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
EXCHANGE ACT OF 1934 for the quarterly period ended: September 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from _____to______
Commission file number: 0-27157
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P.D.C. INNOVATIVE INDUSTRIES, INC.
(Name of small business issuer in its charter)
Nevada 65-0789306
----------------------- -------------------------
(State of incorporation) (IRS employer Ident. No.)
3701 N.W. 126th Ave, Bay 5, Coral Springs, FL 33065
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(address of principal office) (Zip Code)
Registrant's telephone number: (954) 341-0092
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes No X
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The number of shares outstanding of each of the issuer's classes of equity
as of September 30, 2000: 79,160,177 shares of Common Stock, $.001 par value.
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P.D.C. INNOVATIVE INDUSTRIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
TABLE OF CONTENTS
FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheet (Unaudited)
as of September 30, 2000 Page 3
Condensed Consolidated Statements of Operations (Unaudited)
for the three and nine months ended September 30, 2000 and
1999 and from inception to September 30, 2000 Page 4
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the nine months ended September 30, 2000 and 1999
and from inception to September 30, 2000 Page 5
Notes to Consolidated Financial Statements Page 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings Page 9
Item 2. Changes in Securities Page 9
Item 3. Defaults Upon Senior Securities Page 9
Item 4. Submission of Matters to a Vote of Security Holders Page 9
Item 5. Other Information Page 9
Item 6. Exhibits and Reports on Form 8-K. Page 11
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P.D.C. INNOVATIVE INDUSTRIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
(UNAUDITED)
ASSETS
------
Current assets:
Cash $ 281,781
Other receivables 2,257
Inventories 826,777
------------
Total current assets 1,110,815
------------
Property and equipment, net 983,139
Patent license agreement 1,440,000
Other assets 20,010
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$ 3,553,964
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LIABILITIES AND STOCKHOLDERS EQUITY
-----------------------------------
Current Liabilities:
Loans payable $ 190,000
Shareholder loans 45,887
------------
Total current liabilities 235,887
------------
Convertible debentures 476,615
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Stockholders' equity:
Common stock 79,160
Additional paid-in capital 4,574,602
Deficit accumulated during development stage (1,802,150)
------------
2,851,612
Less - stock subscription receivable (10,250)
------------
2,841,362
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$ 3,553,964
============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 3
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<TABLE>
<CAPTION>
P.D.C. INNOVATIVE INDUSTRIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
NINE MONTHS ENDED THREE MONTHS ENDED FROM INCEPTION TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
-------------- ------------- -------------
2000 1999 2000 1999 2000
------------ ---------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C>
Operating expenses:
Salaries and related benefits $ 200,050 $ 145,885 $ 96,717 $ 36,558 $ 555,793
Professional fees and commissions 165,190 53,150 139,835 20,169 354,948
Promotion costs 98,000 98,000 98,000
Travel and entertainment 21,765 22,706 8,128 4,556 55,067
Administrative expenses 53,802 31,782 21,709 15,894 125,434
Auto expenses 20,994 16,163 8,657 4,492 67,056
Equipment maintenance 17,693 7,433 12,936 639 61,172
Rent 50,562 49,392 16,854 16,854 112,407
Other 47,883 36,817 24,624 5,417 189,438
Depreciation 86,504 10,904 25,500 5,452 182,835
------------ ---------- ------------ ---------- -------------
Total operating expenses 762,443 374,232 452,960 110,031 1,802,150
------------ ---------- ------------ ---------- -------------
Net loss $ (762,443) $(374,232) $ (452,960) $(110,031) $(1,802,150)
============ ========== ============ ========== =============
Net loss per share information:
Basic:
Net loss per share $ (.03) $ (.88) $ (.01) $ (.26) $ (.29)
============ ========== ============ ========== =============
Weighted average number of common shares 26,473,672 426,702 46,898,867 426,702 6,174,378
============ ========== ============ ========== =============
Diluted:
Net loss per share $ (.03) $ (.88) $ (.01) $ (.26) $ (.29)
============ ========== ============ ========== =============
Weighted average number of common shares 26,473,672 426,702 46,898,867 426,702 6,174,378
============ ========== ============ ========== =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 4
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<TABLE>
<CAPTION>
P.D.C. INNOVATIVE INDUSTRIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED FROM INCEPTION
SEPTEMBER 30, TO SEPTEMBER 30,
------------ ---------------
2000 1999 2000
---------- ---------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(762,443) $(374,232) $(1,802,150)
Changes in assets and liabilities 210,998 346,053 (326,197)
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Net cash used in operating activities (551,445) (28,179) (2,128,347)
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Cash flows from investing activities:
Purchase of equipment (39,061) - (1,334,271)
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Net cash used in investing activities (39,061) - (1,334,271)
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Cash flows from financing activities:
Proceeds from loans and convertible debentures 758,500 - 809,387
Proceeds from sale of stock - 158,537 2,935,012
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Net cash provided by financing activities 758,500 158,537 3,744,399
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Net increase (decrease) in cash and cash equivalents 167,994 130,358 281,781
Cash and cash equivalents, beginning of period 113,787 11,770 -
---------- ---------- ------------
Cash and cash equivalents, end of period $ 281,781 $ 142,128 $ 281,781
========== ========== ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Page 5
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P.D.C. INNOVATIVE INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three and nine
month periods ended September 30, 2000 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2000
2. GOING CONCERN
P.D.C. Innovative Industries, Inc. (PDCI) is currently a development stage
company and our continued existence is dependent upon our ability to resolve our
liquidity problems, principally by obtaining additional debt and/or equity
financing. PDCI has yet to generate and internal cash flow, and until sales of
our product begin, we are totally dependent upon debt and equity funding.
3. INVENTORIES
Inventories are comprised primarily of finished goods, which are available for
sale, and are stated at the lower of cost or market, determined on the FIFO
method.
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THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS. ACTUAL RESULTS AND EVENTS
COULD DIFFER MATERIALLY FROM THOSE PROJECTED AS A RESULT OF THE RISKS AND
UNCERTAINTIES SET FORTH UNDER THE CAPTION "CAUTIONARY STATEMENTS REGARDING
FORWARD-LOOKING STATEMENTS", IN OUR FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31,
1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
P.D.C. Innovative Industries, Inc. is a developmental stage company, which,
since inception, has been engaged in the research and development of various
products that it plans on bringing to the marketplace during its fiscal year
ending December 31, 2000. It has not yet engaged in any formal marketing or
distribution of its products and therefore has had no revenue from its
operations.
We have incurred net losses applicable to common shareholders since
inception through September 30, 2000 of approximately $1,802,000. We anticipate
that losses from operations will continue for at least the next year, primarily
due to an anticipated increase in marketing and manufacturing expenses
associated with the commercialization of our products. There can be no
assurances that once these products achieve market acceptance, that sufficient
revenues will be generated from their sales to allow us to operate profitably.
RESULT OF OPERATIONS
Three months ended September 30, 2000 compared to the three months ended
September 30, 1999.
The Company's operating expenses for the three months ended September 30,
2000, were $452,960, representing an increase of $344,929 for the corresponding
period for 1999. The major reasons for the overall increase in costs were a
result of increases in salaries and related benefits ($60,159), professional
fees and commissions ($119,666), promotion costs ($98,000), administrative
expenses ($5,815) and depreciation expense ($20,048). These cost increases are
associated with and primarily a result of the Company becoming a reporting
company with the Securities and Exchange Commission, and the Company expanding
the administrative support in preparation of the sales of their products.
Nine months ended September 30, 2000 compared to the nine months ended September
30, 1999.
The Company's operating expenses for the nine months ended September 30,
2000, were $762,443, representing an increase of $388,211 for the corresponding
period for 1999. The major reasons for the overall increase in costs were a
result of increases in salaries and related benefits ($54,165), professional
fees and commissions ($112,040), promotion costs ($98,000), administrative
expenses ($22,020) and depreciation expense ($75,600). These cost increases are
associated with and primarily a result of the Company becoming a reporting
company with the Securities and Exchange Commission, and the Company expanding
the administrative support in preparation of the sales of their products.
Page 7
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BALANCE SHEET DATA
Our combined cash and cash equivalents totaled $281,781 as of September 30,
2000. This is an increase of $167,994 from $113,787 for the year ended December
31, 1999. As of September 30, 2000, the working capital of the Company amounted
to $874,928.
We do not expect to generate a positive internal cash flow for at least the
next twelve (12) months due to the expected increase in spending for research
and development and the costs associated commercializing our initial product.
Property and Equipment was valued at $983,139, net as of September 30,
2000. The overall decrease of $47,443 from the year ended December 31, 1999 is
due primarily to depreciation recorded for the second quarter.
LIQUIDITY AND CAPITAL RESOURCES
We are currently a development stage company and our continued existence is
dependent upon our ability to resolve our liquidity problems, principally by
obtaining additional debt and/or equity financing. We have yet to generate an
internal cash flow, and until the sale of our product begins, we are totally
dependent upon debt and equity funding. In the event that we are unable to
obtain debt or equity financing or we are unable to obtain such financing on
terms and conditions acceptable to us, we may have to cease or severely curtail
our operations. This would materially impact our ability to continue as a going
concern.
The Company is presently operating by obtaining debt capital and loans from
its shareholders until such time that it is able raise additional equity
capital, or begin the sales of its products and generate an internal cash flow.
At our present "burn rate", which is $55,000 per month, we will be able to
satisfy our cash requirements until February 2001. 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.
Page 8
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On September 9, 1999, a lawsuit, Fernando Bugallo vs. P.D.C. Innovative
Industries and David Sowers, (Case No: 99015686) was filed in the Circuit Court
of the 17th Judicial Circuit in and for Broward County Florida. The action is
for breach of contract, specific performance, and rescission of contract. Mr.
Bugallo has requested damages, which exceed $15,000. Mr. Bugallo has alleged
that P.D.C. and Mr. Sowers breeched an agreement to (1) jointly research,
develop, manufacture, and sell a variety of devices and to split all profits and
loses on a 50%-50% basis and (2) breeched an agreement for the purchase and sale
of business assets owned by Mr. Bugallo. P.D.C. intends to vigorously defend
this action, and has filed a counter-claim against Mr. Bugallo for fraud and has
demanded damages in excess of $195,000. The suit is in the discovery stage. At
present, we are unable to predict the outcome this lawsuit.
On October 12, 2000, P.D.C. obtained an Ex Parte Temporary Injunction Order
in the Circuit Court of the 17th Judicial Circuit in and for Broward County
Florida against David Nakhon, alias Marketwizwanabe$$$$. The injunction stems
from Mr. Nakhon posting defamatory messages on the Raging Bull message board
about the company and its officers and directors. P.D.C. has established a
policy to pursue all of its legal remedies against persons posting fraudulent
and/or defamatory information with regard to the Company or its officers and
directors on the Internet. In light of this, P.D.C. intends to file suit
against Mr. Nakhon in the near future.
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.
On July 6, 2000, P.D.C. entered into a Plan of Merger with Sterile-Pro,
Inc., with the Company being the survivor. Sterile-Pro was a Florida
corporation whose principal asset was the right to develop and market a device
known as the "Hypo-Sterile 2000" pursuant to a Licensing Agreement dated June 8,
2000, with Mr. David Sowers, who is the CEO of P.D.C. and who is the person who
applied for and owns the patent rights to the Hypo-Sterile 2000.
The Hypo-Sterile 2000 is a device designed to dispose of contaminated
hypodermic syringes and other intrusive medical instruments at the site of use,
i.e., hospital, doctor's office, lab, etc. The device is designed to reduce, in
an enclosed environment, the entire instrument to small, sterile particles,
which can be disposed of as conventional trash.
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The purpose of the merger was to create a business environment pursuant to
which the Hypo-Sterile 2000 can be more efficiently produced and sold.
Sterile-Pro did not have manufacturing capabilities, the Company does.
Therefore, the merger of the two entities combined a valuable asset of one
constituent (the development and marketing rights owned by Sterile-Pro) with a
valuable asset of the other constituent (the manufacturing capacity of the
Company) into one entity, thereby providing for potentially more efficient and
therefore profitable sales of the device.
In addition, prior to the merger, Sterile-Pro issued its 8% Series A
$1,000,000.00 Senior Subordinated Convertible Redeemable Debenture due July 5,
2002 (the "Sterile-Pro Debenture"), together with underlying shares of
Sterile-Pro's common stock, Par Value $0.001, into which the Sterile-Pro
Debenture was convertible from time to time. After deducting the expenses of
the investment, the net proceeds received and to be received by Sterile-Pro will
aggregate approximately $795,000. The first proceeds were received on July 12,
2000.
Pursuant to the Plan of Merger, the rights and obligations of Sterile-Pro
with respect to the Sterile-Pro Licensing Agreement and the Sterile-Pro
Debenture will inure to the benefit of and be binding upon the Company.
Prior to the merger Mr. David Sowers, his wife, Sandra, and his son Vernon
Leroy, owned 27,010,000 shares of Sterile-Pro common stock. Prior to the
merger, they owned an aggregate of 14,500,000 shares of the Company's Common
Stock. After the merger, they owned an aggregate of 45,000,000 shares of the
Company's Common Stock, or 45% of the total number of shares authorized.
As noted above, Sterile-Pro and Mr. Sowers entered into a Licensing
Agreement to enable Sterile-Pro to begin to develop and sell the Hypo-Sterile
2000. Mr. Sowers also holds the ownership rights to various other products, and
on June 8, 2000, he and the Company entered into a separate Licensing Agreement
pursuant to which the Company will develop, manufacture, and distribute these
products, which consist of:
- POCKET PITCH DIAL LEVEL, a level with an adjustable center level dial
and bulb, 4" fixed length and weighs 6 ounces.
- THE POCKET LEVEL, a level with a fixed center level bulb, 4" fixed
length and weighs 3 ounces
- THE 18" DIAL LEVEL, a level with a fixed center level dial and bulb,
18" collapsed length that extends to 24" and 30", weighs 40 ounces.
- THE 18" STANDARD LEVEL, a level with an adjustable center level dial
and bulb, 18" collapsed length that extends to 24" and 30", weighs 26
ounces.
- THE SQUARING LEVEL, similar in appearance to a traditional framing
square, 90 degree arms extend to 12" and can be extended to 12" x 18"
and 18" x 18" squaring levels on both ends, 45 degree squaring level
at arm joint, weighs 32 ounces,
- THE PERFECT SEAL, an innovative heat/cool air conserving door seal.
- THE FLUSH MIZER, a water saving valve for toilet tanks -
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In consideration for his grant to the Company of this license, the Company
issued 12,000,000 shares of its Common Stock to Mr. Sowers. In addition, Mr.
Sowers stands to receive /the following royalties, based upon the net selling
price of all products and goods in which the Patents is used, before taxes and
after deducting the direct cost of the product and commissions or discounts
paid.
GROSS SALES PERCENTAGE
----------- ----------
$0 to $1,999,999 in gross sales 10%
$2,000,000 to $3,999,999 in gross sales 9%
$4,000,000 to $6,999,999 in gross sales 8%
$7,000,000 to $9,999,999 in gross sales 7%
Greater than $10,000,000 in gross sales 6%
On July 6, 2000, Article 3 of the Company's Articles of Incorporation
were amended to increase the its authorized capital stock from 50,000,000 to
100,000,000 shares of Common Stock, Par Value $0.001 per share.
On September 14, 2000, P.D.C. appointed Richard D. Seay, Esq., as General
Counsel and Director of Operations. Mr. Seay is a member of the Florida Bar and
has practiced Business, Corporate, and Commercial law in South Florida for the
past 12 years.
ITEM 6. EXHIBITS:
(a) (10.1) Exclusive Patents License
(27.1) Financial Data Schedule
(b) Reports on Form 8-K
Merger transaction filed July 26, 2000
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
P.D.C. INNOVATIVE INDUSTRIES, INC. (Registrant)
Date: November 10, 2000 By /s/ David Sowers
---------------------------------
David Sowers, CEO
(Principal Executive Officer)
By /s/ Sandra Sowers
---------------------------------
Sandra Sowers, President and CFO
(Principal Financial Officer)
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