SECURITIES EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KT
TRANSITIONAL REPORT PURSUANT TO
THE SECURITIES EXCHANGE ACT OF 1934
For the period from Inception, January 19, 2000, to September 30, 2000
Commission file number:0-30119
S.D.E. Holdings 1 Inc.
------------------------
(Former Name)
DNAPrint genomics, Inc.
-----------------------
(New Name)
Utah 59-2780520
------------------------- --------------------
(State of incorporation) (I.R.S. Employer
Identification No.)
1748 Independence Blvd., Suite D1, Sarasota, FL 34234
--------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 941-351-4543
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: None
Name of each exchange on which registered: N/A
Securities registered pursuant to Section 12(g) of the Act:
Title of each class: $0.001 par value Common
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for at least the past 90 days.
Yes X No
----- ------
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not 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
1
<PAGE>
Transitional Small Business Disclosure Format:
___X___ Yes _______ No
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of September 30, 2000: $0
Number of outstanding shares of the registrant's $.001 par value common stock,
as of September 30, 2000: 1,000,000.
2
<PAGE>
TABLE OF CONTENTS
PART I
Page
Item 1. Description of Business.................... 4
Item 2. Properties ................................ 5
Item 3. Legal Proceedings.......................... 5
Item 4. Submission of Matters to a Vote of
Security Holders.......................... 6
PART II
Item 5. Market for Registrant's Common Stock and
Security Holder Matters .................. 6
Item 6. Management's Discussion and Analysis of
Financial Condition and Results of
Operations ............................... 7
Item 7. Financial Statements and Supplementary Data.. 8
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure..... 8
PART III
Item 9. Directors and Executive Officers of the
Registrant................................. 9
Item 10. Executive Compensation...................... 12
Item 11. Security Ownership of Certain Beneficial
Owners and Management...................... 14
Item 12. Certain Relationships and Related
Transactions............................... 15
PART IV
Item 13. Exhibits, Financial Statement Schedule
and Reports on Form 8-K.................... 15
Index to Exhibits ......................... 16
Signature Page............................. 17
Index to Financial Statements.............. F-1
3
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
------------------------
General
--------
The Company was incorporated under the laws of the State of Nevada on
January 19, 2000 and is in the early developmental and promotional stages. To
date the Company's activities have been organizational ones, directed at
developing its business plan and raising its initial capital. The company has no
commercial operations as of date hereof. The company has no full-time employees
and owns no real estate.
At period end, the Company is a "shell" company and its only current
business plan is to seek, investigate, and, if warranted, acquire one or more
properties or businesses, and to pursue other related activities intended to
enhance shareholder value. The acquisition of a business opportunity may be made
by purchase, merger, exchange of stock, or otherwise, and may encompass assets
or a business entity, such as a corporation, joint venture, or partnership. The
Company has no capital, and it is unlikely that the Company will be able to take
advantage of more than one such business opportunity. The Company intends to
seek opportunities demonstrating the potential of long-term growth as opposed to
short-term earnings.
On October 13, 2000, the Company completed a merger as described in a Form
8K12(g)3 dated November 3, 2000 with DNAPrint genomics, Inc., a Utah
Corporation. This report is being filed to conform the merged companies
financial reporting period to a calendar year end and to reflect and disclose
the financial position of S.D.E. Holdings 1 Inc. up to the date of the merger,
October 13, 2000.
Pursuant to an Agreement and Plan of Merger (the "Merger Agreement") dated
as of October 17, 2000 between the registrant, S.D.E. Holdings 1 Inc., a Nevada
corporation ("S.D.E.") and the registrant's parent corporation, DNAPrint
genomics, Inc., a Utah corporation ("DNAPrint"), all the outstanding shares of
common stock of S.D.E. were exchanged for an equal number of shares of common
stock of DNAPrint which were then cancelled and returned to the authorized but
unissued shares of DNAPrint in a merger transaction in which DNAPrint was the
surviving corporation. Pursuant to the merger S.D.E. was the disappearing
corporation and DNAPrint as the surviving corporation has elected 12g-3
successor issuer status. The merger was accomplished pursuant to Section 92A.180
of the Nevada Revised Statues pertaining to the merger of subsidiary
corporations into parent corporations.
4
<PAGE>
The Merger Agreement was adopted by the unanimous consent of the Board of
Directors of both S.D.E. and DNAPrint on October 17, 2000. No approval of the
shareholders of DNAPrint was required under applicable state corporate law. No
other approval of the owners of any constituent corporation was required under
applicable state corporate law. S.D.E. and DNAPrint complied in all respects
with the provisions of Nevada Revised Statute 92A.180 pertaining to the merger
of subsidiary corporations into parent corporations.
Prior to the merger, S.D.E. had 500,000 shares of common stock outstanding
after 500,000 shares were returned to treasury on October 13, 2000. These shares
were owned by DNAPrint which, pursuant to the merger, were cancelled and
returned to the authorized but unissued shares of DNAPrint.
Prior to the effectiveness of the Merger Agreement, DNAPrint had an
aggregate of 384,400,986 shares of common stock, par value $.01, issued and
outstanding, and no shares of preferred stock outstanding, $.01 par value. Upon
effectiveness of the merger, the number of shares of common stock issued and
outstanding remained unchanged.
The officers of DNAPrint continue as officers of DNAPrint subsequent to the
Exchange Agreement. See "Management" below. The officers, directors, and by-laws
of DNAPrint will continue without change.
For a complete synopsis of the business plan of DNAPrint genomics, Inc.,
the reader is referred to the Form 8K12(g)3 as filed for DNAPrint genomics, Inc.
on November 3, 2000.
ITEM 2. PROPERTY
-------------------------------
The Company has offices at 1748 Independence Blvd., Suite D1, Sarasota, FL
34234. The company owns no real property.
ITEM 3. LEGAL PROCEEDINGS
------------------------------------
The Company was a party to no pending legal proceedings, nor is its
property subject to such proceedings, at date of this report.
5
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
----------------------------------------------------------------------
No matters were submitted during the period covered by this report to a
vote of security holders of the Company, through the solicitation of proxies or
otherwise.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
--------------------------------------------------------------------------------
As of the date of this report, there has been no trading or quotation
of the Company's common stock. The range of high and low trade quotations for
each fiscal quarter since the last report, as reported by the National Quotation
Bureau Incorporated, was as follows
2000 High Low
First quarter * *
Second quarter * *
1999 High Low
First quarter * *
Second quarter * *
Third quarter * *
Fourth quarter * *
1998 High Low
First quarter * *
Second quarter * *
Third quarter * *
Fourth quarter * *
1997 High Low
First quarter * *
Second quarter * *
Third quarter * *
Fourth quarter * *
* No quotations
The above quotations reflect inter-dealer prices, without retail mark-up,
mark-down, or commission and may not necessarily represent actual transactions.
As of September 30, 2000, there were 3 record holders of the Company's
common Stock prior to merger with DNAPrint genomics, Inc.
The Company has not declared or paid any cash dividends on its common stock
and does not anticipate paying dividends for the foreseeable future.
6
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION AND CHANGES IN FINANCIAL CONDITION
--------------------------------------------------------------------------------
No operations were conducted and no operating revenues were generated in
the period from inception to September 30, 2000. The Company had no income from
inception to September 30, 2000. The Company at period end had cash of $1,488,
and no other assets. The Company at year end was illiquid and needed cash
infusions from shareholders to provide capital, or loans from any sources.
Transitional Report
-------------------
The Company elected to use a calendar year for accounting purposes due to
its merger with DNAPrint genomics, Inc. on October 13, 2000. DNAPrint genomics,
Inc. uses a normal calendar year for accounting.
Results of Operations for the period ended September 30, 2000 from Inception,
January 19, 2000
--------------------------------------------------------------------------------
The Company incurred expenses totalling $1,732 in 2000 from inception to
September 30, 2000. The Company had no operations in for the period from
inception to September 30, 2000. The net loss from inception to September 30,
2000 was ($1,732). The net loss per share was less than ($.01) for the period
from inception to September 30, 2000. A continuation of the trend of net losses
should be expected to continue in the future until profitable operations are
achieved.
Liquidity & Capital Resources
-----------------------------
The Company had nominal cash at period end September 30, 2000, prior to
merger, $1,488, and no other capital resources. The company will be dependent on
its shareholders for loans for expenses, and has no capital availability except
through private sales of treasury stocks, none of which has been arranged.
7
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
--------------------------------------------------------------
Please refer to pages F-1 through F-8.
ITEM 8. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
--------------------------------------------------------------------------------
A.J. Robbins, P.C., Certified Public Accountants and Consultants, were
retained in 2000 as auditors for the Company for the period ended September 30,
2000.
In connection with audits of two most recent fiscal years and any interim
period preceding resignation, no disagreements exist with any former accountant
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope of procedure, which disagreements if not resolved
to the satisfaction of the former accountant would have caused him to make
reference in connection with his report to the subject matter of the
disagreement(s).
The principal accountants' reports on the financial statements for any of
the past two years contained no adverse opinion or a disclaimer of opinion nor
was qualified as to uncertainty, audit scope, or accounting principles except
for the "going concern" qualification.
8
<PAGE>
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT AND
COMPLIANCE WITH SECTION 16(A)
--------------------------------------------------------------------------------
The directors and executive officers currently serving the Company are
as follows:
NAME POSITION HELD TENURE
Scott A. Deitler* President and Director Annual since 2000
Wesley F. Whiting* Secretary and Treasurer Annual since 2000
* These Officers and Directors resigned at October 13, 2000, at the time of the
business combination with DNAPrint genomics, Inc. See 8K12(g)3 dated November 3,
2000.
BIOGRAPHICAL INFORMATION
SCOTT A. DEITLER, age 43, President and director since inception, received
a B.A. in Business and Conservation from the University of Colorado in 1978.
From 1987 to 1995, he was President and a director of Colorado Coin Co. in
Boulder, Colorado. From 1993 to 1998, he was President of Ulta Travel, Inc., a
travel agency. He has been President and Director of J.S.J. Capital Corp.
(1999), J.S.J. Capital II, Inc. (1999), J.S.J. Capital III, Inc. (1999),
Investra Enterprises, Inc. (1999), Advanced Ceiling Supplies, Inc. (1997), and
Marathon Marketing Corp. (since 1991). He was Secretary and Director of Cross
Check Corp. since 1997. All of which are blank check companies without specific
business, but which are seeking an acquisition or merger, except that Investra
Enterprises, Inc. merged with Pathobiotek Diagnostics, Inc. in March 2000 and
Cross Check Corp. merged with HouseholdDirect.com, Inc. in March 2000. Mr.
Deitler resigned as an officer of Cross Check Corp. and Investra Enterprises,
Inc. in March 2000.
WESLEY F. WHITING, age 64, has served as Secretary and Treasurer since
February 21, 2000. Mr. Whiting has been president, director and secretary of
Berge Exploration, Inc. (1978- 1988) and president, vice president, and director
of NELX, Inc. (1994-1997), and was vice president and director of Intermountain
Methane Corporation (1988-1997), and president of Westwind Production, Inc.
(1997-1998). He has been a director of Kimbell deCar Corporation since 1998, and
he has been President and a director of Dynadapt System, Inc. since 1998.
9
<PAGE>
Mr. Deitler and Mr. Whiting resigned as officers and Directors concurrent
with the merger.
The Company has new officers and directors as a result of its merger with
DNAPrint genomics, Inc. on November 3, 2000.
CARL L. SMITH, President and Director, is 58 years of age. Mr. Smith is an
entrepreneur in venture capital marketing, sales and business development. Mr.
Smith has served as the CEO of DNAPrint genomics, Inc. f/k/a Catalyst
Communications, Inc. from 1994 to the present and has served on the board of
directors of Diversified Resources Group, Inc. from 1994 to 1996 and from April
1999 to the present. Mr. Smith has served as a director of GRG, Inc. from
September 1998 to October 2000, and also serves on the Board of Directors of
Penn-Akron Corporation from June 2000 to the present. Mr. Smith has also been
chairman of Tampa Bay Financial, Inc. from 1994 to the present, a Florida based
consulting company and became President of American Communications Enterprises
in October 2000. Catalyst Communications, Inc. filed a Chapter 11 Bankruptcy in
1998 for which a Plan was confirmed in 1999.
MATTHEW A. VEAL, Chief Financial Officer, Secretary and Director is 41
years old. Mr. Veal, a CPA, is currently CFO for the following entities
(including DNAPrint genomics, Inc.): Tampa Bay Financial, Inc. (since 1995),
Diversified Resources Group, Inc. (since 1999), Global Resources Group, Inc.
(since 1998), and American Communications Enterprises, Inc. (since 2000).
Diversified Resources Group, Inc. filed Bankruptcy, Chapter 11, in 1997, the
Plan was confirmed in 1998 and it was closed in 1999. From 1997 to 1998 he was
Chief Accounting Officer for Kosmas Group International. From 1995 to 1997 he
was CFO for Catalyst and from 1994 to 1995 he was CFO for ComCentral Corp. Mr.
Veal served on the Board of Directors of ComCentral through 1995 and Data 1,
Inc. and American Communications Enterprises, Inc. Mr. Veal is a graduate of the
University of Florida School of Accounting. Catalyst Communications, Inc. filed
a Chapter 11 Bankruptcy in 1998 for which a Plan was confirmed in 1999.
10
<PAGE>
DR. TONY FRUDAKIS, Chief Scientific Officer, received his doctorate degree
in molecular and cell biology from the University of California Berkeley in
1992. He has 11 total years of experience as a molecular biologist. Since
September 1998, Dr. Frudakis worked to develop and manage high-throughput DNA
analysis products, services and genotyping systems for application which form
the basis of the DNAPrint genomics business plan. Dr. Frudakis has worked on
implementing the FEMS software application to handle the companies
high-throughput electrophoresis needs, developed automated routines and managed
laboratory accreditation and promotion. He has developed several new molecular
biology products developing TruSeq(tm) into an off-the-shelf product. From 1995
to 1999, Dr. Frudakis served as a scientist at Corixa Corporation in Seattle, WA
where he managed and executed high-throughput gene discovery programs. At
Corixa, Dr. Frudakis directed a differential display and subtractive library
based program of genetic discovery for genes that are over-expressed in various
cancers, resulting in a patent application for over 350 unique genes. For this
work, Dr. Frudakis used gene chip technology (Synteni). During the course of the
last 5 1/2 years, Dr. Frudakis has worked in the development and management of
high-throughput gene discovery routines based on DNA sequencing. Dr. Frudakis'
work has resulted in the authorship of several patents for over 350 different
novel expressed sequence tags (EST's) and 12 full-length sequences which will be
used by Corixa to develop novel Cancer Vaccines. Dr. Frudakis is also a
co-inventor of patents associated with the DNA sequencing reagents and the
software product described here.
GEORGE FRUDAKIS, Vice President of Business Operations, started a
multi-component company called GAFF group in 1998. During his life's work as a
self-employed entrepreneur, he made the initial seed investment for the DNAPrint
genomics business plan.
O. HOWARD DAVIDSMEYER, Director, is 76 years old. Mr. Davidsmeyer has been
the chairman of Diversified Resources Group, Inc., formerly known as Data 1,
Inc., from 1994 to 1996 and again from 1997 to present. He also served as CEO
from 1994 to 1995 and again June 1999 to present. He has also served as chairman
of DNAPrint genomics, Inc. f/k/a Catalyst Communications, Inc. from 1994 to
present. Mr. Davidsmeyer's career extends many years and includes a variety of
business and civic accomplishments. Catalyst Communications, Inc. filed a
Chapter 11 Bankruptcy in 1998 for which a Plan was confirmed in 1999.
MYUNG HO KIM, PH.D. MATHEMATICS. Myung obtained his Ph.D. from the
University of Michigan. Myung has scores of publications in mathematical texts
and journals as well as previous professorships and fellowships. His job
function is generating and adapting mathematical ideas into computer code for
pattern recognition and other types of sophisticated analysis. He has built
information retrieval systems for a variety of applications.
VENKATESWARLU KONDRAGUNTA, PH.D. STATISTICS. He worked in the laboratory of
genetic statistician Dr. Ranajit Chakaroborty, at the University of Texas from
1998 to August 2000. Venkateswarlu specializes in the application of population
statistics and mathematical expression to high-density datasets such as those
that we will be building. He attended the University of Madras, India.
11
<PAGE>
INDEMNIFICATION OF OFFICERS AND DIRECTORS
As permitted by Utah Statutes, the Company may indemnify its directors and
officers against expenses and liabilities they incur to defend, settle, or
satisfy any civil or criminal action brought against them on account of their
being or having been Company directors or officers unless, in any such action,
they are adjudged to have acted with gross negligence or willful misconduct.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in that Act and is, therefore, unenforceable.
ITEM 10. EXECUTIVE COMPENSATION
----------------------------------------------
The Company accrued no compensation to the executive officers as a group
for services rendered to the Company in all capacities during the period from
inception to September 30, 2000. No one executive officer received, or has
accrued for his benefit, in excess of $60,000 for the year. No cash bonuses were
or are to be paid to such persons.
The Company does not have any employee incentive stock option plans.
There are no plans pursuant to which cash or non-cash compensation was paid
or distributed during the last fiscal year, or is proposed to be paid or
distributed in the future, to the executive officers of the Company. No other
compensation not described above was paid or distributed during the last fiscal
year to the executive officers of the Company. There are no compensatory plans
or arrangements, with respect to any executive office of the Company, which
result or will result from the resignation, retirement or any other termination
of such individual's employment with the Company or from a change in control of
the Company or a change in the individual's responsibilities following a change
in control.
12
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE OF EXECUTIVES
----------------------------------------
Annual Compensation Awards
<S> <C> <C> <C> <C> <C> <C>
Name & Year Salary Bonus Other Annual Restricted Securities
Principal Position ($) ($) Compensation Stock Underlying
($) Award(s) Options/
($) SARS (#)
------------------------------------------------------------------------------------------------------------------------
Scott A. Deitler, 1998 0 0 0 0 0
President 1999 0 0 0 0 0
2000 0 0 0 0 0
Wesley F. Whiting, 1998 0 0 0 0 0
Secretary & Treasurer 1999 0 0 0 0 0
2000 0 0 0 0 0
</TABLE>
Directors' Compensation
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Name Annual Meeting Consulting Number Number of
Retainer Fees ($) Fees/Other of Securities
Fee($) Fees ($) Shares Underlying
(#) Options
SARS (#)
----------------------------------------------------------------------------------------------------------------------------
A. Director, Scott A. Deitler 0 0 0 0 0
B. Director, Wesley F. Whiting 0 0 0 0 0
</TABLE>
Option/SAR Grants Table (None)
Aggregated Option/SAR Exercises in Last Fiscal Year an FY-End Option/SAR
value (None)
Long Term Incentive Plans - Awards in Last Fiscal Year (None)
No officer or director has received any other remuneration in the two year
period prior to the filing of this Form 10-KT. There is no current plan in
existence, to pay or accrue compensation to its officers and directors for
services related to seeking business opportunities and completing a merger or
acquisition transaction. See "Certain Relationships and Related Transactions."
The Company has no stock option, retirement, pension, or profit-sharing programs
for the benefit of directors, officers or other employees, but the Board of
Directors may recommend adoption of one or more such programs in the future.
13
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------------------------
The following table sets forth, at September 30, 2000, the number of shares
of common stock owned of record and beneficially by executive officers,
directors and persons who hold 5.0% or more of the outstanding common stock of
the Company. Also included are the shares held by all executive officers and
directors as a group.
SHAREHOLDERS/ NUMBER OF SHARES OWNERSHIP
BENEFICIAL OWNERS PERCENTAGE
------------------- ------------------ ----------
Scott Deitler 100,000 10%
President and Director
P.O. Box 1467
Boulder, CO 80306
Wesley F. Whiting
Secretary & Treasurer 0 0%
5855 Parfet Street
Arvada, CO 80002
Lawrence Deitler 400,000 40%
2724 Irma Lake Dr.
West Palm Beach, FL 33411
Susan J. Cornman 500,000 50%
10200 W. 44th Ave., #400
Wheat Ridge, CO 80033
All directors and executive 100,000* 10%
officers as a group (2 persons)
* All shares were purchased by DNAPrint genomics, Inc. and retired to treasury
as part of the merger with DNAPrint genomics, Inc.
14
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------------------------
During February 2000, the Company issued for cash 500,000 shares of its
$.001 par value common stock to a private investor. The Company also issued for
cash 500,000 shares of its $.001 par value common stock to its president and the
father of its president. Certificates evidencing the common stock issued by the
Company to these persons have all been stamped with a restrictive legend, and
are subject to stop transfer orders by the Company. For additional information
concerning restrictions that are imposed upon the securities held by current
stockholders, and the responsibilities of such stockholders to comply with
federal securities laws in the disposition of such common stock, see "Risk
Factors - Rule 144 Sales."
As of October 13, 2000, DNAPrint purchased all 500,000 shares issued and
outstanding concurrent with surrender and cancellation of 500,000 shares owned
by Susan J. Cornman. S.D.E. Holdings 1 Inc. became a wholly owned subsidiary,
and the shares were retired in the merger between DNAPrint genomics, Inc. and
its wholly owned subsidiary, S.D.E. Holdings 1 Inc.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
-------------------------------------------------
The following documents are filed as part of this report:
1. Reports on Form 8-K:
None
2. Exhibits:
None
15
<PAGE>
INDEX TO EXHIBITS
Form 10-KT
Regulation Consecutive
S-K Number Exhibit Page Number
3.1 Articles of Incorporation *Incorporated by reference
to Registration Statement
10SB/12(g) #0-30119
3.2 Bylaws *Incorporated by reference
to Registration Statement
10SB/12(g) #0-30119
27.1 Financial Data Schedule EX-27.1
16
<PAGE>
SIGNATURES:
-----------
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
DATED: November 17, 2000
DNAPrint genomics, Inc.
By: /s/Carl L. Smith
---------------------------
Carl L. Smith, President
BY: /s/Matthew A. Veal
--------------------------------
Matthew A. Veal, Director
/s/O. Howard Davidsmeyer
--------------------------------
O. Howard Davidsmeyer, Director
17
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PERIOD ENDED SEPTEMBER 30, 2000
PAGE
Independent Auditors' Report F-2
Financial Statements:
Balance Sheet F-3
Statements of Operations F-4
Statement of Changes in Stockholders' Equity (Deficit) F-5
Statements of Cash Flows F-6
Notes to Financial Statements F-7
F-1
<PAGE>
A.J. ROBBINS, PC
Certified Public Accountants
and Consultants
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
S.D.E. HOLDINGS 1 INC.
BOULDER, COLORADO
We have audited the accompanying balance sheet of S.D.E. Holdings 1 Inc. (a
development stage company) as of September 30, 2000, and the related statements
of operations, changes in stockholders' equity (deficit), and cash flows for the
period from January 19, 2000 (inception) to February 29, 2000 and for the seven
months ended September 30, 2000. 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 S.D.E. Holdings 1 Inc. as of
September 30, 2000, and the results of its operations and its cash flows for the
period from January 19, 2000 (inception) to February 29, 2000 and for the seven
months ended September 30, 2000, 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 1 to the
financial statements, the Company is in the development stage and has not
commenced operations. Its ability to continue as a going concern is dependent
upon its ability to develop additional sources of capital, locate and complete a
merger with another company and ultimately achieve profitable operations. These
conditions raise substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/A.J. Robbins
DENVER, COLORADO
OCTOBER 2, 2000
3033 East 1st Avenue, Suite #201, Denver, CO 80206
- 303-321-1281 Fax 303-321-1288
F-2
<PAGE>
<TABLE>
<CAPTION>
S.D.E. HOLDINGS 1 INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
<S> <C>
SEPTEMBER 30,
2000
------------------
ASSETS
CURRENT ASSETS, CASH $ 1,488
==================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES, PAYABLE TO RELATED PARTIES $ 2,220
------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.001 par value, 25,000,000 shares 1,000
authorized, 1,000,000 shares issued and outstanding
(Deficit) accumulated during the development stage (1,732)
------------------
Total Stockholders' Equity (Deficit) (732)
------------------
$ 1,488
==================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
S.D.E. HOLDINGS 1 INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<S> <C> <C> <C>
CUMULATIVE
FOR THE PERIOD FROM
FROM JANUARY 19,
JANUARY 19, 2000
FOR THE SEVEN 2000 (INCEPTION)
MONTHS ENDED (INCEPTION) TO TO
SEPTEMBER 30, FEBRUARY 29, SEPTEMBER 30,
2000 2000 2000
----------------- ----------------- -----
REVENUE $ - $ - $ -
----------------- ----------------- -----------------
EXPENSES:
General and Administrative 1,512 220 1,732
----------------- ----------------- -----------------
Total Expenses 1,512 220 1,732
----------------- ----------------- -----------------
NET (LOSS) $ (1,512) $ (220) $ (1,732)
================= ================= =================
NET (LOSS) PER COMMON SHARE - BASIC $ * $ *
================= =================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 1,000,000 1,000,000
================= =================
*Less than $(.01)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
S.D.E. HOLDINGS 1 INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM JANUARY 19, 2000 (INCEPTION)
TO FEBRUARY 29, 2000
AND FOR THE SEVEN MONTHS ENDED SEPTEMBER 30, 2000
<S> <C> <C> <C> <C> <C>
(DEFICIT)
ACCUMULATED
STOCK DURING THE
COMMON STOCK SUBSCRIPTION DEVELOPMENT
SHARES AMOUNT RECEIVABLE STAGE TOTAL
----------------------------------------------------------------------------------------------
BALANCES, JANUARY 19, 2000 - $ - $ - $ - $ -
Issuance of stock on February 1,000,000 1,000 (800) - 200
21, 2000, for $.001 per share
NET (LOSS) - - - (220) (220)
---------------- ---------------- ---------------- ---------------- ----------------
BALANCES, FEBRUARY 29, 2000 1,000,000 1,000 (800) (220) (20)
Satisfaction of subscription - - 800 - 800
receivable
NET (LOSS) - - - (1,512) (1,512)
---------------- ---------------- ---------------- ---------------- ----------------
BALANCES, SEPTEMBER 30, 2000 1,000,000 $ 1,000 $ - $ (1,732) $ (732)
================ ================ ================ ================ ================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
S.D.E. HOLDINGS 1 INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<S> <C> <C> <C>
CUMULATIVE
FOR THE PERIOD FROM
FROM JANUARY 19,
JANUARY 19, 2000
FOR THE SEVEN 2000 (INCEPTION)
MONTHS ENDED (INCEPTION) TO TO
SEPTEMBER 30, FEBRUARY 29, SEPTEMBER 30,
2000 2000 2000
----------------- ----------------- ------------
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
Net (loss) from operations $ (1,512) $ (220) $ (1,732)
Adjustments to reconcile net (loss) to net cash provided (used)
by operating activities:
Changes in:
Payable to related parties 2,200 20 2,220
----------------- ----------------- --------------
Net Cash Provided (Used) by Operating Activities 688 (200) 488
----------------- ----------------- --------------
CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
Collection of subscription receivable 800 - 800
Common stock issued for cash - 200 200
----------------- ----------------- --------------
Net Cash Provided by Financing Activities 800 200 1,000
----------------- ----------------- --------------
NET INCREASE (DECREASE) IN CASH 1,488 - 1,488
CASH, beginning of period - - -
----------------- ----------------- --------------
CASH, end of period $ 1,488 $ - $ 1,488
================= ================= ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-6
</TABLE>
<PAGE>
S.D.E. HOLDINGS 1 INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
HISTORY
S.D.E. Holdings 1 Inc. (the Company), a development stage company, was organized
under the laws of the State of Nevada on January 19, 2000. The Company is in the
development stage as defined in Financial Accounting Standards Board Statement
No. 7. The fiscal year end is the last day of February.
GOING CONCERN AND PLAN OF OPERATION
The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company is in the
development stage and has not earned any revenues from operations to date.
The Company is currently devoting its efforts to locating merger candidates. The
Company's ability to continue as a going concern is dependent upon its ability
to develop additional sources of capital, locate and complete a merger with
another company, and ultimately, achieve profitable operations. The accompanying
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
CASH
Cash and cash equivalents consists primarily of cash on hand and cash in banks.
INCOME TAXES
The Company uses the liability method of accounting for income taxes pursuant to
Statement of Financial Accounting Standards No. 109. Under this method, deferred
income taxes are recorded to reflect the tax consequences in future years of
temporary differences between the tax basis of the assets and liabilities and
their financial amounts at year end.
For federal income tax purposes, substantially all expenses must be deferred
until the Company commences business and then they may be written off over a 60
month period. Therefore, $1,732 of net losses incurred in the period from
January 19, 2000 (inception) to September 30, 2000 have not been deducted for
tax purposes and represent a deferred tax asset. The Company is providing a
valuation allowance in the full amount of the deferred tax asset since there is
no assurance of future taxable income. Tax deductible losses can be carried
forward for 20 years until utilized.
F-7
<PAGE>
S.D.E. HOLDINGS 1 INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS (LOSS) PER COMMON SHARE
During 1997 the Financial Accounting Standard Board (FASB) issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128). SFAS
128 replaced the calculation of primary and fully diluted earnings per share
with basic and diluted earnings per share. Basic earnings (loss) per common
share is computed based upon the weighted average number of common shares
outstanding during the period. Diluted earnings per share consists of the
weighted average number of common shares outstanding plus the dilutive effects
of options and warrants calculated using the treasury stock method. In loss
periods, dilutive common equivalent shares are excluded as the effect would be
anti-dilutive.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates and assumptions.
NOTE 2 - STOCKHOLDERS' EQUITY
During February 2000, the Company issued for cash and a stock subscription
receivable 500,000 shares of its $.001 par value common stock to a private
investor. The Company also issued for cash and a stock subscription receivable
500,000 shares of its $.001 par value common stock to its president and the
father of its president.
In March 2000 the stock subscription receivables were paid in full.
In September 1990 the Company entered into an agreement to sell 100% of the
Company's outstanding common stock for $150,000; simultaneously, 500,000
outstanding shares were retired.
NOTE 3 - PAYABLE TO RELATED PARTIES
The Company received advances of $2,200 from stockholders in March 2000.
F-8
