- Quarterly Report (10-Q)

 

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

þ		QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended December 31, 2009
o		TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from __________ to __________

 

Commission file number:   001-31669

 

SUNRIDGE INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

 

Nevada		98-0348905
(State or other jurisdiction of		(IRS Employer Identification No.)
incorporation or organization)

 

16857 E. Saguaro Blvd.

Fountain Hills, Arizona 85268

(Address of principal executive offices)

 

[phone]

(Registrant ’ s telephone number, including area code)

 

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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   þ   No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

 

Large accelerated filer     o	Accelerated filer     o
Non-accelerated filer     o	Small reporting company     þ

 

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).  Yes  o  No þ

 

As of February 16, 2010, 40,000,000 shares of the issuer’s common stock were outstanding.

 

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SUNRIDGE INTERNATIONAL, INC.

 

Table of Contents

 

 

		Page
Forward-Looking Statements		3
PART I.  FINANCIAL INFORMATION
Item 1.	Financial Statements	4
	Consolidated Balance Sheets as of December 31, 2009 (Unaudited) and June 30, 2009	4
	Unaudited Consolidated Statements of Operations for the Six Months ended December 31, 2009 and 2008	5
	Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the Six Months ended December 31, 2009	6
	Unaudited Consolidated Statements of Cash Flows for the Six Months ended December 31, 2009 and 2008	7
	Condensed Notes to the Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	17
Item 4T.	Controls and Procedures	18
PART II.  OTHER INFORMATION
Item 1.	Legal Proceedings	19
Item 1A.	Risk Factors	19
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 3.	Defaults Upon Senior Securities	19
Item 4.	Submission of Matters to a Vote of Security Holders	19
Item 5.	Other Information	19
Item 6.	Exhibits	20
Signatures		21

 

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SUNRIDGE INTERNATIONAL, INC.

 

FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and should be read in conjunction with the Financial Statements of SunRidge International, Inc. (the “Company” or “SunRidge”).  Such statements are not historical facts and reflect our current views regarding matters such as operations and financial performance. In general, forward-looking statements are identified by such words or phrases as “expects,” “anticipates,” “believes,” “could,” “approximates,” “estimates,” “may,” “intends,” “predicts,” “projects,” “plans,” or “will,” or the negative of those words or other terminology. These statements are not guarantees of future performance and involve certain  known and unknown inherent risks, uncertainties and other factors that are difficult to predict; our actual results could differ materially from those expressed in these forward-looking statements.  The cautionary factors, risks and other factors presented should not be construed as exhaustive.   Other risks not presently known to us, or that we currently believe are immaterial, could also adversely affect our business, financial condition or results of operations.

 

Each forward-looking statement should be read in context with, and with an understanding of, the various disclosures concerning our business made elsewhere in this Quarterly Report, as well as other public reports filed by us with the United States Securities and Exchange Commission. Readers should not place undue reliance on any forward-looking statement as a prediction of actual results of developments. Except as required by applicable law or regulation, we undertake no obligation to update or revise any forward-looking statement contained in this Quarterly Report.

 

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PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

SUNRIDGE INTERNATIONAL, INC. AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

December 31, 2009 (Unaudited) and June 30, 2009

 

		12/31/2009				6/30/2009
ASSETS
CURRENT ASSETS
Cash & Cash Equivalents		$	298			$	–
Inventory			1,416				3,556
TOTAL CURRENT ASSETS			1,714				3,556
Property and Equipment-Net			3,270				3,669
Deposits			–				4,520
TOTAL ASSETS		$	4,984			$	11,745
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES
Notes payable - related parties		$	435,246			$	289,726
Notes payable			223,500				195,300
Cash overdraft			–				2,463
Advance payable			5,300				–
Accounts payable			447,605				101,452
Accrued interest			86,727				61,553
TOTAL LIABILITIES			1,198,378				650,494
Commitments			–				–
STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred Stock - $0.0001 par value; 50,000,000 shares authorized, none issued or outstanding			–				–
Common Stock -  $0.001 par value; 500,000,000 shares authorized, 40,000,000 and 40,000,000 shares issued and outstanding, respectively			40,000				40,000
Additional Paid-In Capital			12,386,970				12,386,970
Accumulated Deficit			(13,620,364	)			(13,065,719	)
TOTAL STOCKHOLDERS ’ EQUITY (DEFICIT)			(1,193,394	)			(638,749	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)		$	4,984			$	11,745

 

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

 

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SUNRIDGE INTERNATIONAL, INC. AND SUBSIDIARIES

 

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Six and Three Months Ended December 31, 2009 and 2008

 

		Six Months Ended								Three Months Ended
		12/31/2009				12/31/2008				12/31/2009				12/31/2008
PRODUCT REVENUES		$	7,000			$	78,470			$	–			$	28,839
Cost of Product Revenues			2,270				25,133				–				13,233
GROSS PROFIT			4,730				53,337				–				15,606
GENERAL & ADMINISTRATIVE EXPENSES
Employees and consultants expenses			185,600				23,500				185,000				6,500
Depreciation			399				399				200				200
Reorganization costs			189,673				–				13,150				–
Selling and marketing expenses			–				17,045				–				10,045
Legal and professional fees			108,673				8,002				72,584				7,002
Rent expense			32,920				27,120				13,560				13,560
Telephone and utilities			1,839				4,976				593				1,312
Office expenses			1,730				22,666				1,484				10,610
Freight			107				798				93				–
Insurance			5,345				14,416				5,230				7,781
Other general & administrative expenses			2,114				1,037				1,366				671
TOTAL GENERAL & ADMINISTRATIVE EXPENSES			528,400				119,959				293,260				57,681
LOSS FROM OPERATIONS			(523,670	)			(66,622	)			(293,260	)			(42,075	)
OTHER INCOME (EXPENSE)
Other income			–				1,754				–				745
Interest expense			(30,975	)			(27,931	)			(15,810	)			(14,495	)
			(30,975	)			(26,177	)			(15,810	)			(13,750	)
NET LOSS		$	(554,645	)		$	(92,799	)		$	(309,070	)		$	(55,825	)
Basic and diluted net loss per share		$	(0.01	)		$	(0.00	)		$	(0.01	)		$	(0.00	)
															–
Weighted average shares outstanding			40,000,000				40,000,000				40,000,000				40,000,000

 

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

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SUNRIDGE INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the Six Months Ended December 31, 2009

 

 

										Additional								Stockholders’
		Common Stock								Paid-In				Accumulated				Equity
		Shares				Par Value				Capital				Deficit				(Deficit)
BALANCE AT JULY 1, 2008			19,450,000			$	19,450			$	12,407,520			$	(12,828,816	)			(401,846	)
Effect of recapitalization (See Note 1):
Stock Retired			(12,500,000	)			(12,500	)			12,500				–				–
Issuance of Common Stock			33,050,000				33,050				(33,050	)			–				–
BALANCE  AT JULY 1, 2008
RECAPITALIZED			40,000,000				40,000				12,386,970				(12,828,816	)			(401,846	)
Net loss			–				–				–				(236,903	)			(236,903	)
BALANCE AT JUNE 30, 2009			40,000,000				40,000				12,386,970				(13,065,719	)			(638,749	)
Net loss			–				–				–				(554,645	)			(554,645	)
BALANCE AT DECEMBER 31, 2009			40,000,000			$	40,000			$	12,386,970			$	(13,620,364	)		$	(1,193,394	)

 

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

 

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SUNRIDGE INTERNATIONAL, INC. AND SUBSIDIARIES

 

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended December 31, 2009 and 2008

 

		Six Months Ended
		12/31/2009				12/31/2008
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss			(554,645	)			(92,799	)
Adjustments to reconcile net income to net c ash used by operating activities:
Depreciation			399				399
Reorganization costs			189,673				–
Changes in Assets and Liabilities:
Deposits			4,520				–
Inventory			2,140				11,027
Accounts receivable			–				(18,347	)
Accounts payable and advances			299,975				11,022
Accrued interest			25,174				18,027
NET CASH USED IN OPERATING ACTIVITIES			(32,764	)			(70,671	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment on Notes Payable, Related Party			(3,700	)			(24,400	)
Proceeds from borrowings, Related Party			11,025				60,000
Proceeds from borrowings			28,200				35,550
Overdraft repayment			(2,463	)			(410	)
NET CASH  PROVIDED BY FINANCING ACTIVITIES			33,062				70,740
Net change in cash and cash equivalents			298				69
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			–				–
CASH AND CASH EQUIVALENTS AT END OF PERIOD			298				69
Supplemental disclosure of cash flow information:
Cash paid during the six months for interest			5,801				9,904
Cash paid for income taxes			–				–

 

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

 

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SUNRIDGE INTERNATIONAL, INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Ophthalmic International, Inc. (“OI”) was incorporated in March 1997 in the state of Nevada. OI had been a wholly-owned subsidiary of Coronado Industries, Inc. until January 26, 2007, when OI and its subsidiaries were purchased from Coronado Industries, Inc. for cash and other consideration.

Tari, Inc. (“Tari”) was incorporated on May 2, 2001 under the laws of the State of Nevada and located in Toronto, Ontario, Canada.

In September 2009, Tari consummated an Agreement of Share Exchange and Plan of Reorganization (the “Agreement”) with OI. Pursuant to the Agreement, Tari agreed to issue an aggregate of 33,050,000 shares of its restricted common stock to the shareholders of OI in exchange for all the issued and outstanding common stock shares of OI.

The exchange of shares has been accounted for as a reverse acquisition in the form of a recapitalization with OI as the “accounting acquirer.” Prior to the acquisition, Tari changed its name to SunRidge International, Inc. (hereinafter referred to as “SunRidge” or the “Company”).  Following the acquisition, OI became the wholly-owned subsidiary of SunRidge.  SunRidge has adopted a fiscal year end of June 30. Operations after the acquisition will be based in Fountain Hills, Arizona, where the Company intends to manufacture and market a patented Vacuum Fixation Device and patented suction rings to major medical supply companies and health care providers throughout the world.  As a recapitalization the accompanying financial statements represent the activity of OI.

GOING CONCERN

The Company’s financial statements are presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Ophthalmic International, Inc. has not made an operating profit since 1996. Further, the Company has a working capital deficit of $(1,196,664) and a negative net worth of $(1,193,394) as of December 31, 2009.  As a result, the independent registered public accounting firm issued a going concern opinion on the financial statements of SunRidge for the fiscal year ended June 30, 2009.

 

The consolidated financial statements do not include any adjustments to reflect the possible future effects of the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the uncertainty of the Company’s ability to continue as a going concern

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SUNRIDGE INTERNATIONAL, INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

BASIS OF PRESENTATION

 

In the opinion of management, the accompanying consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) necessary to present fairly the Company’s financial position as of December 31, 2009 and the results of its operations, changes in stockholders’ deficit, and cash flows for the six months ended December 31, 2009. Although management believes that the disclosures in these consolidated financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities Exchange Commission.

 

The result of operations for the six months ended, December 31, 2009, are not necessarily indicative of the results that may be expected for the full year ending June 30, 2010. The accompanying consolidated financial statements should be read in conjunction with the more detailed consolidated financial statements, and the related footnotes thereto, filed with the Company’s current report on Form 8-K filed October 2, 2009.

PRINCIPLES OF CONSOLIDATION

 

The consolidated financial statements include the financial position, results of operations, cash flows and changes in stockholders’ equity (deficit) of the Company and its wholly-owned subsidiaries. All material intercompany transactions, accounts and balances have been eliminated.

 

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

CASH AND CASH EQUIVALENTS

Cash and cash equivalents are considered to be all highly liquid investments purchased with an initial maturity of three (3) months or less.

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SUNRIDGE INTERNATIONAL, INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

INVENTORIES

Inventories consist primarily of materials and parts and are stated at the lower of cost, as determined on a first-in, first-out (FIFO) basis, or market.

ACCOUNTS RECEIVABLE

The Company follows the allowance method of recognizing uncollectible accounts receivable.  The allowance method recognizes bad debt expense as a percentage of accounts receivable based on a review of the individual accounts outstanding and the Company’s prior history of uncollectible accounts receivable. As of December 31, 2009 the Company has no allowance for uncollectible accounts receivable, as the receivable balance is zero. The Company does not record interest income on delinquent receivable balances until it is received.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Maintenance and repairs that neither materially add to the value of the property nor appreciably prolong its life are charged to operations as incurred.  Betterments or renewals are capitalized when incurred. Depreciation is provided using accelerated methods over the following useful lives:

 

Office furniture & Equipment		5 – 7 Years
Machinery		5 – 7 Years
Leasehold Improvements		5 – 39 Years

 

LONG-LIVED ASSETS

We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.

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SUNRIDGE INTERNATIONAL, INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

DEFERRED INCOME TAXES

Deferred income taxes are provided on an asset and liability method, whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences.  Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

LOSS PER SHARE

Basic loss per share includes no dilution and is computed by dividing loss to common stockholders by the weighted average number of common shares outstanding for the period.  The effect of the recapitalization is included in all periods presented.  There are no dilutive securities outstanding as of December 31, 2009 or 2008.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying values of our financial instruments included in current assets and current liabilities approximated their respective fair values at each balance sheet date due to the immediate or short-term maturity of these financial instruments.  The fair value of long-term notes payable is based on current rates at which we could borrow funds with similar remaining maturities.

RECENT ACCOUNTING PRONOUNCEMENTS

With the exception of those discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements during the six months ended December 31, 2009, that are of significance, or potential significance, to us.

 

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SUNRIDGE INTERNATIONAL, INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

 

In October 2009, the FASB issued guidance on revenue recognition for multiple-deliverable revenue arrangements. The guidance is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010 and addresses how to separate deliverables and how to measure and allocate arrangement consideration to one or more units of accounting. The Company is currently assessing the impact of this guidance on its financial position and results of operations.

REVENUE RECOGNITION

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, our price is fixed or determinable, and collection is reasonably assured. We recognize revenue on our standard products when title passes to the customer upon shipment. The standard products do not have customer acceptance criteria. The Company has standard rights of return that are accounted for as a warranty provision. The Company does not have any price protection agreements or other post shipment obligations. For custom equipment where customer acceptance is part of the sales agreement,  revenue will be recognized when the customer has accepted the product. In cases where custom equipment does not have customer acceptance as part of the sales agreement, revenue will be recognized upon shipment, as long as the system meets the specifications as agreed upon with the customer. Certain transactions may have multiple deliverables, with the deliverables clearly defined. To the extent that the secondary deliverables are other than perfunctory, the Company will recognize the revenue on each deliverable as it is delivered, if separable, or on the completion of all deliverables, if not separable.

NOTE 3 – EQUITY

In September 2009 Tari, Inc. completed a five for one forward stock split which brought the shares outstanding of Tari, Inc. from 3,890,000 to 19,450,000. The five-for-one forward split has been accounted for retroactively for all periods presented.

The President of Tari, Inc. contributed 12,500,000 shares of common stock to the Company as part of the exchange of share with Ophthalmic International, Inc.

In September, 2009 Tari consummated an Agreement of Share Exchange and Plan of Reorganization (the “ Agreement ” ) with OI. Pursuant to the Agreement Tari agreed to issue an aggregate of 33,050,000 shares of its restricted common stock to all of the shareholders of OI in exchange for all the issued and outstanding common stock shares or OI.

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SUNRIDGE INTERNATIONAL, INC. AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 4 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events through February 22, 2010.

 

Between January 1, 2010 and February 5, 2010, we received loans in the total amount of $238,355 from two non-affiliated sources and our President. $190,005 of this amount was used to pay off the debt owed to third parties and Theodore Tsagkris, our prior President, Secretary, Treasurer and Director at December 31, 2009, 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.

 

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SUNRIDGE INTERNATIONAL, INC.

 

 

Item 2 .

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Overview

 

The following is a discussion of the financial condition of the Company as of December 31, 2009 and June 30, 2009, and results of operations of the Company as of and for the periods ended December 31, 2009 and 2008.  This discussion should be read in conjunction with the Financial Statements of the Company and the related notes included in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission ("SEC") on October 2, 2009. 

 

On September 5, 2009, we entered into an Agreement of Share Exchange and Plan of Reorganization (the “Share Exchange Agreement”) and consummated a share exchange (the “Share Exchange”) with Ophthalmic International, Inc. (“OI”), a Nevada corporation.  The closing date of the transaction was September 29, 2009 (the “Closing Date”) and resulted in the acquisition of OI (the “Acquisition”).  Pursuant to the terms of the Share Exchange Agreement, we acquired all of the outstanding capital stock of OI from the five OI shareholders, and the OI shareholders transferred and contributed all of their share interests in OI to us .  In exchange, we issued to the OI shareholders 33,050,000 shares, or approximately 82.6% of our common stock.  On the Closing Date, OI became our wholly owned subsidiary.

 

Ophthalmic International, Inc.

 

OI was founded in 1997 and until January 2007, was a subsidiary of Coronado Industries, Inc., a publicly traded company.  In January 2007, OI was acquired by G. Richard Smith, OI’s President and majority shareholder and former Chairman, Director and principal shareholder of Coronado Industries, Inc.  Since January 2007, OI has operated as a private company.  At one time OI attempted a merger with a public company, but the terms were unsatisfactory so the deal was not consummated and OI remained private.

 

Since 1997, Ophthalmic International, Inc. has manufactured and marketed a fixation device with a patented designed suction ring that treats Open Angle and Pigmentary glaucoma.

 

In the United States, glaucoma is the second leading cause of blindness affecting approximately 3,000,000 persons. Of those, about 60,000 are legally blind. If detected and treated early, glaucoma need not cause blindness or even severe vision loss. While there is no cure for glaucoma, we believe that our patented device and process provide an effective treatment for afflicted persons and that a significant global market for our patented process, equipment and rings currently exists. OI has not yet received FDA approval for sale of its products in the United States and at this time it appears OI’s sales in Europe and Canada will be negatively impacted until such FDA approval is obtained.

 

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SUNRIDGE INTERNATIONAL, INC.

 

 

Glaucoma may have many forms which cause or present a feature of progressive damage to the optic nerve due to increased pressure within the eyeball. As the optic nerve deteriorates, blind spots and patterns develop. If left untreated, the result may be total blindness. The space between the lens and the cornea in the eye is filled with a fluid called the aqueous humor. This fluid circulates from behind the colored portion of the eye (the iris) through the opening at the center of the eye (pupil) and into the space between the iris and cornea. The aqueous humor is produced constantly, so it must be drained constantly. The drain is at the point where the iris and cornea meet, known as the drainage angle, which directs fluid into a channel (Schlemm’s canal) that then leads it to a system of small veins outside the eye. When the drainage angle does not function properly, the fluid cannot drain and pressure builds up within the eye. Pressure also is exerted on another fluid in the eye, the vitreous humor behind the lens, which in turn presses on the retina. This pressure affects the fibers of the optic nerve, slowly damaging them. The result over time is a loss of vision.

 

Results of Operations

 

Three Months Ended December 31, 2009

The Company ’ s revenues in the quarter ended December 31, 2009 decreased by $28,839 and we had no sales during the quarter.  This sales decrease resulted from the lack of working capital for marketing efforts and an economically depressed European market for our product.      

 

In October 2009, we entered into an agreement with a consultant experienced in marketing medical equipment in Europe to continue his efforts to cause the national health care systems in France and Italy to provide payments to doctors in those countries who treat glaucoma patients with our PNT product.  Such a decision by the French and/or Italian national health care systems would provide a great stimulus to our marketing efforts in Europe.  We agreed to pay this consultant $180,000 plus expenses by February 1, 2010 in consideration for his past and future efforts on behalf of the Company.  As of February 16, 2010, we had not paid any monies to this consultant, although the contract has been expensed as of December 31, 2009.  We are hopeful that a positive decision by the French or Italian national health care systems will be forthcoming in the near future.

 

Our total general and administrative expenses increased dramatically in the 2009 quarter in comparison to the 2008 quarter as a result of the European consultant expense described above.  Legal and Professional Expenses increased dramatically during the 2009 quarter as a result of the reverse acquisition of SunRidge by Ophthalmic completed in September 2009.  Selling and Marketing Expenses decreased in the 2009 quarter from the 2008 quarter as a result of ceased product promotion activities in 2009. Insurance expenses decreased in the 2009 quarter from the 2008 quarter because we changed our products liability insurance carrier in 2009. Our Employees and Consultants Expenses may increase in 2010 as we commence paying salaries to our officers and hire additional personnel, assuming we can obtain sufficient working capital. 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.

 

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SUNRIDGE INTERNATIONAL, INC.

 

Liquidity and Capital Resources

We suffered a severe liquidity shortage in fiscal years 2008 and 2009. Through December 31, 2009, we have borrowed a total of approximately $659,000, including $277,051 from our President and his family.  These loans bear interest at annual rates from 12% to 18% and all of these loans are due on demand or prior to June 30, 2010. Our interest expense during the quarter ended December 31, 2009 increased by 10.9% ($3,044) from the prior year as a result of receiving new loans during the quarter.  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 "Subsequent Events" and "Part II Item 1. Legal Proceedings" below.)

 

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 December 31, 2009.

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 October 1, 2009 to December 31, 2009, G. Richard Smith, loaned the Company an additional $9,025.  This loan bears an interest rate of 12% per annum and is due on demand.  At December 31, 2009, G. Richard Smith was owed $195,051 by the Company and Gary R. Smith was owed $11,500.

 

As of June 30, 2009, Theodore Tsagkaris, our prior President, Secretary, and Treasurer and a Director at December 31, 2009, was owed $138,193 for advances to the Company and $30,000 for accrued management fees.  These debts are unsecured and are non-interest bearing.  The Share Exchange Agreement provides that these sums, and $21,812 of accounts payable owed to third parties, will be paid in three equal payments within four months of the closing of the Share Exchange Agreement.  The Share Exchange Agreement also provides that upon the payment in full of these Company debts, Mr. Tsagkaris will resign as a Director of the Company.  During the quarter ended December 31, 2009, no additional debt was accrued to Mr. Tsagkaris.

 

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 December 31, 2009, Marston & Webb, Inc. was owed $20,000 of principal and accrued interest thereon.

 

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SUNRIDGE INTERNATIONAL, INC.

 

Six Months Ended December 31, 2009

The Company’s revenues in the six-month period ended December 31, 2009 were $7,000, a decrease of $71,470 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 decreased only slightly in the 2009 period as a percentage of revenues.  

 

Our general and administrative expenses increased dramatically in the 2009 six-month period in comparison to the 2008 period  as a result of the reorganization costs of the reverse acquisition of SunRidge by Ophthalmic International in the first quarter of the year and the European consultant expense in the second quarter.  Employees and Consultants Expenses increased by $162,100 in the 2009 period as a result of the European consultant expense in the second quarter.  Legal and Professional Expenses increased dramatically during 2009 period as a result of the reverse acquisition of SunRidge by Ophthalmic completed in September 2009 and the subsequent SEC filing expenses.  Selling and Marketing Expenses decreased in the 2009 period from the 2008 period as a result of lack of working capital for marketing activities in 2009. Insurance expenses decreased in the 2009 period from the 2008  period because we changed our products liability insurance carrier in 2009.  Our Rent Expense increased during the 2009 period as a result of interest and penalty charges by our landlord for non-payment earlier in the year. Our Employees and Consultants Expenses may increase in 2010 as we commence paying salaries to our officers and hire additional personnel, assuming we can obtain sufficient working capital. 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.

Subsequent Events

Between January 1, 2010 and February 5, 2010, we received loans in the total amount of $238,355 from two non-affiliated sources and our President. $190,005 of this amount was used to pay off the debt owed to third parties and Theodore Tsagkris, our prior President, Secretary, Treasurer and Director at December 31, 2009, 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.   

 

Item 3 .

Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable.

 

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SUNRIDGE INTERNATIONAL, INC.

 

 

Item 4 T.

Controls and Procedures.

 

Management is responsible  for establishing and maintaining adequate internal control over financial reporting for the small business issuer.  The Company’s Chief Executive Officer and Chief Financial Officer have concluded, based on an evaluation required by paragraph (b) of Section 240.13a-15 or 240.15d-15 of the Rules of the Securities Exchange Act of 1934 (the “Exchange Act”), conducted as of the end of the period covered by this Quarterly Report on Form 10-Q, that the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) or 240.15d-15(e)) have functioned effectively.   For purposes of this Item, the term “disclosure controls and procedures” means controls and other procedures of the Company that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act (15 U.S.C. 78a et seq. ) is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.   

 

There have been no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Section 240.13a-15 or 240.15d-15 of the Rules of the Exchange Act, that occurred during the Company’s last fiscal quarter that have materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. 

 

As directed by Section 404 of the Sarbanes-Oxley Act, the Securities and Exchange Commission adopted rules requiring each public company to include a report of management on the company’s internal controls over financial reporting in its annual reports.  In addition, the independent registered public accounting firm auditing a company’s financial statements must also attest to the effectiveness of the company’s internal controls over financial reporting. While we were not subject to these requirements for the fiscal year ended June 30, 2009, we will be subject to these requirements beginning fiscal year 2010.

 

While we expect to expend significant resources in developing the necessary documentation and testing procedures required by Section 404 of the Sarbanes-Oxley Act, there is a risk that we may not be able to comply timely with all of the requirements imposed by this rule.  In the event that we are unable to receive a positive attestation from our independent registered public accounting firm with respect to our internal controls, investors and others may lose confidence in the reliability of our financial statements and our stock price and ability to obtain equity or debt financing as needed could suffer.

 

In addition, in the event that our independent registered public accounting firm is unable to rely on our internal controls in connection with its audit of our financial statements, and in the further event that it is unable to devise alternative procedures in order to satisfy itself as to the material accuracy of our financial statements and related disclosures, it is possible that we would be unable to file our Annual Report on Form 10-K with the Securities and Exchange Commission, which could also adversely affect the market price of our common stock and our ability to secure additional financing as needed.

 

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SUNRIDGE INTERNATIONAL, INC.

 

 

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings.

 

At December 31, 2009, a number of accounts payable creditors, including our landlord and our patent attorney, were threatening litigation over the non-payment of their long-standing debts.  In January 2010, we commenced negotiations with certain creditors for the repayment of their entire debt during 2010, based upon expected financing during 2010. There is no assurance our efforts to negotiate with our creditors will be resolved without litigation.  

 

Item 1A.

Risk Factors.

 

Not applicable.

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

 

None.

 

Item 3.

Defaults Upon Senior Securities.

 

None.

 

Item 4.

Submission of Matters to a Vote of Security Holders.

 

None.

 

Item 5.

Other Information.

 

None.

 

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SUNRIDGE INTERNATIONAL, INC.

 

 

Item 6.

Exhibits

 

Exhibit No.		Description
31.1*		Certification by Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act *
31.2*		Certification by Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act *
32.1*		Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act *
32.2*		Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act *

__________

*	Filed herewith.

 

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SUNRIDGE INTERNATIONAL, INC.

 

Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	SUNRIDGE INTERNATIONAL, INC.
Dated:   February 22, 2010	By:	/s/  G. Richard Smith
		G. Richard Smith President and Chief Executive Officer (Principal Executive Officer)

 

Dated:   February 22, 2010	By:	/s/  Gary R. Smith
		Gary R. Smith Secretary/Treasurer, Chief Financial Officer and Director (Principal Accounting Officer)

 

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