UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended September 30, 2004
Commission File Number 333-69414
SOURCE DIRECT HOLDINGS, INC.
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(Exact name of registrant as specified in charter)
Nevada 98-0191489
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4323 Commerce Circle, Idaho Falls, Idaho 83401
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (877) 529-4114
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of November 17, 2004, the Company
had outstanding 69,031,400 shares of its common stock, no par value.
TABLE OF CONTENTS
ITEM NUMBER AND CAPTION PAGE
PART I
ITEM 1. FINANCIAL STATEMENTS 3
ITEM 2. MANAGEMENT'S DISCUSSION AND PLAN OF OPERATIONS 7
ITEM 3. CONTROLS AND PROCEDURES 11
PART II
ITEM 2. CHANGES IN SECURITIES 13
ITEM 6. EXHIBITS 14
2
PART I
ITEM 1. FINANCIAL STATEMENTS
SOURCE DIRECT HOLDINGS, INC.
[A Development Stage Company]
Balance Sheet
September 30, 2004
ASSETS
Unaudited
September 30,
2004
-------------
Current Assets:
Cash $ 38,000
Trade Receivables 38,887
Inventory 167,440
Employee Advance 5,437
-------------
Total Current Assets 249,764
Property and Equipment :
Property and Equipment 64,598
Less: Accumulated Depreciation (6,035)
-------------
Net Property and Equipment 58,563
Other Assets:
Formula, Trademark, Trade Name 115,000
Accumulated Amortization (6,389)
-------------
Net Other Assets 108,611
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TOTAL ASSETS $ 416,938
=============
LIABILITIES & STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts Payable $ 28,098
Equipment Loans (current) 7,000
Payroll Liabilities 18,044
Taxes Payable 60
-------------
Total Current Liabilities 53,202
Total Liabilities 53,202
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Stockholders' Deficit
Common Stock -- $.001 par value; 200,000,000
shares authorized; 67,781,700 issued and
outstanding at September 30, 2004 67,781
Additional Paid-in Capital 1,020,719
Accumulated Deficit during the Development Stage (724,764)
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Total Stockholders' Deficit 363,736
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TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT $ 416,938
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3
SOURCE DIRECT HOLDINGS, INC.
[A Development Stage Company]
Statements of Operations
September 30, 2004
For the three For the three Inception
Months Ended Months Ended Through
September 30, September 30, September 30,
2004 2003 2004
------------- ------------- -------------
Revenues $ 33,498 $ -- $ 55,232
Cost of Goods Sold 18,119 -- 29,319
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Gross Profit 15,379 -- 25,913
General and Administrative Expense 178,248 168,828 750,587
------------- ------------- -------------
Operating Loss (162,869) (168,828) (724,674)
Interest income -- -- --
Interest expense -- -- --
Gain/(loss) on asset sales -- -- --
Income taxes -- -- (90)
------------- ------------- -------------
Net Loss before extraordinary (162,869) (168,828) (724,764)
Extraordinary gain, net -- -- --
------------- ------------- -------------
Net Loss $ (162,869) $ (168,828) $ (724,764)
============= ============= =============
Net Loss per share $ (0.01) $ (0.01) $ (0.01)
Weighted Average Number of Shares
Outstanding - Basic and Diluted 64,759,661 12,151,400 41,649,672
4
SOURCE DIRECT HOLDINGS, INC.
[A Development Stage Company]
Condensed Statements of Cash Flows
(Unaudited)
For the Three For the Three Inception
Months Ended Months Ended Through
September 30, September 30, September 30,
2004 2003 2004
------------- ------------- -------------
Cash Flow Used for Operating Activities
Net Loss $ (162,869) $ (168,828) $ (724,764)
Adjustments to Reconcile net losst to
to net cash used for operating activites:
Depreciation 2,501 -- 10,507
Amortization Expense 1,917 -- 1,917
Increase in Trade Receivables (18,642) -- (38,888)
Increase in Inventory (94,594) (12,702) (167,441)
Increase in employee advance (5,437) -- (5,437)
Increase in accounts payable 28,098 -- 28,098
Decrease in equipment loans (8,602) -- 6,999
Increase/(Decrease) in payroll Liabilities (5,197) -- 18,045
Increase in income taxes payable -- -- 60
------------- ------------- -------------
Net Cash Flows Used for Operating Activities (262,825) (181,530) (870,904)
Cash Flows used for Investing Activities
Purchase equipment (13,567) (250) (64,596)
Acquisition of Intangible Assets -- -- (115,000)
------------- ------------- -------------
Net Cash Flows Used for Investing Activities (13,567) (250) (179,596)
Cash Flows used for Financing Activities
Decrease in Shareholder Loans (36,563) (1,318) --
Decrease in Note Payable -- (20,000) --
Issued stock for cash 350,000 202,000 1,088,500
------------- ------------- -------------
Net Cash Flows Used for Financing Activities 313,437 180,682 1,088,500
Net Increase / (Decrease) in Cash 37,045 (1,097) 38,000
Beginning Cash Balance 955 83 --
Ending Cash Balance $ 38,000 $ (1,015) $ 38,000
============= ============= =============
5
SOURCE DIRECT HOLDINGS, INC.
Notes to Consolidated Financial Statements
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of Source Direct
Holdings, Inc. ("Source Direct" or the "Company") have been prepared in
accordance with accounting principles generally accepted in the United States of
America and the rules of the Securities and Exchange Commission ("SEC"), and
should be read in conjunction with the audited financial statements and notes
thereto contained in Source Direct's Annual Report for the year ended June 30,
2004, filed with the SEC on Form 10-KSB. In the opinion of management, all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of financial position and the results of operations for the interim
periods presented have been reflected herein. The results of operations for
interim periods are not necessarily indicative of the results to be expected for
the full year. Notes to the financial statements which would substantially
duplicate the disclosure contained in the audited financial statements for June
30, 2004 as reported in the form 10-KSB have been omitted.
NOTE 2 - COMMON STOCK
During the quarter ended September 30, 2004, the Company issued the following
shares of its common stock:
In August 2004 the Company sold 500,000 shares of common stock for a purchase
price of $50,000. The sell included warrants to purchase up to an additional
500,000 shares of common stock at an exercise price of $0.125 per share.
In July 2004 the Company sold 1,500,000 shares of common stock for gross
proceeds of $150,000. The sell included warrants to purchase up to 1,500,000
additional shares of common stock at an exercise price of $0.125 per share.
In August 2004, the Company sold 1,500,000 shares and warrants to purchase
another 1,500,000 shares, at an exercise price of $0.125 per share, to two
accredited investors for a purchase price of $150,000.
In August 2004, the Company issued an aggregate of 5,000,000 shares to outside
consultants in exchange for consulting services provided to the Company.
Additionally, the Company issued warrants to purchase up to an additional
4,000,000 shares to the consultants.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward Looking Statements
This Quarterly Report contains forward-looking statements about our
business, financial condition and prospects that reflect our assumptions and
beliefs based on information currently available. Additionally, from time to
time, we or our representatives have made or may make forward-looking
statements, orally or in writing. Such forward-looking statements may be
included in, but not limited to, press releases, oral statements made with the
approval of an authorized executive officer or in various filings made by us
with the Securities and Exchange Commission. Words or phrases including "will
likely result," "are expected to," "will continue," "is anticipated,"
"estimate," "project or projected," or similar expressions are intended to
identify "forward-looking statements." Such statements are qualified in their
entirety by reference to and are accompanied by the discussion below of certain
important factors that could cause actual results to differ materially from such
forward-looking statements.
Management is currently unaware of any trends or conditions other than
those mentioned in this management's discussion and analysis that could have a
material adverse effect on the Company's consolidated financial position, future
results of operations, or liquidity. However, investors should also be aware of
factors that could have a negative impact on the Company's prospects and the
consistency of progress in the areas of revenue generation, liquidity, and
generation of capital resources. These include: (i) variations in revenue, (ii)
possible inability to attract investors for its equity securities or otherwise
raise adequate funds from any source should the Company seek to do so, (iii)
increased governmental regulation, (iv) increased competition, (v) unfavorable
outcomes to litigation involving the Company or to which the Company may become
a party in the future, (vi) a very competitive and rapidly changing operating
environment, (vii) changes in business strategy, (viii) market acceptance of our
products, and (ix) a failure to successfully market our products.
The risks identified here are not all inclusive. New risk factors
emerge from time to time, and it is not possible for management to predict all
of such risk factors, nor can it assess the impact of all such risk factors on
the Company's business or the extent to which any factor or combination of
factors may cause actual results to differ materially from those contained in
any forward-looking statements. Accordingly, forward-looking statements should
not be relied upon as a prediction of actual results.
All forward-looking statements are intended to be covered by the safe
harbor created by Section 21E of the Securities Exchange Act of 1934.
BUSINESS
Source Direct Holdings, Inc., is a development-stage company, which has
acquired the formulas for two cleaning products. These products are Simply
Wow(R) and Stain Pen(TM). In addition to these two products we have developed a
new product called Prompt(TM) that was introduced in August 2004.
We own the trademarks to all three of our products but have not made
application for any patents. Management believes it would be difficult, if not
impossible, to duplicate the formulas for the Company's products. We maintain
confidentiality agreements with all parties who have access to the formulas.
Nevertheless, there is no assurance that someone could not duplicate the
formulas and directly compete with the Company. The cost of litigating the issue
of illegal competition may preclude us from being able to protect the secrecy of
the formulas.
7
PRODUCTS
Simply Wow(R)
Simply Wow(R) is an all-purpose cleaner that safely and effectively
cleans any washable surface. Simply Wow(R) is developed with nonionic
surfactants that contain penetrating and suspending agents that dissolve the
toughest grease, protein, dirt, and oil stains. The product is a water-based,
multipurpose, biodegradable, nontoxic degreaser with a pleasant lemon fragrance
that effectively replaces flammable or combustible solvent cleaners. It contains
no hazardous solvents or acidic-type chemicals, and its formulation safely
accomplishes the cleaning that previously required solvent or acid cleaners,
which exposed the user and the environment to the inherent hazards of such
chemicals.
Stain Pen(TM)
Stain Pen(TM) is an on-the-spot stain remover. The convenient size
makes it easy to keep at home, in the car, or at the office. This product has a
proprietary formula that safely removes food stains, oil paint (wet or dry),
makeup, wine, blood, grass stains, grease, coffee and tea stains, and copy
machine stains with no harmful fumes or large quantities of liquid to spill.
Stain Pen(TM) works simply by applying a small amount of stain pen solution to
the stain and applying a damp cloth.
Prompt(TM)
Prompt(TM) is a multi-purpose, low foaming, non-toxic, biodegradable
industrial strength cleaner for multiple commercial and industrial cleaning
applications. It is non-hazardous, user friendly, VOC (Volatile Organic
Compounds) compliant and is highly effective in many commercial cleaning
applications. Prompt's proprietary formulation encapsulates dirt and oil in many
industrial applications that include: floors, walls, metal fabricating
equipment, smoke and fire damage as well as equipment restoration.
Future Products
We have also completed development of formulas for other proprietary
cleaning products, which we intend to introduce to the market in the future
under private label. These products include an automotive vinyl protector and
cleaner, an all-purpose automotive wheel cleaner, an automotive engine cleaner,
and a liquid laundry product.
We are subject to risks that existing or new manufacturers could
develop new or better products than the ones offered by us. While we devote a
portion of our funds to on-going research and development, the amount of our
funding in this area is extremely limited when compared to the manufacturers of
products which compete with ours. We believe that most other companies in the
household cleaning industry are significantly better funded than are we and
devote significantly more funds to developing new, or improving existing,
products which compete with ours.
PRODUCT PRODUCTION
We do not currently produce our products in-house except for Stain
Pen(TM), which is produced in our facility. We believe that the production
facility, which has agreed to manufacture our other products, would be adequate
to produce our products in sufficient quantities to meet any anticipated future
needs. We have not secured any form of financing for significant production of
our products. We will attempt to secure funding either from private sources or
through a bank loan or factoring arrangement. There is no assurance that we will
be able to obtain any of these sources of financing, or that if we could obtain
it that the financing terms would be favorable to the company.
PRODUCT DISTRIBUTION
The most critical phase of our operations is the marketing of our
products. We market our products using both current management personnel and
outside independent marketing companies. We currently have outside marketing
arrangements, which we consider significant. They are with Marden Distribution,
Inc., Integritas, Inc., Media Corp Worldwide, Fusion Packaging Solutions, Inc.,
Impact Sales, Inc., and Morgan & Sampson SCA.
8
The Marden Agreement grants Marden Distribution, Inc. exclusive right
to distribute our products to Wal-Mart(R), Sam's Club(R), and ACE Hardware(R).
Marden is an approved vendor with these retail organizations. We believe that
the ability of Marden to present our products to these national chains will
reduce the cost to the company.
Our agreement with Marden is exclusive in the sense that no one else
can market Simply Wow(R), Stain Pen(TM), and derivatives of these products such
as our engine cleaner, upholstery cleaner, and wheel cleaner, to Wal-Mart(R),
Sam's Club(R), and ACE Hardware(R). We have agreed to pay Marden a flat
percentage fee based on the gross "sell-in" price to each retailer based on the
wholesale cost of the goods sold to the retailer plus the flat percentage
amount. Marden has agreed to pay all of the costs and expenses associated with
the marketing and distribution of the products to the retailers. We have agreed
to maintain product liability insurance, which we currently have in place, and
to hold Marden harmless from any liability associated with the use of our
products.
The Integritas agreement provides that Integritas, Inc. will provide
product distribution, customer relations and investor relations services.
The Media Corp agreement grants Media Corp Worldwide exclusive direct
response "As Seen on TV" commercial marketing. Media Corp Worldwide will create
infomercial advertising Source Direct's proprietary cleaning products, and will
further market our proprietary product lines Simply Wow(R) and Stain Pen(TM) on
television only.
In September 2004, we signed 2 additional agreements with Media Corp
Worldwide. The first, designated as the "QVC Agreement," and extends the
marketing relationship between the Company and Media Corp. The QVC Agreement
grants to Media Corp the exclusive right to sell the Company's products to the
QVC Home Shopping Network. The second, designated the Mail Order Catalog
Agreement (the "Catalog Agreement") granted to Media Corp the exclusive right to
sell the Products to mail order catalog companies within the United States.
The Fusion Packaging Solutions agreement is an exclusive mass
merchandising and co-branding distribution agreement. Fusion Packaging
Solutions, Inc., has a proprietary solution called Pig Spit(R). Pig Spit(R) was
introduced at the Sturgis Motorcycle Rally in 1994 and has won the respect of
motorcycle enthusiast around the world. Pig Spit(R) makes black wrinkle and
powder coat finishes look like new. It wicks into hard-to-reach areas like motor
fins and transmissions and eliminates wax stains. Pig Spit(R) is available at
most Harley Davidson(R) motorcycle shops in the U.S. and will now be made
available exclusively for distribution to mass merchandisers through Source
Direct Holdings, Inc., and marketed under the co-branded name of Simply Wow(R)
Pig Spit(R).
The Impact Sales agreement grants Impact Sales, Inc., the exclusive
distribution rights for all Source Direct proprietary cleaning products to more
than 6,800 grocery retailers in the United States that include: Albertsons,
Inc.(R), Kroger Co.(R) and Safeway, Inc.(R). Impact Sales, Inc has been
servicing large national retail grocery accounts for more than 20 years and
employs more 200 sales associates from their 13 offices in California, Colorado,
Florida, Idaho, Illinois, Oregon, Utah, and Washington.
The Morgan & Sampson agreement grants Morgan & Sampson SCA the
exclusive marketing and distribution rights to Source Direct's proprietary Stain
Pen(R) Twin Pack to more than 5,000 grocery retailers in the Western United
States and Hawaii.
In addition to the above agreements, we also utilize internal marketing
efforts to advertise and distribute our products. We recently became a title
sponsor on a NASCAR sponsorship agreement with Erik Darnell and Darnell Motor
Sports for the 2004 and 2005 NASCAR racing seasons.
DESCRIPTION OF PROPERTY
The offices of Source Direct recently relocated to a new production and
office facility. This facility is located at 4323 Commerce Circle, Idaho Falls,
Idaho. The new location has over 14,000 square feet which includes 3,780 square
feet of office space and 10,530 square feet of warehouse space. We believe that
this facility provides an excellent opportunity for expansion. Our intention is
to produce, package and house our inventory for all of the Stain Pen(TM)
products in this facility.
9
Risk Factors
There are various risks involved in any investment in the Company,
including those described below. Any shareholder or potential investor in the
Company should consider carefully these risk factors.
o The financial statements of the Company include a "Going Concern"
Limitation.
o The Company is a development stage company and may require additional
funding.
o The Company has not applied for a patent on its products.
o The loss of the services of current management would have a material
negative impact on the operations of the Company.
o The Company will be in competition with a number of other companies,
which may be better financed than the Company.
o There is no active public market for the common stock of the Company.
o The Company's shares are designated as penny stock.
o The market for the Company's shares is volatile.
o Future issuances of stock could adversely affect holders of the
Company's common stock.
Financial Condition and Changes in Financial Condition
We generated revenues from sales of our cleaning products of $33,498
during the quarter ended September 30, 2004. A majority of these revenues were
generated from purchase orders from various Albertsons(R) stores. We anticipate
receiving additional orders from this source as well as from the other
distribution agreements that are in place, but we can give no assurance that
such sales will occur. Our cost of goods sold for these sales totaled $18,120,
which resulted in a gross profit margin of $15,379 or 45.9% of sales.
Operating expenses for the current quarter ended September 30, 2004
totaled $162,869. Compensation related expenses were $91,349. Travel expenses
incurred for product promotion and general business activities totaled $10,146.
We incurred $27,135 in legal and accounting related expenses primarily as a
result of the various marketing agreement preparations. Research and development
expenses totaled $6,001 for the quarter. The remaining expenses were incurred
for general business purposes. We believe we will continue to incur substantial
expenses for the near term as we increase our marketing efforts to introduce our
products to the market.
Operating expenses for the prior year quarter ended September 30, 2003,
totaled $168,828. All of the expenses relate to the business of the prior
operations before the October 2003 merger, and we do not believe they have any
significance on our current business operations or our future plans.
Liquidity and Capital Resources:
Since inception to September 30, 2004, we have funded our operations
from the sale of securities and loans from shareholders.
During the quarter ended September 30, 2004 we sold 3,500,000 shares of
our common stock for total proceeds of $350,000. We have utilized these funds
for our various marketing and promotion efforts and general business activities.
At September 30, 2004, we had cash balances of $38,000, and net working
capital of $195,562. In addition, we had current account receivables of $38,887
which were generated from the various purchase orders for our products.
Inventory of cleaning products amounted to $167,440. Our cash requirements for
the next twelve months will depend significantly on the number of purchase
orders we receive for our products and our ability to secure financing for these
orders. We anticipate that we will be able to secure either a business loan or a
factoring arrangement for any purchase order that exceeds our current ability to
fund internally. However, we have no current agreements or arrangements which
would provide such funding. We have also not negotiated the terms of such
funding and cannot provide any assurance that the terms will be favorable for
the company. We are also unable to predict the number of orders for our
products, or to determine if we receive additional orders, the amount of
operating profit such orders would generate. Therefore, we are unable to predict
our future cash requirements until we secure additional purchase orders.
10
We continue to perform research and development to improve our existing
cleaning products and to provide new cleaning products. We anticipate that we
will continue to spend funds for research and development during the next twelve
months, but we are unable to predict or anticipate the total amount of these
future research and development expenses. In many instances, new products are
developed as a result of interest expressed by a potential retail client in
products similar or ancillary to the ones initially presented. This may occur
especially in our private label products. Many retail outlets require a set of
related private label cleaning products before ordering any cleaning products.
Such was the case in our automotive cleaning products. Our wheel cleaning and
tire cleaning products were developed as a result of responses from potential
clients for our automotive vinyl-cleaning product, who required a set of
automotive cleaning products rather than the single vinyl-cleaning product.
We believe we will need additional funding. We are assessing the
possibilities for financing our business plan and trying to determine what
sources of financing we might explore to raise the needed capital. We have no
outside sources for funding our business plan at this time other than the sales
of our common stock. We will need additional capital for any current or future
expansion of our operations we might undertake.
Plan of Operation
The operating subsidiary has embarked on a two-fold growth program,
which includes the following strategies and plans:
Our plan of operation includes the implementation of a multi-pronged
marketing strategy to distributors, retail stores, and cleaning professionals,
and direct to consumers to position the Company to become a major supplier in
the U.S. all-purpose cleaning solution market. Management's business model is to
position the Company as an authority in this area, based on (i) its potential as
a market innovator and future leader, (ii) careful attention to product quality,
(iii) the Company's tested and proven products, (iv) its ethical business
practices, and (v) the confidence of a large number of loyal consumers.
We also intend to seek acquisitions or co-branding arrangements with
small, under-capitalized suppliers of cleaning products whose products would
compliment or extend our product line, and which could be acquired readily to
support the corporate objectives. We intend to acquire only companies whose
market presence, product mix, and profitability meet certain acquisition
criteria, and to incorporate their products into the existing product line or
into lines of supporting or related products.
In order to achieve the planned level of growth in both sales and
profitability, we anticipate the need for a substantial amount of external
capital, either from the sale of securities or incurring of debt, to permit us
to execute the next stages of our business plan. We have no firm commitments or
arrangements for this funding and there is no assurance that we will be able to
secure the funding necessary to implement the business plan.
New Accounting Pronouncements
Source Direct does not expect the adoption of recently issued
accounting pronouncements to have a significant impact on Source Direct's
results of operations, financial position, or cash flow.
ITEM 3. CONROLS AND PROCEDURES
Disclosure controls and procedures are controls and other procedures
that are designed to ensure that information required to be disclosed in company
reports filed or submitted under the Securities Exchange Act of 1934 (the
"Exchange Act") is recorded, processed, summarized and reported, within the time
periods specified in the Securities and Exchange Commission's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in
company reports filed under the Exchange Act is accumulated and communicated to
management, including the Company's Chief Executive Officer and Chief Financial
Officer (the "Certifying Officers"), as appropriate to allow timely decisions
regarding required disclosure.
11
As required by Rules 13a-15 and 15d-15 under the Exchange Act, the
Certifying Officers carried out an evaluation of the effectiveness of the design
and operation of the Company's disclosure controls and procedures as of
September 30, 2004. Their evaluation was carried out with the participation of
other members of the Company's management. Based upon their evaluation, the
Certifying Officers concluded that the Company's disclosure controls and
procedures were effective.
The Company's internal control over financial reporting is a process
designed by, or under the supervision of, the Certifying Officers and effected
by the Company's Board of Directors, management and other personnel, to provide
reasonable assurance regarding the reliability of the Company's financial
reporting and the preparation of the Company's financial statements for external
purposes in accordance with generally accepted accounting principles. Internal
control over financial reporting includes policies and procedures that pertain
to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the Company's assets; provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of the Company's financial statements in accordance with generally
accepted accounting principles, and that the Company's receipts and expenditures
are being made only in accordance with the authorization of the Company's Board
of Directors and management; and provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition
of the Company's assets that could have a material effect on its financial
statements. There has been no change in the Company's internal control over
financial reporting that occurred in the quarter ended September 30, 2004, that
has materially affected, or is reasonably likely to affect, the Company's
internal control over financial reporting.
12
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
In our Annual Report on Form 10-KSB for the year ended June 30, 2004,
we erroneously disclosed the March 2004 sale of 1,600,000 shares of our common
stock to Mark Miller in two separate paragraphs. Mr. Miller purchased only
1,600,000 shares.
In August 2004, Mr. Miller purchased an additional 500,000 shares of
our common stock for a purchase price of $50,000, and received warrants to
purchase up to an additional 500,000 shares of our common stock at an exercise
price of $0.125 per share. These securities were issued without registration
under the Securities Act by reason of the exemption from registration afforded
by the provisions of Section 4 (2) thereof, and Rule 506 promulgated thereunder,
as a transaction by an issuer not involving a public offering.
Additionally, as we previously disclosed in our Annual Report for the
year ended June 30, 2004, in July 2004, we issued 1,500,000 shares of our common
stock to NCP Enterprises, for gross proceeds of $150,000. NCP Enterprises also
received warrants to purchase up to 1,500,000 additional shares of our common
stock at an exercise price of $0.125 per share. These securities were issued
without registration under the Securities Act by reason of the exemption from
registration afforded by the provisions of Section 4 (2) thereof, and Rule 506
promulgated thereunder, as a transaction by an issuer not involving a public
offering.
In August 2004, we also issued an aggregate of 1,500,000 shares and
warrants to purchase another 1,500,000 shares, at an exercise price of $0.125
per share, to two accredited investors for a purchase price of $150,000. These
securities were issued without registration under the Securities Act by reason
of the exemption from registration afforded by the provisions of Section 4 (2)
thereof, and Rule 506 promulgated thereunder, as a transaction by an issuer not
involving a public offering.
Further, as we disclosed in our Annual Report for the year ended June
30, 2004, in August 2004, we issued an aggregate of 5,000,000 shares to six
outside consultants in exchange for consulting services provided to the Company.
Additionally, we issued warrants to purchase up to an additional 4,000,000
shares to four of the consultants. The shares and warrants were issued without
registration under the Securities Act by reason of the exemption from
registration afforded by the provisions of Section 4 (2) thereof, and Rule 504
promulgated thereunder, as a transaction by an issuer not involving a public
offering.
We have utilized the funds received from the stock sales for our
various marketing and promotion efforts and general business activities.
13
ITEM 6. EXHIBITS
3.1 Certificate of Amendment to Certificate of Incorporation (4)
3.2 Articles of Merger, without attachment (2)
10.1 Agreement and Plan of Merger Dated September 29, 2003, without
Attachments (2)
10.2 Distribution Agreement dated March 17, 2004, with Marden
Distribution, Inc. (3)
10.3 Consulting Agreement dated July 2, 2003 with Ageless Enterprises
LLC (4)
10.4 Agreement between Source Direct Holdings, Inc., and Integritas,
Inc., dated as of July 25, 2004. (4)
10.5 Television Marketing Agreement between Source Direct Holdings,
Inc., and MediaCorp Worldwide, LLC, dated as of September 8,
2004. (4)
10.6 QVC Agreement between Source Direct Holdings, Inc., and
MediaCorp Worldwide, LLC, dated as of September 17, 2004. (5)
10.7 Mail Order Catalog Agreement between Source Direct Holdings,
Inc., and MediaCorp Worldwide, LLC, dated as of September 17,
2004. (5)
31.1 Certification of Chief Executive Officer, pursuant to Rule
13a-14(a) of the Exchange Act, as enacted by Section 302 of the
Sarbanes-Oxley Act of 2002. (1)
31.2 Certification of Chief Financial Officer, pursuant to Rule
13a-14(a) of the Exchange Act, as enacted by Section 302 of the
Sarbanes-Oxley Act of 2002. (1)
32.1 Certification of Chief Executive Officer and Chief Financial
Officer, pursuant to 18 United States Code Section 1350, as
enacted by Section 906 of the Sarbanes-Oxley Act of 2002. (1)
(1) Filed herewith
(2) Incorporated by reference from Form 8-K (dated October 16, 2003)
(3) Incorporated by reference from Form 10-QSB (dated May 14, 2004)
(4) Incorporated by reference from Form 10-KSB (filed September 9,
2004)
(5) Incorporated by reference from Form 8-5 (filed September 30,
2004)
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Signatures
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
(Registrant) Source Direct Holdings, Inc.
Date: November 18, 2004 By: /s/ Deren Z. Smith
----------------------------
Deren Z. Smith, President
(Principal Executive Officer)
Date: November 18, 2004 By: /s/ Kevin Arave
-----------------------------
Kevin Arave, Treasurer
(Principal Financial Officer
and Chief Accounting Officer)
15