<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
(Amendment No. 1)
(Mark One)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
// TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ____________ to ____________
Commission file number _________________________________
SHC CORP.
(Exact name of small business issuer as specified in its charter)
ILLINOIS 36-3971950
-------- ----------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
390 South Eighth Street, Second Floor, West Dundee, Illinois 60118
(Address of principal executive offices)
(847) 836-6685
(Issuer's telephone number)
--------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
APPLICABLE ONLY TO 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 l2, 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
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT SEPTEMBER 10, 2000
----- ---------------------------------
<S> <C>
Common Stock, Par Value $0.001 86,019.408 Shares
</TABLE>
1
<PAGE>
ITEM 1. Financial Statements
SHC CORP.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASSETS JUNE 30, DECEMBER 31,
2000 1999
-------------- ---------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 74,469 $ 14,242
Accounts receivable, net of allowance for
doubtful accounts of $1,410,000 and $1,245,238 882,986 912,673
Notes receivable 4,196 4,196
Prepaid expenses 42,658 34,419
-------------- ---------------
TOTAL CURRENT ASSETS 1,004,309 965,530
FIXED ASSETS
Property and equipment 551,500 694,342
Less: accumulated depreciation (243,541) (199,403)
-------------- ---------------
TOTAL FIXED ASSETS, NET 307,959 494,939
OTHER ASSETS
Security Deposits and other assets 99,329 97,769
-------------- ---------------
TOTAL ASSETS $ 1,411,597 $ 1,558,238
============== ===============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 490,191 $ 591,908
Accrued liabilities 1,094,886 690,838
Current portion of notes payable 1,809,858 1,875,394
-------------- ---------------
TOTAL CURRENT LIABILITIES 3,394,935 3,158,140
LONG-TERM PORTION OF NOTES PAYABLE 5,096 61,586
-------------- ---------------
TOTAL LIABILITIES 3,400,031 3,219,726
REDEEMABLE COMMON STOCK
Common Stock - Class A, $.001 par value; 400,000 shares
redeemable at $0.50 per share 200,000 200,000
STOCKHOLDERS' DEFICIT
Preferred stock, par value $.001; 1,000,000 shares
authorized; none issued -- --
Common stock, par value $.001; 100,000,000
shares authorized; 85,519,408 and 75,073,908
shares issued and outstanding, respectively 85,519 75,074
Additional paid-in capital 3,429,774 1,990,969
Less: subscription receivable (40,000) --
Accumulated deficit (5,663,727) (3,927,531)
-------------- ---------------
TOTAL STOCKHOLDERS' DEFICIT (2,188,434) (1,861,488)
-------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 1,411,597 $ 1,558,238
============== ===============
</TABLE>
See notes to the consolidated financial statements.
2
<PAGE>
SHC CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND THE SIX MONTHS ENDED
JUNE 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
2000 1999 2000 1999
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET REVENUES $ 738,745 $ 709,329 $ 1,490,346 $ 1,264,259
COST OF STORE OPERATIONS 537,454 523,341 1,155,356 865,884
------------- ------------ ------------ ------------
Gross profit 201,291 185,988 334,990 398,375
OPERATING EXPENSES
Selling, general and administrative 1,049,362 870,799 1,727,782 1,408,230
Reserve for store closings --- --- 250,000 ---
------------- ------------ ------------ ------------
Loss from operations (848,072) (684,811) (1,642,793) (1,009,855)
OTHER EXPENSES
Interest expense 46,744 44,067 93,404 84,385
------------- ------------ ------------ ------------
NET LOSS $ (894,816) $ (728,878) $ (1,736,197) $ (1,094,740)
============= ============ ============ ============
LOSS PER SHARE DATA
Basic and diluted $ (0.01) $ (0.01) $ (0.02) $ (0.02)
============= ============ ============ ============
WEIGHTED AVERAGE SHARES
Basic and diluted 83,114,327 71,609,640 81,380,333 67,842,935
============= ============ ============ ============
</TABLE>
See notes to the consolidated financial statements.
3
<PAGE>
SHC CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
2000 1999
---------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,736,197) $ (1,094,240)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 69,064 60,995
Provision for store closings 250,000 ---
Shares issued for services and compensation 385,196 117,057
Change in operating assets and liabilities:
Accounts receivable 29,687 (152,177)
Prepaid expenses (8,239) (24,827)
Accounts payable (101,717) 332,588
Accrued liabilities 428,379 241,098
---------------- -----------------
NET CASH FROM OPERATING ACTIVITIES (683,827) (519,506)
---------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (32,915) (252,033)
Increase in security deposits and other assets (1,560) (62,527)
---------------- -----------------
NET CASH FROM INVESTING ACTIVITIES (34,475) (314,560)
---------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from equity transactions 676,455 432,946
Proceeds from notes payable 160,000 343,699
Principal payments of notes payable (57,926) (47,291)
---------------- -----------------
NET CASH FROM FINANCING ACTIVITIES 778,529 729,354
---------------- -----------------
NET INCREASE (DECREASE) IN CASH 60,227 (104,712)
CASH, BEGINNING OF PERIOD 14,242 149,321
---------------- -----------------
CASH, END OF PERIOD $ 74,469 $ 44,609
================ =================
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 24,758 $ 44,579
================ =================
NON-CASH TRANSACTIONS
Payments of accrued expenses made by shareholder $ 71,039 $ ---
================ =================
Liabilities exchanged for equity $ 276,560 $ 46,759
================ =================
Write-off of property and equipment of closed stores $ 150,803 $ ---
================ =================
Shares issued under subscription agreement and unpaid $ 40,000 $ ---
================ =================
</TABLE>
See notes to the consolidated financial statements.
4
<PAGE>
NOTE 1 - INTERIM FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by SHC Corp., or the
Company, and are unaudited. In the opinion of management, the accompanying
unaudited financial statements contain all necessary adjustments for fair
presentation, consisting of normal recurring adjustments except as disclosed
herein.
The accompanying unaudited financial statements have been condensed pursuant to
the rules and regulations of the Securities and Exchange Commission; therefore,
certain information and disclosures generally included in financial statements
have been condensed or omitted. These financial statements should be read in
connection with the Company's annual financial statements included in the
Company's annual report on Form 10-KSB as of December 31, 1999. The financial
position and results of operations of the interim periods presented are not
necessarily indicative of the results to be expected for the year ended December
31, 2000.
GOING CONCERN - The accompanying consolidated financial statements have been
prepared assuming the Company will continue as a going concern. The Company has
incurred $5.6 million of losses from operations since inception and is highly
reliant on obtaining continued financing to satisfy its liquidity requirements.
These factors raise substantial doubt about the ability of the Company to
continue as a going concern. Management has undertaken measures to reduce its
operating costs and has closed several unprofitable stores. Concurrently,
management is negotiating with third party lenders and equity investors in an
effort to obtain sufficient financing to meet its operating needs.
There can be no assurances that these cost reduction measures will be adequate
or that the additional financing, if any, will be sufficient to enable the
Company to continue as a going concern.
STORE CLOSINGS - As described in its annual Form 10-KSB report, the Company has
decided to suspend its expansion program due to a shortage of capital and has
elected to close certain store locations instead. Management has identified as
many as 30 stores for shutdown or divestiture, of which 24 have been closed as
of September 10, 2000. The Company has established a reserve of approximately
$250,000 to provide for closing costs and the write-off of fixed assets,
primarily leasehold improvements. This reserve has been recorded in the first
quarter of fiscal 2000. During the first two quarters, the Company wrote-off
approximately $150,000 of property and equipment against this reserve. The
Company will continue to monitor its store program as it seeks to raise more
capital.
EQUITY TRANSACTIONS - During the first six months ended June 30, 2000, the
Company issued approximately 11.4 million shares of common stock. The following
unaudited amounts indicate the purpose of the issuance, the approximate number
of shares issued, and the approximate amount of consideration received: sale of
common stock, 4.25 million shares for $305,000, conversion of debt, 2.81 million
shares for $228,000; and, compensation for services and other expenses, 4.39
million shares for $433,000.
During the first quarter, Midwest Investors Group of Illinois LLC (MIG), a
company formed by the current Chairman of the Board and the current President,
purchased approximately 18.6 million shares from a group headed by the previous
Chairman of the Board. MIG, in turn, sold those shares to existing and new
shareholders and the excess funds received have been contributed to the Company
or used to pay expenses of the Company and its subsidiaries. As of June 30,
2000, the total of these funds has been approximately $443,000, of which,
$371,455 was contributed as capital.
During the first quarter, the Company issued 500,000 shares of common stock, for
which, it will receive $40,000. As of June 30, 2000, these funds have not been
received.
5
<PAGE>
EARNINGS PER SHARE - The Company has a complex capital structure as defined
under SFAS No. 128. Consequently, the generation of earnings results in a dual
presentation of basic and diluted EPS. The Company had a loss for the first six
months of 2000 and 1999 and, accordingly, potential common stock equivalents
have been excluded from the weighted average share computations because their
inclusion would have been anti-dilutive.
NOTE 2 - LEGAL PROCEEDINGS
LEGAL MATTERS -- In July 1995, the Company, a shareholder of the Company, the
Placement Agent, two officers of the Placement Agent and the former president,
CEO and director executed an agreement with respect to the settlement of
litigation brought by the former president, CEO and director against the
Company, the Placement Agent and two officers of the Placement Agent claiming
wrongful breach by the Company of an alleged employment agreement with the
former president, CEO and director and the Company's wrongful rejection of its
former president's attempt to put 122,900 shares of Common Stock to the Company
thereunder and intentional interference with such alleged agreement by the
Placement Agent and its officers. Under the terms of the settlement, the former
president, CEO and director agreed to act as a consultant to the Company for a
period of 27 months to commence upon the closing of the Company's IPO and the
Company agreed to pay him an aggregate $560,000 thereunder of which $300,000 was
paid out of the net proceeds of the Company's IPO and the balance would be paid
in 26 monthly installments commencing September 15, 1995. The former president,
CEO and director has also agreed that during the consulting period he would not
compete with the Company and would refrain from acquiring beneficial ownership
of more than 10% of its outstanding shares or becoming involved in any proxy
contest with respect to, or tender offer for, the Company. The settlement
arrangement also provided for the exchange of general releases between the
Company, the former president, CEO and director and the other parties thereto.
The Company expensed the entire cost of this settlement in 1995. The Company has
not made any payments to the former president, CEO and director subsequent to
July 1996.
During the month of December 1997, the former president, CEO and director of the
Company and his attorney executed settlement agreements whereby their claims
arising from the alleged breach of the July 1995 settlement agreements was
settled for 1,000,000 shares of the Common Stock of the Company. The settlement
agreement was effective with the acquisition of Sonoma. The former president,
CEO and director was an affiliate of Sonoma on the date of the acquisition.
In May 1998, the Company and certain of its officers entered into a second
agreement with the former president, CEO and director to settle all remaining
claims and issues between the parties. The terms of the agreement provided for
certain payments to be made by or on behalf of the Company to the former
president, CEO and director in exchange for the delivery and release to an
escrow agent and voting trust of 12,632,568 shares of Company stock held by the
former president, CEO and director. A third party ultimately delivered $650,000
representing the Company's obligation to the escrow agent and in exchange for
such funds was assigned the Company's rights in and to certain of the escrowed
shares. The former president, CEO and director instituted proceedings to enforce
certain provisions in the second settlement agreement. On or about June 13,
2000, the proceeding was dismissed, subject to the finalization of a settlement
in principle reached by the parties. The final settlement provides for the
release and distribution of all shares currently held pursuant to the voting
trust and the issuance of approximately 1,300,000 shares of the Company's common
stock to the former president, CEO and director. With regards to the settlement,
the Company recorded an expense of $65,000 in 1998. The parties are currently in
the process of finalizing and documenting the settlement agreement.
Sonoma owns 80% of the outstanding capital stock of Payday. Prior to January
1999, the remaining 20% was held by Argent Enterprises, Inc., an Illinois
corporation ("Argent"). Sonoma and Argent are parties to an agreement
restricting transfer of the Payday stock. Such agreement grants each party the
right of first refusal to purchase any stock of Payday before any such stock may
be transferred by a shareholder to any third party. In January 1999, Sonoma and
Payday received notice from a third party that such third party was a 20%
shareholder of Payday based on a transaction with Argent whereby it acquired
such interest. The Company and Payday are currently in the process of
investigating such purported transaction in order to determine whether such
third party is a shareholder of Payday and whether such purported transaction
violated the terms of the shareholders' agreement.
In May 1998, Payday entered into an agreement with a third party which allegedly
owned 20% of 1825 Corp., a former Payday subsidiary which owned and operated
several Payday stores. Pursuant to the agreement, such third party was to sell
and assign all of its 20% interest to Payday in consideration of certain
payments by Payday consisting of cash and stock of the Company. Part of the
consideration was delivered to and accepted by such third party, and part of the
consideration was rejected. The parties are in dispute as to whether the
contract was breached and by whom. The third party commenced litigation and the
Company cannot predict with any certainty the outcome of this litigation.
On November 4, 1998, an investor in the Company filed a lawsuit seeking $250,000
in damage. The plaintiff asserts that he exercised a "put" option with respect
to 1,000,000 shares owned by plaintiff, which would allegedly entitle him to
"put" such shares to the Company in exchange for $250,000. The plaintiff claims
that the Company breached an agreement between the parties by failing to honor
the put and pay $250,000 to plaintiff and received a judgment to such effect in
May 2000. The parties have subsequently agreed to a settlement in principle and
are currently in the process of documenting the settlement agreement.
Payday is a defendant in a number of federal class action cases asserting
various violations of the Truth in Lending Act ("TILA"), Fair Debt Collection
Practices Act ("FDCPA"), state consumer fraud claims and unconscionability
claims. The cases are at various stages in the litigation and appeal process.
Two of these cases, consolidated for appeal purposes, were dismissed by the
respective federal district court judges before whom they were pending. The
Court of Appeals for the Seventh Circuit affirmed the dismissals. The Plaintiffs
have filed a Petition for WRIT OF CERTIORARI with the United States Supreme
Court, requesting that the Court accept the appeal because: (a) the Seventh
Circuit misapplied TILA to Plaintiff's claims; (b) TILA permits the recovery of
statutory damages for Plaintiff's claims; and (c) there exists a conflict
between the federal Circuit Courts of Appeal and the interpretation of TILA to
the Plaintiffs' claims. There is no way to predict whether the Supreme Court
will accept the Plaintiff's Petition. The Supreme Court will not decide until it
returns from summer recess. If the Supreme Court were to accept the case for
review, there is a possibility of an unfavorable outcome and the Supreme Court
could reverse the Seventh Circuit's finding and determine that Payday was in
"technical" violation of TILA. Plaintiffs would be entitled to recover statutory
damages based on the lesser of $500,000 or 1% of the defendant's net worth, and
attorneys' fees. Because of the current procedural status of the cases, the
Company is unable to evaluate the outcomes of these cases.
There are three other cases, similar to the previously mentioned cases, and to
the extent they assert the same TILA violation as those cases, their outcome is
determined by the financial disposition of those cases. These cases raise new
TILA violations based upon disclosure of a security interest taken in the
post-dated check received from each borrower. Payday has argued in its filings
in this case that this issue has been addressed and resolved favorable to the
lender in cases decided by various federal district court judges and the Seventh
Circuit.
In two of these cases, Payday has filed a motion to dismiss on behalf of Payday.
For the third case, there is currently a stay in effect pending settlement
discussions between the parties. The outcome of these cases, for the mort part,
depends upon whether the Seventh Circuit's opinions in the two cases before the
Supreme Court remain final and the resolution of the security interest
disclosure by the federal district judges before whom the remaining cases are
pending. The Company cannot quantify any potential losses until these legal
issues are finally resolved.
In April 1999, the Company entered into a settlement agreement with a creditor
of the Company pursuant to which the Company is obligated to make installment
payments in the aggregate amount of $100,000 to the creditor, with all remaining
sums due on or before October 15, 1999. In addition, the Company issued 10,000
shares of common stock to the investor as part of the settlement. In May 2000,
the parties entered into a second settlement agreement pursuant to which the
amounts due to the creditor were satisfied through the issuance of an additional
990,000 shares of common stock in May 2000 and the return and subsequent
cancellation of the previously delivered 10,000 shares in or about June 2000.
The creditor retains the right to reinstate the lawsuit if the Company's stock
fails to be tradable or is delisted at any time during the next seven years. If
this occurs, the agreement provides for a one time 30-day grace period to remedy
the situation.
During 1998, the Company entered into a consulting agreement with a financial
consultant. Under the terms of the agreement, the Company issued 200,000 shares
of common stock and agreed to pay the consultant a monthly fee of $5,000 for a
period of 24 months. As of June 30, 2000, the Company has a remaining
obligation of $20,000 for services to be rendered during 2000.
In April 2000, the Company entered into a settlement agreement with its prior
counsel, pursuant to which the Company paid $20,000 and such prior counsel
returned 1,000,000 shares previously issued to him by the Company. The agreement
also provides for a mutual release of all claims between the parties.
NOTE 3 - SUBSEQUENT EVENTS
Since June 30, 2000, the Company has received notice that a note holder has
agreed to convert two notes, totaling $50,000, and unpaid interest for 1,030,000
shares of common stock.
6
<PAGE>
ITEM 2. Management Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis should be read in conjunction with the
Company's consolidated financial statements and the notes thereto contained
elsewhere in this report. The discussion of these results should not be
construed to imply any conclusion that any condition or circumstance discussed
herein will necessarily continue in the future. When used in this report, the
words "believes," "anticipates," "expects," and similar expressions are intended
to identify forward-looking statements. Those statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those that are modified by such statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date hereof. The Company undertakes no obligation to publicly release the
results of any revisions to these forward-looking statements that may be made to
reflect events or circumstances after the date of this report, or to reflect the
occurrence of unanticipated events.
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2000 TO THE THREE MONTHS ENDED
JUNE 30, 1999
NET REVENUES. SHC Corp. and its subsidiaries ("Company") generated revenues of
$738,745 for the three months ended June 30, 2000. This represented a 4.2%
increase over $709,329 in revenues generated in the three months ended June 30,
1999. The principal reason for this growth was an increase in loan activity from
year-to-year.
COST OF STORE OPERATIONS. The Company incurred expenses of $537,454 for
operating its stores during the three months ended June 30, 2000, which
represented an increase of 2.7% over the in expenses that were incurred during
the three months ended June 30, 1999. This increase was a result of an increases
in store operating costs.
GROSS PROFIT. For the three months ended June 30, 2000, the Company reported
gross profit of $201,291. This is a increase of 8.2% from the prior year's
amount of $185,988. This was due to reductions in certain operating expenses
as stores were closed, while Company was able to maintain loan volume.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Expenses related to these
activities were $1,049,362, which was 21% higher than the second quarter's
amount from the prior year. The increase was due primarily to higher expenses
associated with professional and consulting services incurred.
INTEREST EXPENSE. This expense increased by 6.1% from $44,067 in 1999 to $46,744
in 2000. This was due to increased bank borrowings and other notes payable.
NET LOSS. The Company reported a wider net loss in 2000 from a year earlier for
those reasons cited previously.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2000 TO THE SIX MONTHS ENDED
JUNE 30, 1999
NET REVENUES. The Company had revenues of $1,490,346 for the six months ended
June 30, 2000. This represented a 18% increase over the $1,264,259 in revenues
generated in the six months ended June 30, 1999. The principal reason for this
growth was an increase in the number of stores operating in the first quarter of
2000 over the number in 1999 during the same period.
COST OF STORE OPERATIONS. The Company incurred expenses of $1,155,356 for
operating its stores during the six months ended June 30, 2000, which
represented an increase of 33% over the $865,884 in expenses that were incurred
during the six months ended June 30, 1999. This increase was a result of costs
incurred with the opening of new stores that included staffing, rent, utilities
and other store costs during the first quarter of 2000.
7
<PAGE>
GROSS PROFIT. For the six months ended June 30, 2000, the Company reported gross
profit of $334,990. This is a decrease of 16% from the prior year's amount of
$398,375. This was due to costs associated with store openings and ramping up
store activities which exceeded the gains in revenues, specifically in the first
quarter of 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. For the first six months of 2000,
these expenses were $1,727,782, which was 23% higher than the amount for the
same period of the prior year. The primary reasons for this increase is an
increase in professional and consulting fees during the period.
RESERVE FOR STORE CLOSINGS. The Company recorded a provision for stores that
were closed in the first quarter or will be closed. This is necessitated by the
Company's accelerated growth, for which, the Company does not have the cash
wherewithal to meet the cash demands.
INTEREST EXPENSE. This expense increased by 11% from $84,385 in 1999 to $93,404
in 2000. This was due to increased bank borrowings and other notes payable.
NET LOSS. The Company reported a wider net loss in 2000 from a year earlier.
This was due to those factors noted above.
PART II
ITEM 1 Legal Proceedings
The information required by Part II, Item 1 of Form 10-QSB is hereby
incorporated by reference to Note 2 to SHC Corp.'s Consolidated Balance Sheets
for the three months ended June 30, 2000, included in Item 1 of Part 1 of this
Form 10-QSB.
ITEM 2 Other Information
As of June 30, 2000 and December 31, 1999, the Company had a negative working
capital position of $2,390,626 and $2,192,610. The Company was able to fund its
operations during the first six months through equity transactions, in which, it
received approximately $676,000 in cash and the issuance of $160,000 in notes.
The Company realizes it needs to strengthen its working capital position and
over all financial condition. Through September 2000, it has closed 24 stores to
reduce the losses and improve its cash position. It is in talks with several
groups regarding cash infusions via equity or debt capital. If such talks are
successful, the Company will receive funds for operating capital. If the
discussions are not successful, the Company will need to examine various
options, such as, closing additional stores and/or financial restructuring.
In an effort to reduce debt, the Company has negotiated with three noteholders
to exchange their notes for common stock in fiscal 2000 and any unpaid interest.
The outstanding amount of these notes is approximately $265,000, of which,
$215,000 was converted through June 30, 2000.
8
<PAGE>
It is management's intention to offer a conversion of debt-for-stock to other
noteholders after the Company's common stock is listed again on the OTC Bulletin
Board. Management does not know how many noteholders, if any, will agree to
convert their notes, but believes there will be some conversions.
9
<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, thereunto duly
authorized.
-----------------------------------------------
SHC CORP. (f/k/a VictorMaxx Technologies, Inc.)
By: /s/ Terrence L. Donati
----------------------------------
Terrence L. Donati, President, Principal
Financial Officer and Principal Accounting Officer
Date: September 19, 2000
------------------
By: /s/ Terrence L. Donati
----------------------------------
Terrence L. Donati, Director
Date: September 19, 2000
------------------
By: /s/ D. Desmond Paden
----------------------------------
D. Desmond Paden, Director
Date: September 19, 2000
------------------
By: /s/ Philip E. Ruben
----------------------------------
Philip E. Ruben, Director
Date: September 19, 2000
------------------
10
