U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2000
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission file no.: 0-26021
SD PRODUCTS, INC.
--------------------------------------------
(Name of small business issuer in its charter)
FLORIDA 65-0790763
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2958 Braithwood Court
Atlanta, GA 30345
------------------------------------- --------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (770) 414-9596
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange
on which registered
None
---------------------- -------------------------
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.0001 par value
(Title of class)
-------------------
Copies of Communications Sent to:
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
Tel: (561) 832-5696
Fax: (561) 659-5371
<PAGE>
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
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. [X]
State issuer's revenues for its most recent fiscal year. $0.00
Of the 2,800,000 shares of voting stock of the registrant issued and
outstanding as of December 15, 2000, 682,500 shares are held by non-affiliates.
Because of the absence of an established trading market for the voting stock,
the registrant is unable to calculate the aggregate market value of the voting
stock held by non-affiliates as of a specified date within the past 60 days.
2
<PAGE>
Part I
Item 1. Description of Business.
(a) Business Development.
SD Products Corp. was organized under the laws of Florida on
October 20, 1997 by Mr. Mark A. Mintmire, our executive officer and director.
The purpose of the business is to provide a lending source for the purchase of
leased automobiles, including limousines. Currently a developmental stage
company, we plan to conduct business initially in Florida and Georgia later
opening up to selected areas nationwide. Eventually, we intend to be able to
provide a full spectrum of lease financing services such as direct leasing,
providing insurance and maintenance and repair work for our clients.
Business Objective
Our objective is to become a significant provider of automobile lease
financing for the sub- prime and credit- impaired car buyer. This market is
comprised of those car buyers with credit risks that would not be acceptable to
major lenders such as General Motors Credit Corporation or Ford Motor Credit
Corporation.
Our services will be initially be offered in Palm Beach and Broward
Counties, Florida; expanding to Atlanta, Georgia; then to adjacent counties in
south Florida; and eventually throughout Florida, Georgia and selected areas
nationwide. To achieve this objective, we intend to provide a comprehensive
package of automobile lease financing programs to both dealerships and
individuals, focusing on Palm Beach and Broward Counties which have high growth
opportunities. The Company's executive offices are presently located at 2958
Braithwood Court, Atlanta, GA 30345 and its telephone number is (770) 414-9596.
The Company generally has been inactive, having conducted no business
operations except organizational and fund raising activities since its
inception. SDP received gross proceeds in the amount of $23,000 from the sale of
a total of 800,000 shares of common stock, $.0001 per value per share (the
"Common Stock"), in two (2)offerings conducted pursuant to Section 3(b) of the
Securities Act of 1933, as amended (the "Act"), and Rule 504 of Regulation D
promulgated thereunder ("Rule 504"). These offerings were made in the State of
Georgia and the State of Florida. The Company undertook its first offering of
shares of Common Stock pursuant to Rule 504 on April 7, 1998 and its second
offering of shares of Common Stock pursuant to Rule 504 on June 24,1998. While
no offering memorandum was used in connection with these offerings, the business
plan of the Company, which was disclosed to each prospective investor, was to
provide for a lending / funding source for the purchasers of leased automobiles,
including limousines. Neither Georgia nor Florida required a disclosure document
under the terms of the exemption under which these offerings were made.
The Company undertook its first public offering of a minimum of
100,000 to a maximum of 1,000,000 shares of Common Stock pursuant to Rule 415
under the Securities Act of 1933 on October 6, 2000. An SB-1 Registration
Statement was filed with the SEC in accordance with the
3
<PAGE>
'33 Act which became effective on October 13, 2000. The proceeds of the offering
are expected to be used to continue business operations and expand the scope of
the business with particular emphasis on enhancing the Company's credit lines.
There are no preliminary agreements or understandings between the
Company and its officers and directors or affiliates or lending institutions
with respect to any loan agreements or arrangements.
(b) Business of Issuer.
General
Since its inception, the Company has conducted no business operations
except for organizational activities and an offering of Common Stock pursuant to
which it has received gross offering proceeds in the amount of $23,000. Further,
the Company has had no employees since its organization. It is anticipated that
the Company's sole executive officer and director, along with the consultant,
will receive reasonable salaries for services as executive officers at such time
as the Company commences business operations. These individuals will devote such
time and effort as may be necessary to participate in the day-to-day management
of the Company. The Company proposes to engage in business as the provider of
financing/funding for automobile leases.
Business Strategy
The Initial Phase of Operations
This phase will consist of development of clientele for the purchase of
leased automobile and limousines in Palm Beach and Broward Counties, Florida.
Once funded, this phase is expected to take about six months. We believe this
offering will include enough funding to generate cash flow to fund those
operations.
If we are able to generate enough proceeds during this offering, we plan
to open one additional office in Florida each quarter until we have four
operating offices. The third office will be located in Martin County since that
is immediately adjacent to Palm Beach and Broward County. We will open the
fourth office in Dade County. Mr. Adams will manage these operations. Management
plans to closely monitor company operations for approximately one year. If each
of the operations is capable of sustaining itself, we intend to seek additional
financing through the offering of additional equity securities, conventional
bank financing, small business administration financing, venture capital and/or
the private placement of corporate debt.
Intermediary Stage of Operations
The intermediary stage of operations will require additional funding to
open new locations. We will finance this phase from funds raised in excess of
the minimum in this offering and any income from operations. This phase is
expected to begin immediately after the initial phase.
4
<PAGE>
We intend to open the first office outside of Florida in Atlanta, Georgia.
Mr. Mintmire already has business activities in that area and is familiar with
the business environment there. Mr. Mintmire will supervise the Atlanta
operation and generally oversee the Florida operation.
We believe that the additional funding from this offering should be
sufficient to cover these increased costs for up to nine months. These funds
will be used to open a third and fourth Atlanta office during the next two
quarters, then expand into Martin County and Indian River County. It is also our
intention to increase advertising and promotional costs and add a regional
manager to oversee these additional operations. In addition, to be competitive
with other automobile lease finance companies, we believe we must implement an
employee benefit program. We believe that this expansion could achieve similar
economies on the same scale as those anticipated by the Palm Beach, Broward and
Dade Counties expansion.
Our primary revenues during this stage will come from our ability to
purchase discounted automobile lease contracts and receivables from car dealers,
bundle these contracts and receivables and sell these pools of securities in the
secondary market. Pursuing these revenue sources require a significant amount of
up-front money. It is likely that it we will expend a great deal of time, money
and resources before we can purchase and bundle a pool of securities. We will
expend additional, perhaps even greater time and resources in finding a suitable
buyer for such a bundle.
Our secondary revenue source will come from the interest charged to
purchasers we finance directly. However, we will need to establish a significant
client base in order for this endeavor to prove lucrative. We intend to bundle
the automobile lease financing receivables we acquire into pools of securities
for the purpose of offering such pools for sale in the secondary market via a
public and/or private offering or through the sale to an institution or
individual buyer. This re- selling of receivables will enable us to reuse the
cash which we will re-commit to the purchase additional automobile leases and
contracts or to use to finance sub-prime and credit-impaired clients on an
individual basis.
Plans for Acquiring Existing Businesses
In the event we are successful in securing the additional financing for
long term expansion, we plan to seek out acquisitions of businesses which we
believe will complement our overall strategy inside and outside of Florida. We
eventually intend to expand operations to encompass the entire United States.
When we expand our automobile lease finance market outside of Florida, we will
be required to comply with applicable usury and related consumer fraud
regulations in each additional state.
Acquisitions
We expect to increase market penetration through internal expansion and
thereafter through selected acquisitions. These acquisitions could include both
new and used car dealerships as well as finance companies. We believe that, in
the current market, expansion into markets beyond the state of Florida could be
especially attractive if the internal structuring of a successful operation in
Florida can be replicated in other selected geographic areas with high growth
opportunities. However, such expansion presents certain challenges and risks.
There is no assurance that, even if we are successful in establishing a presence
in our targeted markets, we will be able to profitably penetrate these markets.
5
<PAGE>
We may also seek to expand by acquisitions of unrelated companies which
engage in related services such as industrial equipment financing, aircraft
lease financing and aircraft equipment financing. If acquisition candidates are
subject to public reporting requirements, the pool of potential acquisitions or
merger candidates is reduced since these transactions require that certified
financials be provided for the acquiring, acquired or merging candidate within a
specified period of time. That is why we intend to expand through internal
operations through the short and intermediary term. When we do seek acquisitions
or mergers, we will limit the search to companies which either already have
certified financial statements or companies whose operations lend themselves to
review for a certified audit within the required time.
Reverse Merger as a Means of Expansion
In order to aid our ability to expand, we may seek a reverse merger with
a larger, public company. While we have no present intention to seek such a
merger, if an appropriate vehicle were to become known, we would consider such a
merger.
Franchises
If sufficient capital is acquired, we intend to begin seeking
acquisitions of independently owned and operated automobile lease finance
businesses within two years. These franchises will decrease our day-to-day
operating costs by assuming the responsibility for their own operations while
paying us royalties. In addition, the more franchises offices we acquire, the
more readily recognizable our brand name becomes in the marketplace by
consumers.
Risks Associated with Expansion
The potential investor should be aware that we may incur large liabilities
which would increase as our geographic coverage expands. Further, we believe
this expansion would, in due course, place us in a position to be a major force
in Florida and Georgia in funding higher risk automobile and limousine leases.
If this expansion is implemented, Mr. Adams and Mr. Mintmire believe they will
be able to oversee the operation with the addition of the contemplated regional
manager.
Marketing Plans
We intend to employ a multi-pronged marketing approach. This approach
consists of direct sales and forging strategic alliances. This dual-channeled
approach should allow us to quickly access large pools of automobile lease
finance receivables, develop regional awareness and ultimately become a market
leader.
Direct Sales
Our initial marketing efforts will be in the area of direct sales to
automobile purchasers. We believe Mr. Adams will be able to secure our client
base. However, we expect to employ qualified sales personnel to establish new
customer accounts. We will present quality presentations and follow-up with the
clients to ensure a higher retention rate. By employing our own sales personnel,
we will be able to penetrate additional markets at a minimal cost since sales
associates receive compensation in the form of commissions based on the client's
contracting
6
<PAGE>
our programs. Management is currently unable to forecast the acceptance of our
lease finance programs or the expenses of doing business in this manner;
however, we intend to market our programs competitively in our identified target
markets.
Assuming the availability of adequate funding, we intend to stay abreast
of changes in the marketplace by ensuring that we remain in the field where
clients and competitors can be observed firsthand. We believe that the loyalty
of these clients can be maintained through a continuous presence, relationship
building and professional service.
We will attempt to maintain diversity within our client base in order to
decrease our exposure to downturns or volatility in any particular industry. As
part of this client selection strategy, we will offer services to clients which
have a reputation for reputable dealings and a reliable and broad inventory
base. We will eliminate clients that we believe present a higher risk of product
mechanical failure and very poor sub-prime and "impaired credit" purchaser
profiles. Where feasible, we will evaluate each client's portfolio of automobile
lease finance receivables for creditworthiness, product grade and loan failure
history.
Strategic Alliances
We intend to form strategic alliances with automobile and limousine
sales companies, to provide us with an easy, cost-effective, "in-house"
alternative to seeking buyers directly. In this system of marketing, we would
make our programs available to selected automobile and limousine dealerships.
The dealership then behaves much like a franchise in that, for little cost, the
dealer's agents sell our programs for us in order to provide financing for their
sub- prime credit automobile purchasers.
Expenditures
Our primary direct costs will be as follows:
o Salaries to Mr. Adams and Mr. Mintmire (payroll cost, actual or
deferred)
o Marketing and sales related costs
o Employment related taxes
o Health benefits.
Facilities
We currently own no property. We maintain our present office, rent free, at
facilities provided by Mr. Mark Mintmire, our sole principal. We anticipate
continued use of this office on a rent-free basis for the foreseeable future.
This arrangement will meet our needs while we are in the development stage.
Assuming we obtain the necessary additional financing, we believe we would be
able to locate adequate commercial facilities at reasonable rental rates in Palm
Beach County suitable for our future needs.
7
<PAGE>
Debt Financing
We have not yet sought any debt financing since we do not believe we would
qualify for such a loan until we have completed at least two years of profitable
operations. Once we have met this criteria, we intend to seek out funds from
licensed venture capital firms. Since we will not seek financing until we have
several locations operating successfully, we believe we will be in a better
position to negotiate appropriate placement and repayment terms for these loans.
However, in the event we do receive financing but default in payments, the
financing would result in foreclosure upon our assets to the detriment of the
shareholders.
Industry Regulation
We are not subject to industry specific regulation. However, we are subject
to usury and other standards relating to permitted maximum rates of interest and
related consumer fraud regulations.
Item 2. Description of Property.
The Company's executive offices are located at 2958 Braithwood Court,
Atlanta, Georgia 30345. Its telephone number is (770) 414-9596. The Company pays
no rent for this space. The Company owns no real or personal property.
Item 3. Legal Proceedings.
The Company knows of no legal proceedings to which it is a party or
to which any of its property is the subject which are pending, threatened or
contemplated or any unsatisfied judgments against the Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of the Company's shareholders,
through the solicitation of proxies or otherwise during the fiscal year ended
September 30, 2000, covered by this report.
Item 5. Market for Common Equity and Related Stockholder Matters.
(a) Market Information.
There has been no established public trading market for the Common
Stock since the Company's inception on October 20,1997.
(b) Holders.
As of December 15, 2000, the Company had 39 shareholders of record of
its 2,800,000 outstanding shares of Common Stock.
(c) Dividends.
The Company has never paid or declared any dividends on its Common
Stock and does not anticipate paying cash dividends in the foreseeable future.
Item 6. Management's Discussion and Analysis or Plan of Operation.
8
<PAGE>
Plan of Operations
Since its inception, the Company has conducted minimal business operations
except for organizational and capital raising activities. The Company has not
realized significant revenues since its inception due to the fact that its key
executive, Mr. Mintmire, until his graduation in August 1998, has been enrolled
as a full-time college student in the Masters of Business Administration program
at Georgia State University, in Atlanta, Georgia. As a result, from inception
(October 20, 1997) through September 30, 2000, the Company had only interest
income of $1,172 from a loan to a related party. Total Company operations and
operating expenses as of September 30, 2000 were $16,899. The Company proposes
to engage in the business of automobile lease financing/funding.
Mr. Charles Adams, consultant to SDP, agreed to develop the
automobile lease financing/funding business for the Company for the following,
among other, reasons: (i) because of his belief that a public company could
exploit its talents, services and business reputation to commercial advantage
and (ii) to observe directly whether the perceived advantages of a public
company, including, among others, greater ease in raising capital, liquidity of
securities holdings and availability of current public information, would
translate into greater profitability for a public, as compared to a
locally-owned lease finance/funding company.
If the Company is unable to generate sufficient revenue from
operations to implement its expansion plans, management intends to explore all
available alternatives for debt and/or equity financing, including but not
limited to private and public securities offerings. Depending upon the amount of
revenue, if any, generated by the Company, management anticipates that it will
be able to satisfy its cash requirements for the next approximately six (6) to
nine (9) months without raising funds via debt and/or equity financing or from
third party funding sources. Accordingly, management expects that it will be
necessary for SDP to raise additional funds in the next six(6) months, if only a
minimal level of revenue is generated in accordance with management's
expectations.
Mr. Adams, at least initially, will be solely responsible for
developing SDP's automobile lease finance/funding business. However, at such
time, if ever, as sufficient operating capital becomes available, management
expects to employ additional staffing and marketing personnel. In addition, the
Company expects to continuously engage in market research in order to monitor
new market trends, seasonality factors and other critical information deemed
relevant to SDP's business.
In addition, at least initially, the Company intends to operate out
of the home of Mr. Mintmire. Thus, it is not anticipated that SDP will lease or
purchase office space or computer equipment in the foreseeable future. SDP may
in the future establish its own facilities and/or acquire computer equipment if
the necessary capital becomes available; however, the Company's financial
condition does not permit management to consider the acquisition of office space
or equipment at this time.
9
<PAGE>
Financial Condition, Capital Resources and Liquidity
For the Fiscal Years ending September 30, 2000 and September 30, 1999
At September 30, 2000 and September 30, 1999, the Company had assets
totaling $6,811 and $13,200 respectively, and liabilities of $500 and $952
respectively. The Company's total assets are primarily attributable to interest
income from a loan to a related party. The Company's total liabilities are
attributable primarily to accrued legal expenses, organization expenses and
professional fees. Since the Company's inception, it has received $23,000 in
cash contributed as consideration for the issuance of shares of Common Stock.
SDP's working capital is presently minimal and there can be no assurance that
the Company's financial condition will improve. The Company is expected to
continue to have minimal working capital or a working capital deficit as a
result of current liabilities. Even though management believes, without
assurance, that it will obtain sufficient capital with which to implement its
business plan on a limited scale, the Company is not expected to continue in
operation without an infusion of capital. In order to obtain additional equity
financing, management may be required to dilute the interest of existing
shareholders or forego a substantial interest of its revenues, if any.
The Company has no potential capital resources from any outside
sources at the current time. In its initial phase, the Company will operate out
of the facility provided by Mr. Mintmire. Mr. Adams will begin by finding
clients for the Company and instructing Mr. Mintmire in the operation of an
automobile lease financing/funding business. To attract clients, Mr. Adams and
Mr. Mintmire will visit potential clients in order to determine their lease
financing needs. The Company will place advertising in local area newspapers in
Palm Beach County to directly solicit prospective sub-prime and/or credit
impaired auto buyers. In the event the Company requires additional capital
during this phase, Mr. Mintmire has committed to fund the operation until such
time as additional capital is available. The Company believes that it will
require six (6) to nine (9) months in order to determine the market demand
potential.
The ability of the Company to continue as a going concern is
dependent upon its ability to obtain clients who will utilize the Company's
automobile lease financing/funding programs and whether the Company can attract
an adequate number of direct clients who will qualify for a lease financing
program. The Company believes that in order to be able to expand its initial
operations, it must rent offices in Palm Beach County, hire clerical staff and
acquire through purchase or lease computer and office equipment to maintain
accurate financial accounting and client data. The Company believes that there
is adequate and affordable rental space available in Palm Beach County and
sufficiently trained personnel to provide such clerical services at affordable
rates. Further, the Company believes that the type of equipment necessary for
the operation is readily accessible at competitive rates.
To implement such plan the Company has initiated a Form SB-1 public
offering pursuant to Rule 415 under the Securities Act of 1933. It intends to
initiate a self-underwritten sale of a minimum of 100,000 shares at an offering
price of $1.00 and a maximum sale of 1,000,000 shares at an offering price of
$1.00. The offering is being made on a self-underwritten basis by us through our
only principal, Mark A. Mintmire, without the use of securities brokers. All
proceeds from the sale of shares will be held in an attorney escrow account
maintained by Duncan, Blum & Associates, Bethesda, Maryland.
10
<PAGE>
Net Operating Losses
The Company has net operating loss carry-forwards of $6,500 expiring
at September 30, 2018, $4,400 expiring at September 30, 2019and $5,900 expiring
at September 30, 2020. The company has a $2,500 and $1,600 deferred tax asset as
of September 30, 2000 and September 30, 1999, respectively, resulting from the
loss carry-forwards, for which it has established a 100% valuation allowance.
Until the Company's current operations begin to produce earnings, it is unclear
as to the ability of the Company to utilize such carry-forwards.
Year 2000 Compliance
The Company did not experience a negative impact to its technology
infrastructure as a result of the Year 2000. The Company does not anticipate
that it will experience any material disruption in its operations as a result of
the Year 2000 changeover in the future.
Forward-Looking Statements
This Form 10-KSB includes "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. All statements, other
than statements of historical facts, included or incorporated by reference in
this Form10-KSB which address activities, events or developments which the
Company expects or anticipates will or may occur in the future, including such
things as future capital expenditures (including the amount and nature thereof),
business strategy, expansion and growth of the Company's business and
operations, and other such matters are forward-looking statements. These
statements are based on certain assumptions and analyses made by the Company in
light of its experience and its perception of historical trends, current
conditions and expected future developments as well as other factors it believes
are appropriate in the circumstances. However, whether actual results or
developments will conform with the Company's expectations and predictions is
subject to a number of risks and uncertainties, general economic market and
business conditions; the business opportunities (or lack thereof) that may be
presented to and pursued by the Company; changes in laws or regulation; and
other factors, most of which are beyond the control of the Company.
Consequently, all of the forward-looking statements made in this Form 10-KSB are
qualified by these cautionary statements and there can be no assurance that the
actual results or developments anticipated by the Company will be realized or,
even if substantially realized, that they will have the expected consequence to
or effects on the Company or its business or operations. The Company assumes no
obligations to update any such forward-looking statements.
Item 7. Financial Statements
The Financial Statements of SD Products, Inc., and Notes to Financial
Statements together with the Independent Auditor's Report of Durland and
Company, CPA's, P.A., required by this Item 13 commence on page F-1 hereof and
are incorporated herein by this reference. The Financial Statements filed as
part of this Report on Form 10-KSB are listed in the Index to Financial
Statements below:
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
None
11
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report...........................................F-2
Balance Sheets.........................................................F-3
Statements of Operations...............................................F-4
Statements of Changes in Stockholders' Equity..........................F-5
Statements of Cash Flows...............................................F-6
Notes to Financial Statements..........................................F-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
SD Products Corporation
Atlanta, Georgia
We have audited the accompanying balance sheet of SD Products Corporation, a
development stage enterprise, as of September 30, 2000 and the related
statements of operations, stockholders' equity and cash flows for the two years
then ended. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about 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 statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SD Products Corporation as of
September 30, 2000 and the results of its operations and its cash flows for the
two years then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 5 to the
financial statements, the Company has experienced a loss since inception. The
Company's financial position and operating results raise substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 5. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Durland & Company, CPAs, P.A.
Durland & Company, CPAs, P.A.
Palm Beach, Florida
December 20, 2000
F-2
<PAGE>
<TABLE>
<CAPTION>
SD Products Corporation
(A Development Stage Enterprise)
Balance Sheets
September 30,
2000 1999
-------------------- ----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 336 $ 13,200
Loan and accrued interest receivable - related party 6,475 0
-------------------- ----------------
Total current assets 6,811 13,200
-------------------- ----------------
Total Assets $ 6,811 $ 13,200
==================== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued expenses $ 0 $ 452
Accrued expenses - related party 500 500
-------------------- ----------------
Total current liabilities 500 952
-------------------- ----------------
Total Liabilities 500 952
-------------------- ----------------
STOCKHOLDERS' EQUITY
Preferred stock, $0.0001 par value, authorized 10,000,000
shares: none issued 0 0
Common stock, $0.0001 par value, authorized 50,000,000
shares: 2,800,000 issued and outstanding 280 280
Additional paid-in capital 22,930 22,930
Deficit accumulated during the development stage (16,899) (10,962)
-------------------- ----------------
Total Stockholders' Equity 6,311 12,248
-------------------- ----------------
Total Liabilities and Stockholders' Equity $ 6,811 $ 13,200
==================== ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
SD Products Corporation
(A Development Stage Enterprise)
Statements of Operations
For the Year and Period Since Inception Ended September 30,
Period from
October 20, 1997
(Inception) through
2000 1999 September 30, 2000
----------------- ------------------ ----------------------
<S> <C> <C> <C>
Revenues $ 0 $ 0 $ 0
----------------- ------------------ ----------------------
Expenses
General and administrative expenses 910 1,466 8,802
Legal fees - related party 0 500 510
Professional fees 5,502 3,057 8,759
----------------- ------------------ ----------------------
Total expenses 6,412 5,023 18,071
----------------- ------------------ ----------------------
Loss from operations (6,412) (5,023) (18,071)
Other income (expense)
Interest income - related party 475 604 1,172
----------------- ------------------ ----------------------
Net loss $ (5,937)$ (4,419)$ (16,899)
================= ================== ======================
Net loss per weighted average share, basic $ (0.01)$ (0.01)
================= ==================
Weighted average number of shares 2,800,000 2,800,000
================= ==================
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
SD Products Corporation
(A Development Stage Enterprise)
Statement of Changes in Stockholders' Equity
Period From October 20, 1997 (Inception) through September 30, 2000
Deficit
Accumulated
Additional During the Total
Number of Preferred Common Paid-in Development Stockholders'
Shares Stock Stock Capital Stage Equity
------------ ------------ ------------ ------------ --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
BEGINNING BALANCE,
October 20, 1997 (Inception) 0 $ 0 $ 0 $ 0 $ 0 $ 0
October 20, 1997 - services ($0.0001/sh) 2,100,000 0 210 0 0 210
April 7, 1998 - cash ($0.01/sh) 20,000 0 2 198 0 200
April 8, 1998 - cash ($0.01/sh) 100,000 0 10 990 0 1,000
April 11, 1998 - cash ($0.01/sh) 40,000 0 4 396 0 400
April 12, 1998 - cash ($0.01/sh) 40,000 0 4 396 0 400
April 13, 1998 - cash ($0.01/sh) 20,000 0 2 198 0 200
April 14, 1998 - cash ($0.01/sh) 40,000 0 4 396 0 400
April 15, 1998 - cash ($0.01/sh) 20,000 0 2 198 0 200
April 17, 1998 - cash ($0.01/sh) 20,000 0 2 198 0 200
June 24, 1998 - cash ($0.05/sh) 300,000 0 30 14,970 0 15,000
June 29, 1998 - cash ($0.05/sh) 100,000 0 10 4,990 0 5,000
Net loss 0 0 0 0 (6,543) (6,543)
------------ ------------ ------------ ------------ --------------- --------------
BALANCE, September 30, 1998 2,800,000 0 280 22,930 (6,543) 16,667
Net loss 0 0 0 0 (4,419) (4,419)
------------ ------------ ------------ ------------ --------------- --------------
BALANCE, September 30, 1999 2,800,000 0 280 22,930 (10,962) 12,248
Net loss 0 0 0 0 (5,937) (5,937)
------------ ------------ ------------ ------------ --------------- --------------
ENDING BALANCE, September 30, 2000 2,800,000 $ 0 $ 280 $ 22,930 $ (16,899)$ 6,311
============ ============ ============ ============ =============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
SD Products Corporation
(A Development Stage Enterprise)
Statement of Cash Flows
For the Year and Period Since Inception Ended September 30,
Period from
October 20, 1997
(Inception) through
2000 1999 September 30, 2000
----------- ------------- ---------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (5,937)$ (4,419)$ (16,899)
Adjustments to reconcile net loss to net cash used for operating activities:
Stock issued for services 0 0 10
Stock issued for services - related party 0 0 200
Changes in operating assets and liabilities:
(Increase) decrease accrued interest receivable - related party (475) 93 (475)
Increase (decrease) accrued expenses (452) (2,548) 0
Increase (decrease) accrued expenses - related party 0 0 500
----------- ------------- ------------------
Net cash used by operating activities (6,864) (6,874) (16,664)
----------- ------------- ------------------
CASH FLOW FROM INVESTING ACTIVITIES:
(Advance to) repayment from related party (6,000) 18,000 (6,000)
----------- ------------- ------------------
Net cash (used) provided by investing activities (6,000) 18,000 (6,000)
----------- ------------- ------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 0 0 23,000
----------- ------------- ------------------
Net cash provided by financing activities 0 0 23,000
----------- ------------- ------------------
Net increase in cash (12,864) 11,126 336
CASH, beginning of period 13,200 2,074 0
----------- ------------- ------------------
CASH, end of period $ 336 $ 13,200 $ 336
=========== ============= ==================
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
SD Products Corporation
(A Development Stage Enterprise)
Notes to Financial Statements
(1) Summary of Significant Accounting Principles
TheCompany SD Products Corporation is a Florida chartered development
stage corporation which conducts business from its headquarters in
Atlanta, Georgia. The Company was incorporated on October 20, 1997.
The Company has not yet engaged in its expected operations. The
Company's future operations will be to provide automobile leasing for
various consumer groups. Current activities include raising additional
equity and negotiating with potential key personnel and facilities.
There is no assurance that any benefit will result from such
activities. The Company will not receive any operating revenues until
the commencement of operations, but will nevertheless continue to incur
expenses until then.
The following summarize the more significant accounting and reporting
policies and practices of the Company:
a) Start-up costs Costs of start-up activities, including organization
costs, are expensed as incurred, in accordance with Statement of
Position (SOP) 98-5.
b) Net loss per share Basic is computed by dividing the net loss by the
weighted average number of common shares outstanding during the period.
c) Use of estimates The financial statements have been prepared in
conformity with generally accepted accounting principles. In preparing
the financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities
as of the date of the statements of financial condition and revenues
and expenses for the period then ended. Actual results may differ
significantly from those estimates.
(2) Loan Receivable The Company authorized a loan in the amount of $6,000
to a related party at the rate of 9% per year, payable on demand.
Interest of $475 was accrued at September 30, 2000.
(3) Stockholders' Equity The Company has authorized 50,000,000 shares of
$0.0001 par value common stock and 10,000,000 shares of $0.0001 par
value preferred stock. Rights and privileges of the preferred stock are
to be determined by the Board of Directors prior to issuance. The
Company had 2,800,000 shares of common stock and 0 shares of preferred
stock issued and outstanding at September 30, 2000. The Company, on
October 20, 1997, issued 2,000,000 shares to its sole Officer and
Director for the value of services rendered in connection with the
organization of the Company. On the same date, the Company issued
100,000 shares for the value of consulting services rendered in
connection with the organization of the Company. In April 1998, the
Company issued 300,000 shares of common stock at $0.01 per share for
$3,000 in cash. In June 1998, the Company issued 400,000 shares of
common stock at $0.05 per share for $20,000 in cash.
(4) Income Taxes Deferred income taxes (benefits) are provided for certain
income and expenses which are recognized in different periods for tax
and financial reporting purposes. The Company has net operating loss
carry- forwards for income tax purposes of approximately $6,500,
expiring at September 30, 2018, $4,400 expiring at September 30, 2019
and $5,900 expiring at September 30, 2020..
The amount recorded as deferred tax assets is approximately $2,500 and
$1,600 as of September 30, 2000 and September 30, 1999, respectively,
which represents the amount of tax benefit of the loss carryforward.
The Company has established a 100% valuation allowance against this
deferred tax asset, as the Company has no history of profitable
operations.
F-7
<PAGE>
SD Products Corporation
(A Development Stage Enterprise)
Notes to Financial Statements
(5) Going Concern As shown in the accompanying financial statements, the
Company incurred a net loss of $16,900 for the period from October 20,
1997 (Inception) through September 30, 2000. The ability of the Company
to continue as a going concern is dependent upon commencing operations
and obtaining additional capital and financing. The financial
statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern. The Company is
currently seeking financing to allow it to begin its planned
operations.
(6) Related parties Counsel to the Company directly owns 100,000 shares of
the Company, and indirectly owns 100,000 shares in the Company through
the 100% sole ownership of the common stock of another company that has
invested in the Company. Also, counsel's adult son, sole Officer and
Director of the Company, directly owns 2,020,000 shares in the Company.
Related party balances and amounts for the period since inception,
(October 20, 1997), ended September 30, 2000 are as follows:
Professional fees payable - related party $ 510
==============
Organizational costs - related party $ 245
==============
Interest earned - related party $ 1,172
==============
F-8
<PAGE>
Part III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
With Section 16(a) of the Exchange Act.
Executive Officers and Directors
Set forth below are the names, ages, positions with the Company and
business experiences of the executive officers and directors of the Company.
Name Age Position(s) with Company
----- --- ------------------------
Mark A. Mintmire 30 President, Secretary, Chief
Executive Officer & Director
Charles Adams 35 Consultant(1)(2)
-----------------------------
(1) Except for Mr. Adams the Company's key consultant; who had no role in
founding or organizing the Company, the above-named person may be deemed to
be "promoters" and "parents" of the Company, as those terms are defined
under the Rules and Regulations promulgated under the Act.
(2) Mr. Adams acts as a Key consultant of the Company.
All directors hold office until the next annual meeting of the
Company's shareholders and until their successors have been elected and qualify.
Officers serve at the pleasure of the Board of Director. Mr. Mintmire and Mr.
Adams will devote such time and effort to the business and affairs of the
Company as may be necessary to perform their responsibilities as executive
officers and/or directors of the Company.
Aside from the above officer and director, there are no other persons
whose activities will be material to the operations of the Company at this time.
Mr. Mintmire is the sole "promoter" of the Company as such term is defined under
the Act.
Family Relationships
There are no family relationships between or among the executive
officers and director of the Company.
Business Experience
Sole Officer and Director
Mark A. Mintmire. Mr. Mintmire has served as the sole executive
President, Treasurer and Director of the company since its inception(October 20,
1997). As such, he acts as the CEO, CFO and principal accounting officer. Mr.
Mintmire was a full time Masters of Business Administration student at Georgia
State University, Atlanta, Georgia, until graduating in August 1998,
concentrating in Finance. Mr. Mintmire is an active consultant to a number of
companies including:
20
<PAGE>
Global Equity Funds, Ltd., a small private investment banking group located
in Calgary, Canada; Paradigm Sales and Marketing Corporation, located in
Hattiesburg, Mississippi; and Bio-Solutions International, Inc., located in
Denver, Colorado.
From 1993 through September 1997, Mr. Mintmire formed, financed and
operated a bar and restaurant in Atlanta, Georgia, with an investor and
operational group. Mr. Mintmire sold his interest in the bar and restaurant in
September 1997 to attend graduate school. Mr. Mintmire has extensive experience
in computer based capital budgeting and financial forecasting. Mr. Mintmire also
will become familiar with the our automobile lease finance clients by teaming up
with Mr. Adams on client visits to establish a sound business relationship.
Key Consultant
Mr. Charles Adams. Mr. Adams has served as our key consultant since its
inception. Mr. Adams specializes in financing equipment which is placed with end
users. Since October 1997, he has engaged in private business ventures, mostly
in the area of finance. Through his company, Adams Inc., which was formed in
October 1997, he is currently providing consulting services and commercial
equipment leasing. Mr. Adams also arranges the operating leases for rolling
stock (cars, buses, trucks and construction equipment) and large commercial
marine end users (boats for ferries, cruise lines and commercial fisheries). He
has independently engaged in commercial leasing of limousines and limousine
fleets.
From October 1997 until the present, Mr. Adams has been employed by
Carcorp, Inc. which is one of only two lenders who provide commercial paper for
Bombardier, Inc., under operating leases for Lear jets and other major aviation
equipment. Mr. Adams is the Director of Finance of Carcorp, Inc. and supervises
a staff of eight (8). In this capacity, Mr. Adams arranges the operating leases
for rolling stock, large commercial equipment, aviation and commercial marine
end users. From 1995 through October 1997, Mr. Adams was independently engaged
in commercial leasing of limousines and limousine fleets. From 1996 through
October 1997, he also was employed by Ed Morse Cadillac as the Fleet Manager for
its Jeep operations. From 1993 through 1995, Mr. Adams was employed by Palm
Beach Lincoln Mercury in sales. Prior to relocating to Florida, from 1991
through 1993 Mr. Adams was employed by Alpha Zeta Trust in California, where he
was responsible for the acquisition of commercial real estate, including
negotiations of sale and arrangement of bridge financing. During Mr. Adams'
employment, Alpha Zeta Trust acquired two large loan pools from Resolution Trust
Corporation. The profitable part of these pools were sold at a substantial
profit, while the non-performing loans were foreclosed. From 1988 through 1991,
Mr. Adams independently engaged in the acquisition of real estate. During the
same period, he was employed by Ogner Motors, a Porsche, Audi and Ferrari
authorized dealer in Woodland Hills, California as a salesman. In this capacity,
Mr. Adams was responsible for all aspects of automobile acquisition, including
arranging the purchase financing. Mr. Adams attended Los Angeles Valley College
for two (2) years and took marketing and sales extension courses at the
University of California at Los Angeles.
At present, we believe Mr. Adams' expertise is sufficient to meet our
needs. It is anticipated, however that we will need to employ a manager,
additional clerical support and an accountant. Mr. Adams
21
<PAGE>
will begin by finding clients and advising Mr. Mintmire in the operation of the
lease financing. Mr. Adams will visit clients and prospective clients on a
regular schedule to foster strong business relationships.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers and directors and persons who own more
than 10% of a registered class of the Company's equity securities, to file with
the Securities and Exchange Commission (hereinafter referred to as the
"Commission") initial statements of beneficial ownership, reports of changes in
ownership and annual reports concerning their ownership, of Common Stock and
other equity securities of the Company on Forms 3, 4 and 5, respectively.
Executive officers, directors and greater than 10% shareholders are required by
Commission regulations to furnish the Company with copies of all Section 16(a)
reports they file. To the Company's knowledge, Mr. Mintmire comprises all of the
Company's executive officers, directors and greater than 10% beneficial owners
of its common Stock, and has complied with Section 16(a) filing requirements
applicable to him during the Company's fiscal year ended September 30, 2000.
Item 10. Executive Compensation
The Company, in consideration for various services performed for the
Company, issued to Mr. Mark A. Mintmire, the Company's sole executive officer
and/or director 2,000,000 shares of restricted common stock. The Company issued
100,000 shares of unrestricted common stock to Mr. Adams for consulting services
performed and costs incurred by Mr. Adams on behalf of SDP. Except for the
above-described compensation, it is not anticipated that any executive officer
of the Company will receive any cash or non-cash compensation for his or her
services in all capacities to the Company until such time as the Company
commences business operations. At such time as SDP commences operations, it is
expected that the Board of Directors will approve the payment of salaries in a
reasonable amount to each of its officers for their services in the positions of
President/Treasurer, Executive Vice President and Secretary respectively, of the
Company. At such time, the Board of Directors may, in its discretion, approve
the payment of additional cash or non-cash compensation to the foregoing for
their services to the Company.
The Company does not provide officers with pension, stock
appreciation rights, long-term incentive or other plans but has the intention of
implementing such plans in the future.
Compensation of Directors
The Company has no standard arrangements for compensating the directors of
the Company for their attendance at meetings of the Board of Directors.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table summarizes certain information with respect to the
beneficial ownership of company shares as of September 30, 2000, regarding the
ownership of common stock by each shareholder known to be the owner of more than
5% of the outstanding shares, each director
22
<PAGE>
and all executive officers and directors as a group. Except as otherwise
indicated, each of the shareholders has sole voting and investment power with
respect to the shares of Common Stock beneficially owned.
Number
Name of Beneficial Owner: of Shares(1) %
------------------------- -------- ---
Mark A. Mintmire (2) 2,000,000 71.42%
All Directors, Officers and 5%
Shareholders as a Group 2,000,000 71.42%
All Beneficial Owners as a 2,800,000 100.0%
Group ======= ======
--------------------
(1) Reflects total outstanding shares of 2,800,000 as of September 30, 2000.
(2) Our sole executive and director.
Item 12. Certain Relationships and Related Transactions:
On October 20, 1997, at inception, the Company issued 2,000,000
shares of restricted Common Stock to Mr. Mark A. Mintmire, the President and
Treasurer of the Company and record and beneficial owner of approximately 71.42%
of the Company's outstanding Common Stock, in consideration and exchange
therefore for services in connection with the organization of SDP performed for
the Company by him.
On October 20, 1997, the Company issued 100,000 shares of
unrestricted Common Stock to Mr. Donald F. Mintmire, the legal counsel of the
Company and record and beneficial owner of approximately 3.57% of the Company's
outstanding Common Stock, in exchange for services to the Company in connection
with the organization of SDP valued by him at $500.
On October 20, 1997, the Company issued 100,000 shares of
unrestricted Common Stock to Mr. Charles Adams, the key consultant of the
Company and record and beneficial owner of approximately 3.57% of the Company's
outstanding Common Stock, in consideration and exchange therefore for services
in connection with the organization of SDP performed for the Company by him.
On April 14, 1998, the Company sold for $200 in cash a total of
20,000 shares of unrestricted Common Stock to Mark A. Mintmire, the sole
executive and director of the Company, and the record and beneficial owner of
approximately 72.14% of the Company's outstanding Common Stock, for certain
business consulting services performed for the Company valued at $200.
At the current time, the Company has no provision to issue any
additional securities to management, promoters or their respective affiliates or
associates. At such time as the Board
23
<PAGE>
of Directors adopts an employee stock option or pension plan, any issuance would
be in accordance with the terms thereof and proper approval. Although the
Company has a very large amount of authorized but unissued Common Stock and
Preferred Stock which may be issued without further shareholder approval or
notice, the Company intends to reserve such stock for the Rule 506 offerings
contemplated to implement continued expansion, for acquisitions and for properly
approved employee compensation at such time as such plan is adopted. (See Part
I, Item 1. "Description of Business - (b) Business of Issuer.") contemplated or
any unsatisfied judgments against the Company.
Item 13. Exhibits and Reports on Form 8-K.
(a) The exhibits required to be filed herewith by Item 601 of
Regulation S-B, are described in the following index of exhibits, are
incorporated herein by reference, as follows:
<TABLE>
<S> <C> <C>
Exhibit No. Description
----------- ---------------------------------------
2.1 SB-1 Registration Statement(1)
3.(i).1 Articles of Incorporation of SD Products Corp. filed October 20, 1997(2)
3.(i).2 Articles of Amendment to the Articles of Incorporation of SD Products Corp. filed
April 30, 1999(2)
3.(ii) Bylaws of SD Products Corp.(2)
23.2 * Independent Auditors Consent to the incorporation by reference of financial
statements of the company as of September 30, 2000 in Form SB-1.
27 * Financial Data Schedule
---------------------------------
</TABLE>
(1) Incorporated herein by reference to the Registration Statement on Form SB-1
and Amendments thereto of SD Products Corp.(Registration No. 333-36966),
filed with the U.S. Securities and Exchange Commission.
(2) Incorporated herein by reference to the Registration Statement on Form
10-SB of SD Products Corp.(File No. 0-26021), filed with the U.S.
Securities and Exchange Commission.
* Included herein.
(b) No Reports on Form 8-K were filed during the fiscal year ended September
30, 2000, covered by this Annual Report on Form 10-KSB.
24
<PAGE>
SIGNATURES
----------
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SD PRODUCTS, CORP.
(Registrant)
Date: December 28, 2000 By: /s/ Mark A. Mintmire
--------------------------------
Mark A. Mintmire, President
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Date Signature Title
---- --------- -----
December 28, 2000 By: /s/ Mark A. Mintmire
------------------------- President, Director
Mark A. Mintmire Secretary and Treasurer
25
