U.S. Securities and Exchange CommissionWashington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarter ended: March 31, 2002
Commission file no.: 000-26021
S D Products Corp.
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(Name of Small Business Issuer in its Charter)
Florida 65-0790763
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(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
1218 Cornerstone Court
Orlando, FL 32835
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (407) 492-6612
Securities registered under Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
None None
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Securities registered under Section 12(g) of the Act:
Common Stock, $0.0001 par value per share
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(Title of class)
Copies of Communications Sent to:
Donald F. Mintmire
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
Tel: (561) 832-5696 - Fax: (561) 659-5371
Indicate by 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
---- ----
As of March 31, 2002, there are 2,800,000 shares of voting stock of the
registrant issued and outstanding.
PART I
Item 1. Financial Statements
INDEX TO FINANCIAL STATEMENTS
Balance Sheets...............................................................F-2
Statements of Operations.....................................................F-3
Statements of Changes in Stockholders' Equity................................F-4
Statements of Cash Flows.....................................................F-5
Notes to Financial Statements................................................F-6
F-1
SD Products Corporation
(A Development Stage Enterprise)
Balance Sheets
March 31, September 30,
2002 2001
------------------- ------------------
(unaudited)
ASSETS
CURRENT ASSETS
Cash $ 52 $ 52
Loan and accrued interest receivable - related party 7,287 7,018
------------------- ------------------
Total current assets 7,339 7,070
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Total Assets $ 7,339 $ 7,070
=================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Accrued expenses $ 4,600 $ 0
Accrued expenses - related party 6,500 6,500
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Total current liabilities 11,100 6,500
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Total Liabilities 11,100 6,500
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STOCKHOLDERS' EQUITY (DEFICIENCY)
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 (26,971) (22,640)
------------------- ------------------
Total Stockholders' Equity (Deficiency) (3,761) 570
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Total Liabilities and Stockholders' Equity (Deficiency) $ 7,339 $ 7,070
=================== ==================
The accompanying notes are an integral part of the
financial statements.
F-2
SD Products Corporation
(A Development Stage Enterprise)
Statements of Operations
(Unaudited)
Period from
Three Months Ended Six Months Ended October 20, 1997
March 31, March 31, (Inception)
------------------------- ------------------------- through
2002 2001 2002 2001 March 31, 2002
------------ ------------ ------------ ------------ -------------------
Revenues $ 0 $ 0 $ 0 $ 0 $ 0
------------ ------------ ------------ ------------ -------------------
Expenses
General and administrative expenses 0 48 0 93 9,086
Legal fees - related party 0 0 0 0 510
Professional fees 500 500 4,600 4,500 19,359
------------ ------------ ------------ ------------ -------------------
Total expenses 500 548 4,600 4,593 28,955
------------ ------------ ------------ ------------ -------------------
Loss from operations (500) (548) (4,600) (4,593) (28,955)
Other income (expense)
Interest income - related party 133 137 269 272 1,984
------------ ------------ ------------ ------------ -------------------
Net loss $ (367)$ (411)$ (4,331)$ (4,321)$ (26,971)
============ ============ ============ ============ ===================
Net loss per weighted average share, basic $ (0.01)$ (0.01)$ (0.01)$ (0.002)
============ ============ ============ ============
Weighted average number of shares 2,800,000 2,800,000 2,800,000 2,800,000
============ ============ ============ ============
The accompanying notes are an integral part of the
financial statements.
F-3
SD Products Corporation
(A Development Stage Enterprise)
Statements of Changes in Stockholders' Equity (Deficiency)
Period From October 20, 1997 (Inception) through March 31, 2002
Deficit
Accumulated
Additional During the Total
Number of Preferred Common Paid-in Development Stockholders'
Shares Stock Stock Capital Stage Equity
----------- ----------- ------------ ------------ --------------- --------------
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/June 1998 700,000 0 70 22,930 0 23,000
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)
----------- ----------- ------------ ------------ --------------- --------------
BALANCE, September 30, 2000 2,800,000 0 280 22,930 (16,899) 6,311
Net loss 0 0 0 0 (5,741) (5,741)
----------- ----------- ------------ ------------ --------------- --------------
BALANCE, September 30, 2001 2,800,000 0 280 22,930 (22,640) 570
Net loss 0 0 0 0 (4,331) (4,331)
----------- ----------- ------------ ------------ --------------- --------------
ENDING BALANCE, March 31, 2002
(unaudited) 2,800,000 $ 0 $280 $22,930 $ (26,971)$ (3,761)
=========== =========== ============ ============ =============== ==============
The accompanying notes are an integral part of the
financial statements.
F-4
SD Products Corporation
(A Development Stage Enterprise)
Statements of Cash Flows
(Unaudited)
Period from
Six Months Ended October 20, 1997
March 31, (Inception)
-------------------------------- through
2002 2001 March 31, 2002
---------------- --------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (4,331)$ (4,321)$ (26,971)
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 (269) (272) (1,287)
Increase (decrease) accrued expenses 4,600 4,500 4,600
Increase (decrease) accrued expenses - related party 0 0 6,500
---------------- --------------- -------------------
Net cash used by operating activities 0 (93) (16,948)
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CASH FLOW FROM INVESTING ACTIVITIES:
(Advance to) repayment from related party 0 0 (6,000)
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Net cash (used) provided by investing activities 0 0 (6,000)
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CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 0 0 23,000
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Net cash provided by financing activities 0 0 23,000
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Net increase (decrease) in cash 0 (93) 52
CASH, beginning of period 52 336 0
---------------- --------------- -------------------
CASH, end of period $ 52 $ 243 $ 52
================ =============== ===================
The accompanying notes are an integral part of the
financial statements.
F-5
SD Products Corporation
(A Development Stage Enterprise)
Notes to Financial Statements
(Information with respect to the six months
ended March 31, 2002 and 2001 is unaudited)
(1) Summary of Significant Accounting Principles
The Company 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.
d) Interim financial information The financial statements for the six
months ended March 31, 2002 and 2001 and for the period since October 20,
1997, (Inception), through March 31, 2002, include all adjustments which in
the opinion of management are necessary for fair presentation, and such
adjustments are of a normal and recurring nature.
(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
$1,287 was accrued at March 31, 2002.
(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 March 31, 2002. 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.
F-6
SD Products Corporation
(A Development Stage Enterprise)
Notes to Financial Statements
(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, $6,000 expiring
at September 30, 2020, $5,700 expiring at September 30, 2021 and $4,300
expiring at September 30, 2022.
The amount recorded as deferred tax assets is approximately $4,000 and
$3,100 as of March 31, 2002 and 2001, 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.
(5) 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.
As discussed in Note 2, the Company extended a loan to a company under
common control.
Related party balances and amounts for the period since inception, (October
20, 1997), ended March 31, 2002 are as follows:
Loan and accrued interest receivable - related party $ 7,287
===========
Accrued expenses and accounts payable - related party $ 6,500
===========
Interest earned - related party $ 1,287
===========
(6) Going Concern As shown in the accompanying financial statements, the
Company incurred a net loss of $27,000 for the period from October 20, 1997
(Inception) through March 31, 2002. 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.
F-7
Item 6. Management's Discussion and Analysis or Plan of Operation.
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 any 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 March 31, 2002, the Company had only interest income
of $7,287 from loans to related parties. Total Company operating expenses for
the three months ended March 31, 2002 were $500. 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.
Financial Condition, Capital Resources and Liquidity
For the Six Months ending March 31, 2002
At March 31, 2002, the Company had assets totaling $7,339 and liabilities
of $11,100. 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.
It'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.
Net Operating Losses
The Company has net operating loss carry-forwards of $4,300 expiring at
September 30, 2022, $5,700 expiring at September 30, 2021, $6,000 expiring at
September 30, 2020, $4,400 expiring at September 30, 2019 and $6,500 expiring at
September 30, 2018. The Company has a $4,000 deferred tax asset as of March 31,
2002, 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.
Forward-Looking Statements
Certain statements contained in this quarterly filing, including, without
limitation, statements containing the words "believes", "anticipates", "expects"
and words of similar import, constitute forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements.
Such factors include, among others, the following: international, national
and local general economic and market conditions: demographic changes; the
ability of the Company to sustain, manage or forecast its growth; the ability of
the Company to successfully make and integrate acquisitions; raw material costs
and availability; new product development and introduction; existing government
regulations and changes in, or the failure to comply with, government
regulations; adverse publicity; competition; the loss of significant customers
or suppliers; fluctuations and difficulty in forecasting operating results;
changes in business strategy or development plans; business disruptions; the
ability to attract and retain qualified personnel; the ability to protect
technology; and other factors referenced in this and previous filings.
Given these uncertainties, readers of this Form 10-QSB and investors are
cautioned not to place undue reliance on such forward-looking statements. The
Company disclaims any obligation to update any such factors or to publicly
announce the result of any revisions to any of the forward- looking statements
contained herein to reflect future events or developments.
PART II
Item 1. 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 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults in Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the quarter ending March 31, 2002, covered
by this report to a vote of the Company's shareholders, through the solicitation
of proxies or otherwise.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None.
SIGNATURES
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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: May 15, 2002 BY: /s/ Mark A. Mintmire
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Mark A. Mintmire
President