UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended December 31, 2003
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to __________
Commission File Number: 333-69414
SOURCE DIRECT HOLDINGS, INC.
(Exact name of Registrant as specified in charter)
Nevada
98-0191489
State or other jurisdiction of
I.R.S. Employer I.D. No.
incorporation or organization
2345 North Woodruff Avenue, Idaho Falls, Idaho
83401
(Address of principal executive offices)
(Zip Code)
Issuer’s telephone number, including area code: (877) 529-4114
Check whether the Issuer (1) has 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 fling requirements for the past 90 days. (1) Yes [X] No [ ] (2) Yes [X] No [ ]
State the number of shares outstanding of each of the Issuer’s classes of common equity as of the latest practicable date: At February 10, 2004, there were 67,681,400 shares of our common stock outstanding.
PART I
Item 1. Financial Statements
The condensed financial statements included herein have been prepared by us, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures are adequate to make the information presented not misleading.
In our opinion all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the financial position of Source Direct Holdings, Inc. (the “Company”) as of December 31, 2003, and the results of its operations and changes in its financial position from July 8, 2002, through December 31, 2003, have been made. The results of its operations for such interim period are not necessarily indicative of the results to be expected for the entire year.
SOURCE DIRECT HOLDINGS, INC.
[Formerly known as Global-Tech Capital Corp, Inc.]
[A Development Stage Company]
Condensed Consolidated Financial Statements
December 31, 2003
SOURCE DIRECT HOLDINGS, INC.
[A Development Stage Company]
Condensed Consolidated Balance Sheet
December 31, 2003
(Unaudited)
ASSETS
|
December 31, 2003 |
|
Current Assets |
|
|
Cash |
$ 84,494 |
|
Inventory |
25,894 |
|
Total Current Assets |
110,388 |
|
|
|
|
Equipment |
3,259 |
|
|
|
|
Other Assets |
115,000 |
|
|
|
|
TOTAL ASSETS |
$ 228,647 |
|
LIABILITIES AND STOCKHOLDERS= EQUITY
Current Liabilities |
|
|
Accounts payable-trade |
$ 2,225 |
|
Total Current Liabilities |
2,225 |
|
|
|
|
Stockholders= Equity |
|
|
Common stock |
67,681 |
|
Additional paid-in capital |
520,819 |
|
Deficit accumulated during the development stage |
(362,078) |
|
Total Stockholders= Equity |
226,422 |
|
TOTAL LIABILITIES AND STOCKHOLDERS= EQUITY |
$ 228,647 |
|
See accompanying notes to condensed consolidated financial statements
SOURCE DIRECT HOLDINGS, INC.
[A Development Stage Company]
Condensed Consolidated Statements of Operations
(Unaudited)
|
For the Three Months Ended December 31, 2003 |
|
For the Three Months Ended December 31, 2002 |
Revenues: |
$ - - |
|
$ - |
|
|
|
|
Expenses: |
|
|
|
General and administrative expenses |
157,264 |
|
- |
Research and development |
6,309 |
|
- |
Total Expenses |
163,573 |
|
- |
|
|
|
|
Net loss before income taxes |
(163,573) |
|
- |
|
|
|
|
Provision for income taxes |
- |
|
- |
|
|
|
|
Net loss |
$ (163,573) |
|
$ - |
|
|
|
|
Loss per share |
$ (0.01) |
|
$ 0.00 |
|
|
|
|
Weighted Average Number of Shares Outstanding |
54,402,487 |
|
2,000 |
See accompanying notes to condensed consolidated financial statements
SOURCE DIRECT HOLDINGS, INC.
[A Development Stage Company]
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
For the Six Months Ended December 31, 2003 |
|
For the Six Months Ended December 31, 2002 |
|
From July 8, 2002 (Date of Inception) Through December 31, 2003 |
Revenues: |
$ - |
|
$ - |
|
$ - |
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
General and administrative expenses |
326,225 |
|
- |
|
349,460 |
Research and development |
12,618 |
|
- |
|
12,618 |
Total Expenses |
338,843 |
|
- |
|
362,078 |
|
|
|
|
|
|
Net loss before income taxes |
(338,843) |
|
- |
|
(362,078) |
|
|
|
|
|
|
Provision for income taxes |
- |
|
- |
|
- |
|
|
|
|
|
|
Net loss |
$ (338,843) |
|
$ - |
|
$ (362,078) |
|
|
|
|
|
|
Loss per share |
$ (0.01) |
|
$ 0.00 |
|
$ (0.01) |
|
|
|
|
|
|
Weighted Average Number of Shares Outstanding |
33,276,943 |
|
2,000 |
|
25,417,953 |
See accompanying notes to condensed consolidated financial statements
SOURCE DIRECT HOLDINGS, INC.
[A Development Stage Company]
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
For the Six Months Ended December 31, 2003 |
|
For the Six Months Ended December 31, 2002 |
|
From July 8, 2002 (Date of Inception) Through December 31, 2003 |
Cash Flows from Operating Activities: |
|
|
|
|
|
Net loss |
$ (338,843) |
|
$ - |
|
$ (362,078) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
Stock issued for professional fees |
22,500 |
|
- |
|
22,500 |
Increase in inventory |
(25,894) |
|
- |
|
(25,894) |
Increase in current liabilities |
2,225 |
|
- |
|
2,225 |
Net Cash Flows from Operating Activities |
(340,012) |
|
- |
|
(363,247) |
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
Purchase of equipment |
(3,259) |
|
- |
|
(3,259) |
Net Cash Flows from Investing Activities |
(3,259) |
|
- |
|
(3,259) |
|
|
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
|
|
Proceeds from issuance of common stock |
449,000 |
|
- |
|
451,000 |
Payments on long-term debt |
(21,318) |
|
- |
|
- |
Net Cash Flows from Financing Activities |
427,682 |
|
- |
|
451,000 |
Net Increase (Decrease) in Cash |
84,411 |
|
- |
|
84,494 |
Beginning Cash Balance |
83 |
|
- |
|
- |
Ending Cash Balance |
$ 84,494 |
|
$ - |
|
$ 84,494 |
|
|
|
|
|
|
Supplemental Information |
|
|
|
|
|
Stock issued for intellectual properties |
$ 115,000 |
|
$ - |
|
$ 115,000 |
Cash paid for interest |
$ - |
|
$ - |
|
$ - |
Cash paid for income taxes |
$ - |
|
$ - |
|
$ - |
See accompanying notes to condensed consolidated financial statements
SOURCE DIRECT HOLDINGS, INC.
[A Development Stage Company]
Notes to Condensed Consolidated Financial Statements
PRELIMINARY NOTE
The accompanying condensed financial statements have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with U. S. generally accepted accounting principles have been condensed or omitted. These interim financial statements include all adjustments, which in the opinion of management, are necessary in order to make the financial statements not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company=s Annual Report for the year ended June 30, 2003.
MERGER
On October 14th, 2003, the company acquired Source Direct, Incorporated, a private Idaho company, through a reverse merger transaction. 57,030,000 shares of common stock were issued to shareholders of Source Direct, Inc at a rate of 1.5 shares of the Company=s stock for each share of Source Direct, Inc. The Company then amended its articles of incorporation to change its name to Source Direct Holdings, Inc.
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Item 2. Management’s Discussion and Analysis and Plan of Operation
Overview
Source Direct Holdings, Inc. is a development stage company. In October 2003 we acquired Source Direct, Incorporated (the “Subsidiary”), retained the services of new management, and commenced development of a new business.
The Subsidiary is a development stage company which owns the formulas for two cleaning products which it is in the process of introducing into the market. These products are Simply Wow™ and Stain Pen™.
Simply Wow™ is an all-purpose cleaner that safely and effectively cleans any washable surface that is developed with nonionic surfactants that contain penetrating and suspending agents that dissolve the toughest grease, protein, dirt and oil stains. The product is a water-based, multipurpose, biodegradable, nontoxic degreaser with a pleasant lemon fragrance that effectively replaces flammable or combustible solvent cleaners. It contains no hazardous solvents or acidic type chemicals and its formulation safely accomplishes the cleaning that previously required solvent or acid cleaners which exposed the user and the environment to the inherent hazards of such chemicals. Simply Wow™ has been tested against all leading cleaners in the industry and has proven to be a superior cleaner in all areas of performance.
Stain Pen™ is a unique on-the-spot stain remover. The very convenient size makes it easy to keep at home, in the car, or at the office. This product has a proprietary formula that safely removes food stains, oil paint (wet or dry), makeup, wine, blood, grass stains, grease, coffee and tea stains and copy machine stains with no harmful fumes or large quantities of liquid to spill. All that is needed to make Stain Pen™ work is to apply a small amount of stain pen solution to the stain and apply a damp cloth.
The Subsidiary is in the process of implementing a multi-pronged marketing strategy to distributors, retail stores and cleaning professionals, and direct to consumers to position the company to become a major supplier in the U.S. all-purpose cleaning solution market. The Subsidiary has completed several product demonstrations with various large retail stores. Purchase orders from these retail stores are expected in the near future and management feels that widespread retail distribution will be accomplished very rapidly because of this alliance.
As part of its two-fold growth program, the Subsidiary also anticipates acquisition of small, under-capitalized suppliers of cleaning products whose products would complement or extend the Subsidiary line, and which could be acquired readily to support the corporate objectives. Management intends to acquire only companies whose market presence, product mix, and profitability meet certain acquisition criteria, and to incorporate their products into the existing Subsidiary line or into lines of supporting or related products.
Results of Operations
For both quarters ending December 31, 2003 and 2002, we generated no revenues. During the quarter ended December 31, 2003, we incurred total expenses of $163,573 compared to $0 for the comparable prior year period. This increase in expenses reflects marketing, consulting and general administration expenses related to the initial presentation and marketing effort of introducing our products to potential retailers. We believe the lack of revenues and increase in expenses may reflect future results of operations until the end of the first quarter 2004 when we anticipate receiving purchase orders for product, but management is unable to predict the extent to which revenues and expenses will change in future operating periods since the new business is in its startup phase.
During the six month period ended December 31, 2003, as well as during the comparable prior year period, we had no revenues from operations. During the six months ended December 31, 2003, we incurred total expenses of $338,843 compared to $0 for the comparable prior year period. This increase in expenses reflects the same expenses related to the initial presentation and marketing effort of introducing our products to potential retailers, as well as expenses relating to our two offerings of common stock.
Management estimates revenues and expenses for the remainder of the fiscal year ending June 30, 2004, will increase based upon the anticipation of commencement of operations and initial purchase orders for product being received.
Liquidity and Capital Resources
As of December 31, 2003, cash totaled $84,494, as compared with no cash or cash equivalents at December 31, 2002. Cash used in operations was $340,012 during the six month period ended December 31, 2003. During the same period, cash flows from investing activities decreased by $3,259 and cash flows from financing activities increased by $427,682. There were no comparable investing or financing activities for the same period last year, and there is no material comparable operating data for the same period in the prior year.
Working capital was $108,163 at December 31, 2003, as compared with working capital of $0 at December 31, 2002. This significant increase in working capital was a result primarily of gross proceeds from two stock offerings which generated $449,000 in cash during the six month period ended December 31, 2003.
Management believes that with the anticipated growth in operating cash flows from its initial operations, as well as its financing activities from the sale of its common stock, we will generate sufficient cash to satisfy existing operating cash needs and working capital requirements until the end of the fiscal year June 30, 2004. Additionally, we may compensate employees with equity incentives where possible and continue to utilize equity instruments to compensate existing and new employees hired to minimize cash outlays. Management believes this strategy provides the ability to increase stockholder value as well as utilize cash resources more effectively.
During future quarters, we may seek additional funding to finance future acquisitions. The amount and timing of such capital transactions is not yet known and will depend largely on our operating needs and the costs of any new acquisitions. Our ability to secure this additional funding given present market conditions is uncertain, as is the financial effect any such funding may have on our capital structure or operating results.
Forward-Looking Statements
This report contains statements that plan for or anticipate the future. Forward-looking statements include statements about the Subsidiary’s future operations involving the marketing of cleaning products, about its future business plans and strategies, and most other statements that are not historical in nature. In this report forward-looking statements are generally identified by the words “anticipate,” “plan,” “intend,” “believe,” “expect,” “estimate,” and the like. Although the parties believe that any forward-looking statements made in this report are reasonable, because forward-looking statements involve future risks and uncertainties, there are factors that could cause actual results to differ materially from those expressed or implied.
Item 3. Controls and Procedures
Evaluation of disclosure and controls and procedure: With the participation of management the Company’s chief executive officer and chief financial officer have evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this quarterly report. Based on that evaluation the chief executive officer and chief financial officer have concluded that the Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and are operating in an effective manner.
Changes in internal controls: There were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II
Item 5. Other Information
In August, 2003, the Subsidiary entered into two consulting agreements with Chuck McHenry and Joe Thomas. As part of their intended compensation pursuant to their consulting agreements, each individual received 2,500,000 shares of common stock of the Subsidiary. In the merger agreement that was closed in October 2003 these shares were exchanged at a rate of 1.5 shares of our common stock for each of their outstanding shares in the Subsidiary. In December 2003 it was mutually agreed by the board of directors and Messrs. McHenry and Thomas that there had been no performance pursuant to the consulting agreements on behalf of the Company or the Subsidiary, and that all of the shares owned by Messrs. McHenry and Thomas should be cancelled and returned to the authorized but unissued common stock of the Company. The certificates representing the shares were cancelled on December 17, 2003.
Item 6. Exhibits and Reports on Form 8-K
(a)
Exhibits.
Exhibit No.
Description
31.1
Rule 15d-14(a) Certification by Principal Executive Officer
31.2
Rule 15d-14(a) Certification by Principal Financial Officer
32
Section 1350 Certification of Principal Executive Officer and
Principal Financial Officer.
(b)
Reports on Form 8-K: A Form 8-K dated October 14, 2003, was filed with the Securities and Exchange Commission on October 16, 2003, reporting Items 1, 2, 4, 5, 7 and 9. Financial statements for the Subsidiary and pro forma financial information dated June 30, 2003, were filed as required with the Form 8-K. An amendment to that Form 8-K was filed on October 21, 2003.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Source Direct Holdings, Inc.
Date: February 17, 2004
By/s/ Deren Z. Smith
Deren Z. Smith, President (Principal executive officer)
Date: February 17, 2004
By/s/ Kevin Arave
Kevin Arave, Treasurer (Principal financial officer and chief accounting officer)
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