Three Months Ended March 31, 2010
The Company
’
s revenues in the quarter ended March 31, 2010 increased by $17,108 over the same quarter of the prior year. This sales increase resulted from the commencement of sales in China.
Our total general and administrative expenses increased by 279.8% in the 2010 quarter as a result primarily of Loss on Stock Issuances, increased Employee and Consultant Expenses and Selling and Marketing Expenses. The Loss on Stock Issuances of $170,807 resulted from our creditors demanding a $.30 per share conversion price on their debt and accounts payable conversion in March 2010 instead of the $.40 per share trading price. See Note 5 of the Notes to Financial Statements. Our Employee and Consultant Expenses more than tripled in the 2010 quarter as a result of hiring our first investor relations consultant in the 2010 quarter. Our Employee and Consultant Expenses will likely increase as we expand the shipment of our products to China, Europe and the Caribbean in the future, assuming we can obtain sufficient working capital. We will likely commence paying our officers and Directors compenstion some time in the future. Our Selling and Marketing Expenses increased during the 2010 quarter when we recorded a promotional expense from 2007 in March 2010. Our Selling and Marketing Expenses will likely increase as we expand sales of our products to China, Europe and the Caribbean in the future. We are likely to incur additional Research and Development Expenses in 2010 as we apply to the FDA for our clinical study protocols. There is no assurance that we will ever be profitable.
Liquidity and Capital Resources
We suffered a severe liquidity shortage in fiscal years 2009 and 2010. During the nine months ended March 31, 2010, we have borrowed a total of approximately $395,000. These loans bear interest at annual rates from 10% to 12%. Our interest expense during the quarter ended March 31, 2010 increased by 203.6% ($28,246) from the prior year as a result of receiving new loans during the quarter. During March, April and May, 2010, we repaid approximately $528,000 of debt and accounts payable by issuing common stock to some creditors. Without substantial funding in the very near future, our liquidity shortage will become critical. We are hopeful we will be able to obtain substantial funding in the near term and the long term, but we presently have no agreements or arrangement to obtain any such funds. (See "Part II, Item 1. Legal Proceedings" and "Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds" below.)
SUNRIDGE INTERNATIONAL, INC.
The consolidated financial statements contained in this Form 10-Q have been prepared assuming we will continue to operate and do not include any adjustments that might be necessary if we are unable to continue as a going concern. Our independent registered public accountants issued a going concern qualification to their audit report on our consolidated financial statements for the fiscal year ended June 30, 2009 and that qualification would have been extended through the quarter ended March 31, 2010.
Our French distributor has completed a clinical study of French PNT patients which we believe will be an acceptable substitute for the Canadian clinical study we had previously planned. In the future, we are hopeful we can negotiate for a potential U.S. distributor of the PNT product to finance the U.S. clinical study required for FDA approval. If we are required to fund our U.S. clinical study, the cost could approach $5 Million. Without FDA approval our revenues will be totally dependent on foreign sales.
From January 1, 2010 to March 31, 2010, G. Richard Smith, loaned the Company an additional $5,350 and was repaid $24,700. This debt bears an interest rate of 12% per annum and is due on demand. At March 31, 2010, G. Richard Smith was owed $178,401 by the Company.
During the quarter ended March 31, 2010, Gary R. Smith, our Chief Financial Officer and Treasurer, was repaid his loans of $12,500 and accrued interest thereon. On March 31, 2010, The Smith Foundation, Inc., a charitable foundation of which G. Richard Smith, our President and a Director, is President, was issued 49,600 shares of restricted common stock in conversion of $12,000 in loans and accrued interest thereon. On March 31, 2010, John Sharkey, a Director of the Company, was issued 97,121 shares of restricted common stock in conversion of $29,136 of expense he incurred on behalf of the Company in 2007.
On April 18, 2008, Marston & Webb, Inc. loaned Ophthalmic International $20,000. This loan bears an interest rate of 12% per annum and is due on demand. On September 29, 2009, Victor Webb, a principal on Marston & Webb, Inc., became a Director of the Company. At March 31, 2010, Marston & Webb, Inc. was issued 79,671 shares of restricted common stock for the $20,000 of principal and $3,901 of accrued interest thereon.
Between January 1, 2010 and March 31, 2010, we received loans in the total amount of $356,305 from five non-affiliated sources and our President. $190,500 of this amount was used to pay off the debt owed to third parties and Theodore Tsagkris, our prior President, Secretary, Treasurer, as required by the agreement between Ophthalmic International, Inc. and the Company. After the payments of these debts, Mr. Tsagkris resigned as a Director of the Company, effective February 11, 2010.
SUNRIDGE INTERNATIONAL, INC.
Nine Months Ended March 31, 2010
The Company’s revenues in the nine-month period ended March 31, 2010 were $25,761, a decrease of $54,362 from the prior year period. This sales decrease resulted from the lack of working capital for marketing efforts and an economically depressed European market for our product. Our gross margin increased slightly in the 2010 period as a percentage of revenues.
Our total general and administrative expenses increased by over 316% in the nine-month period ended March 31, 2010 in comparison to the 2009 period as a result primarily of Reorganization Costs, Loss on Stock Issuances, increased Employee and Consultant Expenses, and Legal and Professional Fees. The Reorganization Costs were incurred as a result of the Company's acquisition of Ophthalmic International, Inc. in October 2009
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The Loss on Stock Issuances of $170,807 resulted from our creditors demanding a $.30 per share conversion price on their debt and accounts payable conversion in March 2010 instead of the $.40 per share trading price. See Note 5 of the Notes to Financial Statements.
Our Employee and Consultant Expenses increased by more than 600% in the 2010 period over the 2009 period as a result of the hiring of our European consultant in the second
quarter of our 2010 fiscal year. Our Employee and Consultant Expenses will likely increase as we expand the shipment of our products to China, Europe and the Caribbean in the future, assuming we can obtain sufficient working capital.
We will likely commence paying our officers and Directors compensation some time in the future. Our Legal and Professional Fees increased in the 2010 period because of the acquisition of Ophthalmic International, Inc. in October 2009. Our Selling and Marketing Expenses will likely increase as we expand sales of our products to China, Europe and the Caribbean in the future. We are likely to incur
additional Research and Development Expenses in 2010 as we apply to the FDA for our U.S. clinical study protocols. There is no assurance that we will ever be profitable.
In the nine-month period ended March 31, 2010, our interest expense increased by 74.8% over the same period of the prior year as a result of receiving about $395,000 of additional debt during the 2010 fiscal year.
