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 June 30, 1999
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.)
251 Royal Palm Way Suite 301
Palm Beach, Florida 33480
------------------------------- --------------
(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)
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
<PAGE>
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 COIRPORATE ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE PRESEDING 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: 7,029,589 shares outstanding as
of June 30, 1999
<PAGE>
SDC INTERNATIONAL, INC. and SUBSIDIARY INDEX
PART 1 FINANCIAL INFORMATION:
ITEM 1 CONDOLIDATED BALANCE SHEETS
Consolidated Balance Sheets (Unaudited) June 30, 1999
and December 31, 1998 F-1
Consolidated Statements of Operations (Unaudited) for
the six months ended June 30, 1999 and June 30, 1998 F-2
Consolidated Statements of Operations (Unaudited) for
the three months ended June 30, 1999 and June 30, 1998 F-3
Consolidated Statements of Stockholders' (Deficiency)
Equity (Unaudited) for the six months ended June 30, 1999 F-4
Consolidated Statements of Cash Flows (Unaudited) for the
six months ended June 30, 1999 and June 30, 1998 F-6
Notes to consolidated Financial Statements F-7
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9-11
PART II OTHER INFORMATION
<PAGE>
SDC INTERNATIONAL, INC. AND SUBSIDIARY
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 90,422 $ 41,651
Inventory $ 199,049 303,223
Prepaid expenses 15,000 15,000
----------- -----------
Total current assets 304,471 359,874
Machinery and equipment, net 9,645 15,251
Cash - restricted 80,532 80,532
Agency rights at cost, net of accumulated
amortization of $82,812 and $63,702 70,091 89,201
Net assets of discontinued subsidiary 24,924 94,518
Other assets 28,894 48,894
----------- -----------
$ 518,557 $ 688,270
=========== ===========
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses $ 77,542 $ 87,900
Due to related parties, including accrued
interest of $97,391 and $88,928,net of
unamortized discount of $0 and $154,396 1,190,699 1,470,262
----------- -----------
Total current liabilities 1,268,241 1,558,162
----------- -----------
Commitments
STOCKHOLDERS' DEFICIENCY
Common stock $.001 par value, 10,000,000
shares authorized, 7,029,589 and 4,671,917
shares issued and outstanding, respectively 7,030 4,672
Additional paid-in capital 12,926,087 10,570,673
Common shares payable 290,126 70,875
Accumulated deficit (14,013,426) (11,549,518)
Accumulated foreign currency
translation adjustment 40,499 33,406
----------- -----------
(749,684) (869,892)
----------- -----------
$ 518,557 $ 688,270
=========== ===========
</TABLE>
See notes to financial statements
F-1
<PAGE>
SDC INTERNATIONAL, INC. AND SUBSIDIARY
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Six months Six months
Ended Ended
June 30, June 30,
1999 1998
----------- -----------
<S> <C> <C>
Sales $ 116,986
Cost of sales 124,399
-----------
Gross profit (7,413)
-----------
Expenses:
Selling, general and administrative,
including $1,360,671 and $698,864
paid by issuance of stock $ 1,928,797 $ 1,268,318
Depreciation and amortization 24,716 260,442
----------- -----------
Total expenses 1,953,513 1,528,760
----------- -----------
Loss from operations before
interest expense (1,960,926) (1,528,760)
Interest expense including
amortization of debt discount,net (426,295) (20,753)
----------- -----------
Loss from continuing operations (2,387,221) (1,549,513)
(Loss) income from operations of
discontinued subsidiary (76,687) 44,805
----------- -----------
Net loss $(2,463,908) $(1,504,708)
=========== ===========
Net loss per share - Basic and diluted:
Loss from continuing operations $(0.40) $(0.44)
Loss from operations of
discontinued subsidiary (0.01) 0.01
----------- -----------
Net loss $(0.41) $(0.43)
=========== ===========
Weighted average shares outstanding 5,919,590 3,495,952
=========== ===========
</TABLE>
See notes to financial statements
F-2
<PAGE>
SDC INTERNATIONAL, INC. AND SUBSIDIARY
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three months Three months
Ended Ended
June 30, June 30,
1999 1998
----------- -----------
<S> <C> <C>
Sales $ 116,986
Cost of sales 124,399
-----------
Gross profit (7,413)
-----------
Expenses:
Selling, general and administrative,
including $863,531 and $231,150
paid by issuance of stock $ 1,136,877 $ 441,328
Depreciation and amortization 12,358 135,010
----------- -----------
Total expenses 1,149,235 576,338
----------- -----------
Loss from operations before
interest expense (1,156,648) (576,338)
Interest expense including
amortization of debt discount,net (288,761) (15,163)
----------- -----------
Loss from continuing operations (1,445,409) (591,501)
(Loss) income from operations
of discontinued subsidiary (36,986) (50,793)
----------- -----------
Net loss $(1,482,395) $ (642,294)
=========== ===========
Net loss per share - Basic and diluted:
Loss from continuing operations $(0.21) $(0.16)
Loss from operations of
discontinued subsidiary (0.01) (0.01)
----------- -----------
Net loss $(0.22) $(0.17)
=========== ===========
Weighted average shares outstanding 6,753,344 3,632,980
=========== ===========
</TABLE>
See notes to financial statements
F-3
<PAGE>
SDC INTERNATIONAL, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' (Deficiency) Equity
<TABLE>
<CAPTION>
Accumulated
Common Stock Foreign
----------------- 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, 1998 $4,671,917 $ 4,672 $ 10,570,673 $ 70,875 $ (11,549,518) $ 33,406 $ (869,892)
Issuance of common stock in
connection with private
placement memorandum 25,000 25 49,975 50,000
Issuance of common stock in
connection with loan
agreements 49,000 49 106,576 106,625
Issuance of common stock to
consultants and employees
for services 852,660 853 1,386,693 1,387,546
Issuance of common stock in
repayment of short-term
loan 1,431,012 1,431 812,170 813,601
Shares to be issued for loan
extension (108,000) 219,251 219,251
Comprehensive loss:
Foreign currency translation
adjustment 7,093 7,093
Net loss for the period (2,463,908) (2,463,908)
----------
Total comprehensive loss (2,456,815)
---------- ------- ------------ -------- ------------- ---------- ----------
Balance June 30, 1999 7,029,589 $ 7,030 $ 12,926,087 $290,126 $ (14,013,426) $ 40,499 $ (749,684)
========== ======= ============ ======== ============= ========== ==========
</TABLE>
See notes to financial statements
F-4
<PAGE>
SDC INTERNATIONAL, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Six months Six months
Ended Ended
June 30, June 30,
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(2,463,909) $(1,504,708)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 24,716 260,500
Amortization of debt discount 154,396 8,750
Amortization of excess of value of net
assets acquired over cost of Acquisition (12,630) (28,000)
Expenses paid by issuance of stock 1,713,422 698,864
Loss from operations of discontinued
subsidiary 89,317 (44,806)
Changes in:
Inventory 104,174 (74,026)
Security deposits 20,000
Prepaid expenses (759)
Other current assets 24,039
Accounts payable and accrued expenses (10,358) 27,241
Accrued interest 72,064
---------- ----------
Net cash used in operating activities (308,807) (632,905)
---------- ----------
Cash flows from investing activities:
Purchase of machinery and equipment (9,657)
----------
Net cash used by investing activities (9,657)
----------
Cash flows from financing activities:
Advances (repayment of advances) from
officer, net (7,422) 49,800
Loans from related parties, net 315,000 271,428
Proceeds from sale of stock 50,000 253,500
---------- ----------
Net cash provided by financing
activities 357,578 574,728
---------- ----------
Net (decrease) increase in cash 48,771 (67,834)
Cash, beginning of period 41,651 104,997
---------- ----------
Cash, end of period $ 90,422 $ 37,163
========== ==========
Supplemental cash flow disclosure:
Cash paid for:
Interest $ 19,581 $ 1,321
Income taxes $ 3,681
Supplemental disclosure of noncash investing
and financing activities:
Issuance of common stock for in connection
with stockholder loans $ 29,925
Issuance of common stock in payment of loan
payable to stockholder $ 813,601 $ 35,000
</TABLE>
See notes to financial statements
F-5
<PAGE>
SDC INTERNATIONAL, INC. AND SUBSIDIARY
Notes to Financial Statements
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 the
period ended June 30, 1999, the Company has been attempting to
acquire entities in the Czech Republic and has been incurring
expenses in connection therewith.
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. 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 consolidated financial statements include all
adjustments necessary in order to make the consolidated
financial statements not misleading. The results of
operations for the six months ended are not necessarily
indicative of the results to be expected for the full year.
For further information, refer to the Company's audited
financial statements and footnotes thereto at December 31,
1998, 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. As of June 30, 1999, outstanding borrowings under
the line of credit amounted to $500,000 and accrued
interest amounted to $46,441. As consideration for the
extension of the line of credit, the Company agreed to
issue 54,000 shares of common stock quarterly, until paid.
The value of the shares to be issued at June 30, 1999
(162,000) amounted to $290,126 and has been recorded as
common shares payable on the accompanying balance sheet.
[2] Loans from stockholders:
During October 1997, from June 1998 through September
1998, and during the six months ended June 30,1 999, the
Company borrowed $100,000, $1,186,500 and $350,000,
respectively, from stockholders under notes which are
repayable in periods ranging from 90 to 180 days, at a
stated interest rate of 14% per annum. Interest accrued
on these notes at June 30, 1999 amounted to $70,023.
During the period subsequent to June 30, 1999, holders of
notes with outstanding principal balances of $750,000
converted their notes, together with accrued interest,
into 823,994 shares of common stock.
F-6
<PAGE>
SDC INTERNATIONAL, INC. AND SUBSIDIARY
Notes to Financial Statements
Note B - Due to Related Parties (Continued)
In connection with these borrowings, during the year ended
December 31, 1998 and the four months ended December 31,
1997, the Company issued to the stockholders 228,033 and
15,000 shares of common stock valued at $474,140 and
$26,250, respectively. In addition, several notes had a
beneficial conversion feature whereby the principal and
accrued interest could be converted to common stock at
less than the prevailing market price. Such amounts have
been accounted for as debt discounts. The Company's
effective rate for these borrowings, including debt
discount, ranged from 14% to 134%. During the six months
ended June 30, 1999, amortization of discount amounted to
$134,756.
During the six months ended June 30, 1999, the Company
repaid notes of $250,000, and accrued interest of $63,601
by issuance of 1,431,012 common shares.
Note C - Stockholders' Equity
[1] As of December 31, 1998, 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] During the six months ended June 30, 1999, the Company
issued 852,660 shares of common stock, both under the
Company's stock option plan in the form of options which
vested immediately with no exercise price, and
unregistered shares restricted under Section 144. Such
shares have been valued at the closing bid price at date
of grant.
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 $3,000 and $7,000 during the six months ended
June 30, 1999 and June 30, 1998, respectively.
Included in general and administrative expenses is rent
expense for the above and other rentals which totaled
$16,793 and $7,807 for the six months ended June 30, 1999
and June 30, 1998, 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 June 30, 1999, no
amounts were due under this agreement.
[3] Executive compensation:
For the six months ended June 30, 1999 and June 30, 1998,
respectively, the Company incurred management fees of
$39,000 and $64,000, payable to its Chief Executive
Officer.
For the six months ended June 30, 1999 and June 30, 1998,
respectively, the Company incurred management fees of
39,000 and $64,000 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. 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,
beginning in 1997, offers a line of airfreight cargo
containers. In early 1998, the Company executed letters of
intent and agreements to purchase Tatra, a.s. However, the
Company has not consummated the transaction, and continues its
efforts toward the 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.
During the quarter ending June 30, 1999, the Company, with its
investment bankers, Nutmeg Securities, met with Komercni Banka
relative to the Company's offer to purchase the shares and
debt of Tatra offered by Komercni Banka. Meetings were also
8
<PAGE>
held with other smaller creditor banks of Tatra. However, the
mandate issued to Komercni Banka by Tatra owner Skoda Plzen
was canceled after Komercni Banka failed to accept and
finalize negotiations with a strategic acquirer for Tatra.
During the quarter ending June 30, 1999, the Company elected
Richard A. Eisner & Company, New York City, as its auditor.
Due to the fact that members of the Company's former auditing
firm, Scarano & Tomaro, had joined with Eisner company, and
due to the fact that the Company needed a larger and more
internationally qualified auditing firm, the change was made
despite the fact that the audits required for SEC filing would
most likely be delayed.
During the quarter ending June 30, 1999, management began
evaluating its Bolivian subsidiary which was not progressing
as well as planned. The basic reason the Company acquired the
Bolivian operation was to establish an entity for the sale of
used Tatra trucks, a procedure which would be necessary in
order to arrange a leasing program for new Tatra trucks,
assuming the acquisition of Tatra by the Company would be
completed. At the time of the acquisition, the economy of
neighboring country Brazil, was very positive. However,
shortly after the acquisition, the economy of Brazil
deteriorated and, therefore, caused economic hardship for
Bolivia, as Bolivia had always been very dependent upon the
economic benefits of a positive Brazilian economy. Because
the Tatra acquisition has not been concluded, because of the
Brazil economic deterioration, and because the performance of
the subsidiary without the Tatra program was still in a loss
situation, management determined that plans to either dispose
of the subsidiary or reorganize the operations would be
necessary by year end, assuming the Tatra acquisition was not
completed by year end.
During the quarter ending June 30, 1999, General
Alexander M. Haig, Jr., and Mr. Richard Donnelly became
shareholders and strategic Advisory Board members of the
Company. General Haig is a former Secretary of State, former
White House Chief of Staff, and the former Allied Supreme
Commander of NATO, which the Czech Republic recently joined.
He will be involved primarily in the area of marketing of
foreign government sales of Czech-manufactured Tatra trucks
after completion of SDC's planned acquisition of Tatra, a.s.
Mr. Richard Donnelly, who recently retired as President of
General Motors Europe, has joined SDC International's
management team. Donnelly had responsibility for GM's vehicle
business in Europe with annual revenues of $25 billion, 80,000
employees producing in 11 countries and selling 1.9 million
vehicles annually in 42 countries throughout Western, Central
and Eastern Europe. He was Chairman of GM's European Strategy
Board and has been a Director of Saab (Sweden), Isuzu (Japan)
and of ACEA, the European automobile manufacturers association
headquartered in Brussels.
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
toward the acquisition of Tatra, a.s. and the development of
9
<PAGE>
strategic alliances 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 a 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 result of marketing
efforts by the Company. The Company records revenue when
products are shipped. During the quarter ending June 30,
1999, the Company shipped $116,986.
Operating expenses for the quarter ending June 30, 1999,
were more than in the quarter ending June 30, 1998, 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 oftentimes
include paid processional advisors such as attorneys and
accountants. Expense categories such as legal, accounting,
travel, and costs and expenses for securities matters
increased 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 Tatra a.s.
Total expenses for the quarter ending June 30 were
$1,149,235 in 1999 and $576,338 in 1998. Non-cash expenses
such as depreciation and amortization and payment for
consulting services accounted for more than seventy-five
percent (75%) of the expenses during the quarter ending June
30, 1999. During the quarter ending June 30, 1999, expenses
increased due to the increased activity level of corporate and
product acquisition plans and related activities. The
Company's net loss of $1,482,395 for the quarter ending June
30, 1999, includes certain non-cash charges as follows:
Depreciation and Amortization $ 12,358
Issuance of common stock as
consideration of services 863,531
----------
TOTAL NON-CASH CHARGES $ 875,889
Accordingly, the Company's cash loss before the above charges
amounted to approximately $606,506, which includes accrued
interest and amortization (non-cash) of debt discount of
$288,761.
During the three months ending June 30, 1999, as compared to
the three months ending June 30, 1998, operating expenses were
approximately $572,897 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
three month period ending June 30, 1999, were; amortization &
depreciation $12,358; rents $11,598; management compensation
& salary $78,000; travel & lodging $37,364; consulting (stock)
$893,531; legal and accounting $62,369; telephone $10,042;
interest $27,300; securities related expenses $5,625;
automobile $5,777; sales commissions $10,688; and capital
funding expenses $25,000. Operating expense categories which
exceeded $5,000 for the three month period ending June 30,1998 were:
10
<PAGE>
amortization & depreciation $135,010; rents $20,567; management
compensation & salary $43,000; travel & lodging $16,504; consulting
$13,441, legal and accounting $21,461; office supplies $7,706;
wages $40,687; and telephone $11,777.
LIQUIDITY AND CAPITAL RESOURCES
At the end of June, 1999, the Company's net working capital
is ($963,770). However, when considering shareholder loans to
be long term debt, the actual net working capital is positive
$226,929. Net cash used for the Company's operating
activities for the six months ending June 30, 1999 amounted to
$308,807, whereas the net cash used for operating activities
for the six months ending June 30, 1998 amounted to $632,905.
Net cash provided (+) by financing activities in the six
months ending June 30, 1999 was $357,578, compared to
$574,728 for the six months ending June 30, 1998. Therefore,
total cash at the end of the quarter ending June 30, 1999 was
$90,422 compared to $37,163 at the end of the quarter ending
June 30, 1998.
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 pursuit of a joint
venture or acquisition are anticipated to continue until the
Company has concluded a joint venture or acquisition, if any
can be concluded, and then only if suitable financing of any
such joint venture or acquisition is received by the Company.
The Company acknowledges that there can be no assurance that
it will be able to obtain 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:
See attached Current Report on Form 8-K dated May 31, 1999.
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
March 27, 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.
/s/Ronald A. Adams March 27, 2000
Ronald A. Adams, Director and Chairman
(Principal Executive Officer and Principal
Financial Officer)
13
<PAGE>
U. S. Securities and Exchange Commission
Washington, D. C. 20549
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event
reported): May 31, 1999
SDC International, Inc.
-------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-27520 75-2583767
-------------------------- ----------- -------------------
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
777 S. Flagler Drive Suite 8-W
W. Palm Beach, FL 33401
------------------------------- -------------
(Address of principal (Zip Code
executive offices)
Issuer's telephone number (561) 882-9300
Not Applicable
(Former name and former address, if changed since last report)
<PAGE> EX-6 - pg. 1
Item 4. Changes in Registrant's Certifying Accountant.
Effective May 31, 1999, Registrant changed its certifying
accountant from Scarano & Tomaro, to Richard A. Eisner &
Company, LLP, New York City. By mutual agreement with the
former accountant, Registrant decided it was in the best
interest of the Registrant to engage an accountant with the
professional resources necessary to meet the needs of the
Registrant in its international operations, business plan, and
pending acquisition of a foreign corporation. Accordingly,
the former accountant did not stand for reelection. The
former accountant's reports for the last two years contain no
adverse opinion or disclaimer of opinion nor is there any
disagreement with the former accountant.
The decision to change accountants and the selection of
Richard A. Eisner & Company, LLP, was recommended and approved
by the Registrant's Board of Directors.
SIGNATURE
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, thereunto duly authorized.
SDC International, Inc.
(Registrant)
Date: 6-14-99 By:/s/Ronald A. Adams
Ronald A. Adams, Chairman
and Chief Executive Officer
<PAGE> Ex-6 pg. 2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Balance
Sheet, Statement of Operations, Statement of Cash Flows and Notes thereto
incorporated in Part I, Item 1. of this Form 10-QSB and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 90,422
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 199,049
<CURRENT-ASSETS> 304,471
<PP&E> 9,645
<DEPRECIATION> 0
<TOTAL-ASSETS> 518,557
<CURRENT-LIABILITIES> 1,268,241
<BONDS> 0
0
0
<COMMON> 7,030
<OTHER-SE> 13,216,213
<TOTAL-LIABILITY-AND-EQUITY> 518,557
<SALES> 116,986
<TOTAL-REVENUES> 116,986
<CGS> 124,399
<TOTAL-COSTS> 124,399
<OTHER-EXPENSES> 1,953,513
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 426,295
<INCOME-PRETAX> (2,387,221)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> (76,687)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,463,908)
<EPS-BASIC> (0.41)
<EPS-DILUTED> (0.41)
</TABLE>
