As filed with the Securities and Exchange Commission on October 5, 2001
Registration No. 333-36966
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 2 TO THE
FORM SB-1 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
SD PRODUCTS CORP.
(Exact name of registrant as specified in its charter)
Florida 6159 522298 65-0790763
------------------------- ------------------- ----------------------- -------------------
(State or Other (Primary Standard (North American (IRS Employer
Jurisdiction of Industrial Industry Identification
Incorporation or Classification Classification Number ("EIN") Number)
Organization) ("SIC") Number) System
("NAICS")Number)
---------------------------------------
2958 Braithwood Court
Atlanta, Georgia 30345
(770) 414-9596
(Address, including zip code, and
telephone number, including area code, of
registrant's principal executive office)
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Copy To:
Carl N. Duncan, Esq.
Duncan, Blum & Associates
5718 Tanglewood Drive
Bethesda, Maryland 20817
(301) 263-0200
Approximate date of re-commencement of proposed sale to the public:
As soon as practicable after renewal of this
Registration Statement
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [x].
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
an amendment which specifically states that the Registration Statement shall
thereafter become effective in accordance with Section 8 (a) of the Securities
Act of 1933 or until the Registration Statement shall become effective on such
date as the Securities and Exchange Commission, acting pursuant to said Section
8(a), may determine.
Disclosure of Alternative Used: Alternative 1 : Alternative 2 9
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PROSPECTUS
===============================================================================
SD PRODUCTS CORP.
(A Developmental Stage Company)
2958 Braithwood Court, Atlanta, Georgia 30345
(770) 414-9596
<s> <c> <c> <c>
----------------------- ------------------------- -------------------------------------------
Shares Offering Price Gross Proceeds to the Company
--------------------- ----------------------- ------------------------- -------------------------------------------
Minimum 100,000 $1.00 $100,000
--------------------- ----------------------- ------------------------- -------------------------------------------
Maximum 1,000,000 $1.00 $1,000,000
--------------------- ----------------------- ------------------------- -------------------------------------------
Selling Shareholders May Also Be Selling up to 800,000 Additional Shares
At the Conclusion of Our Primary Offering
Company Information
< There is currently no market for our shares.
< We provide a lending source for financing and funding of lease purchase
agreements relating to automobiles and limousines.
< We intend to qualify our shares for quotation on the NASDAQ Bulletin Board
concurrently with the date of this prospectus.
Terms of the Initial Offering Period
< The initial offering period will commence on the date of this prospectus
and will be continuous in nature. Unless terminated earlier, the initial
offering period is expected to last from 2 to 9 months from the date
listed in this prospectus, unless it is terminated earlier, but in no case
later than December ___, 2001.
< During the initial offering period, we will sell shares at $1.00 per share
with the minimum purchase being $500 (500 shares). Since there is no
selling commission, all proceeds from the sales will go to us.
< We are making this offering on a self-underwritten basis 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.
< We seek to sell 100,000 to 1,000,000 shares at $1.00 per share. Upon
conclusion or termination of the primary component of this offering,
designated selling shareholders may sell up to 820,000 additional shares
in a secondary offering pursuant to this prospectus.
< If we do not sell a minimum of $100,000 of shares during the initial
offering period, we will promptly return, without interest all money from
shares sold.
Additional Shares Being Offered
< We will not receive any proceeds from the additional 820,000 shares, which
may be offered by our selling shareholders.
--------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Carefully consider the risk factors beginning on page 4 of this prospectus.
You meet must meet certain requirements in order to purchase the shares offered
in this prospectus. You must indicate in the Subscription Agreement and Power of
Attorney that you have either a net worth of at least $100,000 (exclusive of
home, furnishings and automobiles) or a net worth of at least $50,000 (also
exclusive of home, furnishings and automobiles) and an annual adjusted gross
income of not less than $25,000.
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October ____, 2001
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Table of Contents
Descriptive Title Page
PROSPECTUS SUMMARY.............................................................3
SUMMARY FINANCIAL DATA.........................................................4
RISK FACTORS...................................................................4
RELATED PARTY TRANSACTIONS.....................................................8
FIDUCIARY RESPONSIBILITY OF THE COMPANY'S MANAGEMENT..........................10
SELLING SHAREHOLDERS..........................................................10
APPLICATION OF PROCEEDS.......................................................13
CAPITALIZATION................................................................14
DILUTION......................................................................14
THE COMPANY...................................................................15
LITIGATION....................................................................24
SECURITIES OWNERSHIP OF CERTAIN OWNERS
AND THE PRINCIPAL SHAREHOLDER.................................................24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS............................................24
ABSENCE OF CURRENT PUBLIC MARKET AND DIVIDEND POLICY..........................30
DESCRIPTION OF CAPITAL STOCK..................................................30
SUBSCRIPTION PROCEDURE........................................................31
ERISA CONSIDERATIONS..........................................................32
LEGAL MATTERS.................................................................32
EXPERTS.......................................................................32
AVAILABLE INFORMATION.........................................................33
APPENDIX I (FINANCIAL STATEMENTS)............................................I-1
EXHIBIT A - SUBSCRIPTION AGREEMENT...........................................A-1
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Prospectus Summary
The following is a summary of the information contained in this
prospectus. Before making any investment, you should carefully consider the
information under the heading "Risk Factors."
The Company SD Products Corp., currently a developmental stage
company, was incorporated in Florida on October
20, 1997. We have had no revenues to
date. In fact, we have incurred a $21,633 net
loss from continuing operations and our assets
at June 30, 2001 aggregate $7,077. Our objective
is to become a significant provider of
automobile lease financing for credit-impaired
car buyers. We plan to conduct business
initially in Florida and Georgia and later
opening up to selected areas nationwide. We
intend to, eventually, be able to provide a full
spectrum of lease financing services for our
clients.
Securities Offered Maximum amount of shares offered: 1,000,000 shares
by the Company at $1.00 per share, or $1,000,000.
Minimum amount of shares offered: 100,000 shares
at $1.00 per share, or $100,000.
Offering Initial: We will begin to sell shares on the date
Period(s) listed on the cover of this prospectus.
During this initial offering period, we may
continue to offer shares from 2 to 9 months. This
initial offering period will close once the
minimum $100,000 in shares is sold and we close
the escrow account. If the minimum $100,000 in
shares is not sold by July ___, 2002, nine months
from the date of this prospectus, we will promptly
return all proceeds to the investors without
interest.
Continuous: If we do not sell the maximum
$1,000,000 in shares during the initial offering
period, we will update this prospectus and
continue the offering for up to 24months from the
date this prospectus is issued, updating as
necessary. During this continuous offering period,
we will sell subscriptions for shares at $1.00 per
share until a market develops for the shares. We
will then sell the shares at the prevailing market
price per share.
Secondary Offering: As described in "Selling
Shareholders," upon conclusion or termination of
the primary component by the company in this
offering, it is contemplated that the listed
selling shareholders may individually offer up
to 880,000 shares in addition to the up to
1,000,000 shares we are selling. The
shareholders, not the company, will receive the
proceeds from the sale of their individual shares
Proceeds Held Proceeds from these sales will not be paid to
us until the $100,000 minimum in sales is
achieved. Investors are reminded that, given the
9-month duration of the initial offering period,
investments may be held in escrow until the end of
the initial offering period. Even if interest is
earned, it will not be returned to investors
because of pertinent Maryland state law pertaining
to attorney escrow accounts.
Minimum The minimum purchase during the primary component
Subscription of this our offering is $500.
-3-
Risks and Conflicts This investment involves substantial risks due in
of Interest part to the costs that we will incur and the
highly speculative nature of the automobile
leasing business. Risks inherent in investing in
the company are discussed under "Risk Factors,"
including the substantive doubt about our
ability to continue as a going concern, the
$1.00 per share price being determined
arbitrarily.
Plan of Distribution The shares are being offered directly by Mark A.
Mintmire, our sole principal.
Application of We expect to use the proceeds of the primary
Proceeds component of this offering are expected to be used
to continue business operations and expand the
scope of the business with particular emphasis
on enhancing our credit lines. In the event we
receive more than the $100,000 minimum, we
intend to be more aggressive in implementing our
business plan.
Summary Financial Data
The following is a summary of the financial data contained in this
prospectus. This information reflects the our operations for the period from
inception to June 30, 2001.
o Current assets $7,077
o Noncurrent assets 0
o Current liabilities $5,500
o Gross Revenues 0
o Gross Profit 0
o Loss from continuing operations ($23,212)
o Net loss ($21,633)
Risk Factors
Before making an investment, you should consider carefully the
following risk factors.
We are a new company in its development stage. Our main efforts thus
far have been geared toward raising funds in order to commence business
operations. You should, therefore, be aware of the difficulties normally
encountered by a new, developing company. The likelihood that we will succeed
must be considered in light of the problems, expenses and delays frequently
encountered as listed below.
1. Additional Funding Essential to Business Success but Unlikely Because
of Lack of Net Worth; Proceeds of Sale of Shares May Be Inadequate to
Continue Business Operations. If we receive significantly less than the
$1,000,000 maximum, we may not have the funds to continue with our
operations. Without an infusion of capital or profits, we do not expect
to continue doing business after 6 to 9 months from the date of this
prospectus. As of June 30, 2001, our total assets consisted of a loan
-4-
of $6,882 plus $195 in cash for a total net assets of $7,077. In
addition, our working capital is presently minimal and there can be no
assurance that our financial condition will improve. Our success is
dependent upon our obtaining additional financing in order to arrange a
large volume of direct automobile lease financing directly to
consumers. There is no assurance that we will be able to obtain
necessary lines of credit or equity financing from any source. (See
"Related Party Transactions" and "Fiduciary Responsibility of
Management.")
2. Working Capital May Be Insufficient to Promote Growth. We expect to
expand through internal growth, by granting franchises and through
acquisitions. We also plan to expand our business from its current
location and by entry into other markets. Our ability to grow will
depend on the availability of working capital to support such growth
existing and emerging competition and our ability to maintain
sufficient profit margins in the face of an increasingly competitive
industry. There can be no assurance that we will be able to create or
maintain a market presence.
3. Pursuit of Revenue Sources Will Require Up-Front Money; Financing
Future Activities Could Lead to Long-Term Debt. One of our sources of
revenue will be derived from our ability to purchase discounted
automobile lease contracts and receivables. The pursuit of our
anticipated revenue sources will require a significant amount of
up-front money. To secure such revenues, a significant amount of
capital must be invested or borrowed and any inability or failure on
our part to raise this capital will impair our ability to generate
revenues. It may be necessary, for example, to borrow funds to achieve
our growth objectives. While we currently have no long-term debt, we
cannot guarantee that in pursuing the course of setting up and
increasing our business (i.e., acquiring office space, purchasing
equipment, etc.) we will not accumulate sufficient debt to decrease our
profit margin. If the accumulated debt is substantially more than the
revenues we are capable of generating, we will not be able to produce a
profit and continue doing business.
4. Monetary Reserve for Non-payables May Reduce the Working Capital. We
expect to receive payments on the automobile lease financing
receivables on a timely basis. A monetary reserve will be maintained in
case payments are not received on a timely basis. In the event it is
necessary to use reserves to repay our loans (this in addition to the
cessation or deferral of lease payments) will deprive us of income for
operations. This loss of income will have a detrimental impact on
operations and result in unexpected losses for us.
5. Self-underwritten Offering Made by Principal Who Has No Relevant Prior
Experience. Because there is no firm commitment for the purchase of
shares, there can be no assurance that we will sell the intended
$1,000,000. No underwriter, placement agent or other person has
contracted with us to purchase or sell any of the shares offered.
Accordingly no commitment exists by anyone to purchase any shares and,
consequently, we can give no assurance that any of the shares will be
sold. In fact, the risk is greater in this case since Mr. Mintmire has
not previously conducted a self-underwritten offering (meaning without
the use of broker-dealers).
-5-
6. Complete Reliance on Two Key Personnel with Little or No Experience in
the Automobile Leasing Business. Our business is dependent upon two
individuals: Mark A. Mintmire, our sole director and executive officer,
and Charles Adams, our key consultant. Since Mr. Mintmire has no
experience in the automobile leasing business, our success is greatly
dependent upon the expertise of Mr. Adams who, in turn, has only
approximately three years of relevant experience. At present, it is
estimated that the time devoted by each individual to manage the
day-to-day affairs of the business will be approximately five to ten
hours per week. This time commitment is expected to increase at such
time as we obtain sufficient funding with which to begin the search for
leases to finance. Similarly, future members of management may have
professional responsibilities to other entities. The departure or
disabling of either of these individuals could have a material adverse
effect on our performance. Our success also depends on our ability to
attract, retain and motivate qualified personnel.
7. Conflicts of Interest from Principals Being Involved in Competing
Business Activities. While subject to fiduciary obligations, our
executive officer and director as well as our key consultant may have
conflicts of interest in the future to the extent that these
individuals are involved in the management of any company that
transacts business or competes directly with us. For example, Mr. Adams
is the president and manager of his own lease finance company. As a
result, business, which might have gone to us, may go to Mr. Adams. Mr.
Adams will divide his time and effort between our company, his existing
leasing business and his other business obligations. Any time and
effort he spends developing his own business endeavors will result in
less business for us. Under these circumstances, we would earn less
revenue and our ability to compete would be diminished.
8. Arbitrary Offering Price Is in Excess of the Net Tangible Book Value.
The common stock's price per share in this offering has been
arbitrarily determined by Mr. Mark A. Mintmire, currently acting as a
one-man board of directors, and bears no relationship to our assets,
book value or net worth. Our offering price per share is substantially
in excess of our net tangible book value as a "start-up" company.
9. Absence of Public Market for Shares Will Adversely Affect the Market
Price and Liquidity of the Shares. There is no public market for our
shares of common stock and no assurance that one will develop. No
assurance can be given that if a market for these shares develops, it
will continue. If an active public market does not develop or is not
maintained, the market price and liquidity of the shares may be
adversely affected. Consequently, if you choose to purchase shares as a
result of this offering, you may not be able to re-sell your shares in
the event of an emergency or for any other reason. Also, the shares may
not be readily accepted as collateral for a loan. Accordingly, you
should consider the purchase of shares only as a long-term investment.
10. Shares Will be Listed as "Penny Stock" if a Primary and Secondary
Market Develops for the Shares. In the event a market develops for our
shares and a secondary trading market also develops, the common stock
is expected to come within the meaning of the term "penny stock." It
-6-
will, therefore, be less likely that brokers will sell the shares due
to the difficulty imposed by the penny stock regulations in selling the
stock. As long as our common stock is considered penny stock, the
regulations can be expected to have an adverse effect on the liquidity
of any common stock that may develop in the secondary market.
11. No Present Client Base and Limited Funds to Attract Clients. While we
intend to engage in the automobile lease finance industry, we currently
have no clients and there can be no assurance that we will be
successful in obtaining clients by marketing in Palm Beach and Broward
Counties (Florida) as planned. Further, the very limited funding
currently available to us will only permit us to conduct business on a
very limited scale.
12. Competition May Be Too Strong for Business to Obtain Enough Clients.
The market for financing "credit-impaired" and "sub-prime" car buyers
is highly competitive. Our competitors include local, regional and
national automobile dealers, used car finance companies and other
sources of financing for automobile purchases, many of which are larger
and have greater financial and marketing resources than we do.
13. Broad Discretion of Management with Regard to Application of Proceeds
Could Have an Adverse Effect on Company Growth. The amounts discussed
in the "Application of Proceeds" section indicates the proposed use of
proceeds from this offering. However, management may choose to use
these funds in ways that vary from the usage stated in this prospectus
without consent from the investors. These decisions could have an
adverse effect on the profitability of the company.
14. Need to Re-Sell Acquired Receivables in Order to Increase Profits. We
intend to bundle together a number of automobile lease financing
receivables for the purpose of re-selling them in public and private
offerings by institutional investors and individuals. This reselling
will provide us with additional working capital. There is no assurance,
however, that we will be successful in trying to re-sell these
"bundled" securities in the secondary market.
15. Governmental Regulations Could Hinder the Ability to Produce a Profit.
Federal, state and local regulation and supervision requires us to
limit interest rates, fees and other charges related to finance
contracts. The interest rates and fees we charge may, in the future,
may be lower than those we currently charge. If this instance occurs,
our financial condition, results of operations or cash flows may be
adversely affected.
16. High Interest Rates Will Hinder Our Ability to Make a Profit from the
Purchase of Lease. The revenues we generate will result from paying a
low interest rate on the money we borrow to buy contracts while
charging a higher interest rate on the contract itself. While the
finance contracts that we will service would bear interest at fixed
rates, our indebtedness would generally bear interest at floating
rates. In the event our interest expense increases, we would seek to
compensate for these increases by raising the interest rates on new
finance contracts. To the extent we are unable to do so because of
legal limitations or otherwise, the net margins on our finance
contracts would decrease, thereby adversely affecting our financial
condition.
-7-
17. Extended Declines in Automobile Sales, Seasonal Variations and Business
Cycle Exposure Will Hinder the Number of Clients Available. We expect
to experience higher revenues in our first and second quarters because
of an observed correlation between federal income tax refunds and their
use as down-payments on the purchase of new and used automobiles. In
addition, we expect to experience lower revenues in the third and
fourth quarters due to lower overall economic activity. The automobile
industry historically experiences cyclical growth that follows general
economic cycles. The automobile industry is greatly influenced by
consumer confidence, employment rates, general economic conditions,
interest rates, levels of personal discretionary spending and credit
availability. There can be no assurance that the automobile industry
will not experience protracted periods of decline in sales in the
future. Any protracted declines will have an adverse negative impact on
our financial condition and results of operations.
18. Offering will be Rescinded if the Minimum Amount of Funds is Not
Achieved. We are endeavoring to sell at least $100,000 worth of shares.
There is no assurance that we will be able to achieve this minimum
amount within the 2-9 months alloted for this initial offering. If we
cannot sell at least the $100,000 in shares, we will terminate the
entire offering and return all proceeds from sales at that point.
Investors purchasing shares will not have access to the money paid for
the shares until the initial 9-month offering has ended. Without this
minimum infusion of capital, we cannot continue doing business beyond 9
months from the date of prospectus.
19. Operational Costs May Have Been Incorrectly Estimated; There May be
Unforeseen Costs. There can be no assurance that we have correctly
estimated the costs for establishing a client base or for obtaining a
substantial volume of direct automobile lease financing directly with
consumers. We may expend significantly more funds than anticipated
without expanding the business. In such an event, we would not be able
to continue operations, as projected, and would have to close the
business.
20. Shares Are Entitled to Dividends but There are No Current Plans to Pay
Dividends. Each share is entitled to dividends if and when the Board of
Directors decides to distribute dividends. It is not, however,
currently within our plans to pay dividends, either now or for the
foreseeable future. We may be restricted from paying dividends to our
shareholders under future credit or other financing agreements. The
amount and frequency of dividends distributed to shareholders is solely
within the discretion of our management, currently only Mr. Mark A.
Mintmire. At present, we will retain any earnings for the operation and
expansion of the business. Moreover, no assurance can be given that our
services and products will be accepted in the marketplace or that there
will be sufficient revenue generated for us to be profitable.
Related -Party Transactions
Prospective investors should consider the following inherent or
potential conflicts of interests before subscribing for shares:
-8-
Existing Ownership of Shares by Principals
<c> <c> <c>
Owner Date Issued No. of Shares Notes
--------------------------- ------------------ ---------------------- ---------------------------------------------
Mark A. Mintmire, 10/20/97 2,000,000 Issued for services (valued at $200)
President and Treasurer performed in setting up the company.
--------------------------- ------------------ ---------------------- ---------------------------------------------
Donald F. Mintmire, 6/24/98 17,500 Issued for cash of $875; Mr. Mintmire also
Legal Counsel owns approximately .63% of outstanding
common stock.
--------------------------- ------------------ ---------------------- ---------------------------------------------
Charles Adams, 10/20/97 100,000 Issued for services (valued at $10)
Key Consultant performed in setting up the company.
We have no plans to issue any additional securities to management, promoters,
affiliates or associates at the present time. If the Board of Directors adopts
an employee stock option or pension plan, we may issue additional shares
according to the terms of this plan.
Business with Affiliates of the Company
We have only done business with affiliates at the prices and on terms
comparable to those of non-affiliates. The Board of Directors must approve any
related party contract or transaction. Mr. Adams, who is not presently a
director, has agreed, in the event that he is elected to serve as a director in
the future, he would abstain from voting on any related party contract or
transaction involving his existing business.
We do not intend to use the proceeds from this offering to make
payments to any promoters, management (except as salaries, benefits and out of
pocket expenses) or any of their affiliates. We have no present intention of
acquiring any assets by any promoter, management or their affiliates or
associates. In addition, we have no current plans to acquire or merge with any
business which our promoters, management or their respective affiliates have an
ownership interest. Existing conflict of interest provisions are set forth in
the Amended Articles of Incorporation for the Company. Although there is no
present potential for a related party transaction, in the event that any
payments are to be made to promoters and management, this information will be
disclosed to the shareholders.
There are no arrangements or agreements between non-management
shareholders and management under which non-management shareholders may directly
or indirectly participate in or influence company affairs.
-9-
Fiduciary Responsibility of the Company's Management
Our counsel has advised us that we have a fiduciary responsibility for
the safekeeping and use of all company assets. Management is accountable to each
shareholder and required to exercise good faith and integrity with respect to
its affairs. (For example, management cannot commingle the company's property
with the property of any other person, including that of any current or future
member of management.)
The SEC has stated that, to the extent any exculpatory or
indemnification provision includes indemnification for liabilities arising under
the Securities Act of 1933, it is the opinion of the SEC that this
indemnification is contrary to public policy and, therefore, unenforceable.
Shareholders who believe that our management may have violated applicable law
regarding fiduciary duties should consult with their own counsel as to their
evaluation of the status of the law at that time.
According to federal and state statutes, including the Florida General
Corporation Law, shareholders in a corporation have the right to bring class
action suites in federal court to enforce their rights under federal securities
laws. Shareholders who have suffered losses in connection with the purchase or
sale of their shares may be able to recover any such losses from a corporation's
management where the losses result from a violation of SEC rules. It should be
noted, however, that it would be difficult to establish a basis for liability
that we have not met these SEC standards. This is due to the broad discretion
given the directors and officers of a corporation to act in its best interest.
Selling Shareholders
Upon conclusion or termination of the primary component of this
offering, it is contemplated that the shareholders listed below may individually
offer up to 800,000 shares in addition to the 1,000,000 shares being sold by the
company. The shareholders, not the company, will receive the proceeds from the
sale of their individual shares.
The only selling shareholders who have held a position, office or had
any other material relationship with the company during the previous three years
are Charles Adams, our key consultant, and Donald F. Mintmire, our legal
counsel. During the contemplated secondary component of this offering, each
selling shareholder may offer all, some or none of the common stock they own.
Amount of
Name of Owner Address of Owner Shares Being Sold (1) Percent of Class
-------------- ----------------- ---------------------- ----------------
Charles Adams 219 Almeria 100,000 .03571
West Palm Beach, Fl 33405
Brannon C. Amtower 594 Wilbledon Road NE - Apt 6722 20,000 .00714
Atlanta, GA 30324
Angela Bartolota 4309 W. Atlantic Boulevard - # 908 17,500 .00625
Coconut Creek, Fl. 33066
-10-
Amount of
Name of Owner Address of Owner Shares Being Sold (1) Percent of Class
-------------- ----------------- ---------------------- ----------------
James Brock 1933 Radar Road N.E. 20,000 .00714
Atlanta, GA 30345
Kevin Bell 299 Northside #605 20,000 .00714
Atlanta, GA 30309
Kimberley Brown 4371 Winters Chapel Road - # 2826 17,500 .00625
Doraville, GA 30380
Michael Bunn 848 Myrtle Street N.E. 17,500 .00625
Atlanta, GA 30303
A. Rene Dervaes, Jr. 170 South Country Road 17,500 .00625
Palm Beach, Fl 33480
Marie Evans 2583 McCurdy Way 17,500 .00625
Decatur, GA 30033
Rodney Ford 2281 Clifton Springs Road 20,000 .00714
Decatur, GA 30334
Jennifer Froehlich 928 Rosenal Road 20,000 .00714
Atlanta, GA 30306
Mark Gallagher 1238 Kendrick Road N.E. 17,500 .00625
Atlanta GA 30319
Marco Gollarza 333 Edgewood Avenue 17,500 .00625
Atlanta, GA 30312
Melinda Gore 2409 Chastain Drive 17,500 .00625
Atlanta, GA 30342
Mathew Hann 370 Alberta Terrace - #6-1 17,500 .00625
Atlanta, GA 30305
Roxanne Hemmerlein 1342 Eddy Road 20,000 .00714
Jacksonville, Fl 32211
Erin Hess 10005 Greenwood Avenue -- #3 17,500 .00625
Atlanta,GA 30306
Scott Jackson 366 Barnett Street NE 20,000 .00714
Atlanta, GA 30306
Brian S. Jansma 1825 Charline NE 20,000 .00714
Atlanta, GA 30306
Christina Kelly 676 Myrtle Street 17,500 .00625
Atlanta, GA
Legal Computer Technology, 277 Royal Poinciana Way -- #195 17,500 .00625
Inc. Palm Beach, FL 33480
Kerry Matheiu 740 NW 103 Terrace 17,500 .00625
Pembroke Pines, Fl 33325
-11-
Name of Owner Address of Owner Shares Being Sold (1) Percent of Class
-------------- ----------------- ---------------------- ----------------
Mary C. McGowan 2057 Jordan Terrace N.E. 20,000 .00714
Atlanta, GA 30345-231
Meka McNeal 7202 Trolley Aquare Crossing 17,500 .00625
Atlanta, GA 30305
Samuel Melice II 600 Davis Road North -- #87 17,500 .00625
Palm Springs, FL 33461
Donald F. Mintmire 205 Sunrise Avenue - #204 17,500 .00625
Palm, Beach, FL 33480
Amy Moss 1406A Druid Valley Drive 17,500 .00625
Atlanta, GA 30379
Lionel Obriot 980 Taft Avenue -- #11 17,500 .00625
Atlanta, GA 30309
Ocean Group 205 Sunrise Avenue - #204 17,500 .00625
Holdings, Inc. Palm Beach, Fl 33480
Douglas Paxton 258 8th Street N.E. 17,500 .00625
Atlanta, GA 30309
Cindy Pelierin 1570 Dekalb - #P 20,000 .00714
Atlanta, GA 30307
Sammy Peroulas 1825 Charline Avenue 20,000 .00714
Atlanta, GA 30306
Forrest Pitt 752 Glenwood Avenue S.E. - # 615 17,500 .00625
Atlanta, GA 30316
William Ragsdale 1515 N. Highland -- #3 20,000 .00714
Atlanta, GA 30305
Shannon Russel 500 Means Street -- Studio H 17,500 .00625
Atlanta, GA 30318
John Stagl 106 Barefoot Coove 17,500 .00625
Hypoluxo, FL
Julia Taylor 5022 Roderick Trave 20,000 .00714
Marietta, GA 30056
Geoffrey Watson 5022 Rodrick Trace 20,000 .00714J
Marietta, GA 30058
Jerry Weldon 685 W/ Wesley Road 17,500 .00625
------ ------
Atlanta, GA 30305
Total 800,000 28.5712%
======= =======
(1) Each of these selling shareholders owns less than 1% percent of our common shares.
-12-
Application of Proceeds
Net proceeds from the sale of the shares of common stock are estimated
to be $965,050 if the 1,000,000 ($1,000,000) maximum number of shares is sold
and $65,050 if only the $100,000 ($100,000) minimum number of shares is sold in
the primary component of this offering. We will not receive any money from the
sales of shares by the selling shareholders in the secondary component of this
offering.
These proceeds from our primary offering will be used to finance the
expansion of our activities as well as for general business purposes. In the
event only the minimum sales are made, we will concentrate our efforts primarily
on expanding our lines of credit and providing collateral for leased automobile
and limousine financing. In the event that more than the minimum is sold, we
intend to also develop additional operations, personnel and projects. None of
the estimates include income from revenue. We anticipate receiving income from
our day-to-day operations, but there can be no assurance that this income will
be enough to generate a positive cash flow before the sales from this offering
are expended.
Gross Proceeds (1)(2)
$100,000 $550,000 $1,000,000
-------- -------- ----------
Dollar Dollar Dollar
Amount Percentage Amount Percentage Amount Percentage
------ ---------- ------ ---------- ------ ----------
Offering Expenses $34,950 34.95% $34,950 6.35% $34,950 3.49%
Financing and Funding 55,050 55.05% 490,050 89.10% 920,050 92.01%
Salaries 50,000 50.00% 66,000 12.00% 75,000 5.00%
Working Capital 10,000 10.00% 25,000 4.50% 45,000 4.50%
------ ------ ------ ----- ------ -----
Net Proceeds $65,050 $515,050 $965,050
======= ======== ========
--------------------
(1) In order to begin our operations, we incurred costs for equipment,
printing and related expenditures which have been paid by Mark A.
Mintmire. We do not intend to reimburse Mr. Mintmire for these costs.
(2) We reserve the right to change the application of proceeds depending on
unforeseen circumstances at the time of this offering. The intent is to
implement our business plan to the fullest extent possible with funds
raised in this offering.
(3) If the minimum offering of $100,000 is achieved in the primary
component of the offering, proceeds from this offering are expected to
satisfy our cash requirements for the next 12 months. Therefore, it
will not be necessary to raise additional funds in order for us to
continue operations.
-13-
Capitalization
The following table shows the our capitalization as of June 30, 2001
and the pro forma capitalization on the same date. This information reflects the
sale of the 100,000 shares offered for estimated net proceeds of $0.65 per
share. This information also indicates the sale of 1,000,000 shares offered for
estimated net proceeds of $0.97 per share.
As Adjusted
-----------
Actual Minimum Maximum
------ ------- -------
Shareholders' equity
Common stock, $.0001 par value; 50,000,000 Shares authorized;
2,800,000Shares issued and outstanding; 2,900,000 (Minimum) and
3,800,000 (Maximum) Shares to be issued and outstanding, as adjusted $280 $290 $380
Additional Paid-in capital 22,930 88,150 988,060
Deficit accumulated during the development stage (21,633) (21,633) (21,633)
-------- -------- --------
Total Shareholders' equity and total capitalization $1,577 $66,807 $966,807
====== ======= ========
Dilution
The following table shows the percentage of equity the investors in
this offering will own compared to the percentage of equity owned by the present
shareholders and the comparative amounts paid for the shares by the investors as
compared to the total consideration paid by our present shareholders.
Dilution for $100,000 Minimum Offering
--------------------------------------
Initial public offering price per share $1.00 (100.0%)
Net tangible book value per share before offering 0.001 (0.1%)
Increase per share attributable to new shareholders 0.022 (2.2%)
Pro forma net tangible book value per share after offering $0.023 (2%)
-------
Total dilution per share to new shareholders
$0.98 (98%)
=====
-14-
Shares Purchased Total Consideration
---------------- -------------------
Average Price
Number Percent Amount Percent Per Share
------ ------- ------ ------- ---------
Existing Shares 2,800,000 96.60% $23,210 18.84% $0.008
New Shares 100,000 3.40 100,000 81.16 1.00
------- ----- ------- ----- ----
Total 2,900,000 100.00% $123,210 100.00% $0.04
========= ====== ======== ======= =====
Dilution for $1,000,000 Maximum Offering
----------------------------------------
Initial public offering price per Share $1.00 (100.0%)
Net tangible book value per Share before offering $0.001 (0.1%)
Increase per Share attributable to new Shareholders $0.254 (2.54%)
Pro forma net tangible book value per Share after offering $0.25 (2.5%)
-----
Total dilution per Share to new Shareholders $0.75 (75%)
=====
Shares Purchased Total Consideration
---------------- -------------------
Average Price
Number Percent Amount Percent Per Share
------ ------- ------ ------- ---------
Existing Shares 2,800,000 73.6% $23,210 2.3% $0.008
New Shares 1,000,000 26.4 1,000,000 97.7 1.00
--------- ---- --------- ---- ----
Total 3,800,000 100.00% $1,023,210 100.00% $0.269
========= ------- ========== ======= ======
The Company
Introduction
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.
-15-
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 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.
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.
-16-
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.
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
-17-
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
-18-
compensation in the form of commissions based on the client's
contracting 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:
< Salaries to Mr. Adams and Mr. Mintmire (payroll cost, actual or
deferred)
< Marketing and sales related costs
< Employment related taxes
< 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.
-19-
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.
Reporting
As a reporting company, we are required to file quarterly unaudited
financial reports on Form 10-QSB and annual audited financial reports on Form
10-KSB. In addition, we would be required to file on Form 8-K under certain
specified conditions or those deemed material in character.
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.
Current Employees and Proposed Staffing
< Currently Minimal Employees; No Monetary Compensation
As of April 30, 2000, Mr. Mintmire was our only part-time employee. We
have had no other employees since we were incorporated. In addition,
Mr. Mintmire (sole executive officer and director) and Mr. Charles
Adams ( key consultant) have served in those positions without
compensation from inception to the present. If we sell the maximum
shares offered, it is anticipated that these individuals will receive
reasonable salaries for services as executive officers. Mr. Adams has
been compensated, in the form of company common stock, for specialized
services, including the preparation of our business plan and the
performance of consulting services. Mr. Mintmire was compensated, in
the form of restricted common stock, for management services relating
to our formation and for financial consulting services.
< Management
The following table reflects the name, address, age and position of the
executive officer and director. For additional information, see the
biographical information which follows:
-20-
Name Address Position
---- ------- --------
Mark A. Mintmire (1) 2958 Braithwood Court President, Secretary, Chief Executive
Atlanta, Georgia 30345 Officer and Director
Charles Adams (2) 219 Almeria Road Consultant(1) (2)
West Palm Beach, Florida 33405
---------------------------
(1) Mr. Mintmire may be deemed to be our sole "promoter" and "parent" of as those terms are defined by the Securities Act.
(2) Mr. Adams acts as our key consultant but should not be deemed a "promoter" or "parent" of the company.
All directors hold office until the next annual meeting of our
shareholders and until their successors have been elected and qualify. Officers
serve at the pleasure of the Board of Directors. Aside from employing Mr.
Mintmire as officer/director and Mr. Adams as key consultant, there are no other
individuals whose activities will be material to our operations at this time.
< 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:
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
-21-
(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 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.
< Proposed Additional Personnel
It is expected that additional personnel will be employed to assist in
operations and financial management. We have also identified several
people that are candidates for key positions within the organization.
We have discussed opportunities with some of these individuals and
intend to actively recruit them upon achieving adequate funding. We
recognize that their expertise and experience is essential to the
success of our business. In addition, we intend to also continue to
expand our business and finance advisors.
It is generally anticipated that any future employees will devote full
time to the company. The Board of Directors may then, in its
discretion, approve the payment of cash or non-cash compensation to
these employees for their services.
-22-
< Remuneration and Employment Contracts
2,000,000 and 100,000 shares of common stock were issued to both Mr.
Mark Mintmire and Mr. Charles Adams.
Except for this described compensation, it is not anticipated that any
executive officer will receive any cash or non-cash compensation for
his or her services. When we begin operations, it is expected that the
Board of Directors will approve the payment of salaries in a reasonable
amount to each of our officers for their services.
Although there are no employment agreements in place, Mark A. Mintmire
will be paid compensation at the annual rate of $50,000 in 2000. If
only the minimum amount of shares is sold and no other funds are
available, both Mr. Mintmire's salary and Mr. Adams' consulting
services compensation will be $30,000. The balance will be deferred for
each individual until cash flow is available to adequately pay the
larger amount.
< Compensation of Directors
Until we have $1,000,000 in lease receivables, no members of the Board
of Directors will be paid separately for their services. Directors'
out-of-pocket expenses will be reimbursed upon presentation of
appropriate documents.
< Employee Benefits
We do not provide officers with pension, stock appreciation rights,
long-term incentive or other plans but have the intention of
implementing such plans in the future.
We intend to implement a restricted employee stock option plan. Under
this plan, the Board of Directors could grant employees, directors and
certain advisors options to purchase shares at exercise prices of at
least 85% of the then current market price. Income from any such
options is not expected to be tax deferrable. As of the date of this
prospectus, the plan has not been defined and no options have been
granted but it is anticipated that 500,000 Shares will be reserved.
We intend to adopt an employee bonus program to provide incentive to
our employees. This plan would pay bonuses in cash or stock to
employees based upon our pre-tax or after-tax profit for a particular
period. We also intend to adopt a retirement plan, such as a 401(k)
retirement plan, and implement an employee health plan comparable to
the industry standard. Establishment of such plans and their
implementation will be at the discretion of the Board of Directors; any
such bonus plan will be based on annual objective, goal-based criteria
developed by the Board of Directors for eligible participants and will
be exercisable only at prices greater than or equal to the market value
of the underlying shares on the date of their grant.
-23-
Litigation
There has never been any material civil, administrative or criminal
proceedings concluded, pending or on appeal against Mr. Mark A. Mintmire, Mr.
Adams or us.
Securities Ownership of Certain Owners and the Principal Shareholder
The following table summarizes certain information with respect to the
beneficial ownership of company shares, immediately prior to and after this
offering. The following table sets forth information as of June 30, 2001
regarding the ownership of common stock by each shareholder known to be the
owner of more than 10% of the outstanding shares, each director 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.
After the Offering
------------------
Prior to Offering (1) Minimum(2) Maximum(3)
----- -- -------- ------- -------
Name of Beneficial Owner: Number % Number % Number %
---- -- ---------- ------ ------ - ------ - ------ -
Mark A. Mintmire (4) 2,000,000 71.42% 2,000,000 68.96% 2,000,000 52.63%
All Directors, Officers and 10%
Shareholders as a Group 2,000,000 71.42% 2,000,000 68.96% 2,000,000 52.63%
--------- ------ --------- ------ --------- ------
All Beneficial Owners as a Group 2,800,000 100.0% 2,900,000 100.0% 3,800,000 100.0%
========= ====== ========= ====== ========= ======
--------------------
(1) Reflects total outstanding shares of 2,800,000 as of August 31, 2000.
(2) Assumes issuance and sale of 100,000 shares during this offering period
(the "minimum" offering) in addition to the 2,800,000 shares
outstanding as of August 31, 2000, an aggregate 2,900,000 shares.
(3) Assumes issuance and sale of 1,000,000 shares of our during this
offering period (the "maximum" offering) in addition to the 2,800,000
shares outstanding as of August 31, 2000, an aggregate 3,800,000
shares.
(4) Our sole executive and director.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Plan of Operations
Since its inception, we have conducted minimal business operations
except for organizational and capital raising activities. We have 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
-24-
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, 2001, we had only interest income of $1,444
from a loan to a related party. Total company operations and operating expenses
as of March 31, 2001 were $22,664. We propose to engage in the business of
automobile lease financing/funding.
Mr. Charles Adams, consultant to SDP, agreed to develop our automobile
lease financing/funding business 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 we are 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 us, 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, we
expect 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, we intend 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, our 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 Nine Months ending
June 30, 2001
At June 30, 2001, we had assets totaling $7,077 and liabilities of
$5,500. Our total assets are primarily attributable to interest income from a
loan to a related party. Our total liabilities are attributable primarily to
accrued legal expenses, organization expenses and professional fees. Since our
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 our financial condition will improve. We are
expected to continue to have minimal working capital or a working capital
-25-
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, we are 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.
We have no potential capital resources from any outside sources at the
current time. In its initial phase, we will operate out of the facility provided
by Mr. Mintmire. Mr. Adams will begin by finding clients for us 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. We 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 we require additional
capital during this phase, Mr. Mintmire has committed to fund the operation
until such time as additional capital is available. We believe that it will
require six (6) to nine (9) months in order to determine the market demand
potential.
Our ability to continue as a going concern is dependent upon its
ability to obtain clients who will utilize our automobile lease
financing/funding programs and whether we can attract an adequate number of
direct clients who will qualify for a lease financing program. We believe 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. We believe 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, we believe that the type of
equipment necessary for the operation is readily accessible at competitive
rates.
To implement such plan we have 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. If these bootstrap efforts fail,
we will have no choice but to close down.
Net Operating Losses
We have net operating loss carry-forwards of $4,700 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
$3,200 deferred tax asset as of June 30, 2001, resulting from the loss
carry-forwards, for which it has established a 100% valuation allowance. Until
our current operations begin to produce earnings, it is unclear as to our
ability to utilize such carry-forwards.
-26-
Year 2000 Compliance
We did not experience a negative impact to its technology
infrastructure as a result of the Year 2000. We do 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-QSB 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-QSB which address activities, events or developments which we expect
or anticipate 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 our business and operations, and other such
matters are forward-looking statements. These statements are based on certain
assumptions and analyses made by us 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
our 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 us;
changes in laws or regulation; and other factors, most of which are beyond our
control. Consequently, all of the forward-looking statements made in this Form
10-QSB are qualified by these cautionary statements and there can be no
assurance that the actual results or developments anticipated by us will be
realized or, even if substantially realized, that they will have the expected
consequence to or effects on us or our business or operations. We assume no
obligations to update any such forward-looking statements.
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, we had assets totaling $6,811 and
$13,200 respectively, and liabilities of $500 and $952 respectively. Our total
assets are primarily attributable to interest income from a loan to a related
party. Our total liabilities are attributable primarily to accrued legal
expenses, organization expenses and professional fees. Since our 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 our financial condition will improve. We are 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, we are 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.
We have no potential capital resources from any outside sources at
the current time. In its initial phase, we will operate out of the facility
provided by Mr. Mintmire. Mr Adams will begin by finding clients for us and
instructing Mr. Mintmire in the operation of an automobile lease
-27-
financing/funding business. To attract clients, Mr. Adams and Mr. Mintmire will
visit potential clients in order to determine their lease financing needs. We
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
we require additional capital during this phase, Mr. Mintmire has committed to
fund the operation until such time as additional capital is available. We
believe that it will require six (6) to nine (9) months in order to determine
the market demand potential.
Our ability to continue as a going concern is dependent upon its
ability to obtain clients who will utilize our automobile lease
financing/funding programs and whether we can attract an adequate number of
direct clients who will qualify for a lease financing program. We believe 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. We believe that there is adequate and affordable renal space
available in Palm Beach County and sufficiently trained personnel to provide
such clerical services at affordable rates. Further, we believe that the type of
equipment necessary for the operation is readily accessible at competitive
rates.
To implement such plan, we have 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. We are making the offering on a self-underwritten basis 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
We have net operating loss carry-forwards of $6,500 expiring at
September 30, 2018, $4,400 expiring at September 30, 2019 and $6,000 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
our current operations begin to produce earnings, it is unclear as to our
ability to utilize such carry-forwards.
Year 2000 Compliance
We did not experience a negative impact to its technology infrastructure as a
result of the Year 2000. We do 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 we expect
or anticipates will or may occur in the future, including such things as future
capital expenditures (including the amount and nature thereof), business
-28-
strategy, expansion and growth of our business and operations, and other such
matters are forward-looking statements. These statements are based on certain
assumptions and analyses made by us 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
our expectations and predictions is subject to a number of risks and
uncertainties, general economic market and business condition s; the business
opportunities (or lack thereof) that may be presented to and pursued by us;
changes in laws or regulation; and other factors, most of which are beyond our
control. 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 us will be
realized or, even if substantially realized, that they will have the expected
consequence to or effects on us or its business or operations. We assumes no
obligations to update any such forward-looking statements.
Going Concern
We are the subject of a "going concern" audit opinion. (See Appendix
I.) Such qualification was issued because we have incurred losses from
operations since inception. As of June 30, 2001, we had working capital of
$1,577 that raises substantial doubt about our ability to continue as a going
concern. We had an overall net cash outflow of $141 for the 9 months ended June
30, 2001 and incurred a net loss of $4,734 for the 9 months ended June 30, 2001.
There are no assurances that we will be able to successfully complete
this public offering of common stock or that the ultimate amounts raised will
meet the our cash flow needs and be sufficient to fund our operations through
2002. In addition, there is no assurance that we will be able to successfully
raise the funds necessary through alternative channels, should this offering not
be successful. Further, there is no assurance that we will be able to
successfully develop planned operations even if it is successful in acquiring
the funds necessary, which may have a material impact on our financial position
and results of operations. The accompanying financial statements do not include
any adjustments relating to the recoverability and classification of asset
carrying amounts or the amount and classification of liabilities that might
result should we be unable to continue as a going concern.
If this initial public offering on Form SB-1 as filed with the U.S.
Securities and Exchange Commission fails to raise sufficient capital, we intend
to seek such funds through alternative channels, for example - venture capital
or a joint venture with an established retailer or manufacturer. We are
currently not able to evaluate the potential success of such alternative
financing, as it has not attempted to seek such financing.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. In
accordance with SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No.1 33," we
delayed the implementation of SFAS No. 133, as amended by SFAS 138. The standard
-29-
is effective January 1, 2001 and management does not expect the adoption of the
standard to have any impact on the financial position or results of our
operations.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements"
summarizing the SEC's views in applying generally accepted accounting principles
to various revenue recognition issues. Management believes that its revenue
recognition practices are in conformity with SAB No. 101.
In April 2000, the FASB issued FASB Interpretation No. 44 ("FIN No.
44"), "Accounting for Certain Transactions Involving Stock Compensation: An
Interpretation of APB No. 25." We have adopted the provisions of FIN No. 44, and
such adoption did not impact our results of operations.
In September 2000, the FASB issued SFAS No. 140 "Accounting for
Transfers and Servicing of Financial Asset and Extinguishment of Liabilities", a
replacement of SFAS No. 125. The standard is effective in 2001 and management
does not expect the standard to have any effect on our financial position or
results of operations.
In July 2001, the FASB issued SFAS No. 141 "Business Combinations" and
SFAS No. 142 "Goodwill and Other Intangible Assets." These standards are
effective in 2001 and management does not expect the standards to have any
effect on our financial position or results of operations.
In July 2001, the SEC issued SAB 102 "Selected Loan Loss Allowance
Methodology and Documentation Issues." We do not expect this SAB to have any
effect on our financial position or results of operations.
Absence of Current Public Market
There is no current public trading market for the shares. We intend to
take needed action to qualify the shares for quotation on the NASDAQ Bulletin
Board under the symbol "SDPR" on the same date we file this prospectus, Upon
conclusion of the primary component of this offering. There is no assurance that
we can satisfy the current pertinent listing standards or, if successful in
getting listed, avoid later de-listing.
Description of Stock
We are authorized to issue 50,000,000 shares of common stock, $0.0001
par value. The issued and outstanding shares of common stock being registered
are validly issued, fully paid and non-assessable. The holders of outstanding
shares are entitled to receive dividends out of the assets legally available
whenever and in whatever amounts the Board of Directors may determine.
All shares have equal voting rights of one vote per share. Shareholders
may vote in all matters to be voted upon by the shareholders. A majority vote is
required on all corporate action. Cumulative voting in the election of directors
is not allowed, which means that the holders of more than 50% of the outstanding
shares can elect all the directors as they choose to do so and, in such an
-30-
event, the holders of the remaining shares will not be able to elect any
directors. The shares have no preemptive, subscription, conversion or redemption
rights and can only be issued as fully-paid and non-assessable shares.
Preferred Stock
We are authorized to issue 10,000,000 shares of preferred stock, $0.0001 par
value Currently, we have no issued and outstanding preferred shares and none are
contemplated.
Transfer Agent
Interwest Transfer Co., Inc.
1981 E. Murray Holiday Road --Suite 100
Salt Lake City, Utah 84117
Certain Provision of Florida Law
Section 607.0902 of the Florida Business Corporation Act prohibits
voting by shareholders in a publicly-held Florida corporation who acquired their
shares in a "control share acquisition" unless the acquisition of incorporation
or bylaws specifically state that this section does not apply. A control share
acquisition is an acquisition of shares that immediately entitles the
shareholder to vote in the election of directors within each of the following
ranges of voting power:
1. one-fifth or more, but less than one-third of such voting power;
2. one-third or more, but less than a majority of such voting power; or
3. more than a majority of such voting power.
Our Amended Articles of Incorporation specify that Section 607.0902 does not
apply to control-share acquisitions of shares we offer.
Shareholders are entitled to one vote per share on all matters to be
voted upon by shareholders. Once payment- in-full is made for the shares, this
right is non-assessable. In the event we go out of business, the shareholders
are entitled to share in all remaining assets after liabilities are paid. There
are no redemption or "sinking fund" provisions or preemptive rights with respect
to the shares. Shareholders have no right to require us to redeem or purchase
shares.
Subscription Procedure
In order to purchase shares in this best efforts, continuous offering
commencing on the date of this prospectus:
1. An investor must complete and sign copy of the subscription agreement
and power of attorney.
2. Checks (which should be at least $500) should be made payable as
follows: SD Products Corp. -- Attorney Escrow Account
-31-
3. The check and the subscription agreement should be mailed or delivered
to the escrow agent:
Duncan, Blum & Associates
Attn: Carl N. Duncan, Esq.
5718 Tanglewood Drive
Bethesda, Maryland 20817
You must indicate in the subscription agreement your classification of
net worth as defined in "Prospectus Summary." In addition, you must indicate
that you have received this prospectus and that you are a citizen or permanent
resident of the United States.
Escrow Account
Funds from the sale of this offering will be retained in an IOLTA
attorney escrow account maintained with Duncan, Blum & Associates, our
securities counsel. Under pertinent Maryland regulation, interest will be paid
to the Maryland Bar Association for funding attorney representation for those
who cannot otherwise afford counsel. Accordingly, any interest that accrues will
not be paid to us or shareholders. If the minimum is not achieved, the full
subscription amount will promptly be returned without deduction.
ERISA Considerations
Those who consider purchasing shares on behalf of qualified plans are
urged to consult with tax and ERISA counsel to determine that such a purchase
will not result in a violation of prohibited transaction under ERISA, the
Internal Revenue Code or other applicable law. We will rely on the determination
made by such experts, although no shares will be sold to any plans if we believe
that the sale will result in a prohibited transaction under ERISA or the Code.
Legal Matters
The validity of Shares being offered by this prospectus will be passed
upon for us by Duncan, Blum & Associates, Bethesda, Maryland and Washington,
D.C.
Experts
The financial statements included in this prospectus and in the
registration statement have been audited by Durland & Company, CPAs, P.A.,
independent certified public accountants. Their report contains information
regarding our ability to continue doing business.
-32-
Available Information
We have filed a Registration Statement on Form SB-1 with the Securities
and Exchange Commission with respect to the securities offered in this
prospectus. This prospectus does not contain all of the information in the
registration statement, certain portions have been omitted pursuant to the rules
and regulations of the SEC. You may inspect and copy the registration statement
at the public reference facilities of the SEC as well as at the SEC's regional
offices:
---------------------------------- ----------------------------------------- --------------------------------------
Main Office: Regional Offices:
450 Fifth Street, N.W., 233 Broadway 500 West Madison -- Suite 1400
Washington, D.C. 20549 New York, New York 10011 Chicago, Illinois 60601
--------------------------------- ----------------------------------------- --------------------------------------
Copies of the registration statement can be obtained from the Public
Reference Section of the SEC's main office. Statements made, in this prospectus
concerning the contents of any documents referred to herein are not necessarily
complete and in each instance, are qualified in all respects by reference to the
copy of the entire document filed as an exhibit to the registration statement.
For further information about us and the shares of common stock we are
offering, you may inspect a copy of our registration statement and the
associated filing documents at the public reference facilities of the SEC. The
registration statement and related materials have also been filed electronically
with the SEC. Accordingly, these materials can be accessed through the SEC's web
site that contains reports, proxy and information statements and other
information regarding registrants (http// www.sec.gov)
-33-
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report...............................................I-2
Balance Sheets.............................................................I-3
Statements of Operations...................................................I-4
Statements of Stockholders' Equity.........................................I-5
Statements of Cash Flows...................................................I-6
Notes to Financial Statements..............................................I-7
I-1
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.
Durland & Company, CPAs, P.A.
Palm Beach, Florida
December 20, 2000
I-2
SD Products Corporation
(A Development Stage Enterprise)
Balance Sheets
June 30, September 30,
2001 2000
------------------ -------------------
ASSETS (unaudited)
CURRENT ASSETS
Cash $ 195 $ 336
Loan and accrued interest receivable - related party 6,882 6,475
------------------ -------------------
Total current assets 7,077 6,811
------------------ -------------------
Total Assets $ 7,077 $ 6,811
================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued expenses $ 5,000 $ 0
Accrued expenses - related party 500 500
------------------ -------------------
Total current liabilities 5,500 500
------------------ -------------------
Total Liabilities 5,500 500
------------------ -------------------
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 (21,633) (16,899)
------------------ -------------------
Total Stockholders' Equity 1,577 6,311
------------------ -------------------
Total Liabilities and Stockholders' Equity $ 7,077 $ 6,811
================== ===================
The accompanying notes are an integral part of the financial statements
I-3
SD Products Corporation
(A Development Stage Enterprise)
Statements of Operations
Period from
October 20, 1997
Nine Months Ended Years Ended (Inception)
June 30, September 30, through
--------------------------- -------------------------
2001 2000 2000 1999 June 30, 2001
-------------- ------------ ------------ ------------ -------------------
(unaudited) (unaudited) (unaudited)
Revenues $ 0 $ 0 $ 0 $ 0 $ 0
-------------- ------------ ------------ ------------ -------------------
Expenses
General and administrative expenses 141 270 910 1,466 8,943
Legal fees - related party 0 0 0 500 510
Professional fees 5,000 8,396 5,502 3,057 13,759
-------------- ------------ ------------ ------------ -------------------
Total expenses 5,141 8,666 6,412 5,023 23,212
-------------- ------------ ------------ ------------ -------------------
Loss from operations (5,141) (8,666) (6,412) (5,023) (23,212)
Other income (expense)
Interest income - related party 407 339 475 604 1,579
-------------- ------------ ------------ ------------ -------------------
Net loss $ (4,734)$ (8,327) $ (5,937)$ (4,419)$ (21,633)
============== ============ ============ ============ ===================
Basic net loss per weighted average share $ (0.001)$ (0.001) $ (0.01)$ (0.01)
============== ============ ============ ============
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
I-4
SD Products Corporation
(A Development Stage Enterprise)
Statement of Stockholders' Equity
Deficit
Accumulated
Additional During the Total
Number of Preferred Common Paid-in Development Stockholders'
Shares Stock Stock Capital Stage Equity
--------------- ----------- --------- ------------- --------------- ---------------
BEGINNING BALANCE, September 30,1998 2,800,000 $ 0 $ 280 $ 22,930 $ (6,543)$ 16,667
Net loss - 1999 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 (4,734) (4,734)
--------------- ----------- --------- ------------- --------------- ---------------
ENDING BALANCE, June 30, 2001 (unaudited) 2,800,000 $ 0 $ 280 $ 22,930 $ (21,633)$ 1,577
=============== =========== ========= ============= =============== ===============
The accompanying notes are an integral part of the financial statements
I-5
SD Products Corporation
(A Development Stage Enterprise)
Statement of Cash Flows
Period from
Nine Months Ended Years Ended October 20,
June 30, September 30, 1997 (Inception)
------------------------ ------------------------- through
2001 2000 2000 1999 June 30, 2001
------------ ----------- ------------ ------------ ----------------
(unaudited) (unaudited) (unaudited)
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $ (4,734)$ (8,327) $ (5,937)$ (4,419)$ (21,633)
Adjustments to reconcile net loss to net cash used for
operating activities:
Stock issued for services 0 0 0 0 10
Stock issued for services - related party 0 0 0 0 200
Changes in operating assets and liabilities:
(Increase)decrease accrued interest receivable -
related party (407) (339) (475) 93 (882)
Increase (decrease) accrued expenses 5,000 3,609 (452) (2,548) 5,000
Increase (decrease) accrued expenses - related party 0 (500) 500
------------ ----------- ------------ ------------ ----------------
Net cash used by operating activities (141) (5,557) (6,864) (6,874) (16,805)
------------ ----------- ------------ ------------ ----------------
CASH FLOW FROM INVESTING ACTIVITIES:
(Advance to) repayment from related party 0 (6,000) (6,000) 18,000 (6,000)
------------ ----------- ------------ ------------ ----------------
Net cash (used) provided by investing activities 0 (6,000) (6,000) 18,000 (6,000)
------------ ----------- ------------ ------------ ----------------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 0 0 0 0 23,000
------------ ----------- ------------ ------------ ----------------
Net cash provided by financing activities 0 0 0 0 23,000
------------ ----------- ------------ ------------ ----------------
Net increase (decrease) in cash (141) (11,557) (12,864) 11,126 195
CASH, beginning of period 336 13,200 13,200 2,074 0
------------ ----------- ------------ ------------ ----------------
CASH, end of period $ 195 $ 1,643 $ 336 $ 13,200 $ 195
============ =========== ============ ============ ================
<
The accompanying notes are an integral part of the financial statements
I-6
SD Products Corporation
(A Development Stage Enterprise)
Notes to Financial Statements
(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 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 statements The financial statements for the nine
months ended June 30, 2001 and 2000 and for the period since October
20, 1997, (Inception), through June 30, 2001, 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 $882 was accrued at June 30, 2001.
(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 December 31, 1999. 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 $21,600, which
expire $4,700, $6,000, $4,400 and $6,500 at September 30, 2021, 2020,
2019 and 2018, respectively.
I-7
SD Products Corporation
(A Development Stage Enterprise)
Notes to Financial Statements
(4) Income Taxes (Continued) The amount recorded as deferred tax assets as
of June 30, 2001 is approximately $3,200, 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 ended are as follows:
June 30, 2001
(unaudited) September 30, 2000
-------------------- -----------------------
Loan and accrued interest receivable - related party $ 6,882 $ 6,475
==================== =======================
Accrued expenses - related party $ 500 $ 500
==================== =======================
Interest earned - related party $ 882 $ 475
==================== =======================
(6) Going Concern As shown in the accompanying financial statements, the
Company incurred a net loss of $21,600 for the period from October 20,
1997 (Inception) through June 30, 2001. 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.
I-8
EXHIBIT A
SUBSCRIPTION AGREEMENT
SD Products Corp.
Attn: Mark A. Mintmire, President
2958 Braithwood Court
Atlanta, Georgia 30345
By executing this Subscription Agreement (the "Subscription Agreement")
of SD Products Corp. (hereafter, the "Company"), the undersigned purchaser
(hereafter, the "Purchaser") hereby irrevocably subscribes for shares of common
stock ("Shares") in the Company. Purchaser herewith encloses the sum of
$___________ ($500 minimum in $500 increments,) representing the purchase of
_____ Shares at $1.00 per Share. Subscriptions, whether checks or wire
transfers, should be made payable to SD Products Corp. -- Attorney Escrow
Account and forwarded to the Escrow Agent, Duncan, Blum & Associates (Attn: Carl
N. Duncan, Esq.), 5718 Tanglewood Drive, Bethesda, Maryland 20817. If this
Subscription Agreement is accepted, the Purchaser agrees to contribute the
amount enclosed to the Company.
Purchaser represents that he, she or it has (i) a net worth of at least
$100,000 (exclusive of home, furnishings and automobiles) or (ii) a net worth
(similarly calculated) of at least $50,000 and an annual adjusted gross income
of at least $25,000. Purchaser represents that he meets these financial
requirements and that he is of legal age. Purchaser is urged to review carefully
the responses, representations and warranties he is making herein. Purchaser
agrees that this subscription may be accepted or rejected in whole or in part by
the Company in its sole and absolute discretion.
READ THIS PROSPECTUS CAREFULLY BEFORE YOU SUBSCRIBE. CONTAINED HEREIN ARE
DISCLOSURES CONCERNING VARIOUS RISKS, CONFLICTS, FEES AND EXPENSES RELATING TO
OR TO BE PAID BY THE COMPANY.
The undersigned is reminded that:
(1) The Shares are speculative investments, the purchase of which involves a
high degree of risk of loss of the entire investment of the undersigned
in the Company.
(2) S/he is encouraged to discuss the proposed purchase with her/his
attorney, accountant or a Purchaser Representative (as defined under the
Securities Act of 1933, as amended) or take the opportunity to do so,
and is satisfied that s/he has had an adequate opportunity to ask
questions concerning the Company, the Shares and the Offering described
in the Prospectus.
(3) No federal or state agency has passed upon the adequacy or accuracy of
the information set forth in the Prospectus or made any finding or
determination as to the fairness of the investment, or any
recommendation or endorsement of the Shares as an investment.
(4) S/he must not be dependent upon a current cash return with respect to
her/his investment in the Shares. S/he understands that distributions
are not required (and are not expected) to be made.
A-1
(5) The Company is not a "tax shelter" and the specific tax consequences to
her/him relative to as an investment in the Company will depend on
her/his individual circumstances.
Representations
Purchaser makes the following representations in order to permit the
Company to determine his suitability as a purchaser of Shares:
(1) The undersigned has received the Company's Prospectus and the exhibits
thereto.
(2) The undersigned understands that the Company has made all documents
pertaining to the transactions described in the Company's Prospectus
available to the undersigned in making the decision to purchase the
Shares subscribed for herein.
(3) If the Shares are being subscribed for by a pension or profit-sharing
plan, the undersigned independent trustee represents that s/he has
reviewed the plan's portfolio and finds (considering such factors as
diversification, liquidity and current return and projected return of
the portfolio) this purchase to be a prudent investment under applicable
rules and regulations, and acknowledges that no representation is made
on behalf of the Company that an investment in the Company by such plan
is suitable for any particular plan or constitutes a prudent investment
thereby. Moreover, the undersigned independent trustee represents that
s/he understands that income generated by the Company may be subject to
tax, that s/he is authorized to execute such subscription on behalf of
the plan or trust and that such investment is not prohibited by law or
the plan's or trust's governing documents.
The undersigned understands and agrees that this subscription may be
accepted or rejected by the Company in whole or in part, in its sole and
absolute discretion. The undersigned hereby acknowledges and agrees that this
Subscription Agreement shall survive (i) non-material changes in the
transactions, documents and instruments described in the Prospectus, (ii) death
or disability of the undersigned and (iii) the acceptance of this subscription
by the Company. By executing this Subscription Agreement below, the undersigned
(i) acknowledge the accuracy of all statements and (ii) appoints the management
of the Company to act as his true and lawful attorney to file any documents or
take any action required by the Company to carry out its business activities.
The foregoing information which the undersigned has provided to the
Company is true and accurate as of the date hereof and shall be true and
accurate as of the date of the undersigned's admission as a Shareholder. If in
any respect such representations, warranties or information shall not be true
and accurate at any time prior to the undersigned's admission as a Shareholder,
s/he will give written notice of such fact to the Company, specifying which
representation, warranty or information is not true and accurate and the reason
therefor.
By executing this Subscription Agreement, the undersigned certifies, under
penalty of perjury:
(1) That the Social Security Number or Taxpayer Identification Number
provided below is correct; and
(2) That the IRS has never notified him that s/he is subject to 20% backup
withholding, or has notified her/him that s/he is no longer subject to
such backup withholding. (Note: If this part (2) is not true in your
case, please strike out this part before signing.)
A-2
(3) The undersigned is a U.S. citizen or resident, or is a domestic
corporation, partnership or trust, as defined in the Internal Revenue
Code of 1986, as amended. (Note: If this part (3) is not true in your
case, please strike out this part before signing.)
(4) That the undersigned acknowledges and agrees that this information may
be disclosed to the Internal Revenue Service by the Company and that any
false statement contained herein is punishable by fine, imprisonment or
both. The undersigned will notify the Company within sixty (60) days of
the date upon which any of the information contained herein becomes
false or otherwise changes in a material manner, or the undersigned
becomes a foreign person. The undersigned agrees to update this
information whenever requested by the Company. Under penalties of
perjury, the undersigned declares that the undersigned has examined the
information contained herein and to the best of the undersigned's
knowledge and belief, it is true, correct and complete, and that the
undersigned has the authority to execute this Subscription Agreement.
This Subscription Agreement and the representations and warranties contained
herein shall be binding upon the heirs, executors, administrators and other
successors of the undersigned. If there is more than one signatory hereto, the
obligations, representations, warranties and agreements of the undersigned are
made jointly and severally. By executing this agreement, you are not waiving any
rights under federal law.
The undersigned is the following kind of entity (please check):
|_| Individual |_| IRA
|_| Joint Account - JTWROS |_| Pension Plan
|_| Joint Account - TENCOM |_| Trust
|_| UGMA (Gift to Minor) |_|Non-Profit Organization
|_| Partnership |_| Employee of NASD member firm
|_| Corporation |_| Other (Specify)
Dated this ___ day of ________ of 1999
Mr./Ms._____________________________ _________________________________
Purchaser's Name Social Security or Tax ID#
Mr./Ms._____________________________ _________________________________
Name of Second Purchaser Date of Birth of First Purchaser
____________________________________ (______)_________________________
Street Address of First Purchaser Business Phone (Day)
____________________________________ (______)________________________
City State and Zip Code Home Phone
____________________________________
Signature of First Purchaser (Individual,
Custodian or Email address (if applicable)
Officer or Partner of Entity)
____________________________________________
Signature of Second Purchaser (if applicable)
NOTE: If a joint subscription, please indicate whether joint tenants with right
of survivorship (JTWROS) or tenants in common (TENCOM). Each joint tenant or
tenant in common must sign in the space provided. If purchaser is a trust,
partnership, corporation or other business association, the signing trustee,
partner or officer represents and warrants that he/she/it has full power and
authority to execute this Subscription Agreement on its behalf. If Purchaser is
a trust or partnership, please attach a copy of the trust instrument or
partnership agreement. If Purchaser is a corporation, please attach certified
corporate resolution authorizing signature.
A-3
No dealer, salesperson or other individual has been
authorized to give any information or to make any
representations not contained in this Prospectus in
connection with the Offering covered by this $100,000 - $1,000,000 of Shares of
Prospectus. If given or made, such information or Common Stock at $1.00 per Share
representation must not be relied upon as having
been authorized by the Company. This Prospectus Selling Shareholders May Also Be Selling
does not constitute as an offer to sell, or a 800,000 Additional Shares
solicitation of an offer to buy, the common stock
in any jurisdiction where, or to any person to
whom, it is unlawful to make such offer or
solicitation. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under
any circumstances, create an implication that there
has not been any change in the facts set forth in
this Prospectus or in the affairs of the Company SD PRODUCTS CORP.
since the date hereof.
TABLE OF CONTENTS
Descriptive Title Page
Prospectus Summary 3
Summary Financial Data 4
Risk Factors 4 PROSPECTUS
Related Party Transactions 8
Fiduciary Responsibility of
The Company's Management 10
Selling Shareholders 10
Application of Proceeds 13
Capitalization 14
Dilution 14
The Company 15 October ____, 2001
Management's Discussion and
Analysis of Financial Condition
and Results of Operations
24
Absence of Current Public Market
and Dividend Policy 30
Description of Capital Stock
30
Subscription Procedure 31
ERISA Considerations 31 Until November ___, 2001 (25 days after the date
Legal Matters 32 hereof), all dealers effecting transactions in the
Experts 32 registered securities, whether or not participating
Available Information 32 in this distribution, may be required to deliver a
Appendix I (Financial Statements) I-1 current copy of this Prospectus. This delivery
Exhibit A - Subscription Agreement A-1 requirement is in addition to the obligation of
dealers to deliver a Prospectus when acting as
underwriters and with respect to their unsold
allotments or subscriptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 5. Index to Exhibits
(a)(1) Financial Statements -- Included in Prospectus:
Independent Certified Public Accountants' Report.
Balance Sheet as of June 30, 2001
Statement of Changes in Shareholder's Equity for the Period October
20, 1997 (Date of Formation) through June 30, 2001.
Notes to Financial Statements.
(a)(2) Included Separately from Prospectus: Consent of Independent
Public Accountants.
Schedules are omitted for the reason that all required information is
contained in the financial statements included in the Prospectus.
(b) Exhibits:
*3.1.1 Certificate of Incorporation of Registrant.
*3.1.2 Certificate of Amendment to the Certificate of Incorporation.
*3.2 Bylaws of Registrant
*3.3 Form of Stock Certificate
3.4 Subscription Agreement and Power of Attorney (attached to the
Prospectus as Exhibit A).
*5.1 Opinion of Counsel as to the legality of the Shares.
24.1 Consent of Counsel (Duncan, Blum & Associates).
24.2 Consent of Auditors (Durland & Company, CPAs, P.A.).
*These exhibits were filed in the May 12, 2000 Registration Statement
and/or Pre-Effective Amendments filed subsequently. Since there have been no
changes, these exhibits are not filed in this Post-Effective Amendment No. 2.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-1 and has duly caused this
Post-Effective Amendment No. 1 to the Registration Statement to be signed on its
behalf by the Undersigned, thereunto duly authorized, in the City of Atlanta,
State of Georgia, on the 5th day of October, 2001.
SD Products Corp.
By: /s/ Mark A. Mintmire
------------------------------
Mark A. Mintmire, President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 2 to the Registration Statement has been signed
below by the following person in his respective capacity as officer and/or
director of the Registrant on the date indicated.
Signatures Title Date
---------- ----- ----
/s/Mark A. Mintmire
-------------------------- President, CEO October 5,2001
Mark A. Mintmire and Director
/s/ Mark A. Mintmire
--------------------------- Treasurer, Chief Financial October 5,2001
Mark A. Mintmire Officer and Secretary