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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 2000.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _______ to _______ .
Commission file number 0 - 27157
P.D.C. Innovative Industries, Inc.
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(Exact name of small business issuer as specified in its charter)
Nevada 65-0799306
- -------------------------------- ----------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3701 Northwest 126th Avenue, Corporate Park, Bay 5, Coral Springs, Florida 33065
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(Address of principal executive offices)
(954) 341-0092
---------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
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(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 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
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 16,570,121 shares of Common
Stock, Par Value, $0.001 per share, as of April 30, 2000.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
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INDEX
ITEM PAGE
---- ----
PART I - FINANCIAL INFORMATION 3
ITEM 1. FINANCIAL STATEMENTS 3
Consolidated balance sheets --
March 31, 2000, and March 31, 1999
Consolidated statements of operations --
Three months ended March 31, 2000,
and three months ended March 31, 1999
Consolidated statement of changes in stockholders'
equity --
Three months ended March 31, 2000,
and three months ended March 31, 1999
Consolidated statements of cash flows --
Three months ended March 31, 2000,
and three months ended March 31, 1999
Notes to financial statements --
March 31, 2000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATION. 3
PART II -- OTHER INFORMATION 6
ITEM 2. CHANGES IN SECURITIES. 6
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 8
SIGNATURES 9
2
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PART 1
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
SATISFACTION OF CASH REQUIREMENTS
We had gross sales of $5,165.00 during the fiscal year ended December 31,
1998, and no revenues for the fiscal year ended December 31, 1999, with net
income (loss) of ($573,376.00) in fiscal 1998 as compared to net income (loss)
of ($424,987) in fiscal 1999.
We had gross sales of $0.00 during the Quarter ended March 31, 2000, with
net loss of $121,220.00 in said first Quarter, as compared to net loss of
$144,174.00 in the first Quarter of 1999.
Currently, we still operate at a loss.
At our present "burn rate", which is $55,000.00 per month, we will be
able to satisfy our cash requirements until June 15, 2000. Unless we are able
to generate significant revenue from sales of product, it will therefore be
necessary for us to raise additional capital before that date.
OUR PLAN OF OPERATION
In the beginning of our first year of business and continuing until the
date of this document, our Management has assessed and evaluated the strengths
and weaknesses of our technology, products, and so as to attempt to establish a
set of objectives. Based on these efforts, Management has established
objectives as follows:
1. Continue product development.
2. Identify niche markets for our products.
3. Commence marketing and actual sales.
4. Establish a structure to be able to raise capital more
effectively.
5. Identify potential sources of capital.
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OBJECTIVE NO. 1: CONTINUE PRODUCT DEVELOPMENT
THE STERILE-BOX
The Sterile Box is a device designed to dispose of contaminated
hypodermic syringes and other intrusive medical instruments at the site of use
by subjecting them to high heat. The device reduces, in an enclosed
environment, the entire instrument to small, sterile particles which can be
disposed of as conventional trash. The container is designed to hold up to 200
syringes which can be heat-shrunk to pieces approximately the size of a
quarter, i.e., $0.25.
Although we have been making progress with the prototype, we have still
not yet developed one which completely satisfies us. We anticipate, but
cannot guarantee, that it will be at least 60 days before a prototype is
completed and ready for submission to the FDA.
OUR FAMILY OF LEVELS
Our zero-tolerance leveling products are available in various sizes with
unique features and benefits.
OBJECTIVE NO. 2: IDENTIFYING NICHE MARKETS FOR OUR PRODUCTS
THE STERILE-BOX
We believe that primary markets for the Sterile Box will be in the
health-care sector, divided essentially into three broad categories:
(i) hospitals, (ii) "alternative site" facilities (including surgical centers,
nursing homes, and elderly care facilities and clinics); and (iii) small
medical offices.
OUR FAMILY OF LEVELS
We anticipate that the primary markets for the Level products are
organizations which sell to construction and home-remodeling customers, such as
Home Depot, Ace Hardware, and smaller chain stores and individual wholesalers.
OBJECTIVE NO. 3: COMMENCE MARKETING AND ACTUAL SALES.
OUR FAMILY OF LEVELS
We have recently embarked on an aggressive program to sell all five of
our level products in South Florida, and, to that end, we have hired an
in-house Director of Sales. To date, purchase orders for 5,100 levels have been
received, the billing amounts for which total $214,000.00. The largest of these
orders is from Pacific-Atlantic, Inc., of Miami, Florida, and includes an
option to purchase an additional 5,000 levels by the end of 2000. Payment from
Pacific-Atlantic is not due to be received by us until June 3, 2000.
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In a separate transaction, we have arranged with Millennium Marketing,
Inc., a Boca Raton, Florida, marketing company, to represent our various
construction level products to the California Division of The Home Depot with a
view toward placing them in the 125 Home Depot stores located in California.
The principals of Millennium Marketing are Mr. Joseph Colangelo and Mr.
David Rossi, the well-known Florida golf pro. Millennium Marketing has advised
us that it has its own product available for sale through The Home Depot in
California, and it has agreed to market and represent our products as well
because of their high quality construction. We anticipate that Millennium
Marketing will begin taking our representative products to The Home Depot
during the last week of May (2000). Millennium Marketing has also offered to
enter into a one year contract with us to market and distribute all our
hardware and medical devices in smaller stores throughout the United States. We
are still considering this offer.
OBJECTIVE NO. 4: ESTABLISH A STRUCTURE TO BE ABLE TO RAISE CAPITAL MORE
EFFECTIVELY
Our third objective was met by becoming a fully reporting company under
the Securities Exchange Act of 1934. We believe that by being a fully reporting
company we will be able to raise capital more effectively by offering our
securities under exemption from registration under the Securities Act of 1933.
OBJECTIVE NO. 5: IDENTIFY POTENTIAL SOURCES OF CAPITAL
The structure to raise capital which we have developed over the past 22
months has been primarily by association with venture capital entities who are
willing to invest in manufacturing "start-ups", as long as such companies have
products which show promise of revenues and are listed on the OTC Bulletin
Board and report to the SEC. By continuing to develop our products for
commercial use, and by becoming a fully reporting company, we hope to be able
to attract private capital and maintain existing relationships.
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To that end, we believe that we have a good relationship with at least
two such venture capital firms, namely BVH Holdings, a Jerusalem based fund
with an office in New York City, and Negocios del Caribe, S.A., of Costa Rica,
both of whom have made funds available to us in the past. However, we cannot
guarantee that, if approached, either entity would invest again.
Nevertheless, on April 10, 2000, Levtov Holdings, LLC, an Oregon limited
liability company, which is related to BVH Holdings, lent $200,000.00 to our
Company, which actually received the sum of $180,000.00, net of loan expenses
and of finder's fees paid to Portfolio Investments, Inc., a New York
corporation, which is the Fund Manager of The Jerusalem Fund, a mutual fund.
This represented bridge financing made in connection with a proposed investment
of $2,000,000.00 by Levtov Holdings in our Company pursuant to Section 3(a)(10)
of the Securities Act. At present, a "Fairness Hearing" before the Division of
Finance and Corporate Securities of the Oregon Department of Consumer and
Business Services to seek its approval of the proposed investment is expected
to take place in late June or early July, 2000. However, we cannot guarantee
that Oregon Division of Finance and Corporate Securities will approve the
proposed investment or, that if it is approved, that Levtov Holdings will
actually make the investment.
Notwithstanding the foregoing, Levtov Holdings has issued a written
commitment to our Company to make this investment (pending approval from the
Department), and our relationship in other matters with the principals of
Levtov has been such that every commitment ever made has been honored.
RISKS AND UNCERTAINTIES
Statements contained herein and elsewhere in this Report concerning
future activities, performance or intentions are forward-looking statements
which, by their nature, involve risk and uncertainty because they relate to
events, and depend on circumstances, that will occur in the future, many of
which are not within the Company's control. Actual results and events may
differ materially from those expressed or implied by such statements as the
result of known or unknown risks, uncertainties and/or other factors and there
can be no assurance that such expectations will prove correct.
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
Item (c):
6
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BACKGROUND
On September 6, 1999, our Company entered into a securities subscription
agreement in which we agreed to sell debentures to BVH Holdings, L.L.C. The
Debentures were entitled "P.D.C. Innovative Industries, Inc. 8% Series A Senior
Subordinated Convertible Redeemable Debentures", and the total amount sold to
BVH Holdings was $480,000.00. No payments were to be made prior to the maturity
date. The maturity date of the Debentures was September 6, 2001, at which time
the full principal amount of $480,000.00, plus accrued interest, calculated at
8% per annum, was to be fully due. In connection with the placing of the
Debentures, Portfolio Investors, Inc., received a finder's fee of $64,200.00.
As noted above, Portfolio Investors is the Fund Manager of The Jerusalem Fund,
a mutual fund. The Debentures were issued pursuant to Rule 504 of Regulation D
of the rules and regulations of the SEC.
At the sole option of BVH Holdings, the holder could convert all or any
amount of the principal face amount of the Debentures then outstanding into
freely tradeable shares of the Common Stock of our Company at a conversion
price for each share of Common Stock equal to 75% of the closing bid price of
the Common Stock for the trading day immediately preceding the date of
conversion.
During the year ended December 31, 1999, Debentures totaling $50,000.00
were converted into 383,993 shares of the Common Stock of our Company.
Subsequent to December 31, 1999, and prior to February 29, 2000, all of the
remaining Debentures were converted into 7,095,791 shares of the Common Stock
of our Company. As of February 29, 2000, all of the Debentures were fully
retired, and a total of 7,479,784 shares of the Common Stock of our Company
were issued for the retirement of those Debentures.
RECENT EVENTS
On March 10, 2000, we arranged to recover the sum of $64,200.00, which
represented the amount paid to Portfolio Investors as a finder's fee for
placing the Debentures. We had escrowed the Shares, and these escrowed Shares
were released to BVH Holdings, and the commission previously deducted, i.e.,
the aforesaid $64,200.00, was thereupon returned to the Company, so that the
entire $480,000.00 has actually been received by the Company. We received a
premium for the Shares released from Escrow, and the $64,200.00 was deposited
on March 10, 2000.
ITEM 5. OTHER INFORMATION
We had recently embarked on an aggressive program to sell all five of our
level products in South Florida, and, to that end, we have hired an in-house
Director of Sales. To date, purchase orders for 5,100 levels have been
received, the billing amounts for which total $214,000.00. The largest of these
orders is from Pacific-Atlantic, Inc., of Miami, Florida, and includes an
option to purchase an additional 5,000 levels by the end of 2000. Payment from
Pacific-Atlantic is not due to be received by us until June 3, 2000.
7
<PAGE> 8
In a separate transaction, we have arranged with Millennium Marketing,
Inc., a Boca Raton, Florida, marketing company, to represent our various
construction level products to the California Division of The Home Depot with a
view toward placing them in the 125 Home Depot stores located in California.
The principals of Millennium Marketing are Mr. Joseph Colangelo and Mr.
David Rossi, the well-known Florida golf pro. Millennium Marketing has advised
us that it has its own product available for sale through The Home Depot in
California, and it has agreed to market and represent our products as well
because of their high quality construction. We anticipate that Millennium
Marketing will begin taking our representative products to The Home Depot during
the last week of May (2000). Millennium Marketing has also offered to enter into
a one year contract with us to market and distribute all our hardware and
medical devices in smaller stores throughout the United States. We are still
considering this offer.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following Reports of the Company are incorporated by reference as
part of the Company's Form 10-QSB:
Form 10-SB of the Registrant's Predecessor (MAS Acquisition XIV
Corp.) dated October 27, 1999.
Form 10-QSB of the Registrant's Predecessor dated February 14, 2000.
Form 8-K of the Registrant dated March 6, 2000.
Form 10-KSB of the Registrant dated March 22, 2000.
(b) Reports on Form 8-K filed during the quarter in which this report is
being filed:
(i) A report on Form 8-K dated March 6, 2000, was filed on March 6,
2000,
(A) with respect to a Stock Exchange Agreement (the "Exchange
Agreement") dated as of March 2, 2000 between MRC Legal Services
Corporation, a California Corporation, which entity is the
controlling shareholder of MAS Acquisition XIV Corp. ("MAS XIV"), an
Indiana corporation, and our Company, pursuant to which
approximately 96.8% (8,250,000 shares) of the outstanding shares of
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common stock of MAS Acquisition XIV Corp. were exchanged for
1,500,000 shares of common stock of our Company in a transaction in
which our Company became the parent corporation of MAS XIV. (Upon
execution of the Exchange Agreement and the delivery of our share to
MAS XIV, pursuant to Rule 12g-3(a) of the General Rules and
Regulations of the Securities and Exchange Commission, our Company
became the successor issuer to MAS XIV for reporting purposes under
the Securities Exchange Act of 1934, and we elected to report under
the Act effective March 6, 2000); and
(B) which provided audited financial statements of the
Registrant as of December 31, 1998, and December 31, 1998.
(c) Exhibits:
27 - Financial Data Schedule (for SEC use only).
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
P.D.C. INNOVATIVE INDUSTRIES, INC.
Date: May 25, 2000 /s/ DAVID SOWERS
----------------------------------
David Sowers
Chief Executive Officer
Date: May 25, 2000 /s/ SANDRA SOWERS
----------------------------------
Sandra Sowers
President, Secretary and
Principal Financial Officer
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P.D.C. Innovative Industries, Inc.
3701 NW 126th Avenue
Coral Springs, Florida 33065
Gentlemen:
We have compiled the accompanying Balance Sheet and the related Statements of
Income and Cash Flows, for the three months ended March 31, 2000 in accordance
with the Statements on Standards for Accounting and Review Services issued by
the American Institute of Certified Public Accountants.
A compilation is limited to presenting, in the form of financial statements,
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and accordingly, do not express
an opinion or any other form of assurance on them.
Sincerely,
Franklin & Nicholls, CPA's, L.L.C.
May 25, 2000
10
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P.D.C. INNOVATIVE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the period ended March 31, 2000
<TABLE>
<CAPTION>
TOTAL
SHARES CAPITAL RETAINED STOCKHOLDERS'
OF STOCK STOCK EARNINGS EQUITY
-------- ----- -------- -------------
<S> <C> <C> <C> <C>
BALANCE - 1/1/97 1,000 $ 24,755 $ 24,755
Common stock issued to related parties
Common stock issued to unrelated parties
Net income / (Loss) (41,344) (41,344)
---------- ----------- ----------- -----------
BALANCE - 12/31/97 1,000 $ 24,755 $ (41,344) $ (16,589)
Common stock retired at merger (1,000)
Common stock issued to related parties 5,587,500 39,500
Common stock issued to unrelated parties 7,980,598 1,802,220 1,802,220
Net income / (Loss) (573,376) (573,376)
---------- ----------- ----------- -----------
BALANCE - 12/31/98 13,568,098 $ 1,866,475 $ (614,720) $ 1,251,755
Common stock restated for reverse stock split (13,141,396)
---------- ----------- ----------- -----------
Sub-Total after reverse stock split 426,702 $ 1,866,475 $ (614,720) $ 1,251,755
Common stock issued to Sterile-Pro 2,000,000 0
Common stock issued to Prime Management 300,000 233,100 233,100
Common stock issued to retire Debentures 383,993 50,000 50,000
Common stock issued to unrelated parties 1,292,605 293,037 293,037
Net income / (Loss) (424,987) (424,987)
---------- ----------- ----------- -----------
BALANCE - 12/31/99 4,403,300 $ 2,442,612 $(1,039,707) $ 1,402,905
Common stock issued to retire Debentures 7,479,784 430,000 430,000
Common stock issued to unrelated parties 4,187,126 62,400 62,400
Net income/(Loss) (121,220) (121,220)
---------- ----------- ----------- -----------
BALANCE - 12/31/99 16,070,210 $ 2,935,012 $(1,160,927) $ 1,774,085
========== =========== =========== ===========
</TABLE>
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P.D.C. INNOVATIVE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of March 31, 2000 and March 31, 1999
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
2000 1999
----------- -----------
<S> <C> <C>
ASSETS
Current Assets
Cash in Bank $ 174,043 $ 13,423
Inventory-Work in Process 770,373 95,876
----------- -----------
Total Current Assets $ 944,416 $ 109,299
Fixed assets
Equipment (net of accumulated depreciation) $ 1,002,193 $ 1,146,652
----------- -----------
Total Fixed Assets $ 1,002,193 $ 1,146,652
Other Assets
Patents $ 3,000 $ 3,000
Settlement Receivable 45,500 0
Organization Costs 12,575 12,575
Deposits & Other Receivables 3,256 3,256
----------- -----------
Total Other Assets $ 64,331 $ 18,831
----------- -----------
Total Assets $ 2,010,940 $ 1,274,782
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Due to Shareholders $ 45,887 $ 0
Payroll taxes payable 968 8,664
Current Portion of Long-Term Debt 190,000 0
----------- -----------
Total Current Liabilities $ 236,855 $ 8,664
Long-term debt, net of current portion 0 0
----------- -----------
Total Liabilities $ 236,855 $ 8,664
Stockholder's Equity
Common Stock, $.001 par value; 50,000,000 shares authorized;
16,070,210 shares issued and outstanding $ 16,070 $ 427
Paid in Capital 2,918,942 2,024,585
Accumulated deficit (1,160,927) (758,894)
----------- -----------
Total Stockholders' Equity $ 1,774,085 $ 1,266,118
----------- -----------
Total Liabilities & Stockholders' Equity $ 2,010,940 $ 1,274,782
=========== ===========
</TABLE>
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P.D.C. INNOVATIVE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the quarters ended March 31, 2000 and March 31, 1999
MARCH 31, MARCH 31,
2000 1999
----------- -----------
REVENUE $ 0 $ 0
OPERATING EXPENSES
Salaries and related taxes $ 48,117 $ 63,886
Professional fees & commissions 15,055 13,006
Travel & Entertainment 6,322 8,940
Administrative expense 726 2,785
Auto expense 7,193 7,194
Equipment maintenance 163 0
Rent 3,371 16,152
Depreciation 35,504 0
Other 4,769 32,211
----------- -----------
Total Operating Expenses $ 121,220 $ 144,174
----------- -----------
NET INCOME / (LOSS) $ (121,220) $ (144,174)
=========== ===========
Accumulated Deficit, Beginning (1,039,707) (614,720)
----------- -----------
Accumulated Deficit, Ending $(1,160,927) $ (758,894)
=========== ===========
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P.D.C. INNOVATIVE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the quarters ended March 31, 2000 and March 31, 1999
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operation activities:
Net loss $(121,220) $(144,174)
Adjustments to net loss for cash provided through
Depreciation expense in Income Statement 35,504 0
Depreciation allocated to Inventory-Work in Process 0 0
--------- ---------
Net cash provided in operating activities $ (85,716) $(144,174)
Cash flows from investing activities:
Capital expenditures $ (7,114) $ 319
Inventory (108,211) (13,383)
Settlement receivable 13,000 0
Patents 0 845
Deposits 0 (3,256)
Organization costs 0 0
--------- ---------
Net cash used in investing activities $(102,325) $ (15,475)
Cash flows from financing activities
Issuance of common stock $ 492,400 $ 158,537
Issuance of debentures (430,000) 0
Increase in Payroll Taxes Payable 897 2,765
Increase in Short-term Debt 190,000
Due to Shareholders (5,000) 0
Long-term obligation 0 0
--------- ---------
Net cash provided by financing activities $ 248,297 $ 161,302
--------- ---------
Net increase/(decrease) in cash $ 60,256 $ 1,653
Cash, beginning 113,787 11,770
--------- ---------
Cash, ending $ 174,043 $ 13,423
========= =========
</TABLE>
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P.D.C. INNOVATIVE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF THE COMPANY
In the first quarter of 1998, the Company acquired Perfect Seal, Inc., TriLevel,
Inc., and J.D.S. Innovative Industries, Inc. The State of Florida will
administratively dissolve Perfect Seal, Inc. and J.D.S. Innovative Industries,
Inc., and the remaining corporation, TriLevel will remain as a whole owned
subsidiary of the Company.
In January 1998, the Board of Directors of Kenneth C. Garcia, Inc. and the
Company were merged. The surviving corporation is P.D.C. Innovative Industries,
Inc. The Company is incorporated in Nevada and is a home product designer,
manufacturer, and distributor of newly invented products. As of December 1999,
the Company has five new products that are in various stages of production.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNT POLICIES
PRINCIPLES OF COMBINATION- The accompanying consolidated financial statements
includes the accounts of P.D.C. Innovative Industries, Inc. and its subsidiaries
(together, the Company). Significant intercompany balances and transactions have
been eliminated in the combination
PROPERTY AND EQUIPMENT- Property and equipment are stated at cost. Depreciation
is provided using the straight-line method over the estimated useful lives of
the related assets. Expenditures for major improvements and additions are
charged to asset accounts, while replacements, maintenance and repairs, which do
not extend the lives of the respective assets, are charged to expense as
incurred.
CASH AND CASH EQUIVALENTS- For the purpose of the statement of cash flows, the
Company considers all highly liquid debt instruments purchased with a maturity
of three months or less to be cash equivalents.
INVENTORIES- Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method.
INTANGIBLE ASSETS- Intangible assets consist primarily of the excess of cost
over the net assets acquired relating to the acquisitions. The excess of cost
over net assets acquired (goodwill) is amortized over a 15-year period, using
the straight-line method.
IMPAIRMENT OF ASSETS- In accordance with the provisions of Statement of
Financial Accounting Standards No. 121 (SFAS 121), Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of, the Company's
policy is to evaluate whether there has been a permanent impairment in the value
of long-lived assets, certain identifiable intangibles and goodwill when certain
events have taken place that indicate that the remaining balance may not be
recoverable. When factors indicate that the intangible assets should be
15
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P.D.C. INNOVATIVE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
evaluated for possible impairment, the Company uses an estimate of related
undiscounted cash flows. Factors considered in the valuation include current
operating results, trends and anticipated undiscounted future cash flows. There
have been no impairment losses for the fiscal year ended December 31, 1999.
INCOME TAXES- The Company utilizes the guidance provided by Statement of
Financial Accounting Standards No. 109 (SFAS 109), Accounting for Income Taxes.
Under the liability method specified by SFAS 109, deferred tax assets and
liabilities are determined based on the difference between the financial
statement and tax bases of assets and liabilities as measured by the enacted tax
rates which will be in effect when these differences reverse. Deferred tax
expense is the result of changes in deferred tax assets and liabilities.
USE OF ESTIMATE- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts of assets, liabilities,
income and expense and disclosures of contingencies. Future events could alter
such estimates.
REVENUE RECOGNITION- Revenues are recognized for the Company when the
merchandise is shipped to the customer.
FAIR VALUE OF FINANCIAL INSTRUMENTS- The Company, in estimating its fair value
disclosures for financial instruments, uses the following methods and
assumptions:
CASH, ACCOUNTS RECEIVABLE, ACCOUNTS PAYABLE AND ACCRUED EXPENSES: The
carrying amounts reported in the balance sheet for cash, accounts receivable,
accounts payable and accrued expenses approximate their fair value due to their
relatively short maturity.
LONG-TERM OBLIGATIONS: The fair value of the Company's fixed-rate
long-term obligations is estimated using discounted cash flow analyses, based on
the Company's current incremental borrowing rates for similar types of borrowing
arrangements. At December 31, 1999, the fair value of the Company's long-term
obligations approximated its carrying value.
CREDIT LINE PAYABLE: The carrying amount of the Company's credit line
payable approximates fair market value since the interest rate on these
instruments changes with market interest rates.
NOTE 3. PATENT COSTS
Patent Costs as of the date of these financial statements total $3,000.
16
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P.D.C. INNOVATIVE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. FURNITURE & EQUIPMENT
A summary of equipment as of March 31, 2000 and March 31, 1999 are as follows:
Furniture $ 17,271 $ 19,107
Equipment 1,285,053 1,213,389
----------- -----------
Total Furniture & Equipment $ 1,302,324 $ 1,232,496
Less: accumulated depreciation (300,131) (85,844)
----------- -----------
Furniture and equipment, net $ 1,002,193 $ 1,146,652
=========== ===========
Additions to Accumulated Depreciation for the period ended March 31, 2000 is
allocated as follows:
Depreciation expensed in Income Statement $35,504
Depreciation allocated to Inventory-Work
in Process 0
-------
Total Addition to Accumulated Depreciation $35,504
=======
NOTE 5. LONG-TERM DEBT
On September 6, 1999, the Company entered into a securities subscription
agreement in which the Company agreed to sell a series of debentures to BVII
Holdings, L.L.C. The debentures sold were titled P.D.C. Innovative Industries,
Inc. 8% Series A Senior Subordinated Convertible Redeemable Debentures, and the
total amount sold under this agreement was $480,000. No payments are to be made
prior to the maturity date. The maturity date of the debentures is September 6,
2001, at which time the full principal amount of $480,000 plus accrued interest,
calculated at 8% per annum, is fully due.
At the sole option of BVII Holdings, L.L.C., the holder may convert all or any
amount of the principal face amount of the debenture then outstanding into
freely tradeable shares of the Common Stock of the Company at a conversion price
for each share of Common Stock equal to 75% of the closing bid price of the
common stock for the trading day immediately preceding the date of conversion.
During the year ended December 31, 1999, debentures totaling $50,000 were
converted into 383,993 shares of the Common Stock of the Company. Subsequent to
December 31, 1999, and prior to February 29, 2000, all of the remaining
debentures were also converted into 7,095,791 shares of the Common Stock of the
17
<PAGE> 18
P.D.C. INNOVATIVE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Company. As of February 29, 2000, all of the debentures were fully retired, and
a total of 7,479,784 shares of the Common Stock of the Company were issued for
the retirement of those debentures.
NOTE 6. STOCKHOLDERS' STOCK TRANSACTIONS
The Company's common stock which was authorized as of December 31, 1997, was
1,000 shares at no par value, of which 1,000 shares were issued to and held by
two shareholders. After the merger with Kenneth C. Garcia, Inc., the authorized
shares are 50,000,000 with a $.001 par value.
On January 21, 1999, the Company engaged in a 40 to 1 reverse split of its
common stock. On that date, 17,068,098 shares of common stock were exchanged for
426,702 shares. After the reverse split, the authorized shares remained
50,000,000, all with a $.001 par value.
On April 5, 1999, the Company entered into an agreement with Sterile-Pro,
Incorporated, in order to finish the prototype for Hypo Sterile 2000, the
sterilization container designed to effectively reduce infectious accidents from
injector devices and detoxify the remains of contaminated product from medical
industry treatment of patients with high profile diseases including AIDS,
Tuberculosis and Hepatitis. As part of the agreement, the Company received
500,000 shares (or 100%) of the common stock of Sterile-Pro, Incorporated and
Sterile-Pro, Incorporated received 2,000,000 shares of the common stock of the
Company.
The following is a summary listing of the shareholders of the Company as of
December 31, 1999:
<TABLE>
<CAPTION>
OUTSTANDING AMOUNT
SHARES ISSUED CONTRIBUTED
------------- -----------
<S> <C> <C>
Sterile-Pro, Incorporated 2,000,000 $ -0-
Prime Management 300,000 233,100
Issued for the retirement of Senior
Subordinated Debentures (Note 5) 7,479,784 480,000
All other shareholders 6,290,426 2,221,912
---------- ----------
Total Amount of Contribution 16,070,210 $2,935,012
========== ==========
Capital Stock, at $.001 par value $ 16,070
Paid in Capital 2,918,942
----------
Total Amount of Capital Stock and Paid in Capital $2,935,012
==========
</TABLE>
18
<PAGE> 19
P.D.C. INNOVATIVE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. COMMON SHARE LOSS COMPUTATION
After merger and after full redemption of Senior
Debentures (Note 5), common share loss
computation
Based on 16,070,210 shares $ (.0075) per share
NOTE 8. JUDGMENT SETTLEMENT
On November 17, 1999, the Company entered into a settlement agreement, which
settled a legal action brought by the Company against Power Media Group, Inc.
and other related parties. In the agreement, Power Media agreed to make payments
totaling $75,000 as follows: the first payment of $10,000 to be paid within five
days of the ratification of the agreement by the Court, and ten (10) subsequent
monthly payments of $6,500. The Company received the first payment of $10,000 on
December 3, 1999. The balance still to be received under the terms of the
settlement as of March 31, 2000 is $45,500.
NOTE 9. FINAL JUDGMENT OUTSTANDING
On July 8, 1999, the Court entered a Summary Final Judgment in favor of the
Company against Kahn Noonien Singh Management, L.L.C., a Florida corporation, in
the amount of $492,500 plus $56,496 in statutory interest plus reasonable
attorney fees. The judgment assessed by the Court against Kahn Noonien Singh
Management related to wrongful conversion of stock, breach of oral contract, and
fraud.
Legal counsel for the Company has filed discovery motions and is otherwise
engaged in attempting to locate any assets of Kahn Noonien Singh Management,
which would be available for payment of this judgment.
Due to the questionable collectibility of this judgment, the amount of the
judgment has not been reflected in the attached financial statements.
NOTE 10. LITIGATION
The Company is, from time to time, involved in litigation relating to claims
arising out of its operations in the ordinary course of business. There are no
claims that were outstanding as of the date of these financial statements that
would have a material adverse impact on its financial condition, results of
operations, or cash flows.
19
<PAGE> 20
P.D.C. INNOVATIVE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. COMMITMENTS
The Company has entered into a business lease agreement with L.A.W. Properties -
Coral Springs L.C. for office and manufacturing space at 3701 NW 126th Avenue,
Coral Springs, FL. The Company has committed to a two-year lease with a base
rent of $5,300 per month with a cost of living adjustment over the term of the
lease. Consequently, the Company has committed to a minimum of $127,200 over the
two-year period under this lease agreement.
20
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 174,043
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 770,773
<CURRENT-ASSETS> 944,416
<PP&E> 1,302,324
<DEPRECIATION> 300,131
<TOTAL-ASSETS> 2,010,940
<CURRENT-LIABILITIES> 236,855
<BONDS> 0
0
0
<COMMON> 16,070
<OTHER-SE> 2,918,942
<TOTAL-LIABILITY-AND-EQUITY> 2,010,940
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 121,220
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (121,220)
<INCOME-TAX> 0
<INCOME-CONTINUING> (121,220)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (121,220)
<EPS-BASIC> (0.75)
<EPS-DILUTED> (0.75)
</TABLE>
