UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended ________________________________
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
November 1, 2002 to December 31, 2002
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Commission File Number 0-30653
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Secured Diversified Investment, Ltd.
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(Name of small business issuer in its chapter)
Nevada 87-0375228
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(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
5030 Campus Drive, Newport Beach, California 92660
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (949) 851-1069
-----------------------
Securities registered pursuant to section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
$.001 par value, common voting shares
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(Title of class)
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
report(s), and (2) has been subject to such filing requirements for the
past 90 days. (1) Yes [X ] No [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this form
10-KSB or any amendment to this Form 10-KSB. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act):
Yes [ ] No [X ]
The aggregate market value of the issuer's voting stock held as of March
31, 2003, by non-affiliates of the issuer was approximately $10,486.
As of March 31, 2003, the issuer had 5,979,540 shares of its $.001 par
value common stock outstanding.
Transitional Small Business Disclosure Format. Yes [ ] No [X]
Documents incorporated by reference: None
___________________________________________________________________________
TABLE OF CONTENTS
___________________________________________________________________________
PART I
ITEM 1 DESCRIPTION OF BUSINESS. . . . . . . . . . . . . . . . . . . . .3
ITEM 2 DESCRIPTION OF PROPERTY. . . . . . . . . . . . . . . . . . . . .9
ITEM 3 LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . 10
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS. . . . . 10
PART II
ITEM 5 MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS. . . . . . . . . . . . . . . . . . . . . . 10
ITEM 6 PLAN OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . 11
ITEM 7 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 12
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE. . . . . . . . . . . . . . 22
PART III
ITEM 9 DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS,
AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a)
OF THE EXCHANGE ACT . . . . . . . . . . . . . . . . . . . . . 22
ITEM 10 EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . 25
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT. . . . . . . . . . . . . . . . . . . . . 26
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . 28
PART IV
ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . 29
ITEM 14. CONTROLS AND PROCEDURES. . . . . . . . . . . . . . . . . . . . 29
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
This Form 10-KSB contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. For this
purpose any statements contained in this Form 10-KSB that are not
statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, words such as "may," "will,"
"expect," "believe," "anticipate," "estimate" or "continue" or comparable
terminology is intended to identify forward-looking statements. These
statements by their nature involve substantial risks and uncertainties, and
actual results may differ materially depending on a variety of factors,
many of which are not within the Company's control. These factors include
but are not limited to economic conditions generally and in the industries
in which the Company may participate; competition within the Company's
chosen industry, including competition from much larger competitors;
technological advances and failure by the Company to successfully develop
business relationships.
Item 1. Description of Business
Book Corporation of America ("Book") was incorporated under the laws
of the State of Utah on November 22, 1978 for the purpose of (1) engaging
primarily in the specific business of acquiring, developing, owning,
selling, leasing, licensing, and otherwise dealing with literary properties
and materials, copyrights, licenses, and other tangible and intangible
properties in connection with artistic ideas and endeavors, and to carry on
a negotiation for, production of, purchase of, sale, licensing,
distribution, advertising, and promotion of all rights, privileges, and
properties in the entertainment industry, including, but not limited to,
all types of theatrical motion pictures, theatrical stage plays, television
films, programs and commercials, radio recordings, books, and music
publications and music recordings and (2) acting as principal, agent, joint
venturer, partner, or in any other capacity which may be authorized or
approved by the Board of Directors of Book. Book had no "parents" or
"predecessors," as those terms are defined under the federal securities
laws.
In 1979, Book conducted an intrastate public offering of its common
stock. On October 10, 1988, the common stock of the Book was reverse split
50 to 1, and the par value was changed from $0.01 to $.005 per share. Also
in October 1988, Book acquired Sun Television Entertainment, Inc., bringing
assets of 36 motion picture screenplays (subsequently valued at
$-0-) and motion picture production equipment was transferred to Book by
Visto International, Inc.
Book filed a Form 10-SB Registration Statement with the United States
Securities and Exchange Commission ("SEC") on May 18, 2000, which
registration became effective on July 18, 2000.
In March 2002, control of the Company was acquired by REIT
Consultants, LLC. ("REIT"), when it acquired 2,000,000 shares of Company
common stock from the then contolling shareholders. REIT is a manager
managed limited liability company. Ronald Robinson is the manager of REIT.
REIT has five members all of which are trusts. The trustees of the
trusts, which are members of REIT, are as follows: William S. Biddle is
the trustee of the William S. Biddle Family Trust, which owns a 16.7%
interest in REIT; Sumyie Onodera-Leonard is the trustee of the Sumyie N.
Onodera Familty Trust, which owns a 25% interest in REIT; Robert J.
Leonard is the trustee of the Robert J. Leonard Family Trust, which owns a
25% interest in REIT Robert J. Leonard is the spouse of Sumyie Onodera-
Leonard; Clifford L. Strand is the trustee of the C.L. Strand Trust, which
owns a 16.7% interest in the LLC; and Myra and Wayne Sutterfield are the
trustees of the Wayne Sutterfield Family Trust which owns a 16.6% interest
in REIT.
3
At that time, REIT acquired the controlling interest in the Company,
William Messerli, Philip Yordan and Daniel Yordan resigned as officers and
directors of the Company. Ronald Robinson became the sole officer and
director of the Company.
On July 23, 2002, Book held a special shareholder meeting. At the
meeting, the shareholders approved a proposal to redomicile Book from Utah
to Nevada and to change its name. In accordance with Nevada corporate law,
a change of domicile is affected by merging the foreign corporation with
and into a Nevada corporation. For the sole purpose of changing domicile
from Utah to Nevada, Book formed Secured Diversified Investment, Ltd., a
Nevada corporation (the "Company"). On August 9, 2002, a merger between
Secured Diversified Investment, Ltd., and Book was completed. Upon
completion of merger Secured Diversified Investment, Ltd., became the
surviving corporation and Book was dissolved.
On September 18, 2002, the OTCBB symbol for the Company's common stock
was changed from BCAM to SCDI to reflect the name change.
In addition to approving the change of domicile, the shareholders also
approved amendments to the Company's Articles of Incorporation to change
the par value of the Company's Common Stock from $.005 to $.001 and to
authorize 50,000,000 shares of Preferred Stock, par value $.01.
In September 2002, Ronald Robinson resigned as the sole officer and
director of the Company and the current officers and directors were
appointed to their respective positions.
Since its inception the Company has sustained continued losses and
currently has liabilities in excess of current assets. In addition,
through the end of the transition period, the Company had no revenue
producing activities and was dependent upon its officers and directors to
provide for its cash requirements. These factors indicate considerable
doubt as to the Company's ability to continue as a going concern. To date
the Company has been unsuccessful in its efforts to develop its
entertainment business.
Because of the Company's failure to develop its entertainment
business, management of the Company decided to pursue the acquisition of
ownership interests in a portfolio of real estate properties that are
geographically and functionally diverse. The Company believes that by
acquiring interests in properties that are geographically and functionally
diverse its portfolio will be more stable and less susceptible to
devaluation resulting from regional economic downturns and market shifts.
The Company is currently focusing on acquiring properties in markets with
strong regional economies and where a sufficient number of properties are
available to help insure liquidity.
To this end, on March 31, 2003, the Company consummated an Asset
Purchase Agreement with Seashore Diversified Investment Company
("Seashore"), a Maryland corporation, whereby the Company acquired certain
real estate holdings from Seashore in exchange for restricted shares of its
Preferred and Common Stock. Seashore is a real estate investment trust and
is in the business of acquiring, selling and managing real estate holdings.
4
Specifically, the Company acquired two properties, interests in two
limited liability companies, and a general partnership interest in a
limited partnership in exchange for 3,630,000 shares of restricted common
stock of the Company and 7,370,000 shares of Series A Convertible Preferred
Stock of the Company. The Company's Series A Convertible Preferred shares
have the same voting rights as the Common Stock. The primary assets of the
limited liability companies and the limited partnership are real estate
holdings. Following is a brief description of the interests the Company
has acquired.
Katella Center, Orange, California
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The Company has acquired a 100% ownership interest in a strip mall
which consists of six retail rental units totaling approximately 9,500
square feet located on Katella Avenue in Orange, California. Currently,
five of the six units are rented. The Company is currently trying to rent
the final unit. The rental units are of varying sizes. One tenant, a
clothing manufacturer, currently occupies 45% of the strip mall. The
rental rates for the individual units range from $1.04 to $1.41 per square
foot. The strip mall is currently generating monthly net cash flow of
approximately $3,535.
The strip mall is located on approximately 35,800 square feet of
leased ground owned by a non-affiliated third party. The lease has a 52-
year term that expires in March 2017. The ground lease payment is
currently $3,000 per month. Commencing June 1, 2007, the annual ground
lease payment shall revert to 7% of the fair market value of the land.
There is a first trust deed in the amount of $350,000, which is due and
payable on August 15, 2003. The current monthly payment, which covers only
interest, is $3,500. The interest rate is 12% per annum. Late charges on
late payments in the amount of $1,080 are also due. There is also a second
trust deed in the amount of approximately $15,500. The monthly payment is
$155 per month. This payment covers only the interest on the loan. The
outstanding balance is approximately $4,800. This note has matured. The
lender has verbally agreed to extend the note and no late fees are being
charged at this time. The Company is currently seeking to refinance both
the first and second trust deeds.
As of January 31, 2003, delinquent real property taxes in the amount
of approximately $11,800 are owed. There are also additional penalties of
approximately $2,100 due and owing. Penalties accrue at a rate of $104 per
month.
The fair market value of this strip mall is estimated to be
approximately $600,000.
Shopping Mall, Dickinson, North Dakota
--------------------------------------
The Company has acquired a 100% ownership interest in the nearly
90,000 square foot enclosed T-Rex Mall Plaza in Dickinson, North Dakota.
The T-Rex Mall is approximately 75% occupied at this time. The Mall was
appraised at $3,200,000 on April 24, 2002.
5
The 6.66 acres of ground on which the Mall is located was recently
sold to a third party for $1,645,000 with a leaseback of the ground from
the buyer. For the first year of the ground lease, the monthly lease
payment will be $13,708. Beginning the second year, the ground lease
payment will be adjusted annually in step with the consumer pricing index,
but such increases shall not exceed 3% nor be less than 2% in any given
year. The term of the ground lease will be 50 years. Between the 24th
month and the 48th month of the lease, the Company will have the option to
repurchase the ground provided the lease is still in effect and the lessor
is not in default. The price to buy back the ground will be $1,745,000.
Following the 48th month, the price to repurchase the ground lease will be
$1,845,000 or ten times the next year's lease amount from the date of the
exercise of the option, whichever is greater. Clifford L. Strand, a
Company officer and director was paid a commission of $25,000 in connection
with the sale of the 6.66 acres underlying the Mall and subsequent lease
back of that property.
The $1,645,000 was used to pay the outstanding obligations on the Mall
structure, which is now unencumbered. In connection with the acquisition
of the Mall, the Company assumed obligations of Seashore to pay $567,000 in
currently unsecured debts owed by Seashore. Of these debts, $500,000 is
due to a family trust that is managed by a director of the Company. The
$67,000 obligation is due to a director of the Company for funds advanced
on behalf of Seashore in connection with the Mall.
The Company is currently seeking to retain the services of a
management company in Dickinson, North Dakota to manage this property.
Currently, the average rent per square foot received is approximately
$.52.
Hospitality Inn, Dickinson, North Dakota
----------------------------------------
The Company has also acquired a general partnership interest in a
limited partnership. The primary asset of the limited partnership is a
Hospitality Inn, formerly a Travelodge Hotel, in Dickinson, North Dakota.
The general partnership interest represents a 49% interest in the limited
partnership. The Inn is a 149-unit full service hotel and has the largest
meeting facilities in Dickinson. A 125-seat restaurant and a 110-seat
cocktail lounge are located in the Inn. The Inn is approximately 318,500
square feet.
The Inn is located just off of I-94 at exit 61 and Highway 22, and is
near such attractions as the Theodore Roosevelt National Park, the
Badlands, Dickinson State University, Dakota Dinosaur Museum, and a golf
course.
The limited partnership purchased the Inn for $4,000,000 in 2001.
There is a first trust deed on the Inn in the amount of $800,000.00 and a
second trust deed in the amount of $400,000.00. These notes mature August
and June 2003, respectively. Both the first and second trust deeds are
currently in default and payments are not being made on either trust deed.
The Inn is losing money on a monthly basis. Currently, the
outstanding accounts payable total approximately $300,000. The Inn also
owes approximately $37,000 in federal taxes. The Inn also requires
approximately $250,000 in deferred maintenance in the immediate future.
6
The limited partnership has entered into a contract to sell the
Hospitality Inn to a third party for $2,400,000. Following closing, the
first and second trust deeds will be extinguished and the limited
partnership will receive a residential lot in Poway, California valued at
no less than $1,200,000. The lot is vacant and unencumbered. Pursuant to
the terms of the contract of sale, the limited partnership is required to
cure the $300,000 in accounts payable. The buyer of the Inn has agreed to
help pay certain accounts payable, not to exceed $50,000. The limited
partnership will be responsible to resolve the remaining outstanding
accounts payable. It is anticipated that the limited partnership will
borrow against the Poway lot to raise the funds to pay this obligation.
Finally, the limited partnership agreement provides that the Company,
as general partner, must buy out the limited partners for $2,000,000 in
June 2003. Some of the limited partners are officers and/or directors of
the Company. At this time, the Company is negotiating a buyout of the
limited partners with shares of the Company's Series B Convertible
Preferred Stock. If the Company defaults on its obligation to buyout the
limited partners, the Company's 49% interest in the limited partnership
reverts back to the limited partnership.
Strip Mall, Spencer Springs, Las Vegas, Nevada
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The Company has acquired a 50% interest in a limited liability company
that owns a strip mall in the Spencer Springs area of Las Vegas, Nevada.
The strip mall is located near McCarren International Airport in an area
surrounded by new complexes, high end residential developments, apartments
and condominium projects. It is the only retail center in the immediate
area. Spencer Springs has 14 retail rental units totaling 24,336 square
feet. Currently, approximately 23,136 square feet or 95% of the strip mall
is occupied. The strip mall enjoys a mix of national, regional and local
tenants.
The strip mall was built in the early 1990's and has been well
maintained. No significant renovations are anticipated in the immediate
future.
Spencer Springs is managed by Equity Group of Las Vegas, a
professional property management group. The Company pays Equity Group a
monthly fee of approximately $1,740 to manage Spencer Springs. The Company
anticipates the retention of Equity Group to manage the properties.
Spencer Springs has an estimated market value of $3,750,000. The
outstanding indebtedness on Spencer Springs was approximately $2,135,000 on
December 31, 2002. The note on the property matures in August 2008, with a
balloon payment of approximately $1,900,000 due on maturity. The annual
interest rate on the note is 9.7%.
Pursuant to an agreement between Seashore and the other members of the
limited liability company that own Spencer Springs, Seashore is required to
purchase the other 50% interest in the limited liability company by August
2003 for $1,000,000. The purchase price may be paid in cash or securities
at the option of the other members, one of whom is an officer and director
of the Company. If the Company is unable to meet this obligation by August
2003, the owners of the other 50% interest in the limited liability company
are entitled to acquire the Company's 50% interest for $100.
7
For the year ended December 31, 2002, Spencer Springs generated net
income of $27,224. Pursuant to the limited liability company operating
agreement, however, all of the depreciation on the property is retained by
the managing members of the LLC, which did not include Seashore. This
resulted in a taxable gain of approximately $41,600 to Seashore even though
there was only net income of $27,224. If the Company is not successful in
buying out the managing members of the limited liability company or
renegotiating the operating agreement, it could be confronted with the same
dilemma in the 2003 tax year of having to report a net income with no
corresponding cash flow.
Decatur Square, Las Vegas, Nevada
---------------------------------
The Company also acquired a 50% interest in a limited liability
company that owns a strip mall known as Decatur Square. This strip mall is
located on the corner of Decatur and Lake Mead Boulevard in Las Vegas,
Nevada. It is in a prominent location with a high traffic count. Decatur
Square is surrounded by mid to high end residential developments.
Decatur Square currently has 12 retail rental units totaling
approximately 16,500 square feet. Currently, approximately 13,500 square
feet or 82% of the strip mall is occupied. Upon acquisition, the Company
will seek to lease the remaining unoccupied space. The units vary in size
from 950 square feet to 2,000 square feet. Currently, there are three
individual tenants that each rent more than 10% of our total square
footage.
Decatur Square was built in 1990 and has been well maintained. No
significant renovations are anticipated in the immediate future.
Decatur Square is also managed by Equity Group of Las Vegas, a
professional property management group for a monthly fee of approximately
$1,000. The Company anticipates the retention of Equity Group to manage
the properties.
The estimated fair market value of the property is $1,500,000. As of
December 31, 2002, the property was encumbered for approximately
$1,090,000. The rate of interest on this encumbrance is 9%.
Pursuant to the limited liability company operating agreement, the
Company is required to purchase the remaining 50% interest in the limited
liability company from its other five members by August 2003. The Company
is negotiating an agreement with those other limited liability company
members to acquire their interests for 1,552,480 shares of Series B
Convertible Preferred Stock of the Company valued at $.50 per share and
$123,760. One of the limited liability company members is the family trust
which is managed by an officer and director of the Company. That trust
will receive approximately 317,000 shares of the Series B Convertible
Stock.
The Company is negotiating the sale of Decatur Square to an
independent third party. If the property is sold, two officers and
directors of the Company will receive commissions in connection with the
sale in the amount of $25,000 and $30,000 respectively. It is anticipated
that the commissions will be paid in Series B Convertible Preferred Stock
valued at $.50 per share.
8
Office Building, Newport Beach, California
------------------------------------------
The Company also recently acquired a 18% interest in a limited
liability company, Diversified Commercial Brokers, LLC for $81,675. The
remaining 82% interest in Diversified is owned by two directors of the
Company. The primary asset of Diversified is an 8,685 square office
building located at 5030 Campus Drive in Newport Beach, California. In
November 2002, the office building was appraised at $1,150,000. The
building is currently subject to a first trust deed in the amount of
$740,000 and a second trust deed in the amount of $110,000.
The land on which the office building sits is leased. The ground
lease payment is currently $2,340 per month. The ground lease adjusts to
$3,610 on July 1, 2004 and will adjust again to equal 8% of the market
value of the leased premises on July 1, 2009. The lease expires on June
30, 2034, with two ten-year options which could extend the lease to June
30, 2054.
The office building contains twelve office suites, eleven of which are
currently being rented out. It is anticipated that the final office suite
will be rented in the near future. The average rent per square foot is
approximately $1.55.
The property is managed by PSG Enterprises, an unrelated third party.
PSG Enterprises charges Diversified $750 a month in management fees
With the acquisition of these and other properties, the Company hopes
to become a financially viable business. Currently, however, the Company
has liabilities in excess of current assets. Moreover, through the end of
the transition period, the Company had no revenue producing activities and
was dependent upon its officers and directors to provide for its cash
requirements. These factors indicate considerable doubt as to the
Company's ability to continue as a going concern.
Employees
The Company currently has four full time employees including its
officers. The Company anticipates hiring up to two additional employees
during the next twelve months.
Reports to Security Holders
The public may read and copy any materials filed by the Company with
the SEC at the SEC's Public Reference Room at 150 Fifth Street, N.W.,
Washington, D.C. 20549. The public may obtain information on the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
Company is an electronic filer and the SEC maintains an Internet site that
contains reports and other information regarding the Company which may be
viewed at http://www.sec.gov.
Item 2. Description of Property
The Company's executive offices are located at 5030 Campus Drive in
Newport Beach, California. The Company pays $1,000 per month for the space
it leases. The Company's lease expires in January 2006.
As disclosed in Item 1 above, the Company recently acquired interests
in six properties. For more information regarding these properties see
Item 1, above.
9
Item 3. Legal Proceedings.
To the knowledge of management, there is no material litigation
pending or threatened against the Company or its management. Further, the
Company is not aware of any material pending or threatened litigation to
which the Company or any of its directors, officers or affiliates are or
would be a party.
Item 4. Submission of Matters to a Vote of Securities Holders
No matters were submitted to a vote of security holders during the
transition period from November 1, 2002 to December 31, 2002.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Market Price of and Dividends on the Company's Common Equity and Other
Shareholder Matters.
The Company's shares are currently traded on the Over-the-Counter
Bulletin Board ("OTCBB") under the symbol SCDI. As of March 31, 2003, the
Company had approximately 248 shareholders holding 5,979,540 common shares.
Of the issued and outstanding Common Stock, approximately 349,540 are free
trading, the balance are "restricted securities" as that term is defined in
Rule 144 promulgated by the Securities and Exchange Commission. The
Company has never declared a dividend on its common shares.
The published bid and ask quotations for the Company's Common Stock
from the first available date through the first available price are
included in the chart below. These quotations represent prices between
dealers and do not include retail markup, markdown or commissions. In
addition, these quotations do not represent actual transactions.
Closing Bid Closing Ask
2001 High Low High Low
Oct. 4 (First Available) .07 .03 None None
thru Dec. 31
2002
Jan. 2 thru .07 .05 None None
Mar. 28
Apr. 1 thru .06 .06 None None
June 28
July 1 thru .08 .06 None None
Sept. 30
Oct. 1 thru .08 .08 None None
Dec 31
The above information was obtained from Pink Sheets, LLC, located at
304 Hudson Street, 2nd Floor, New York, New York 10013.
10
Currently, none of the Company's common shares are subject to
outstanding options or warrants to purchase common equity of the Company.
The Company's common shares are subject to conversion of the Company's
outstanding convertible preferred stock. The Company's currently
outstanding 7,370,000 shares of Series A Convertible Preferred Stock cannot
be converted to common shares of the Company for 36 months from the date
they were issued. Thereafter, they may be converted at any time on a one
share for one share basis so long as the average closing bid price per
share of the Company's common stock for the five trading days immediately
preceding the date of conversion is greater than or equal to the purchase
price per share originally paid for the Series A shares. If the average
bid price per share is lower than the purchase price paid per share, the
holder of the Series A shares shall be entitled to convert at a rate equal
to the purchase price divided by the common stock price. The Company has
not yet issued, but anticipates issuing at least 1,552,480 shares of Series
B Convertible Preferred shares. The Series B shares cannot be converted
until 24 months from the date they are issued. The Series B shares are
converted at the same rate as the Series A shares.
The Company has no agreements to register shares on behalf of
shareholders currently holding unregistered securities. The Company has
not paid, nor declared, any dividends since its inception and does not
intend to declare any such dividends in the foreseeable future. The
Company's ability to pay dividend is subject to limitations imposed by
Nevada law.
Recent Sales of Unregistered Securities
On March 31, 2003, the Company issued 3,630,000 restricted Common
shares and 7,370,000 restricted Series A Convertible Preferred shares to
Seashore Diversified Investment Company in exchange for interests in two
properties, membership interests in two limited liability companies and a
general partnership interest in a limited partnership. The shares were
issued without registration under the Securities Act of 1933 in reliance on
an exemption from registration provided by Section 4(2) of the Securities
Act, and from similar applicable state securities laws, rules and
regulations exempting the offer and sale of these securities by available
state exemptions. No general solicitation was made in connection with the
offer or sale of these securities. No funds were received by the Company
for these shares.
Item 6. Plan of Operations
Our plan of operations for the next twelve months is to operate the
properties we recently acquired and to acquire additional ownership
interests in a portfolio of properties that are geographically and
functionally diverse. The Company believes that by acquiring properties
that are geographically and functionally diverse its portfolio will be more
stable and less susceptible to devaluation resulting from regional economic
downturns and market shifts. The Company is currently focusing on
acquiring properties in markets with strong regional economies and where a
sufficient number of properties are available to help insure a liquid
market.
In addition to real estate holdings the Company acquired from
Seashore, it will seek to acquire up to twelve additional real estate
properties in the next twelve months. The Company has identified potential
acquisition properties in Newport Beach, California, Bismark North Dakota,
Wichita, Kansas and Texas. The Company will primarily seek to acquire
properties either through the issuance of its preferred and common stock or
through the use of tenants in common agreements. The Company will rely on
the experience and contacts of current management and the board of
directors to assist it in identifying suitable acquisition candidates.
11
As of December 31, 2002, the Company had $6,058 cash on hand and has
experienced losses from inception. As of December 31, 2002, the Company
had total current liabilities amounting to $68,111. Since inception the
Company has sustained continued losses and has an accumulated operating
loss since inception of $3,425,066. As of December 31, 2002, the Company
had no revenue producing activities and is completely dependent upon its
officers and directors to provide for its cash requirements. These
factors indicate considerable doubt as to the Company's ability to continue
as a going concern. Moreover, while the Company hopes to be successful in
its efforts to acquire and manage real estate holdings, there is no
guarantee that the Company will be successful. Many factors, some of which
may be beyond the control of the Company, may make it difficult or
impossible for the Company to be successful in its new business pursuits.
These factors include, but are not limited to the ability of the Company to
locate, identify and acquire properties that can be operated or sold at a
profit; the ability of the Company to acquire properties for its securities
or pursuant to tenants in common agreements, as noted herein, the Company
has very limited cash or other assets available to it to use for the
acquisition of properties; the ability of management to efficiently manage
and operate the properties it acquires, particularly given that the Company
will seek to acquire properties in diverse markets; changes in interest
rates; regional economic downturns in markets where the Company owns
properties or a general economic downturn across the country; and the
inability of the to liquidate properties in downturning markets.
Item 7. Financial Statements
[This space intentionally left blank.]
12
SECURED DIVERSIFIED INVESTMENT, LTD.
Formerly Book Corporation of America
Financial Statements
December 31, 2002
/Letterhead/
INDEPENDENT AUDITOR'S REPORT
----------------------------
Stockholders and Directors
Secured Diversified Investment, Ltd.
We have audited the accompanying balance sheet of Secured Diversified
Investment, Ltd., as of December 31, 2002, and the related statements of
operations, stockholders' equity, and cash flows for the year then ended.
These financial statements are the responsibility of the company's
management. Our responsibility is to express and opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards, in the United States of America. Those standards require that
we plan and perform the audit 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 audit provides 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 Secured Diversified
Investment, Ltd., at December 31, 2002, and the results of its operations
and cash flows for the year then ended in conformity with generally
accepted accounting principles, in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 6, the
Company's recurring operating losses and lack of working capital raise
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to those matters are also described in Note 6.
The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/S/ Bierwolf, Nilson & Associates
Bierwolf, Nilson & Associates
Salt Lake City, UT
March 28, 2003
14
SECURED DIVERSIFIED INVESTMENT, LTD.
Formerly Book Corporation of America
Balance Sheet
December 31,
2002
-------------
Assets
Current Assets
--------------
Cash $ 6,058
-------------
Total Assets $ 6,058
=============
Liabilities & Stockholders' Equity
Current Liabilities
-------------------
Accounts Payable $ 21,347
Related Party Note Payable (Note #3) 46,764
-------------
Total Current Liabilities 68,111
Stockholders' Equity
Preferred Shares 50,000,000 Authorized;
$0.01 Par Value, Zero Issued & Outstanding -
Common Shares 100,000,000 Authorized;
$0.001 & $0.005 Par Value Respectively
2,349,540 Shares Issued & Outstanding 2,350
Paid In Capital 3,051,109
Contributed Capital 61,189
Accumulated Deficit (3,176,701)
-------------
Total Stockholders' Equity (62,053)
-------------
Total Liabilities & Stockholders' Equity $ 6,058
=============
The accompanying notes are an integral part of these financial statements.
15
SECURED DIVERSIFIED INVESTMENT, LTD.
Formerly Book Corporation of America
Statement of Operations
December October October
31, 2002 31, 2002 31, 2001 Accumulated
----------- ----------- ----------- ------------
Revenues $ - $ - $ - $ 250,000
-------- ----------- ----------- ----------- ------------
Total Revenues - - - 250,000
Operating Expenses
------------------
Bad Debt - - - 200,000
Depreciation - - - 200,000
Failed Offering Costs - - - 5,917
General & Administrative 2,117 14,473 21,229 55,373
Production Costs - - - 132,448
Professional Fees 3,200 64,381 - 67,581
Write Down of Film Inventory - - - 2,563,500
Write Off of Investments
& Other Assets - - - 200,247
----------- ----------- ----------- ------------
Total Operating Expenses 5,317 78,854 21,229 3,425,066
----------- ----------- ----------- ------------
Operating Income (Loss) (5,317) (78,854) (21,229) (3,425,066)
Other Income (Expense)
----------------------
Interest (Expense) (852) (433) - (1,285)
----------- ----------- ----------- ------------
Total Other (Expense) (852) (433) - (1,285)
Income Tax Expense - - 250 350
----------- ----------- ----------- ------------
Net (Loss) $ (6,169) $ (79,287) $ (21,479) $(3,176,701)
=========== =========== =========== ============
Basic and Diluted Income
(Loss) per Share $ (0.00) $ (0.03) $ (0.00)
Weighted Average
Common Shares 2,349,540 2,349,540 2,349,540
The accompanying notes are an integral part of these financial statements.
16
SECURED DIVERSIFIED INVESTMENT, LTD.
Formerly Book Corporation of America
Statements of Stockholders' Equity
For the Period November 1, 2000 to December 31, 2002
Common Common Paid in Contributed Accumulated
Shares Stock Capital Capital Deficit
----------- ----------- ----------- ----------- -------------
Balance,
November 1, 2000 2,349,540 $ 11,748 $3,041,711 $ - $ (3,069,766)
Net Loss for the
Year Ended
October 31, 2001 - - - - (21,479)
Balance,
October 31, 2001 2,349,540 11,748 3,041,711 - (3,091,245)
Contributions to
Capital - - - 61,189 -
Change in Par Value
from $.005 to $.001 - (9,398) 9,398 - -
Net Loss for the
Year Ended
October 31, 2002 - - - - (79,287)
----------- ----------- ----------- ----------- -------------
Balance,
October 31, 2002 2,349,540 2,350 3,051,109 61,189 (3,170,532)
Net Loss for the
Transition Period
Ended December
31, 2002 - - - - (6,169)
----------- ----------- ----------- ----------- -------------
Balance,
December 31, 2002 2,349,540 $ 2,350 $3,051,109 $ 61,189 $ 3,176,701
=========== =========== =========== =========== =============
The accompanying notes are an integral part of these financial statements.
17
SECURED DIVERSIFIED INVESTMENT, LTD.
Formerly Book Corporation of America
Statement of Cash Flows
December October October
31, 2002 31, 2002 31, 2001 Accumulated
---------- ---------- ---------- ------------
Cash Flows from Operating Expenses
----------------------------------
Net (Loss) $ (6,169) $ (79,287) $ (21,479) $ (3,176,701)
Contributions to Capital - 61,189 - 61,189
Adjustments to Reconcile Net Loss
to Net Cash Used by Operating
Activities
Depreciation - - - 200,000
Write Down of Film Inventory - - - 2,593,500
Changes in Operating Assets &
Liabilities
Increase in Interest Payable (426) 426 - -
Increase (Decrease) in Accounts
Payable 815 (17,254) 21,479 21,347
---------- ---------- ---------- ------------
Net Cash (Used) by
Operating Expenses (5,780) (34,926) - (300,665)
Cash Flows from Investing Activities - - - -
------------------------------------ ---------- ---------- ---------- ------------
Net Cash Flows from
Investing Activities - - - -
---------- ---------- ---------- ------------
Cash Flows from Financing Activities
------------------------------------
Proceeds from the Sale of Common
Stock - - - 127,500
Contributed Capital - - - 60,517
Debt to Equity Conversion - - - 71,942
Payments on Note Payable -
Related Party (8,236) - - (8,236)
Issuance of Note Payable -
Related Party - 55,000 - 55,000
---------- ---------- ---------- ------------
Net Cash Provided (Used) by
Financing Activities (8,236) 55,000 - 306,723
---------- ---------- ---------- ------------
Increase (Decrease) in Cash (14,016) 20,074 - 6,058
Cash at Beginning of Period 20,074 - - -
---------- ---------- ---------- ------------
Cash at End of Period $ 6,058 $ 20,074 $ - $ 6,058
========== ========== ========== ============
Disclosures for Operating Activities
------------------------------------
Interest $ - $ 7 $ - $ 7
Taxes - - - -
Significant Noncash Transactions
--------------------------------
Acquisition of Films and Video
Cassettes as Contributed Capital $ - $ - $ - $ 2,447,000
The accompanying notes are an integral part of these financial statements.
18
SECURED DIVERSIFIED INVESTMENT, LTD.
Formerly Book Corporation of America
Notes to Financial Statements
December 31, 2002
NOTE 1 - Nature of Operations
-----------------------------
The Company was incorporated under the laws of the state of Utah on
November 22, 1978. The Company amended its Articles of Incorporation,
authorizing 100,000,000 shares of common stock having a par value of $0.001
per share.
The Articles of Incorporation grants the Company unlimited power to engage
in and to do any lawful act concerning any and all lawful businesses for
which corporations may be organized. The Company currently seeks to
license films to television and to engage in market-by-market exploitation
of the films it holds in its film inventory.
On July 23, 2002, the Shareholders approved a change in domicile from Utah
to Nevada. In accordance with Nevada corporate law, a change of domicile
is affected by merging the foreign corporation with and into a Nevada
corporation. On September 9, 2002, a merger between Secured Diversified
Investment, Ltd., and Book Corporation of America was completed. Upon
completion of the merger Secured Diversified Investment, Ltd., became the
surviving corporation and Book Corporation of America was dissolved.
On November 15, 2002, the Company notified the Securities and Exchange
Commission of their change in fiscal year end from October to December year
end. From this point forward the Company will be reporting on a regular
quarterly and yearly basis.
In accordance with FASB 7 the Company is considered to be a development
stage company.
NOTE 2 - Significant Accounting Policies
----------------------------------------
A. The Company uses the accrual method of accounting.
B. Revenues and directly related expenses are recognized in the period in
which the sales are finalized with customers.
C. The Company considers all short term, highly liquid investments, that
are readily convertible to known amounts within ninety days as cash
equivalents. The Company currently has no cash equivalents.
D. Basic Earnings Per Shares are computed by dividing income available to
common stockholders by the weighted average number of common shares
outstanding during the period. Diluted Earnings Per Share shall be
computed by including contingently issuable shares with the weighted
average shares outstanding during the period. When inclusion of the
contingently issuable shares would have an antidilutive effect upon
earnings per share no diluted earnings per share shall be presented.
(e) Operating expenses and all type of income are recognized in the period
in which the activities occur.
F. Depreciation: The cost of property and equipment is depreciated over
the estimated useful lives of the related assets. The cost of
leasehold improvements is amortized over the lesser of the length of
the lease of the related assets for the estimated lives of the assets.
Depreciation and amortization is computed on the straight line method.
Continued
19
SECURED DIVERSIFIED INVESTMENT, LTD.
Formerly Book Corporation of America
Notes to Financial Statements
December 31, 2002
NOTE 3 - Related Party Note Payable
-----------------------------------
During the year, the Company issued a promissory note to a company whose
shareholders are directors of Secured Diversified Investment, Ltd. The
principal sum of the unsecured note is $55,000. The note is due and
payable on September 30, 2003 together with interest accruing on the
outstanding principal balance at the rate of 9% per annum. The accrued
interest is included in the principal amount of the note.
December 31, October 31,
The Company has the following notes payable obligations: 2002 2002
----------- -----------
Convertible note payable to investor is due on demand
plus accrued interest at a rate of 9% per annum. $ 46,764 $ 55,000
----------- -----------
Totals $ 46,764 $ 55,000
Less Current Maturities (46,764) (55,000)
----------- -----------
Total Long-Term Notes Payable $ - $ -
=========== ===========
Following are maturities of long-term debt for each of the next five years:
Year Amount
----------- -----------
2003 $ 46,764
2004 -
2005 -
2006 -
Thereafter -
-----------
Total $ 46,764
===========
NOTE 4 - Stockholders' Equity
-----------------------------
During the year, the Company changed it's Articles of Incorporation to
change the par value of the Company's common stock from $.005 to $.001 and
authorized 50,000,000 shares of Preferred Stock at a par value of $.01.
NOTE 5 - Contributed Capital
----------------------------
During the quarter ended April 30, 2002, an unrelated party contributed
$61,189 in cash to the Company which was used to satisfy debts incurred
during the course of business, accordingly this amount has been charged to
contributed capital.
Continued
20
SECURED DIVERSIFIED INVESTMENT, LTD.
Formerly Book Corporation of America
Notes to Financial Statements
December 31, 2002
NOTE 6 - Going Concern
----------------------
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course
of business. Currently, the Company does not have significant cash or
other material assets, nor does it have an established source of revenues
sufficient to cover its operating costs and to allow it to continue as a
going concern. The Company does not currently possess a financial
institution source of financing and the Company cannot be certain that it's
existing sources of cash will be adequate to meet its liquidity
requirements.
NOTE 7 - Subsequent Events
---------------------------
While the parties have not finalized all the terms of the agreement, it is
anticipated that the Company will acquire two properties, interests in two
limited liability companies, and a general partnership interest in a
limited partnership in exchange for 3,630,000 shares of restricted common
stock of the Company and 7,370,000 shares of Preferred Convertible Stock of
the Company. The Preferred shares will have the same voting rights as the
Common Stock. The primary assets of the limited liability companies and
the limited partnership are real estate holdings.
21
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons.
The following table sets forth the name, age and position of each
director and executive officer and the term of office of each.
DIRECTOR OR
NAME AGE POSITION OFFICER SINCE
----------------------- ----- --------------------------- --------------
William Biddle 73 Director September 2002
Vice President September 2002
Munjit Johal 47 Chief Financial Officer September 2002
Secretary September 2002
Jay Kister 28 Director September 2002
Sumyie Onodera-Leonard 74 Director September 2002
Pamela Padgett 47 Director September 2002
Clifford L. Strand 56 Chairman of the Board September 2002
Chief Executive Officer September 2002
President September 2002
Wayne Sutterfield 66 Director February 2003
Gernot Trolf 59 Vice President September 2002
Chief Operating Officer September 2002
Each director serves for a period of one year or until his successor
is duly elected and qualified. Officers serve at the will of the Board of
Directors.
William S. Biddle. Director and Vice President, Marketing. Mr.
Biddle has over 37 years experience in the real estate industry, he is a
member of the Society of Exchange Counselors. Mr. Biddle is a past
recipient of the Clifford P. Weaver Memorial Award a national award for the
most creative exchange. He is also a past president of National Exchange
Counselors. In 1979, he received the designation of Certified Commercial
Investment Member from the National Association of Realtors. Mr. Biddle
currently owns two brokerages. He purchased Commercial Brokers, a
commercial real estate brokerage firm in Las Vegas, Nevada, in 1993. He
founded Friendly Hills Realty, a brokerage specializing in high end
residential real estate in 1987. Friendly Hills Realty's principal office
is located in Whittier, California.
22
Munjit Johal. Chief Financial Officer and Secretary. Mr. Johal has
broad experience in accounting, finance and management in the public
sector. Since 1998, Mr. Johal has served as the Chief Financial Officer
for Diffy Foods, Inc. Mr. Johal held the same position with Bengal
Recycling from 1996 to 1997. As the Chief Financial Officer for these
companies, Mr. Johal was primarily responsible for overseeing the financial
affairs of these entities and ensuring that their financial statements of
these were accurate and complete and complied with all applicable reporting
requirements. From 1990 to 1995, Mr. Johal serves as the Executive VP for
Pacific Heritage Bank in Torrance, California. Mr Johal earned his MBA
degree from the University of San Francisco in 1980. He received his BS
degree in History from the University of California in Los Angeles in 1978.
Jay Kister. Director. Since June 2001, Mr. Kister has been employed
with Blossom Valley Mortgage, Inc. Mr. Kister currently serves as a Loan
Broker. From April 1999 to June 2001, Mr. Kister was a Personal Banker for
San Diego National Bank. He was primarily responsible opening and
servicing commercial accounts and commercial loans. From May 1998 to April
1999, Mr. Kister worked for Bank of America performing essentially the same
functions as he performed for San Diego National Bank. Mr. Kister earned a
Bachelor of Arts degree in Spanish from Weber State University in Ogden,
Utah in August 1997.
Sumyie Onodera-Leonard. Director. From 1967 to 1986, Mrs. Onodera-
Leonard served as a professor at California State University, Los Angeles,
specializing in the areas in family finance and home management. She has a
BA in Business Administration and a Masters degree in Secondary Education
in 1957 and 1967 respectively from California State University, Los
Angeles. Mrs. Onodera-Leonard also earned a Masters degree in Home
Management from Michigan State University in East Lansing, Michigan in
1961. She is also a senior gold medalist, U.S. National Champion and
world-record holder in her age group in the 800 meter run.
Pamela Padgett. Director. Since 1994, Ms. Padgett has worked as a
real estate broker. Since March 2002, Ms. Padgett has been affiliated with
The Phoenix Group Realtors as an independent real estate agent. From 2000
through March 2002, she was affiliated as Keller Williams Realty. Ms.
Padgett also works as an independent agent for Uncommon Sense Enterprises a
company she founded in 1994 and continues to own.
Clifford L. Strand. Chairman of the Board of Directors, President and
Chief Executive Officer. Mr. Strand has 35 years experience in the real
estate industry as a broker, investor and strategist. Since January 2001,
Mr. Strand has served as Senior Vice President, Interim President and
President of Seashore Diversified Investment Company, a Maryland real
estate investment trust, where he has been primarily responsible for
managing and directing the affairs of the Company. Seashore specializes
in the acquisition, disposition and management of real estate and
investment properties. From 1984 to 2001, Mr. Strand was self employed as
an independent real estate broker. During that time, Mr. Strand
represented a diverse clientele consisting of banks, savings and loan
institutions, universities, celebrities and corporations. From 1979 to
1984, Mr. Strand served as president of Capital Newport Mortgage Company,
which became part of the Capital Companies. Mr. Strand has a Certificate
in Real Estate from East Los Angeles Community College.
23
Wayne Sutterfield. Director. For the past 35 years Mr. Sutterfield
has been self employed in the real estate industry as a manager, property
owner and contractor. Mr. Sutterfield has owned and managed properties in
Arizona, California and North Dakota. Mr. Sutterfield is a member of the
Contractors Association of America and the Plumbing, Heating and Cooling
Contractors Association. Mr. Sutterfield is a graduate of California L.A.
Technical College-Mechanical Engineering, Construction. Mr. Sutterfield
has been a director of Seashore Diversified Investment Company since 2001.
Gernot Trolf. Vice President and Chief Operating Officer. Since
1996, Mr Trolf has served as the Chief Operating Officer of Seashore
Diversified Investment Company, a real estate investment trust. As the
Chief Operating Officer, Mr. Trolf was primarily responsible for overseeing
the day-to-day operations of the company. In 1993, he founded and
continues to own AATIC a private commodity brokerage. From 1994 to 1997,
Mr. Trolf owned The Stagecoach Restaurant a continental restaurant
specializing in Austrian, German and continental fare in Alpine,
California. From 1994 to 1996, Mr. Trolf was the Director of Food and
Beverage for the Algonquin Hotel in New York and held to same position at
the Regency Hotel in New York from 1991 to 1994. Mr. Trolf was the General
Manager of the Nova Park Hotel in New York from 1979 to 1982. Mr. Trolf is
a former vice president of the Food & Beverage Association of America and a
member of the Board of Directors of The 400,000 Committee for Austrians
living abroad. Mr. Trolf speaks German, French, English, Spanish and
Norwegian.
To the knowledge of management, during the past five years, no present
or former director, executive officer or person nominated to become a
director or an executive officer of the Company:
(1) filed a petition under the federal bankruptcy laws or any state
insolvency law, nor had a receiver, fiscal agent or similar officer
appointed by a court for the business or property of such person, or
any partnership in which he was a general partner at or within two
years before the time of such filing, or any corporation or business
association of which he was an executive officer at or within two
years before the time of such filing;
(2) was convicted in a criminal proceeding or named subject of a
pending criminal proceeding (excluding traffic violations or other
minor offenses);
(3) was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him from or
otherwise limiting, the following activities;
(i) acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, associated person of any of the
foregoing, or as an investment advisor, underwriter, broker or
dealer in securities, or as an affiliate person, director or
employee of any investment company, or engaging in or continuing
any conduct or practice in connection with such activity;
(ii) engaging in any type of business practice; or
(iii) engaging in any activity in connection with the purchase
or sale of any security or commodity or in connection with any
violation of federal or state securities laws or federal
commodities laws;
24
(4) was the subject of any order, judgment, or decree, not
subsequently reversed, suspended, or vacated, of any federal or state
authority barring, suspending, or otherwise limiting for more than 60
days the right of such person to engage in any activity described
above under this Item, or to be associated with persons engaged in
any such activity;
(5) was found by a court of competent jurisdiction in a civil action
or by the Securities and Exchange Commission to have violated any
federal or state securities law, and the judgment in such civil action
or finding by the Securities and Exchange Commission has not been
subsequently reversed, suspended, or vacated
(6) was found by a court of competent jurisdiction in a civil action
or by the Commodity Futures Trading Commission to have violated any
federal commodities law, and the judgment in such civil action or
finding by the Commodity Futures Trading Commission has not been
subsequently reversed, suspended or vacated.
Compliance with Section 16(a) of the Exchange Act
Directors and executive officers are required to comply with Section
16(a) of the Securities Exchange Act of 1934, which requires generally that
such persons file reports regarding ownership of and transactions in
securities of the Company on Forms 3, 4, and 5. A Form 3 is an initial
statement of ownership of securities, which is to be filed by the officers
and directors owning shares in the Company within 10 days after the
effective date of the Company's filing on Form 10-SB. Form 4 is to report
changes in beneficial ownership and is due on or before the tenth day of
the month following any month in which they engage in any transaction in
the Company's common stock. Form 5 covers annual statement of changes in
beneficial ownership which is due 90 days after the fiscal year end of the
Company.
Based solely on a review of Forms 3 and 4 and amendments thereto
furnished to the Company during its most recent fiscal year, and Forms 5
and amendments thereto furnished to the Company with respect to the most
recent fiscal year, it appears that the officers and directors of the
Company inadvertently failed to timely file Form 5s for the fiscal year
ended October 31, 2002. Those forms have been or are currently being
filed.
Item 10. Executive Compensation
The following chart sets forth certain summary information concerning
the compensation paid or accrued for each of the Registrant's last two
completed fiscal years to the Registrant's or its principal subsidiaries'
chief executive officers and each of its other executive officers that
received compensation in excess of $100,000 during such period and the
expected compensation for the next twelve months.
25
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Awards Payouts
Other Restr All
Name and Annual icted Other
Principal Bonus Compen Stock Options LTIP Compan
Position Year Salary $ sation Awards /SARs Payout sation
_____________________________________________________________________________________
Clifford L. Strand 2002 -0- -0- -0- -0- -0- -0- -0-
President &
Chairman of the
Board of Directors
William Messerli 2002 -0- -0- -0- -0- -0- -0- -0-
Former CEO 2001 -0- -0- -0- -0- -0- -0- -0-
Former Director 2000 -0- -0- -0- -0- -0- -0- -0-
_____________________________________________________________________________________
Compensation of Directors
None.
Employment Contracts and Termination of Employment and Change in Control
Arrangements.
Currently, there are no employment contracts between the Company and
any of its officers or directors. The Company, however, has formed a
compensation committee and is in the process of finalizing employment with
the officers of the Company.
There are no compensatory plans or arrangements, including payments to
be received from the Company, with respect to any person named in Cash
Compensation set out above which would in any way result in payments to any
such person because of his resignation, retirement, or other termination of
such person's employment with the Company or its subsidiaries, or any
change in control of the Company, or a change in the person's
responsibilities following a change in control of the Company.
The Company has no retirement, pension, profit-sharing, insurance, or
medical reimbursement plan covering its officers and directors, and does
not contemplate implementing any such plan at this time. None of the
officers or directors of the Company has any options or warrants to
purchase shares of the Company's common stock.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth as of March 31, 2003, the name and the
number of shares of the Registrant's Common Stock, par value of $0.001 per
share, held of record or beneficially by each person who held of record, or
was known by the Registrant to own beneficially, more than 5% of the
5,979,540 issued and outstanding shares of the Company's Common Stock, and
the name and shareholdings of each director and of all officers and
directors as group. The following table also sets forth as of March 31,
2003, the name and the number of shares of the Registrant's Series A
Convertible Preferred Stock, par value of $.01 per share, held of record or
beneficially by each person who held of record, or was known by the
Registrant to own beneficially, more than 5% of the 7,370,000 issued and
outstanding shares of the Company's Series A Convertible Preferred Stock.
The Company's Series A Convertible Preferred Stock has the same voting
rights as the Company's Common Stock.
26
Amount and
Title Nature of
of Name and Address of Beneficial Percentage
Class Beneficial Owner Ownership of Class
Common William S. Biddle(1)(2)(4) -0- -0-
5030 Campus Drive
Newport Beach, California 92660
Common Munjit Johal(1) -0- -0-
5030 Campus Drive
Newport Beach, California 92660
Common Jay Kister(1)(4) -0- -0-
5030 Campus Drive
Newport Beach, California 92660
Common Sumyie Onodera-Leonard(1)(2)(4) -0- -0-
5030 Campus Drive
Newport Beach, California 92660
Common Pamela Padgett(1)(4) -0- -0-
5030 Campus Drive
Newport Beach, California 92660
Common REIT Consultants, LLC(2) 2,000,000 33%
1725 East Warm Springs Road
Suite 10
Las Vegas, Nevada 89119
Common Clifford L. Strand(1)(2)(4) -0- -0-
5030 Campus Drive
Newport Beach, California 92660
Common Seashore Diversified Investment Co.(3)(4) 3,630,000 61%
1000 Quail Street, Suite 190
Newport Beach, California 92660
Common Wayne Sutterfield(1)(2)(4) -0- -0-
5030 Campus Drive
Newport Beach, California 92660
Common Gernot Trolf(1)(4) -0- -0-
5030 Campus Drive
Newport Beach, California 92660
_____________________________________________________________________________________
Series
A Seashore Diversified Investment Co.(3)(4) 7,370,000 100%
Preferred 1000 Quail Street, Suite 190
Newport Beach, California 92660
_____________________________________________________________________________________
Officers, Directors and Nominees as a Group: -0- -0-
(6 people)
_____________________________________________________________________________________
27
(1) Officer and/or director of the Company.
(2) The term "beneficial owner" refers to both the power of investment (the
right to buy and sell) and rights of ownership (the right to receive
distributions from the Company and proceeds from sales of shares). REIT
Consultants, LLC ("REIT") is the registered owner of 2,000,000 shares of
Company common stock. REIT is a manager managed limited liability company.
Ronald Robinson is the manager of REIT. The profits and losses of the
limited liability company are allocated according to the percentage
ownership of the total member interests. No member has the right to demand
or receive any distribution from a limited liability company in any form
other than cash.
REIT has five members all of which are trusts. The trustees of the
trusts, which are members of REIT, are as follows: William S. Biddle is
the trustee of the William S. Biddle Family Trust, which owns a 16.7%
interest in REIT; Sumyie Onodera-Leonard is the trustee of the Sumyie N.
Onodera Familty Trust, which owns a 25% interest in REIT; Robert J.
Leonard is the trustee of the Robert J. Leonard Family Trust, which owns a
25% interest in REIT Robert J. Leonard is the spouse of Sumyie Onodera-
Leonard; Clifford L. Strand is the trustee of the C.L. Strand Trust, which
owns a 16.7% interest in the LLC; and Myra and Wayne Sutterfield are the
trustees of the Wayne Sutterfield Family Trust which owns a 16.6% interest
in REIT. These individuals, in their capacity as trustees, or spouses of
trustees, could be deemed to have beneficial ownership in the number of
shares of the Company owned by REIT that corresponds to the trust's
percentage ownership in REIT because of the respective trust's rights of
ownership.
(3) Clifford L. Strand, the President, Chief Executive Officer and a
director of the Company, is also the President of Seashore Diversified
Investment Company. As such, he may be deemed to be the beneficial owner
of all shares held by Seashore.
(4) Based upon representations made by Seashore, with the exception of
Munjit Johal, the other officers and directors of the Company may be deemed
to be the beneficial owners of at least 50% of the outstanding shares of
Seashore. Therefore, each could be deemed to have an indirect beneficial
ownership interest in a corresponding percentage of the Company Common and
Preferred Stock owned by Seashore.
There are no contracts or other arrangements that could result in a
change of control of the Company.
Item 12. Certain Relationships and Related Transactions
During the transition period from November 1, 2002 to December 31,
2002, the Company used one-half of a 600 square foot office condominium
located at 1000 Quail Street, Suite 190, in Newport Beach California for
its corporate offices. The Company paid no rent for this space pursuant to
a verbal agreement with its chief executive officer, Clifford L. Strand,
who held the lease on the office condominium. This free rent was of
nominal value. The Company has since moved its offices and entered into a
lease agreement.
Subsequent to the end of the transition period, the Company paid
$25,000 in commission to Clifford L. Strand, its CEO, President and
director for services rendered in connection with the land sale and ground
lease back of the 6.66 acres underlying the T-Rex Mall acquired by the
Company on March 31, 2003.
Subsequent to the end of the transition period, the Company completed
an Asset Purchase Agreement with Seashore. As consideration for the
assets acquired, Seashore was issued 3,630,000 shares of restricted Common
Stock and 7,370,000 shares of restricted Series A Convertible Preferred
Stock. Seashore may be deemed to a related party to the Company through
common management and control.
28
PART IV
Item 13. Exhibits and Reports on Form 8-K
(a) Reports on Form 8-K.
On November 18, 2002, the Company filed an Amended Current Report on
Form 8-K/A disclosing the reports the Company would be filing to fulfill its
reporting obligations during the transition period.
(b) Exhibits. The following exhibits are included as part of this
report:
Exhibit 10.1 Asset Purchase Agreement by and among Secured
Diversified Investment, Ltd. and Seashore
Diversified Investment Company
Exhibit 99.1 Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Item 14. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures. The Company's
Chief Executive Officer and Chief Financial Officer has conducted an
evaluation of the Company's disclosure controls and procedures as of a date
(the "Evaluation Date") within 90 days before the filing of this transition
report. Based on his evaluation, the Company's Chief Executive Officer and
Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective to ensure that information required to be disclosed
by the Company in reports that it files or submits under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within
the time periods specified in the applicable Securities and Exchange
Commission rules and forms.
(b) Changes in Internal Controls and Procedures. Subsequent to the
Evaluation Date, there were no significant changes in the Company's internal
controls or in other factors that could significantly affect these controls,
nor were any corrective actions required with regard to significant
deficiencies and material weaknesses.
29
___________________________________________________________________________
SIGNATURES
___________________________________________________________________________
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf,
thereunto duly authorized.
Secured Diversified Investment, Ltd.
Date: April 15, 2003 /S/ Clifford L. Strand
___________________________________________
Clifford L. Strand, Chief Executive Officer
Date: April 15, 2003 /S/ Munjit Johal
___________________________________________
Munjit Johal, Chief Financial Officer
30
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Clifford L. Strand, hereby, certify that:
(1) I have reviewed this transition report on Form 10-KSB of Secured
Diversified Investment, Ltd., (the "Company");
(2) Based on my knowledge, this transition report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this transition report;
(3) Based on my knowledge, the financial statements, and other
financial information included in this transition report, fairly present in
all material respects the financial condition, results of operations and cash
flows of the Company as of, and for, the periods presented in this transition
report;
(4) The Company's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the Company and have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the Company is made known to
us by others within those entities, particularly during the period
in which this transition report is being prepared;
(b) evaluated the effectiveness of the Company's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this transition report (the "Evaluation Date"); and
(c) presented in this transition report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
(5) The Company's other certifying officer and I have disclosed, based
on our most recent evaluation, to the Company's auditors and the audit
committee of the Company's board of directors (or persons fulfilling the
equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Company's
ability to record, process, summarize and report financial data and
have identified for the Company's auditors any material weaknesses
in internal controls; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the Company's
internal controls; and
(6) The Company's other certifying officer and I have indicated in this
transition report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: April 15, 2003 /S/ Clifford L. Strand
_____________________________________
Clifford L. Strand, Chief Executive Officer
31
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Munjit Johal, hereby, certify that:
(1) I have reviewed this transition report on Form 10-KSB of Secured
Diversified Investment, Ltd., (the "Company");
(2) Based on my knowledge, this transition report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this transition report;
(3) Based on my knowledge, the financial statements, and other
financial information included in this transition report, fairly present in
all material respects the financial condition, results of operations and cash
flows of the Company as of, and for, the periods presented in this transition
report;
(4) The Company's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the Company and have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the Company is made known to
us by others within those entities, particularly during the period
in which this transition report is being prepared;
(b) evaluated the effectiveness of the Company's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this transition report (the "Evaluation Date"); and
(c) presented in this transition report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
(5) The Company's other certifying officer and I have disclosed, based
on our most recent evaluation, to the Company's auditors and the audit
committee of the Company's board of directors (or persons fulfilling the
equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Company's
ability to record, process, summarize and report financial data and
have identified for the Company's auditors any material weaknesses
in internal controls; and
(b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the Company's
internal controls; and
(6) The Company's other certifying officer and I have indicated in this
transition report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: April 15, 2003 /S/ Munjit Johal
________________________________________
Munjit Johal, Chief Financial Officer
32