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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year Ended December 31, 1999
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ______________ to
______________ (No fee required)
SOUND DESIGNS, INC.
(Name of Registrant)
NEVADA 000-28331 88-0412455
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification Number)
14677 MIDWAY ROAD, SUITE 206, ADDISON, TEXAS, U.S.A.
(Address of principal executive officers)
75001
(Zip Code)
972-687-0090
(Registrant's telephone number,
including area code)
Securities registered under Section 12(b) of the Exchange Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
None Not applicable
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, PAR VALUE $0.001 PER SHARE
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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.
[X] Yes [ ] No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $68,024.00
At March 28, 2000, there were 39,000,000 shares of the Issuer's common stock
outstanding. The aggregate market value of common stock held by non-affiliates
of the Issuer (based on the closing bid and asked price for the Common Stock on
the OTC Bulletin Board system on March 28, 2000) was approximately $176,138,450.
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SOUND DESIGNS, INC.
ANNUAL REPORT
FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1999
TABLE OF CONTENTS
<TABLE>
<S> <C>
Recent Developments ......................................................................................... 2
Description of Our Business and Plan of Development ......................................................... 2
Stockholder Meetings and Voting ............................................................................. 9
Information About Our Common Stock .......................................................................... 9
Discussion and Analysis of Our Financial Condition .......................................................... 10
Principal Stockholders ...................................................................................... 12
Management .................................................................................................. 13
Forward-Looking Statements .................................................................................. 15
Exhibits and Certain Reports ................................................................................ 15
</TABLE>
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RECENT DEVELOPMENTS
On March 10, 2000, Sound Designs, Inc., a Nevada corporation, closed
the Agreement and Plan of Merger we entered into with SD Acquisition, Inc., our
wholly-owned subsidiary, and Plus Solutions, Inc., a Texas corporation. Pursuant
to the merger agreement, Plus Solutions merged with SD Acquisition and became
our wholly-owned subsidiary. As consideration for the merger, the stockholders
of Plus Solutions received approximately 1.69 shares of our common stock for
each share of Plus Solutions common stock they owned. As a result, the former
stockholders of Plus Solutions currently own 60 percent of the outstanding
shares of our common stock. In addition, the merger agreement required us to
cause all of our existing directors and officers to resign and name Max Golden,
Mack Lawrence and John Reynolds as the directors of Sound Designs.
In the merger agreement, Sound Designs and Plus Solutions made
representations and warranties to each other typical in similar agreements,
which representations and warranties survive indefinitely after the closing of
the merger agreement. In addition, Barry Wosk and Marvin Wosk, the previous
directors and officers of Sound Designs, executed Standstill Agreements which
required Barry Wosk and Marvin Wosk to refrain from selling any shares of our
common stock until April 9, 2000.
After the closing of the merger agreement, Sound Designs adopted the
business plan and business strategy of Plus Solutions and the new board of
directors named all of the previous officers of Plus Solutions to similar
offices with Sound Designs. We intend to call a stockholders meeting in the near
future for the purpose of changing the our name to "Plus Solutions, Inc.". In
addition we will soon apply to the OTC Bulletin Board trading system operated by
the Nasdaq Stock Market, Inc. to change our trading symbol to a symbol that
reflects the new corporate name we intend to adopt.
Because of the change in the composition of our board of directors and
the ownership of more than a majority of the outstanding shares of our common
stock, we believe that the acquisition of Plus Solutions caused a change of
control of Sound Designs upon the closing of the merger agreement.
As a result of the changes in our business plan and strategy, the
ownership of our common stock, and our management, we believe certain
disclosures made in our registration statement on Form 10SB filed December 1,
1999 are no longer accurate. We have provided information in this report that
updates such prior disclosures to reflect the business plan and strategy,
ownership of our common stock, and management after completion of the
acquisition of Plus Solutions. To avoid confusion, we will refer to Sound
Designs after giving effect to the acquisition of Plus Solutions as the
"Company".
DESCRIPTION OF OUR BUSINESS AND PLAN OF DEVELOPMENT
Following its acquisition of Plus Solutions, the Company adopted the
business plan and strategy of Plus Solutions. The business description that
follows describes the business and plan of development of the Company after
giving effect to the acquisition.
The Company is a development-stage company that provides Internet-based
business-to-business e-commerce solutions. We have developed ExpressOrder(TM), a
global business-to-business e-commerce service that enables buyers and suppliers
to automate business transactions on the Internet. Our ExpressBuyer(TM) service
enables businesses to automate their purchasing methods. Our ExpressSeller(TM)
service enables businesses to offer a catalog of their products over the
Internet.
Sound Designs was incorporated in Nevada in September 1998. The
Company's principal executive offices are located at 14677 Midway Road, Suite
206, Addison, Texas 75001.
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THE INTERNET AND E-COMMERCE
The Internet has emerged as one of the fastest growing communication
mediums in history. As a result, the Internet is dramatically changing how
businesses and individuals communicate and share information. The Internet has
created new opportunities for conducting commerce, commonly referred to as
e-commerce or "e-commerce", on a business-to-consumer and person-to-person
basis. In addition, the widespread acceptance of the Internet as a business
communications platform and the adoption of internal communications networks
similar to the Internet by many businesses has created a foundation for
business-to-business e-commerce that will enable organizations to streamline
complex processes, lower costs and improve productivity. We believe
Internet-based business-to-business e-commerce will experience rapid growth and
represent a significantly larger opportunity than business-to-consumer or
person-to-person e-commerce. We expect this market to create a substantial
demand for Internet-based e-commerce solutions and services.
TRADITIONAL PURCHASING METHODS
Virtually all businesses and other organizations are required to
procure various goods and services to operate. Such goods and services range
from significant items, such as information technology, telecommunications
equipment and professional services, to recurring items, such as maintenance,
repair and operations supplies, travel and entertainment services, and office
equipment and supplies.
Most businesses and other organizations meet their procurement needs
through traditional paper-based or semi-automated processes. These processes are
costly, time consuming, complex and often include lengthy approval cycles and
significant involvement of financial and administrative personnel. In addition,
these time consuming processes often result in delivery delays to the customer,
leading to productivity losses and customer dissatisfaction.
Beyond the time and expense associated with manual processing costs,
organizations suffer even greater costs when they cannot fully exploit
procurement economies of scale. Most organizations lack the systems that enable
them to monitor purchases and compile data necessary to negotiate better volume
discounts with preferred suppliers. In addition, many organizations suffer from
a problem known as "maverick buying", which occurs when personnel do not follow
internal guidelines regarding which suppliers to use for operating resource
purchases. When such preferred suppliers are not used, organizations pay
increased costs.
Traditional procurement processes also result in missed revenue
opportunities and additional costs to suppliers. When buyers are unable to
channel purchases to preferred suppliers, these suppliers lose revenue.
Suppliers also suffer from inefficient, error prone and manually-intensive order
fulfillment processes. Many suppliers dedicate significant resources to the
manual entry of information from faxed or phoned purchase orders and the manual
processing of paper checks, invoices and shipping notices. Suppliers also spend
significant resources on customer acquisition and sales costs, including the
production and distribution of paper catalogs. Without fully automated and
integrated e-commerce technologies, both buyers and suppliers incur substantial
extraneous costs in conducting commerce.
OPPORTUNITY FOR BUSINESS-TO-BUSINESS E-COMMERCE SERVICES
Over the past 30 years, information technologies have brought
automation to departmental operations such as manufacturing resource planning,
financial management, sales force automation and human resource management.
However, the information technology platforms that made departmental automation
possible did not provide complete connectivity within organizations or
connectivity between organizations. Thus, the processes linking customers to
suppliers are today largely paper-based or only semi-automated. With the
widespread adoption of the Internet as a business communication platform and the
implementation of internal Internet-based networks, organizations can now fully
automate procurement and selling activities. The availability of this technology
creates a significant market opportunity for Internet-based business-to-business
e-commerce solutions.
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For buyers, an optimal e-commerce solution will include a
user-friendly, customized, Internet-based catalog that connects suppliers and
administrative personnel within an integrated network. This system must be
flexible enough to meet the unique requirements of diverse businesses and must
be highly scalable, reliable and rapidly deployable. The system must provide
data reporting and analytical tools that enable analysis of end-user spending
patterns and provide insight into savings opportunities. For suppliers, the
solution must be easy to implement, offer the ability to catalog a complete
product line and be compatible with current standards.
PLAN OF DEVELOPMENT AND BUSINESS STRATEGY
The Company is a development-stage company and has not had significant
operations or revenues to date. We intend to seek financing to expand our
operations and commence full-scale marketing and customer implementation of our
services. If such financing is not made available to us, however, we may not be
able to implement our plan of development and business strategy or implement any
ExpressOrder(TM) solutions. Even if such financing is made available, we must
successfully implement our plans to develop our business and implement our
business strategy.
DEVELOP A STRONG INTERNAL MARKETING TEAM. We intend to develop a strong
internal marketing team to market our services to targeted businesses and
organizations in the North America and Europe. In addition, we will employ
marketing support personnel to assist the marketing team in the preparation of
presentations, proposals, research and other related administrative tasks. As
industry relationships are built, individuals with specific industry knowledge
will be employed to leverage such relationships.
USE SELECTED ADVERTISING. We will use carefully targeted advertising,
such as print advertising in industry publications, to market our services to
targeted businesses and organizations. It is anticipated that such advertising
will highlight the competitive advantages of ExpressOrder(TM) relative to the
products and services of our competitors. We have also established an Internet
site to assist our marketing efforts. As part of our continuing public relations
efforts, we will attempt to arrange media coverage of our services by
television, radio and print media, and participation in industry conferences.
CONTINUE THE DEVELOPMENT OF EXPRESSORDER(TM). We will continue to
develop and improve our ExpressOrder(TM) solution system. We anticipate that
such continued development and improvement will be critical to maintaining a
competitive advantage over other e-commerce solution providers and providing
maximum value to our customers.
EXPLORE STRATEGIC ALLIANCE OPPORTUNITIES. We will look for value-added
strategic alliances with partners that enable us to enter targeted industries,
gain access to technology or potential customers, or establish revenue sharing
opportunities. Potential alliance partners include advertising agencies,
accounting firms, software or technology-based businesses, and other e-commerce
vendors. During the development of ExpressOrder(TM), we initiated efforts to
contact potential alliance partners and explore mutually beneficial
arrangements. As a result of these efforts, we became a member of International
Business Machines Corp.'s PartnerWorld program in March 2000.
LEVERAGE EXISTING CONTACTS IN TARGETED INDUSTRIES. During the
development of ExpressOrder(TM), we contacted potential customers to establish
relationships and industry knowledge and to solicit input regarding our
services. As a result, ExpressOrder(TM) has been reviewed and evaluated by
senior managers of several large businesses. We believe that these relationships
may be leveraged to identify potential customers and improve the quality of our
services.
TARGET CUSTOMERS IN A BROAD RANGE OF INDUSTRIES THAT CAN MOST BENEFIT
FROM EXPRESSORDER(TM). We intend to target corporations and other organizations
in a broad range of industries that we believe will most benefit from our
outsourced, turnkey solutions offered by ExpressOrder(TM). WE believe these
organizations will be the most likely beneficiaries of an automated, reliable,
robust and scalable e-commerce solution and can provide strong customer
references. In addition, the large number and variety of implementation
circumstances involved in serving these organizations will rigorously test our
products and assist us in designing a robust, reliable and scalable solution.
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PROVIDE SUPERIOR CUSTOMER SATISFACTION. We believe a loyal base of
reference customers affords us a significant competitive advantage. Therefore,
we intend to devote significant resources towards customer satisfaction. We will
employ a variety of customer satisfaction programs to promote superior customer
satisfaction.
EXPRESSORDER(TM)
ExpressOrder(TM) consists of two components. Our ExpressBuyer(TM)
service enables businesses to automate their purchasing methods.
ExpressBuyer(TM) is a robust, scalable and reliable service that enables an
organization to reduce processing costs and improve productivity by automating
the procurement cycle and linking end-users throughout an organization with
internal administration and financial systems. ExpressBuyer(TM) also enables
organizations to reduce the cost of operatiNG resources by channeling purchases
to preferred suppliers. Our ExpressSeller(TM) service enables businesses to
offer a catalog of products over the Internet through a fully automated
transaction. As a complete solution package, ExpressOrder(TM) provides a
business-to-business e-commerce platform.
We believe ExpressOrder(TM) provides the following benefits to our
customers:
STAND-ALONE, EASILY IMPLEMENTED SOLUTION. ExpressOrder(TM) is a
stand-alone service that can easily be initiated with any size company. It does
not require integration into a company's operational systems package or changes
in the existing business processes. It can also serve as an extension and
enhancement of, rather than a replacement for, a supply chain management system,
increasing the efficiencies of these systems.
SPEED OF IMPLEMENTATION. ExpressOrder(TM) is an outsourced, turnkey
solution that can be quickly installed and implemented. We estimate that
ExpressOrder(TM) can be fully implemented for a customer in as little as three
to five months. Because it does not rely on the scarce internal technology
resources of our customers, the total cost of ExpressOrder(TM) will be
significantly less than that of competing solution systems.
FULLY CUSTOMIZABLE AND SCALABLE. ExpressOrder(TM) can be fully
customized as either a buyiNG or selling solution, or both, depending on the
individual needs of our customers. In addition, ExpressOrder(TM) is fully
scalable and may be reconfigured to suit a customers ongoing needs.
EXPRESSBUYER(TM)
ExpressBuyer(TM) is our purchasing component that enables an
organization to reduCE processing costs and improve productivity by automating
purchasing methods. We believe ExpressBuyer(TM) offers the following benefits to
our customers:
Automation of procurement procedures and resulting costs reduction and
productivity increases. ExpressBuyer(TM) automates the procurement of goods and
services and significantly reduces processing costs and increases productivity.
ExpressBuyer(TM) enables an organization to streamline and automate complex
business processes. By operating without a complete re-engineering of the
customers existing systems ExpressBuyer(TM) takes advantage of investments in
financial, human resource and enterprise resource planning systems. As a result,
our services allow organizations to focus on value-added activities such as
negotiating better discounts with preferred suppliers. In addition, our
customers can order and receive requested items more quickly and with less
effort, improving overall productivity.
Compilation and analysis of buying data. ExpressBuyer(TM) enables
organizations to maximize procurement economies of scale, lowering the overall
costs of goods and services. ExpressBuyer(TM) provides reporting tools on buying
patterns, enabling organizations to negotiate more favorable contracts with
suppliers. ExpressBuyer(TM) also routes transactions to preferred suppliers
automatically. Moreover, ExpressBuyer(TM) is accessible on every desktop, is
easy-to-use and streamlines the procurement process.
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These benefits minimize the frustration to end-users that often results in
maverick buying, further enabling organizations to take advantage of negotiated
discounts with preferred suppliers.
EXPRESSSELLER(TM)
ExpressSeller(TM) is our supplier service component that enables
suppliers to offer their complete line of proprietary or vended products over
the Internet and process fully automated sales transactions. We believe
ExpressSeller(TM) offers the following benefits:
Ability to offer complete line of products and services on the
Internet. ExpressSeller(TM) enables suppliers to offer their complete catalog of
goods and services over the Internet, which provides suppliers with greater
access to new and existing customers through a global presence and 24-hour
availability. In addition, by making available Internet-based catalog
capabilities, ExpressSeller(TM) enables suppliers to differentiate and market
their goods and services in their preferred format.
Integration of sales data with suppliers. ExpressSeller(TM) allows a
business to integrate their sales with multiple customers to more effectively
control inventory and take advantage of "just in time" supply systems.
Sales costs reduction. ExpressSeller(TM) enables businesses to reduce
sales costs. By automating catalog sales transactions, a business can reduce the
costs associated with, and reduce the potential for error inherent in,
paper-based ordering and payment processes. Product information can be
distributed electronically, reducing the distribution costs of printed catalogs.
In addition, suppliers can utilize their existing investments in inventory
control and delivery systems, including catalogs and product web pages.
CHARACTERISTICS OF OUR EXPRESSORDER(TM) SERVICES.
Our ExpressOrder(TM) service consists of two main components.
ExpressBuyer(TM) is our completely scalable service that enables businesses to
automate their purchasing methods and thereby reduce costs and improve
productivity. ExpressBuyer(TM) links product end-users administration and
financial personnel. ExpressBuyer(TM) also reduces the costs by directing
purchases to preferred suppliers. ExpressSeller(TM) is our service that allows
the offering of an entire catalog of products through fully automated
transactions.
The main characteristics of our ExpressOrder(TM) services are:
User friendly, Internet-based interfaces. The Internet browser-based
user interface of our ExpressOrder(TM) services enables users throughout an
organization to take full advantage of ExpressOrder(TM) from their desktop and
with minimal training. Online help information provides automated assistance for
less experienced users through the acquisition process, while an advanced user
interface makes the system more productive for experienced users.
Automation of e-commerce transactions. ExpressOrder(TM) provides
flexible workflow capable of streamlining and automating even the most complex
e-commerce transactions. This flexible workflow can be customized for the unique
processes of an organization and can be tailored to respond to user input,
specific events or any extrinsic or intrinsic data relevant to the transaction.
Information access and compilation. ExpressOrder(TM) provides powerful
analytical and reporting tools that enable businesses to evaluate data collected
throughout the process of acquiring, receiving and paying for goods and
services. By employing these analytical tools, an organization can analyze
purchasing patterns to streamline the procurement process, negotiate more
favorable terms with preferred suppliers and gain insight into additional
savings opportunities.
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Multi-platform compatibility. ExpressOrder(TM) functions on common
Internet browser software. As a result, is completely compatible with virtually
all computer operating systems, including Microsoft Windows and Windows NT,
Apple Macintosh and standard Linux/Unix systems.
CUSTOMER SERVICE, TRAINING AND SUPPORT
We believe that customer satisfaction will be essential to our
long-term success and we intend to offer comprehensive customer assistance
programs. Our technical support will provide dependable and timely resolution of
customer technical inquiries and will be available to customers by telephone,
over the Internet or by electronic mail. We will offer complete education and
training to our customers and partners to develop the knowledge and skills to
successfully use our services.
RESEARCH AND DEVELOPMENT
Substantially all of the research and development regarding
ExpressOrder(TM) has been outsourced to various consultants. We estimate that
Plus Solutions incurred development expenses related to ExpressOrder(TM) of
approximately $197,000 during 1998 and 1999, in addition to the devotion of
substantial internal resources. We believe the development of ExpressOrder(TM)
is substantially complete and any further resources devoted to research and
development will be used to make ongoing improvements to ExpressOrder(TM) in
response to market demands We intend to continue to outsource such development
to consultants.
We cannot be sure that continuing development of ExpressOrder(TM) will
be completed or that, if completed, they will have the features or quality
necessary to make them successful in the marketplace. Further, despite input by
potential customers and our internal quality control, errors could be found in
ExpressOrder(TM) that we have not anticipated. We may not be able to
successfully correct these errors in a timely and cost effective manner. If we
are not able to further develop or enhance our services in a timely and
cost-effective basis, or if these new developments or enhancements do not have
the features or quality necessary to make them successful in the marketplace,
our business will be seriously harmed.
COMPETITION
The market for e-commerce solutions is intensely competitive, evolving
and subject to rapid technological change. The intensity of competition has
increased and is expected to further increase in the future. This increased
competition is likely to result in price reductions and reduced gross margins,
any one of which could seriously harm our business. Competitors vary in size and
in the scope and breadth of the products and services offered. We believe the
primary competitors in the e-commerce solutions market are Ariba, Captura
Software, Clarus, Commerce One, Concur Technologies, Extensity, GE Information
Services, Intelysis, and Netscape Communications. We also expect to encounter
competition from major enterprise software developers, such as Oracle,
PeopleSoft and SAP. In addition, because there are relatively low barriers to
entry in the e-commerce solutions market, we expect additional competition from
other established and emerging companies.
We believe that the principal competitive factors affecting our market
include:
o existing customer base
o capabilities, quality and performance of products and services
o ability to configure and improve products and services based
on market demands and customer requirements
o individual requirements of buyers and suppliers in particular
industries
o customer service and satisfaction
o capabilities of core technology
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Although we believe that our services will compete favorably with
respect to these factors, the market for e-commerce solutions is relatively new
and is evolving rapidly. Even if we are currently competitive, we may not be
able to maintain our competitive position against current and potential
competitors, especially those with significantly greater financial, marketing,
service, support, technical and other resources.
Many of our competitors have longer operating histories, significantly
greater financial, technical, marketing and other resources than us,
significantly greater name recognition and a larger existing base of customers.
In addition, many of our competitors have well-established relationships with
potential customers and have extensive knowledge of certain industries. Current
and potential competitors have established or may establish cooperative
relationships among themselves or with third parties to increase the ability of
their products to address customer needs. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. We also expect that competition will increase as a
result of consolidation of the e-commerce solutions industry.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
We will depend on our ability to develop and maintain the proprietary
aspects of our technology. To protect our proprietary technology, we will rely
primarily on a combination of contractual provisions, confidentiality
procedures, trade secrets, and patent, copyright and trademark laws.
We intend to license rather than sell the software technology in
ExpressOrder(TM) and we will require our customers to enter into license
agreements, which impose restrictions on their ability to utilize the software.
In addition, we will avoid disclosure of our trade secrets through a number of
means, including but not limited to, requiring those persons with access to our
proprietary information to execute confidentiality agreements with us and
restricting access to our software source code. We will attempt to protect our
software, documentation and other written materials under trade secret and
copyright laws, which afford only limited protection. We cannot be sure that any
of our proprietary rights will be successfully protected since the validity,
enforceability and protection of proprietary rights in Internet-related
industries are still evolving.
We rely on technology that we license from third parties to perform key
functions with respect to ExpressOrder(TM). If we are unable to continue to
license any of this software on commercially reasonable terms, our business may
be harmed unless equivalent technology can be readily licensed or developed, and
integrated into our services.
We intend to file applications to trademark the terms "ExpressOrder",
"ExpressBuyer" and "ExpressSeller" in the United States and certain other
countries. These trademark applications are subject to review by applicable
government authorities, may be opposed by private parties, and may not be
approved by such authorities.
Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy aspects of our products or to obtain and use
information that we regard as proprietary. Policing unauthorized use of our
products is difficult, and while we are unable to determine the extent to which
piracy of our software products exists, software piracy can be expected to be a
persistent problem. In addition, the laws of some foreign countries do not
protect our proprietary rights to as great an extent as do the laws of the
United States. Our means of protecting our proprietary rights may not be
adequate and our competitors may independently develop similar technology,
duplicate our products or design around patents issued to us or our other
intellectual property.
There has been a substantial amount of litigation in the software and
Internet industries regarding intellectual property rights. It is possible that
in the future third parties may claim that we or our current or potential future
products infringe their intellectual property. We expect that software product
developers and providers of e-commerce solutions will increasingly be subject to
infringement claims as the number of products and competitors in our industry
segment grows and the functionality of products in different industry segments
overlaps. Any such claims, whether or not they have merit, could result in
costly
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litigation, cause development delays or require us to enter into royalty or
licensing agreements. Such royalty or licensing agreements, if required, may not
be available on commercially reasonable terms, which could seriously harm our
business.
EMPLOYEES
As of March 15, 2000, we had a total of 4 employees, all of whom were
management personnel. All of these employees are located in the our principal
executive offices in Addison, Texas. None of our employees is represented by a
collective bargaining agreement and we have never experienced any work stoppage.
We consider our relations with our employees to be good.
Our future operating results depend in significant part on the
continued service of our senior management personnel. Our future success will
also depend on our ability to attract and retain highly qualified technical,
marketing and management personnel. Competition for these personnel is intense,
and we may not be able to retain our key personnel or attract these personnel in
the future.
BUSINESS LOCATIONS
The Company's only business location is its principal executive offices
located at 14677 Midway Road, Suite 206, Addison, Texas 75001. We lease
approximately 1,300 square feet of office space at this location.
STOCKHOLDER MEETINGS AND VOTING
During the period between October 1, 1999 and December 31, 1999, we did
not hold any meeting of our stockholders and no matter was submitted for a
stockholder vote.
INFORMATION ABOUT OUR COMMON STOCK
TRADING HISTORY
Our common stock is traded on the OTC Bulletin Board system under the
symbol "SODE." Our common stock was initially registered under the Securities
Exchange Act pursuant to a registration statement filed on December 1, 1999. Our
common stock was not actually traded on the OTC Bulletin Board system, however,
until February 23, 2000. As a result, the closing bid and asked price for our
common stock has not yet been reported by the OTC Bulletin Board system at the
end of any quarter. On March 28, 2000, the closing bid price for our common
stock was $6.125 and the closing asked price was $5.75. On March 28, 2000, there
were approximately 77 record holders of our common stock.
DIVIDENDS
Our present policy is to retain earnings, if any, to finance future
growth. We have never paid cash dividends and have no present intention to pay
cash dividends.
RECENT PRIVATE OFFERINGS
In September 1998, Sound Designs sold 1,000,000 shares of its common
stock to its founders in a private transaction pursuant to Section 4(2) of the
Securities Act for aggregate consideration of $2,500. All of these shares were
canceled in January 2000.
In March 1999, Sound Designs sold 1,200,000 shares of its common stock
to approximately 34 persons with whom its founders had pre-existing
relationships in a private offering pursuant to Rule 504 under the Securities
Act for aggregate consideration of $60,000.
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On March 10, 2000, Sound Designs closed the Agreement and Plan of
Merger with Plus Solutions. Pursuant to the merger agreement, Plus Solutions
became our wholly-owned subsidiary. As consideration for the merger, the
stockholders of Plus Solutions received an aggregate of 23,400,000 shares of our
common stock. The offering of our common stock to the stockholders of Plus
Solutions, each of whom qualifies as an "accredited investor", in accordance
with the merger agreement was made pursuant to Rule 506 under the Securities
Act.
DISCUSSION AND ANALYSIS OF OUR FINANCIAL CONDITION
Sound Designs was originally organized to engage in the design and
installation of custom audio and visual systems into residential and/or
commercial locations. Following its acquisition of Plus Solutions on March 10,
2000, the Company adopted the business plan and strategy of Plus Solutions. As a
result, we now provide Internet-based business-to-business e-commerce solutions
through our ExpressOrder(TM) service, an outsourced business-to-business
e-commerce service that enables buyers and suppliers to automate business
transactions on the Internet.
The Company's fiscal year ends on December 31 of each calendar year.
The discussion of historical financial data set forth below concerns the
previous business of Sound Designs and, as a result, should be considered to be
of limited value with respect to our current business. Audited financial
statements of Plus Solutions and unaudited pro forma financial statements of
the Company giving effect to the acquisition of Plus Solutions will be
filed with the Securities and Exchange Commission before May 25, 2000.
The Company had no revenues from operations in 1998 and nominal
revenues in 1999 and as such is considered a developmental company.
FINANCIAL RESULTS FROM THE FISCAL YEAR ENDED DECEMBER 31,1998 COMPARED TO
SIMILAR RESULTS FROM THE FISCAL YEAR ENDED DECEMBER 31,1999
Total revenues as of December 31, 1998 were 0 and as of December 31,
1999 $68,024.
Total expenses including general and administrative costs as well as
cost of goods sold were $500 on December 31, 1998, and $73,286 on December 31,
1999. This represented an increase of 14,557.2% when comparing 1998 to 1999.
There was no cost of goods sold in 1998. In 1999, cost of goods totaled
$46,828. This was the largest category of expenditures.
Net operating losses were $500 on December 31, 1998 and $5,262 on
December 31, 1999. This was an increase of 952.4% when comparing 1998 to 1999.
These losses were attributed primarily to the increase of cost of goods sold,
and professional fees as the Company had no operations in 1998. The Company had
2 employees in 1998 and 1999.
Current Assets totaled $2,500 as of December 31, 1998. This consisted
entirely of cash. On December 31, 1999, current assets totaled $93,473. This was
composed of $25,065 in cash or 26.82% of the total current assets with the
balance of current assets composed primarily of accounts receivable, $40,428 or
43.75% of current assets and inventory, $27,462 or 29.38% of current assets. All
other current assets represented less than 1% of the total. There were no
accounts receivable or inventory at December 31, 1998.
Current liabilities totaled $500 as of December 31, 1998 and $36,735 on
December 31, 1999. This consisted entirely of accounts payable. The Company had
no short or long term debt in 1998 or 1999. The ratio of current assets to
current liabilities for December 31, 1998 was 5 and 2.54 at December 31, 1999.
Shareholders paid in capital was $2,500 on December 31, 1998 with
1,000,000 shares of common stock issued. On December 31, 1999, Shareholders paid
in capital was $62,500 with 2,200,000 shares of common stock issued.
10
<PAGE> 12
After deducting operating losses, shareholder equity increased from
$2,000 on December 31, 1998 to $56,738 on December 31, 1999. This was a 2,736.9%
increase from 1998 to 1999.
Changes in working capital were a negative $500 on December 31, 1998,
and a positive $37,435 on December 31, 1999.
Cash from financing activities totaled $2,500 on December 31, 1998, and
$60,000 on December 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
We currently have sufficient cash to continue to operate at our current
levels of expenditure for approximately 90 to 120 days. In order to continue
implementation of our business plan, we will need to secure substantial
additional financing in the near future. We are currently actively exploring
various financing alternatives, but we currently have no commitments from any
person to provide us with financing in any substantive amount. If we fail to
acquire such additional financing, we will be forced to delay the implementation
of our business plan, if we are able to continue our business at all. We cannot
assure you that we will be able to secure the additional financing we require
or, if we do acquire such financing, that it will be on terms that are
commercially reasonable. You should be aware that our failure to secure
substantial additional financing on terms that are acceptable and commercially
reasonable will have a very negative impact on our current financial situation
and our prospects for continued success.
11
<PAGE> 13
PRINCIPAL STOCKHOLDERS
As of the close of business on March 28, 2000, we have issued and
outstanding 39,000,000 shares of our common stock. The following table shows
information concerning the ownership of our common stock as of March 28, 2000
by: (a) each current director, (b) each new director named in the merger
agreement, (c) each current officer, (d) each person we know to own more than 5%
of the shares of our common stock; and (d) all of the current directors and
officers and as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENT OF SHARES
COMMON STOCK OF COMMON STOCK
NAME(1) BENEFICIALLY OWNED OUTSTANDING(2)
- -------- ------------------------- -----------------
<S> <C> <C>
Max Golden, Chairman of the Board of Directors,
President and Chief Executive Officer(3) ....... 7,776,732 19.4%
Mack Lawrence, Director(4) .............................. 184,317 *
John Reynolds, Director ................................. 0 --
Rita Hunter, Vice President(5) .......................... 1,666,873 4.2%
Martha Scroggins, Secretary(6) .......................... 2,218,313 5.6%
Ernest Kluft, Vice President and Chief Technology
Officer(7) ..................................... 33,333 *
David Ballard(8) ........................................ 3,153,459 8.1%
7228 Spring Valley Road
Dallas, Texas 75240
U.S.A.
Mario Pinto ............................................. 2,655,988 6.8%
531 Landsdale, Suite 205
North Vancouver, British Columbia V7L 2G6
Canada
All current directors and officers as a group(9) ........ 11,879,568 29.0%
</TABLE>
- ----------
* Less than one percent.
(1) Unless otherwise set forth, the address of each named person is 14677
Midway Road, Suite 206, Addison, Texas, U.S.A. 75001.
(2) Based upon 15,600,000 shares of our common stock issued and outstanding
as of February 28, 2000.
(3) Includes 1,200,000 shares that may be acquired upon the exercise of
options issued by Plus Solutions.
(4) Includes 100,000 shares that may be acquired upon the exercise of
options issued by Plus Solutions.
(5) Includes 300,000 shares that may be acquired upon the exercise of
options issued by Plus Solutions.
(6) Includes 300,000 shares that may be acquired upon the exercise of
options issued by Plus Solutions.
(7) Includes 33,333 shares that may be acquired upon the exercise of
options issued by Plus Solutions.
(8) Shares recorded in the name of Ballard Property Company #1, Ltd. which
is controlled by Mr. Ballard.
(9) 6 persons.
Included in the shares owned by some of our directors and officers set
forth above are options to purchase shares of common stock of Plus Solutions.
These options were issued pursuant to the Plus Solutions stock option plan prior
to the acquisition of Plus Solutions by Sound Designs. The Company currently
does not have a stock option plan that has been approved by its stockholders. We
intend to call a stockholders meeting in the near future at which we will
propose that our stockholders approve and adopt a stock option plan similar to
the Plus Solutions stock option plan. If such a stock option plan is approved by
our stockholders, we intend to cancel all the options outstanding under the Plus
Solutions stock option plan and issue an identical number of options with
similar terms under the Company's stock option plan to the current holders of
options issued by Plus Solutions. If the Company's proposed stock
12
<PAGE> 14
option plan is not approved by our stockholders, we intend to purchase all the
options outstanding under the Plus Solutions stock option plan for fair market
value and, after such purchase, cancel all such options.
MANAGEMENT
The following table sets forth certain information with respect to our
current directors and officers and the new directors set forth in the merger
agreement:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Max Golden 51 Chairman of the Board of Directors, President and
Chief Executive Officer
Mack Lawrence 53 Director
John Reynolds 57 Director
Rita Hunter 41 Vice President
Martha Scroggins 52 Secretary and Treasurer
Ernest Kluft 56 Vice President and Chief Technology Officer
</TABLE>
Certain background information about each of our current directors and
officers and each new director is set forth below:
Max Golden has been our Chairman of the Board of Directors, President
and Chief Executive Officer since March 10, 2000. Prior to joining the Company,
Mr. Golden was Chairman of the Board of Directors and President of Plus
Solutions since October 1998. From 1995 to 1998, he served as President and
Manager of Alliance Associates, LLC.
Mack Lawrence has been a Director since March 10, 2000. He is a
principal and president of Regency Gas Company, a position he has occupied since
1992. From 1985 to 1992, Mr. Lawrence served as a principal and officer in a
number of private companies, including American Central Gas Company. From 1969
to 1985, Mr. Lawrence served in several capacities at Texas Utilities Fuel
Company and Enserch Exploration, Inc.,including Manager of Gas Supply.
John Reynolds has been a Director since March 10, 2000. He is currently
a Member of the Canadian House of Commons, a position he has occupied since
1997. He also serves as President of both Reynolds Enterprises Ltd. and Griney
Consultants Inc., positions he has held since 1994 and 1997, respectively. Mr.
Reynolds also serves as a director of Vitality Products, Inc.
Rita Hunter currently serves as our Vice President, a position she has
held since March 10, 2000. Prior to joining the Company, she served Plus
Solutions in a similar capacity. Before joining Plus Solutions, Ms. Hunter
served as Manager of Client and Field Services for AmGas Inc., Marketing
Coordinator and Trainer for Artesia Data Systems, and as a Senior Tax
Consultant with KPMG Peat Marwick LLP.
Martha Scroggins is our Secretary and Treasurer, a position she was
elected to on March 10, 2000. Prior to joining the Company, she served Plus
Solutions in a similar capacity. Before serving Plus Solutions, Ms. Scroggins
served as a Manager of Contract Administration with AmGas Inc.
Ernest Kluft is our Chief Technology Officer, a position he was elected
to on March 10, 2000. Prior to joining the Company, he served Plus Solutions in
a similar capacity. Before joining Plus Solutions, Mr. Kluft directed the
planning and systems efforts of Enserch Exploration for some twenty years and
subsequently directed the information technology department of its parent,
Enserch
13
<PAGE> 15
Corporation. Recently, he also coordinated all financial, planning, and
information technology efforts for Lone Star Gas in its successful bid for the
Mexico City natural gas distribution franchise
BOARD OF DIRECTORS COMMITTEES
Our board of directors does not currently have any committees.
EXECUTIVE COMPENSATION
None of our current executive officers provided any services to or
received any compensation from Sound Designs during 1998 and 1999. We intend to
enter into employment agreements with each of our executive officers in the near
future. Such employment agreements have not yet been negotiated, but we
anticipate that each will have terms of 1-3 years and will contain customary
severance provisions that provide a minimum of 30-180 days notice to terminate
the contract, except for any termination for appropriate cause. We also
anticipate that each employment agreement will contain special severance
provisions if the employee is terminated within one year after a change of
control of the Company. The salaries of our executive officers, which will be
reflected in the employment agreements, are as follows:
<TABLE>
<CAPTION>
EXECUTIVE OFFICER SALARY
----------------- ------
<S> <C>
Max Golden ................................. $240,000
Rita Hunter ................................ $ 85,000
Martha Scroggins ........................... $ 85,000
Ernest Kluft ............................... $135,000
</TABLE>
Each of our executive officers currently hold options to purchase
shares of common stock of Plus Solutions. These options were issued pursuant to
the Plus Solutions stock option plan prior to the acquisition of Plus Solutions
by Sound Designs. The Company currently does not have a stock option plan that
has been approved by its stockholders. We intend to call a stockholders meeting
in the near future at which we will propose that our stockholders approve and
adopt a stock option plan similar to the Plus Solutions stock option plan. If
such a stock option plan is approved by our stockholders, we intend to cancel
all the options outstanding under the Plus Solutions stock option plan and issue
an identical number of options with similar terms under the Company's stock
option plan to each of our executive officers. If the Company's proposed stock
option plan is not approved by our stockholders, we intend to purchase all the
Plus Solutions options held by our executive officers for fair market value.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Prior to March 10, 2000,
Barry Wosk and Marvin Wosk comprised the entire board of directors of Sound
Designs. During such period, Barry Wosk served as the President of Sound Designs
and Marvin Wosk served as Secretary. Barry Wosk is the son of Marvin Wosk. In
September 1998, Barry Wosk and Marvin Wosk each purchased 500,000 shares of
Sound Designs common stock for consideration of $.0025 per share. In January
2000, all of the shares issued to Barry Wosk and Marvin Wosk were canceled. In
September 1999, Sound Designs and Barry Wosk entered into a Sales Commission
Agreement which was subsequently canceled in February 2000. Barry Wosk was paid
$3,678 in sales commissions under the Sales Commission Agreement prior to its
cancellation.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING REQUIREMENTS. Based on our
review of reports filed pursuant to Section 16 of the Securities Exchange Act,
we are aware of the following persons who filed to properly file a required
report:
(1) Barry Wosk failed to file a Form 3 upon Sound Designs becoming a
reporting company under the Securities Exchange Act. He also
failed to file a Form 4 regarding the cancellation of all his
shares of our common stock in January 2000.
14
<PAGE> 16
(2) Marvin Wosk failed to file a Form 3 upon Sound Designs becoming a
reporting company under the Securities Exchange Act. He also
failed to file a Form 4 regarding the cancellation of all his
shares of our common stock in January 2000.
FORWARD-LOOKING STATEMENTS
The information in this report contains forward-looking statements
within the meaning of Section 27A of the United States Securities Act of 1933
and Section 21E of the United States Securities Exchange Act of 1934. Such
statements are based upon current expectations that involve risks and
uncertainties that may be outside of our control. Any statements contained
herein that are not statements of historical fact may be deemed to be
forward-looking statements. For example, words such as "may," "will," "should,"
"estimates," "predicts," "potential," "continue," "strategy," "believes,"
"anticipates," "plans," "expects," "intends," and similar expressions are
intended to identify forward-looking statements. Our actual results and the
timing of certain events may differ significantly from the results discussed in
the forward-looking statement.
EXHIBITS AND REPORTS
EXHIBITS
We have included or incorporated by reference the following exhibits to
this Annual Report.
EXHIBIT DESCRIPTION
2.1 Plan and Agreement of Merger dated February 21, 2000 among
Sound Designs, Inc., SD Acquisition, Inc. and Plus
Solutions, Inc. This exhibit is incorporated by reference
to Exhibit 2.1 to our Current Report on Form 8-K dated
March 27, 2000.
3.1 Articles of Incorporation of Sound Designs. This exhibit
is incorporated by reference to Exhibit 3(I) to our
Registration Statement on Form 10SB dated December 1,
1999.
3.2 Bylaws of Sound Designs. This exhibit is incorporated by
reference to Exhibit 3(II) to our Registration Statement
on Form 10SB dated December 1, 1999.
27 Financial data schedule (submitted only with the copy of
this report filed electronically with the Securities and
Exchange Commission).
REPORTS
During the last quarter of our fiscal year ended December 31, 1999, we
filed only one current report under the Securities Exchange Act, our current
report on Form 8-K dated March 27, 2000.
15
<PAGE> 17
SOUND DESIGNS, INC.
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 1999
Audited - See Auditors' Report
- --------------------------------------------------------------------------------
CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
AUDITORS' REPORT 1
STATEMENT OF FINANCIAL POSITION 2
STATEMENT OF LOSSES AND DEFICIT 3
STATEMENT OF CASH FLOWS 4
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY 5
NOTES TO THE FINANCIAL STATEMENTS 6
</TABLE>
<PAGE> 18
<TABLE>
<S> <C> <C>
PARKER & CO.
CHARTERED ACCOUNTANTS PAGE 1 OF 8
- --------------------------------------------------------------------------------
200 - 2560 SIMPSON ROAD, RICHMOND BC V6X 2P9 TEL: (604)276-9920 FAX:(604) 276-4577
</TABLE>
AUDITORS' REPORT
To the stockholders of Sound Designs, Inc.
We have audited the statements of financial position of Sound Designs, Inc. as
at 31 December 1999 and 1998 and the statements of losses and deficit, of cash
flows and of changes in stockholder's equity for the period from the date of
incorporation, 22 September 1998, to 31 December 1998 and for the year ended 31
December 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in Canada, which are in substantial agreement with those in the United States of
America. Those standards require that we plan and perform an audit to obtain
reasonable assurances whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at 31 December 1999 and 1998
and the result of its operations, cash flows and changes in stockholder's equity
for the period 22 September 1998 to 31 December 1998 and for the year ended 31
December 1999 in accordance with generally accepted accounting principles in the
United States of America.
These financial statements have been prepared assuming that the Company will
continue as a going concern. As stated in Note 2 to the financial statements,
the Company will require an infusion of capital to sustain itself. This
requirement for additional capital raises substantial doubt about the Company's
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
RICHMOND, BRITISH COLUMBIA, CANADA
16 FEBRUARY 2000
PARKER & CO.
CHARTERED ACCOUNTANTS
- --------------------------------------------------------------------------------
Parker Co., Chartered Accountants
<PAGE> 19
SOUND DESIGNS, INC.
STATEMENT OF FINANCIAL POSITION
AUDITED - SEE AUDITORS' REPORT PAGE 2 OF 8
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AS AT 31 DECEMBER 1999 1998
-------- --------
<S> <C> <C>
CURRENT ASSETS
Cash $ 25,065 $ 2,500
Accounts receivable 40,428 --
Goods and services taxes recoverable 518 --
Inventory, Note 3 27,462 --
-------- --------
Total current assets 93,473 2,500
-------- --------
TOTAL ASSETS $ 93,473 $ 2,500
======== ========
AS AT 31 DECEMBER 1999 1998
-------- --------
CURRENT LIABILITIES
Accounts payable $ 36,735 $ 500
-------- --------
Total current liabilities 36,735 500
-------- --------
STOCKHOLDERS' EQUITY
Share capital, Note 5 2,200 1,000
Additional paid-in capital 60,300 1,500
-------- --------
Total share capital 62,500 2,500
Deficit (5,762) (500)
-------- --------
Total stockholders' equity 56,738 2,000
-------- --------
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 93,473 $ 2,500
======== ========
</TABLE>
<PAGE> 20
SOUND DESIGNS, INC.
STATEMENT OF LOSSES AND DEFICIT
Audited - See Auditors' Report Page 3 of 8
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FROM THE
DATE OF
INCORPORATION,
FOR THE YEAR 22 SEPTEMBER
ENDED 1998 TO
31 DECEMBER 31 DECEMBER
1999 1998
-------------- --------------
<S> <C> <C>
REVENUE
Sales $ 67,419 $ 0
Interest earned 605 --
-------------- --------------
TOTAL REVENUE 68,024 --
-------------- --------------
EXPENSES
Cost of goods sold 45,828 --
Advertising and promotion 933 --
Commissions 4,223 --
Consulting 706 --
Travel 2,218 --
Accounting 2,352 400
Legal 15,216 --
Bank charges and interest 235 --
Finders fees 70 --
Registration and filing fees 840 100
Transfer agents fees 665 --
-------------- --------------
TOTAL EXPENSES 73,286 500
-------------- --------------
LOSSES BEFORE INCOME TAXES (5,262) (500)
INCOME TAXES, NOTE 6 -- --
-------------- --------------
NET LOSS (5,262) (500)
DEFICIT, BEGINNING (500) --
-------------- --------------
DEFICIT, ENDING $ (5,762) $ (500)
============== ==============
LOSS PER SHARE, NOTE 7 $ (0.00) $ (0.00)
============== ==============
</TABLE>
<PAGE> 21
SOUND DESIGNS, INC.
STATEMENT OF LOSSES AND DEFICIT
Audited - See Auditors' Report Page 4 of 8
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FROM THE
DATE OF
INCORPORATION,
FOR THE YEAR 22 SEPTEMBER
ENDED 1998 TO
31 DECEMBER 31 DECEMBER
1999 1998
------------- -------------
<S> <C> <C>
CASH PROVIDED (USED) FROM OPERATIONS
From operation
Net loss $ (5,262) $ (500)
------------- -------------
Changes in working capital other than cash
Accounts receivable (40,428) --
Goods and services sales taxes recoverable (518) --
Inventory (27,462) --
Accounts payable 36,235 500
------------- -------------
(32,173) 500
------------- -------------
Total cash provided (used) from operations (37,435) --
------------- -------------
CASH PROVIDED (USED) BY INVESTMENT ACTIVITY -- --
------------- -------------
CASH PROVIDED (USED) BY FINANCING ACTIVITY
Shares issued 60,000 2,500
------------- -------------
Total cash provided by financing 60,000 2,500
------------- -------------
------------- -------------
CASH CHANGE 22,565 2,500
CASH BEGINNING 2,500 --
------------- -------------
CASH ENDING $ 25,065 $ 2,500
============= =============
COMPRISED OF:
Cash $ 25,065 $ 2,500
============= =============
</TABLE>
<PAGE> 22
SOUND DESIGNS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FROM INCORPORATION, 22 SEPTEMBER 1998, TO 31 DECEMBER 1999
Audited - See Auditors' Report Page 5 of 8
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON COMMON ADDITIONAL RETAINED
STOCK STOCK PAID IN EARNINGS
CONSIDERATION ISSUED AMOUNT CAPITAL (DEFICIT)
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Private placement for cash on date of
incorporation, 22 September 1998 1,000,000 $ 1,000 $ 1,500
Net loss from date of Incorporation to $ (500)
31 December 1998 --------- -------- -------- --------
Balance as at 31 December 1998 1,000,000 1,000 1,500 (500)
Private placement for cash on 24 1,200,000 1,200 58,800
February 1999
Net loss for the year ended 31 December (5,262)
1999 --------- --------- --------- --------
Balance as at 31 December 1999 2,200,000 $ 2,200 $ 60,300 $ (5,762)
========= ========= ========= =========
</TABLE>
<PAGE> 23
SOUND DESIGNS, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 1999
Audited - See Auditors' Report Page 6 of 8
- --------------------------------------------------------------------------------
NOTE 1 THE CORPORATION AND ITS BUSINESS
Sound Designs, Inc. was incorporated in the State of Nevada, United States of
America on 22 September 1998 under the Nevada Revised Statutes, Chapter 78,
Private Corporations.
The Company has offices in Vancouver, British Columbia, Canada. The Company has
been organized to engage in the sale of electronic sound distribution equipment.
The Company is presently establishing itself as a going concern. Operations
started in the month of September 1999. The fiscal year end of the Company is 31
December.
The Company has entered into a buyer seller agreement with a supplier which
gives the Company an exclusive marketing right to all of Canada provided certain
sales target are achieved. This sales agreement can be cancelled by either party
on 30 days written notice. 100% of the Company's sales have been a result of
this agreement.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
These financial statements have been prepared in United States of America
dollars, which have been rounded to the nearest whole dollar except for the net
loss per share which has been rounded to the nearest cent, using United States
of America Generally Accepted Accounting Principals. These accounting principles
are applicable to a going concern, which contemplates the realization and
liquidation of liabilities in the normal course of business. Current business
activity has just begun and insufficient revenue has been generated to sustain
the Company as a going concern without the Infusion of additional capital.
Revenue is recorded as a sale at the time the goods are shipped from the
Company's warehouse. Costs are recorded at the time an obligation to pay occurs
and are expensed at the time the benefit to the Company is matched to revenue
or, if there is no matching revenue, to the period in which the benefit is
realized.
The inventory is valued at the lower of cost and net realizable value.
NOTE 3 INVENTORIES
The finished product purchased for resale inventory consist of electronic
communication devises that improve the distribution of sound and video
information in a residential facility.
<PAGE> 24
SOUND DESIGNS, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 1999
Audited - See Auditors' Report Page 7 of 8
- --------------------------------------------------------------------------------
NOTE 4 RELATED PARTY TRANSACTIONS
The Company neither owns nor leases any real property. Office services are
provided by the President of the Company. Such costs are Immaterial to the
financial statements and accordingly have not been reflected therein. The
officers and directors of the Company are involved in other business activities,
and may, in the future become active in other business activities. If a specific
business opportunity becomes available, such persons may face a conflict in
selecting between the Company and their own business interests. The Company has
not formulated a policy for the resolution of such conflicts.
<PAGE> 25
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 1999
Audited - See Auditors' Report Page 8 of 8
- --------------------------------------------------------------------------------
NOTE 5 SHARE CAPITAL
The authorized capital stock is 25,000,000 shares of common stock with a per
value of $0.001.
2,200,000 shares of common stock have been issued as follows:
<TABLE>
<CAPTION>
ADDITIONAL
SHARE PAID IN
CONSIDERATION DATE ISSUED CAPITAL CAPITAL TOTAL
- ---------------- ---------------- --------- ------- ---------- -----
<S> <C> <C> <C> <C> <C>
Private placement 22 September 1,000,000 $1,000 $1,500 $2,500
For cash 1998 --------- ------ ------ ------
Balance as at 31 December 1,000,000 1,000 1,500 2,500
1998
Private placement 24 February 1999 1,200,000 1,200 58,800 60,000
Cash --------- ------ ------- -------
Balance as at 31 December 2,200,000 $2,200 $60,300 $62,500
1999 --------- ------ ------- -------
</TABLE>
On 22 September 1998 the Company issued 1,000,000 common shares with a par value
of $0.001 for $0.0025 per share. These shares are "control securities" which
cannot be sold except pursuant to certain limitations and restrictions.
On 24 February 1999 the Company issued 1,200,000 common shares with a par value
of $0.001 for $0.05 per share.
NOTE 6 INCOME TAXES
Income taxes on losses have not been reflected in these financial statement as
it is not virtually certain that these losses will be recovered before the
expiry period of the loss carry forwards.
NOTE 7 LOSS PER SHARE
Basic loss per share is computed by dividing losses available to common
stockholders by the weighted average number of common shares during the period.
Diluted loss per share is calculated on the weighted average number of common
shares that would have resulted if dilutive common stock equivalents had been
converted to common stock. No stock options or similar rights were available or
granted during the period presented. Accordingly, basic and diluted loss per
share are the same for all periods presented.
<PAGE> 26
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 hereunto duly authorized.
Date: March 27, 2000 SOUND DESIGNS, INC.
By: /s/ MAX GOLDEN
---------------------------
Max Golden
President and Chief Executive Officer
Date: March 27, 2000 /s/ MAX GOLDEN
------------------------------
Max Golden
President and Chief Executive Officer, Director
(Principal Executive Officer)
Date: March 27, 2000 /s/ MARTHA SCROGGINS
------------------------------
Martha Scroggins
Secretary and Treasurer
(Principal Accounting Officer)
Date: March 27, 2000 /s/ MACK LAWRENCE
------------------------------
Mack Lawrence
Director
Date: March 27, 2000 /s/ JOHN REYNOLDS
------------------------------
John Reynolds
Director
S-1
<PAGE> 27
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
2.1 Plan and Agreement of Merger dated February 21, 2000 among Sound
Designs, Inc., SD Acquisition, Inc. and Plus Solutions, Inc. This
exhibit is incorporated by reference to Exhibit 2.1 to our Current
Report on Form 8-K dated March 27, 2000.
3.1 Articles of Incorporation of Sound Designs. This exhibit is
incorporated by reference to Exhibit 3(I) to our Registration
Statement on Form 10SB dated December 1, 1999.
3.2 Bylaws of Sound Designs. This exhibit is incorporated by reference
to Exhibit 3(II) to our Registration Statement on Form 10SB dated
December 1, 1999.
27 Financial data schedule (submitted only with the copy of this
report filed electronically with the Securities and Exchange
Commission).
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 25,065
<SECURITIES> 0
<RECEIVABLES> 40,428
<ALLOWANCES> 0
<INVENTORY> 27,462
<CURRENT-ASSETS> 93,473
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 93,473
<CURRENT-LIABILITIES> 36,735
<BONDS> 0
0
0
<COMMON> 62,500
<OTHER-SE> (5,762)
<TOTAL-LIABILITY-AND-EQUITY> 93,473
<SALES> 67,419
<TOTAL-REVENUES> 68,024
<CGS> 45,828
<TOTAL-COSTS> 73,286
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (5,262)
<INCOME-TAX> 0
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<NET-INCOME> (5,262)
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</TABLE>
