 235 330,047 330,282
Issuance of common stock in
repayment of short-term loan 938,054 938 850,551 851,489
Issuance of common stock in
connection with services 95,000 95 105,607 105,702
Issuance of common stock 457,000 457 917,767 (918,224) 0
Sale of common stock 1,296,645 1,296 748,204 749,500
Contribution of capital (844,320) (844) 844 0
Comprehensive loss:
Foreign currency translation
Adjustment (24,224) (24,224)
Net loss for the period (1,419,775) (1,419,775)
-----------
Total comprehensive loss (1,443,999)
--------- -------- ------------ ---------- ------------ ----------- -----------
Balance - September 30, 2000 9,922,383 $ 9,922 $ 17,457,790 $ 0 $(17,750,873) $ 0 $ (283,161)
========= ======== ============ ========== ============ =========== ===========
</TABLE>
See notes to condensed consolidated financial statements
F-4
<PAGE>
SDC INTERNATIONAL, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
2000 1999
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,419,775) $ (3,319,081)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 1,200 37,074
Amortization of debt discount 102,683 192,641
Expenses paid by issuance of stock 435,984 2,150,679
Beneficial conversion feature of
convertible notes 0 68,380
Gain on sale of subsidiary (98,278)
Loans in excess of loss from operations
of discontinued subsidiary 24,416 80,729
Changes in:
Inventory 51,500 161,780
Security deposits 0 20,000
Prepaid expenses 15,000 0
Accounts payable and accrued expenses (203,674) (20,358)
Accrued interest 83,476 93,101
------------- -------------
Net cash used in operating activities (1,007,468) (535,055)
------------- -------------
Cash flows from financing activities:
Proceeds from sale of common stock 749,500 50,000
Proceeds of loans from related parties 203,000 600,000
Repayment of loans from related parties (19,703) (37,421)
------------- -------------
Net cash provided by financing activities 932,797 612,579
------------- -------------
Net (decrease) increase in cash (74,671) 77,524
Cash, beginning of period 170,893 41,651
------------- -------------
Cash, end of period $ 96,222 $ 119,175
============= =============
Supplemental cash disclosures:
Cash paid for interest $ 19,581
Supplemental disclosure of noncash investing
and financing activities:
Issuance of common stock issuable $ 918,224
Issuance of common stock in payment of loan
payable to stockholder $ 851,489 $ 1,178,807
</TABLE>
See notes to condensed consolidated financial statements
F-5
<PAGE>
SDC INTERNATIONAL, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
September 30, 2000
NOTE A - THE COMPANY AND BASIS OF PREPARATION
The accompanying financial statements include the accounts of SDC
International, Inc., (the "Company") and its wholly-owned subsidiaries
SDC Prague, s.r.o. and Skobol, s.a. ("Skobol") after elimination of all
significant intercompany transactions and balances. The Company was
incorporated in the State of Delaware in 1994, and acquired an exclusive
agency agreement from Diesel International, a.s. (formerly known as Skoda
Diesel, a.s.) ("Diesel") which permitted the Company to sell a broad
range of Diesel's products, including diesel engines and power generating
sets. Diesel, which was formed in what is now the Czech Republic, was one
of the founding stockholders of the Company.
During the year ended August 31, 1997, as a result of financial
difficulties encountered by Diesel, the Company discontinued selling
Diesel's products. During November 1997, the Company acquired the
outstanding common stock of Skobol, a Bolivian Corporation, which is a
distributor within the country of Bolivia of products manufactured in the
Czech Republic. In December 1999, the Company's Board of Directors
adopted a plan to dispose of the subsidiary and, accordingly, the
subsidiary has been accounted for as a discontinued operation in the
accompanying financial statements. During June 2000, the subsidiary was
sold and in connection therewith, the Company received a note to be
repaid in installments of $50,000 on each of June 30, 2001, 2002 and
2003. During the period ended September 30, 2000, the Company has
continued its attempts to acquire entities in the Czech Republic and has
been incurring expenses in connection therewith.
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with instructions to
Form 10-QSB. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management the interim
condensed consolidated financial statements include all adjustments
necessary in order to make the condensed consolidated financial
statements not misleading. The results of operations for the nine months
ended are not necessarily indicative of the results to be expected for
the full year. For further information, refer to the Company's audited
financial statements and footnotes thereto at December 31, 1999, included
in the Company's Form 10-KSB, filed with the Securities and Exchange
Commission.
NOTE B - DUE TO RELATED PARTIES
[1] Line-of-credit:
During June 1998, the Company obtained an unsecured $500,000 line of
credit from a stockholder with an interest rate of 14% per annum.
Principal and interest were payable on December 8, 1998. The
agreement provided that the principal balance of the line-of-credit
and any outstanding accrued interest may be converted into common
stock at $1.00 per share. By agreement with the stockholder, the due
date was extended to December 31, 1999. During the three months
ended March 31, 2000, the line-of-credit totaling $500,000 and
accrued interest amounting to $114,110 were repaid by the issuance of
614,110 shares of common stock. Interest expense on the line-of-
credit amounted to $15,173 during the three months ended March 31,
2000. In addition, 216,000 shares of common stock issuable in
connection with an extension agreement (previously valued at
$465,750) were issued during the three months ended March 31, 2000.
F-6
<PAGE>
SDC INTERNATIONAL, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
September 30, 2000
NOTE B - DUE TO RELATED PARTIES (CONTINUED)
[2] Loans from stockholders:
During the nine months ended September 30, 2000, the Company borrowed
an additional $203,000 from stockholders under notes which are
repayable in 180 days, at a stated interest rate of 14% per annum.
Interest accrued on these and previous notes at September 30, 2000
amounted to $68,813. Interest expense on the notes during the nine
months ended September 30, 2000 and 1999, amounted to $83,646 and $,
respectively. During the nine months ended September 30, 2000, notes
payable totaling $200,000 and accrued interest of $37,378 were repaid
by the issuance of 323,944 shares of common stock. In connection with
borrowings during the nine months ended September 30, 2000 and
extension agreements of loans previously outstanding, during the nine
months ended September 30, 2000, 235,000 shares of common stock
valued at $330,282 were issued. Also during the nine months ended
September 30, 2000, 215,000 shares of common stock issuable in
connection with an extension agreement (previously valued at
$426,438) were issued. During the three months ended September 30,
2000, holders of notes with outstanding principal balances of
$550,000 extended the repayment of their loans to January 20, 2001.
During the nine months ended September 30, 2000, amortization of debt
discount amounted to $102,683.
NOTE C - STOCKHOLDERS' EQUITY
[1] As of September 30, 2000, the Company has outstanding warrants to
purchase a total of 180,000 shares of common stock at exercise
prices of $2.00 and $2.50 per share, of which 130,000 expire in 2000
and 50,000 expire in 2003. These warrants had been issued to
consultants during 1998.
[2] From April 2000 through September 2000, the Company sold 1,296,645
shares of its common stock at various prices for total proceeds of
$749,500.
NOTE D - COMMITMENTS AND OTHER COMMENTS
[1] Lease agreement:
Effective January 1, 1997, the Company rents its executive office on
a month to month basis from its Chief Executive Officer ("CEO".)
Rent expense under the arrangement amounted to $18,000 and $3,000
during the nine months ended September 30, 2000 and 1999,
respectively.
Included in general and administrative expenses is rent expense for
the above and other rentals which totaled $35,549 and $16,793 for the
nine months ended September 30, 2000 and 1999, respectively.
[2] 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
results in a finder's fee to Prime of two percent of the gross sales
price or ten percent of the adjusted gross profit resulting from the
sales. Such payments are due 45 days after each quarter-annual
calendar period. As of September 30, 2000, no amounts were due under
this agreement.
[3] Executive compensation:
For the nine months ended September 30, 2000 and 1999, respectively,
the Company incurred management fees of $124,000 and $117,000,
payable to its Chief Executive Officer. For the nine months ended
September 30, 2000 and 1999, respectively, the Company incurred
management fees of $144,000 and $117,000 to its President.
F-7
<PAGE>
Item 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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. Because of a lack of
working capital condition within the manufacturers of such equipment,
the products could not be delivered in an acceptable time period to
the customers of the Company. Therefore, in 1998, the Company
redirected its efforts toward acquiring certain manufacturers of the
products, provided that the quality and global market potential was
deemed significant by the Company. Presently, the Company works to
establish relationships of joint venture or as an acquirer of such
manufacturing companies.
The Company has acted as an exclusive distributor of Skoda Diesel
engines in North, South and Central America, under an exclusive
license from Skoda Diesel, now known as Diesel International, a.s.,
("Diesel"). Diesel 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 offers a line of airfreight cargo containers. In early
1998, the Company executed letters of intent and agreements to
purchase Tatra, a.s. However, due to changes within the organization
of the seller of Tatra, which were beyond the control of the Company,
the transaction has not been consummated, and the Company continues
its efforts toward the Tatra acquisition. Tatra 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. Tatra has ISO 9001 certification
and Tatra trucks meet all Euro II regulations.
Through its direct involvement in Central and Eastern Europe, the
Company has learned that most manufacturing companies within this
geographic/political area with whom the Company wishes to transact its
business have a shortage of marketing skills and financial capability.
Therefore, the Company has determined that it should take an internal
position within its targeted manufacturing companies to assure better
financial capability and marketing skills. This planned activity may
be as a joint venture with or an acquisition of such manufacturing
companies.
The Company has recently reactivated its efforts toward acquiring a
majority interest in Czech aircraft manufacturer, Moravan, a.s. During
1999, the Company had executed an agreement providing for the
Company's acquisition of a majority of shares of Czech aircraft
manufacturer, Moravan, a.s. The agreement, providing for the issuance
-8-
<PAGE>
of additional shares of Moravan equal to fifty-five percent of the
subsequent outstanding shares, had been approved by the Company's
board and by the shareholders of Moravan, a.s. Under Czech law, such
an increase of shares must be registered by the Commercial Court to be
effective, a process which can take an extended period of time and
towards which any third parties may object. There were objections and
there has been no registration in the Commercial Court. The Company
had begun negotiations with IPB, the largest creditor of Moravan to
purchase the bank debt of Moravan on discounted terms. Until such
time that the objections are settled and the Commercial Court
registers the new shares, there is no closing of the acquisition.
During the quarter ending March 31, 2000, the Company had executed a
Confidentiality Agreement with Investicni A Postovni Banka, which is
the creditor bank to Moravan and which was the party in the Czech
Commercial Court which objected to the Moravan share increase
attempted by the Company during 1999. The Agreement provided for the
negotiation of the Company's possible acquisition of the Moravan debt
held by the bank. In June, 2000, the Czech government took control of
Investicni A Postovni Banka (IPB) and shortly afterwards transferred
ownership of its assets to Ceskoslovenska Obchodni Banka (CSOB), which
is the primary Czech depository bank for the Company (SDC). During
the quarter ending September 30, 2000, management began new
discussions with CSOB as the successor to IPB towards the Company's
plan to purchase the debt and shares of Moravan from CSOB. The
Company believes there is a good likelihood that a favorable
conclusion can be attained for the acquisition of the shares and bank
debt of Moravan now held by CSOB. The Company has no substantive
funds or capital at risk until and unless such an acquisition occurs.
During the last quarter of 1999, the Czech government-owned
Konsolidacni Bank took over ownership of and the process of disposing
of Tatra. During the quarter ending March 31, 2000, Konsolidacni
Banka engaged the Czech Revitalization Agency, a subsidiary if the
Konsolidacni Banka, to perform the process of selling Tatra. A
Confidential Memorandum was sent to the Company regarding the proposed
sale, a Confidentiality Agreement was signed, and discussions have
subsequently begun with various parties in the Czech Republic which
are connected with Tatra and its sale process. In accordance to the
requirements of the Memorandum, on June 12, 2000, the Company
submitted its letter requesting negotiations with the Revitalization
Agency to begin for the Company's proposed acquisition of Tatra.
During the quarter ending June 30, 2000, and in preparation for the
planned acquisition of Tatra, the Company hired Mr. Henry Keifer to
become its General Manager and Vice Chairman of the Board of Tatra,
a.s., subject to the closing of such an acquisition. His career
includes positions as Managing Director of PACCAR Australia, President
and Managing Director of PACCAR U.K., and General Manager of Kenworth
Truck. His foreign experience includes six years in England, three
years in Russia, and two years in Australia.
In compliance with the request of the Revitalizaton Agency of the
Czech Republic, on August 28, 2000, the Company submitted its offer
to acquire Tatra, a.s. There have been, and continue to be, numerous
meetings with the Revitalization Agency regarding the Company's offer.
Management believes that the process is being conducted transparently
and professionally, and that the Company has a reasonable chance of
acquiring ownership of Tatra. However, as the Company has executed a
Confidentiality Agreement with the Revitalization Agency, until the
-9-
<PAGE>
negotiations are concluded, either by termination or by execution of a
purchase agreement, the Company cannot and will not publicly disclose
any information regarding such matters.
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 of its time and effort to
negotiating the acquisition of Tatra, a. s., and arranging strategic
alliances related for Tatra rather than devoting its time to beginning
its marketing and sales development. Therefore, the Company's
revenues to date are primarily the result of orders received by the
Company rather than the result of marketing efforts by the Company.
The Company records revenue when products are shipped. During the
quarter ended March 31, 2000, the Company recorded revenue of $70,240
and none during the quarters ended June 30, 2000 and September 30,
2000.
Operating expenses for the nine months ended September 30, 2000, were
$1,625,405 less than in the nine months ended September 30, 1999. The
Company's net loss of $1,419,775 for the nine months ended September
30, 2000, compared to a net loss of $3,319,081 for the nine months
ended September 30, 1999, includes certain non-cash charges as
follows:
<TABLE>
<CAPTION>
Year 2000 Year 1999
----------- -----------
<S> <C> <C>
Depreciation and Amortization $ 103,883 $ 298,095
Expenses paid by Issuance of
common stock 435,984 2,150,679
----------- -----------
TOTAL NON-CASH CHARGES $ 539,867 $ 2,448,774
</TABLE>
Accordingly, the Company's nine month cash loss before the above
charges amounted to approximately $879,907 in 2000 and $870,307 in
1999.
LIQUIDITY AND CAPITAL RESOURCES
At the end of September 2000, the Company had a working capital
deficit of $468,357, which was less than its working capital deficit
at the end of June 2000 which was $ 801,818. However, when
considering shareholder loans to be long term debt, the working
capital is a positive $169,128 rather than a deficit at September 30,
2000. Net cash used for the Company's operating activities for the
nine months ended September 30, 2000 amounted to $1,007,468, whereas
the net cash used for operating activities for the nine months ended
June 30, 1999 amounted to $535,055. Net cash provided by financing
activities in the nine months ended September 30, 2000 was $932,797
compared to $612,579 for the nine months ended September 30, 1999.
Total cash at the end of the nine months ended September 30, 2000 was
$96,222 compared to $25,136 at the end of June, 2000 and $119,175 at
the end of the nine months ended September 30, 1999.
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
-10-
<PAGE>
is no assurance that such financing or capital will be available at
the time when such capital may be needed. Upon founding the Company
in 1994, 10,000,000 shares of common stock of the Company were
authorized. The Company plans to increase its authorized shares of
common stock up to 25,000,000 authorized and to authorize up to
25,000,000 shares of preferred stock. These authorizations will be
necessary in order to effect capitalization to be applied for
acquisition of targeted companies and companies which may be targeted
for acquisition in the future, according to the business plans of the
Company.
Negative cash flows from the Company's pursuit of a joint venture or
acquisition are anticipated to continue until the Company has reached
agreement, if any can be reached, providing for a joint venture or
acquisition and then only if suitable financing of any such joint
venture or acquisition is received by the Company. The Company
acknowledges that there is no assurance that it will be able to
obtain suitable capital or financing at the time of any such joint
venture or acquisition. In the event the Company does not receive
additional capital, there could be a severe adverse impact on the
Company's future operations.
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. 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.
-11-
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings:
None
ITEM 2 - Changes in Securities:
None
ITEM 3 - Defaults Upon Senior Securities:
None
ITEM 4 - Submission of Matters to a Vote of Security Holders:
None
ITEM 5 - Other Information:
None
ITEM 6 - Exhibits and Reports on Form 8-K:
None
-12-
<PAGE>
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, Chairman
November 13, 2000
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.
SDC INTERNATIONAL, INC.
BY:/s/Ronald A. Adams
----------------------------
Ronald A. Adams, Chairman
November 13, 2000
-13-
