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, 2005



COMMISSION FILE NUMBER     333-69414



SOURCE DIRECT HOLDINGS, INC.

(Exact name of registrant as specified in charter)



|NEVADA                                                         | 20-0858264                          
|-------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.)



|4323 Commerce Circle, Idaho Falls, Idaho | 83401     
|---------------------------------------- | ----------
|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 [   ]



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.   Yes [   ]        No [X]



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 8, 2005, the Company had outstanding 81,411,400 shares of its common stock, no par value $0.001.





















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TABLE OF CONTENTS



|ITEM NUMBER AND CAPTION | PAGE                                               
|----------------------- | ---------------------------------------------------
|                        |                                                    
|PART I                  |                                                    
|                        |                                                    
|ITEM 1.                 | FINANCIAL STATEMENTS                               
|ITEM 2.                 | MANAGEMENTS DISCUSSION AND PLAN OF OPERATIONS     
|ITEM 3.                 | CONTROLS AND PROCEDURES                            
|                        |                                                    
|PART II                 |                                                    
|                        |                                                    
|ITEM 1.                 | LEGAL PROCEEDINGS                                  
|ITEM 2.                 | CHANGES IN SECURITIES                              
|ITEM 3.                 | DEFAULTS UPON SENIOR SECURITIES                    
|ITEM 4.                 | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|ITEM 5.                 | OTHER INFORMATION                                  
|ITEM 6.                 | EXHIBITS AND REPORTS ON FORM 8-K                   
|                        |                                                    





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PART I

ITEM 1. FINANCIAL STATEMENTS



SOURCE DIRECT HOLDINGS, INC.

Consolidated Balance Sheets

September 30, 2005



|                                                                                                   |  | September 30,
2005
(Unaudited) |             | June 30,
2005
(Audited)
|-------------------------------------------------------------------------------------------------- |  | ------------------------------ | ----------- | -----------------------
|ASSETS                                                                                             |  |                                |             |                        
|Current Assets                                                                                     |  |                                |             |                        
|Cash and cash equivalents                                                                          |  | $                              | 5,561       |                        
|Accounts Receivable                                                                                |  |                                | 74,401      |                        
|Inventory                                                                                          |  |                                | 351,710     |                        
|Prepaid Expenses                                                                                   |  |                                | 75,000      |                        
|Total Current Assets                                                                               |  |                                | 506,672     |                        
|                                                                                                   |  |                                |             |                        
|Property and Equipment                                                                             |  |                                |             |                        
|Property and equipment                                                                             |  |                                | 884,084     |                        
|Less: Accumulated Depreciation                                                                     |  |                                | (40,483)    |                        
|Net Property and Equipment                                                                         |  |                                | 843,601     |                        
|                                                                                                   |  |                                |             |                        
|Other Assets                                                                                       |  |                                |             |                        
|Intangible assets                                                                                  |  |                                | 115,000     |                        
|Accumulated Amortization                                                                           |  |                                | (14,056)    |                        
|Net Other Assets                                                                                   |  |                                | 100,944     |                        
|                                                                                                   |  |                                |             |                        
|TOTAL ASSETS                                                                                       |  | $                              | 1,451,217   |                        
|                                                                                                   |  |                                |             |                        
|LIABILITIES & STOCKHOLDERS' EQUITY                                                                 |  |                                |             |                        
|Current Liabilities                                                                                |  |                                |             |                        
|Accounts Payable                                                                                   |  | $                              | 74,156      |                        
|Accrued Expenses                                                                                   |  |                                | 45,418      |                        
|Current Portion of Building Loan                                                                   |  |                                | 5,775       |                        
|Notes Payable                                                                                      |  |                                | 129,263     |                        
|Total Current Liabilities                                                                          |  |                                | 254,612     |                        
|                                                                                                   |  |                                |             |                        
|Long-Term Liabilities                                                                              |  |                                |             |                        
|Building Loan, net of current portion                                                              |  |                                | 759,225     |                        
|Shareholder Loan                                                                                   |  |                                | 905         |                        
|Total Long-Term Liabilities                                                                        |  |                                | 760,130     |                        
|                                                                                                   |  |                                |             |                        
|Total Liabilities                                                                                  |  |                                | 1,014,742   |                        
|                                                                                                   |  |                                |             |                        
|Stockholders' Equity                                                                               |  |                                |             |                        
|Common Stock -- $.001 par value; 200,000,000 shares authorized; 80,505,400
 issued and outstanding |  |                                | 80,505      |                        
|Additional paid-in capital                                                                         |  |                                | 2,770,994   |                        
|Accumulated deficit                                                                                |  |                                | (2,415,024) |                        
|Total Stockholders' Equity                                                                         |  |                                | 436,475     |                        
|TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT                                                          |  | $                              | 1,451,217   |                        
|                                                                                                   |  |                                |             |                        
|                                                                                                   |  |                                |             |                        







See accompanying notes to financial statements.



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SOURCE DIRECT HOLDINGS, INC.

Consolidated Statement of Operations

(Unaudited)



|                                               |  | For the Three |            | For the Three
|---------------------------------------------- |  | ------------- | ---------- | -------------
|                                               |  | Months Ended  |            | Months Ended 
|                                               |  | September 30, |            | September 30,
|                                               |  | 2005          |            | 2004         
|                                               |  |               |            |              
|Revenues                                       |  | $             | 59,376     |              
|Cost of Goods Sold                             |  |               | 39,426     |              
|Gross Profit                                   |  |               | 19,950     |              
|                                               |  |               |            |              
|General and admin. Expense                     |  |               | 283,563    |              
|                                               |  |               |            |              
|Operating Loss                                 |  |               | (263,613)  |              
|                                               |  |               |            |              
|Interest income                                |  |               | -          |              
|Interest expense                               |  |               | (16,249)   |              
|Gain/(loss) on asset sales                     |  |               | -          |              
|Income taxes                                   |  |               | -          |              
|                                               |  |               |            |              
|Net Loss before extraordinary                  |  |               | (279,862)  |              
|Extraordinary gain, net                        |  |               | -          |              
|                                               |  |               |            |              
|Net Loss                                       |  | $             | (279,862)  |              
|                                               |  |               |            |              
|Net Loss per share                             |  | $             | (0.003)    |              
|                                               |  |               |            |              
|Weighted Average Number  of shares outstanding |  |               | 80,193,748 |              
|                                               |  |               |            |              







See accompanying notes to financial statements.



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SOURCE DIRECT HOLDINGS, INC.

Condensed Consolidated Statement of Cash Flows

(Unaudited)



|                                                                             |  | For the three |           | For the three
|---------------------------------------------------------------------------- |  | ------------- | --------- | -------------
|                                                                             |  | Months Ended  |           | Months Ended 
|                                                                             |  | September 30, |           | September 30,
|                                                                             |  | 2005          |           | 2004         
|                                                                             |  |               |           |              
|Cash Flow Used for Operating Activities                                      |  |               |           |              
|Net Loss                                                                     |  | $             | (279,862) |              
|Adjustments to Reconcile net loss to net cash used for operating activities: |  |               |           |              
|Depreciation                                                                 |  |               | 10,529    |              
|Amortization Expense                                                         |  |               | 1,917     |              
|(Increase)/Decrease in Trade Receivables                                     |  |               | 49,340    |              
|(Increase)/Decrease in Inventory                                             |  |               | (18,908)  |              
|Increase/(Decrease) in employee advance                                      |  |               | -         |              
|Increase/(Decrease) in accounts payable                                      |  |               | (20,980)  |              
|(Increase)/Decrease in Prepaid Expenses                                      |  |               | 75,000    |              
|Increase/(Decrease) in payroll Liabilities                                   |  |               | 6,661     |              
|                                                                             |  |               |           |              
|Net Cash Flows Used for Operating Activities                                 |  |               | (176,303) |              
|                                                                             |  |               |           |              
|Cash Flows used for Investing Activities:                                    |  |               |           |              
|Purchase equipment                                                           |  |               | -         |              
|Acquisition of Intangible Assets                                             |  |               | -         |              
|Net Cash Flows Used for Investing Activities                                 |  |               | -         |              
|                                                                             |  |               |           |              
|Cash Flows used for Financing Activities:                                    |  |               |           |              
|Proceeds from Equipment Loans                                                |  |               | -         |              
|Proceeds from Shareholder Loans                                              |  |               | 905       |              
|Payments on Shareholder Loans                                                |  |               | -         |              
|Net borrowing (payments) on long-term debt                                   |  |               | (1,397)   |              
|Increase in Note Payable                                                     |  |               | (7,000)   |              
|Proceeds from stock issuance                                                 |  |               | 187,950   |              
|Net Cash Flows Used for Financing Activities                                 |  |               | 180,458   |              
|                                                                             |  |               |           |              
|Net Increase / (Decrease in cash                                             |  |               | 4,155     |              
|Beginning Cash Balance                                                       |  |               | 1,406     |              
|                                                                             |  |               |           |              
|Ending Cash Balance                                                          |  | $             | 5,561     |              
|                                                                             |  |               |           |              
|Supplemental Disclosures:                                                    |  |               |           |              
|Interest paid                                                                |  | $             | 16,249    |              
|Income taxes paid                                                            |  |               | -         |              







See accompanying notes to financial statements.



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Source Direct Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

September 30, 2005

(Unaudited)



Note 1   ORGANIZATION AND INTERIM FINANCIAL STATEMENTS



Interim financial statements-The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles for complete financial statements generally accepted in the United States of America. In the opinion of management, the accompanying consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of our financial position as of September 30, 2005 and 2004. There has not been any change in the significant accounting policies of Source Direct Holdings, Inc. for the periods presented. The results of operations for the three months ended September 30, 2005 are not necessarily indicative of the results for a full-year period.  It is suggested that these unaudited condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Companys Annual Report on Form 10-KSB for the fiscal year ended June 30, 2005 filed with the Securities and Exchange Commission (the SEC).



Note 2   INVENTORY



Inventories are stated at lower of cost or market and consist of the following:



|                |          | September 30, 2005
|--------------- | -------- | ------------------
|Raw Materials   | $204,404
|Finished Goods  | $147,306
|                |          |                   
|Total Inventory | $351,710



Note 3   ISSUANCE OF COMMON SHARES AND WARRANTS



During the period from 7/1/05 through 9/30/05, a shareholder exercised a total of 1,503,600 warrants at $0.125 per share.  These shares have not yet been issued in certificate form, as per request of the shareholder.



Note 4   RELATED PARTY / SHAREHOLDER LOANS



There is currently a Shareholder Loan to the Company in the amount of $905.  The loan is unsecured, due on demand, and non-interest bearing.



Note 5   GOING-CONCERN



The Company has accumulated losses since inception totaling $2,415,024 and was still developing operations as of September 30, 2005.  Financing for the Companys limited activities to date has been provided primarily by the issuance of stock, by advances from Stockholders and by borrowing funds.  The Companys ability to achieve a level of profitable operations and/or additional financing impacts the Companys ability to continue as it is presently organized.  Management continues to develop its planned principal operations.  Should management be unsuccessful in its operating activities, the Company may experience material adverse effects.









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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION



Forward Looking Statements



This Quarterly Report contains forward-looking statements about the business, financial condition and prospects of Source Direct Holdings, Inc. (we or the Company), that reflect managements assumptions and beliefs based on information currently available.  Additionally, from time to time, the Company or its 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 the Company with the Securities and Exchange Commission. Words or phrases such as "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 below discussion 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 the Companys 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.



COMPANY HISTORY



Source Direct, Inc. (SDI), was incorporated under the laws of the State of Idaho on July 8, 2002.  Since its inception, SDI was in the business of promoting and marketing cleaning products and supplies, and developing new products.



On October 14, 2003, SDI, the predecessor of the Company, merged with a wholly owned subsidiary of Global Tech Capital Corp. (GTCC), a publicly traded Nevada corporation which was incorporated on July 21, 1998.  As a result of the merger, SDI was the surviving entity, and became a wholly owned subsidiary of GTCC.  GTCCs name was then changed to Source Direct Holdings, Inc.



References in these financial statements to the Company refer to Source Direct Holdings, Inc., and its subsidiary, Source Direct, Inc., unless otherwise stated.



SUMMARY OF OUR BUSINESS





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We acquired the formulas for two cleaning products. These products are Simply Wow® and Stain Pen®. The formulas for these products were developed by Deren Z. Smith, the President of Source Direct and one of its directors.  Kevin Arave, the Secretary/Treasurer of Source Direct and a director, also assisted in the funding for the development of the formulas.  Any and all rights and interests of these parties in and to the formulas or the trademarks were transferred to the Company for 11,500,000 shares each of the Subsidiary. These shares converted into 17,250,000 of the parent company as a result of the Merger. Furthermore, the company developed a new product called Odor Annihilator in May 2005.



We own the trademarks to all three of our products but have not made application for any patents.  Application for the trademark for Odor Annihilator has been made. 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.



Our business is currently organized into three operational divisions: Household products, Automotive products and Industrial products.



HOUSEHOLD PRODUCTS



Simply Wow®



Organic Simply Wow® is an all-purpose cleaner that safely and effectively cleans any washable surface.  Simply Wow® 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. The following are what we believe to be specific advantages of using Simply Wow®:



1.

It is designed with nonionic surfactants and wetting, penetrating, and suspending agents to dissolve the toughest grease, protein, dirt and oil stains.



2.

It replaces most or all cleaners in a persons home and can be used to clean stains on walls, cars, etc.



3.

It will keep carpets cleaner longer by removing previously uncleanable spots.



4.

It is biodegradable and nontoxic, making this product environmentally safe and friendly.



5.

It removes all types of spots and stains including ink, permanent marker, fingernail polish, scuff marks, crayon, coke, coffee, tea, grease, oil, mildew, pet stains and food stains from materials ranging from clothing to upholstery.



Stain Pen®



Stain Pen® 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® works simply by applying a small amount of stain pen solution to the stain and applying a damp cloth.



Wow Odor Annihilator





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We recently introduced the Odor Annihilator into the market and have applied for a trademark. The Odor Annihilator is an organic, biodegradable cleaning product designed to eliminate household odors.



Wow Oil & Grease Stain Remover



We anticipate that we will be introducing the Oil & Grease Stain Remover in the near future. The Oil & Grease Stain Remover is an organic, biodegradable cleaning product designed to remove the more difficult oil and grease stains.



AUTOMOTIVE PRODUCTS



Simply Wow® Pig Spit®



The Simply Wow® Pig Spit® is a co-branded product with Fusion Packaging Solutions, Inc. Fusion Packaging Solutions has a proprietary solution called Pig Spit®. Pig Spit® was formulated primarily for motorcycle enthusiast. Pig Spit® 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® is available at most Harley Davidson® motorcycle shops in the U.S. and has been available for distribution to mass merchandisers through Source Direct Holdings, Inc.  In November 2005, we received notice from Fusion that it intends to terminate the distribution agreement, following which we will not distribute the Pig Spit® product.



Wow Instant Detailer



The Wow Instant Detailer is an organic, biodegradable product designed for cleaning the interiors of vehicles such as vinyl and leather seats, dashboards and other interior surfaces.



Wow Automotive Exterior Spray Conditioner



The Wow Automotive Exterior Spray Conditioner has been designed to improve the appearance of car paint, engine, trim and components. It is intended to restore dull or faded rubber, tires, trim, vinyl, paint, chrome, and other surfaces. It sprays on easily and does not require rubbing or buffing, is safe to use on most surfaces, and leaves no caking or residue.  The following are what we believe to be specific advantages of using the Wow Automotive Exterior Spray Conditioner:



·

Works into hard-to-reach areas like motors, seams, and trim.

·

Provides UV protection, preventing color fading on paint and carbon fiber finishes.

·

Easy touch-up or full detail.

·

Makes black trim look new.

·

Eliminates wax marks.

·

Provides protection from the elements.

·

Does not attract dirt or dust.

·

Not sensitive to heat and makes engines and hoses look new and shiny, even after running.

·

Does not build up like wax.

·

No wiping required.

·

Enhances paint luster.

·

Keeps chrome wheels looking new, and makes them easier to clean. Resists dirt and road grime.

·

Removes grime from chrome and polished.



INDUSTRIAL PRODUCTS



Wow Industrial Cleaner





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The Wow Industrial Cleaner has been designed to remove grease, oil, wax, tar dirt and other industrial cleaning needs. It is a highly concentrated cleaning solution that can be diluted up a 40:1 ratio. The following are what we believe to be specific advantages of using the Wow Industrial Cleaner:



·

Safe and effective

·

Biodegradable

·

Non-abrasive

·

Non-flammable

·

Industrial strength



PRODUCT PRODUCTION



We do not currently produce our products in-house except for Stain PenTM, 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 also believe other production facilities are available upon similar terms if for any reason the current facility could not meet demand for production. We also believe sufficient quantities of raw materials for our products are reasonably available such that production would not be unreasonably delayed, although we do not have any contracts for production of these raw materials. 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.



Since inception, we have spent approximately $71,884 on research and development of the business, our products, and our marketing strategy.



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 several outside marketing arrangements, which we consider significant. These agreements are with the following organizations:



·

Marden Distribution, Inc.,

·

Fusion Packaging Solutions, Inc.,

·

Morgan & Sampson SCA,

·

New Frontier Marketing, Inc. and

·

Daymon Associates, Inc.



The Marden Agreement grants Marden Distribution, Inc. the exclusive right to distribute our products to Wal-Mart®, Sams Club®, and ACE Hardware®. 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®, Stain PenTM, and derivatives of these products such as our engine cleaner, upholstery cleaner, and wheel cleaner, to Wal-Mart®, Sam’s Club®, or ACE Hardware®.  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.





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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®. Pig Spit® was introduced at the Sturgis Motorcycle Rally in 1994 and has won the respect of motorcycle enthusiasts around the world. Pig Spit® 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® is available at most Harley Davidson® 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® Pig Spit®.  In November 2005, Fusion provided notice that it intends to terminate the agreement as of February 2006, or sooner if certain stated conditions are not met.



The Morgan & Sampson agreement grants Morgan & Sampson SCA the exclusive marketing and distribution rights to Source Direct's proprietary Stain PenTM Twin Pack to more than 5,000 grocery retailers in the Western United States and Hawaii. In January 2005, through this agreement, we began shipments of our Stain PenTM product to all Safeway® stores and Kmart Super Centers® nationwide.



The New Frontier Marketing agreement authorizes New Frontier Marketing, Inc., to act as principal agent for all the Source Direct proprietary cleaning products to all United Natural Foods, Inc. (UNFI), and grocery trade customers in the Northwest region. UNFI is the largest publicly traded wholesale distributor to the natural and organic foods industry. Carrying more than 43,000 SKUs, the company supplies over 21,000 customers nationwide and services a wide variety of retail formats including super natural chains, independent natural products retailers and conventional supermarkets located in Washington State, Oregon, Montana, Idaho and Alaska.



The Daymon Associates broker contract designates Daymon Associates, Inc. as the exclusive sales agent and broker in connection with all sales and/or contracts for merchandise designated to Costco® Warehouses in the following regions:



- Domestic: Bay Area; Los Angeles Region; Midwest Region; Northeast Region; Northwest   Region; San Diego Region; Southeast Region; Texas Region; Mexico Region; Eastern Canada Region; and the Western Canada Region.



- International: Japan; Korea; Taiwan; and United Kingdom.



The Agreement provides that the Company will pay to Daymon a commission on the Company's products sold, shipped, and invoiced to Costco® within the above-defined territory. The Commissions paid will be based on the gross amount of sales generated, defined as the amount of the invoice, less any cash discounts. The Company agreed to pay a 3% commission.



Under the Agreement, Daymon agreed to devote its efforts to the sale of the Company's products during the term of the agreement, which is one year, with automatic one-year renewals unless terminated by either party on 90 days' written notice. Daymon agreed to provide weekly sales data, by location, as well as analytical reviews of such data. Daymon agreed to devote adequate facilities and personnel to perform the services required in the Agreement.



In addition to the above agreements, we also utilize internal marketing efforts to advertise and distribute our products.



In October 2005, we appointed a new National Director of Business Development. Sharon Kirkwood brings 27 years of high-level experience in the consumer packaged goods industry.  Ms. Kirkwood also has many key industry contacts.



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. Erik Darnell is a featured competitor in "Roush Racing: Driver X," a 13-week series debuting on the Discovery Channel beginning in October 2005. The nation's No.1 spectator sport should provide another high-impact venue for brand exposure of Simply Wow®.





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In January 2005, our internal marketing staff contracted with Bi-Mart Membership Discount Stores. The Company has begun shipments of our proprietary 3-ounce Stain PenTM to all Bi-Mart Membership Discount Stores throughout the northwest region.



Bi-Mart stores are membership-only stores, which means that customers must join Bi-Mart or be a guest of a member before shopping with them. Bi-Mart currently has over one million members at more than 60 stores in Washington, Oregon, and Montana, with plans to continue aggressive expansion throughout the greater Northwest. Each store is approximately 30,000 square feet and deals mainly in hard goods in the following departments: photo, house-wares, sporting goods, automotive, hardware, health & beauty, toys, clothing/shoes, beer/food/wine, and a full service pharmacy.



During the quarter ended September 30, 2005, our internal marketing staff expanded our distribution into the Home Shopping Network catalogue, Improvements. Home Shopping Network is a global, multi-channel retailer reaching more than 85 million U.S. households. Management believes this will offer greater distribution opportunities with this mega-retailer, as HSN expands its catalogue portfolio through numerous acquisitions currently under way.



Nationwide brand preference for Stain Pen® is also being supported with advertising in the September 2005 issues of two of America's women's magazines: Redbook and Woman's Day.



In November 2005, we attended the SEMA Show in Las Vegas where we introduced our automotive specialty products. This gave our products exposure to automotive enthusiasts and key domestic and international distributors. The SEMA Show attracts more than 100,000 industry leaders from over 100 countries.



Recently Terminated Marketing Agreements and Arrangements



As part of our overall plan to focus our marketing efforts on maximizing our product exposure we are constantly reviewing our marketing agreements. We have recently terminated several agreements.



Termination of Business Relationship with Benper, S.A. de C.V.



As of July 26, 2005, we terminated all business relationships with Benper, S.A. de C.V. ("Benper"), a Mexican corporation. The Company and Benper had been in negotiations relating to the possibility of entering into a distributor agreement for certain of the Company's products in Mexico, Central America, and South America. However, the Company and Benper were unable to agree on terms for such an agreement, and accordingly, the Company terminated all current and future business relationships with Benper.



Termination of Impact Sales Agreement



The Company also agreed to terminate an agreement with Impact Sales, Inc. ("Impact Sales"), dated as of June 8, 2004 (the "Impact Agreement"). The Impact Agreement related to the distribution rights for certain of the Company's proprietary cleaning products to specified grocery retailers in the United States. The Company and Impact Sales mutually agreed to terminate the Impact Agreement. The termination was effective as of January 2005.



Termination of MediaCorp QVC Agreement



An agreement between the Company and MediaCorp Worldwide, L.L.C. ("MediaCorp"), dated September 17, 2004 (the "QVC Agreement"), expired as of its own terms and was not renewed by the Company and MediaCorp. The QVC Agreement related to the exclusive right granted to MediaCorp to establish a relationship between the QVC Home Shopping Network ("QVC") and the Company. The stated term of the QVC Agreement was for six months, or longer if MediaCorp secured an order for certain of the Company's products by QVC. The Company and MediaCorp decided not to extend the QVC Agreement, and as such, MediaCorp no longer has an exclusive right to seek to establish a relationship between the Company and QVC.



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Termination of Business Relationship with Integritas Inc.



As of September 15, 2005, we terminated all business relationships with Integritas Inc. ("Integritas"), a Nevada corporation. In August 2004, the Company and Integritas entered into an agreement whereby Integritas agreed to provide certain services to the Company including but not limited to (i) attending business meetings and conferences; (ii) advising on potential marketing and distribution opportunities; (iii) creative input; and (iv) compliance issues. As compensation under the agreement, the Company issued 1,000,000 shares of its common stock and an option to purchase up to an additional 1,500,000 shares of common stock at an exercise price of $0.125 per share. The option was exercisable for three years. The term of the agreement was for one year, renewable at the option of the parties. The Company determined not to renew the agreement, and as of September 15, 2005, terminated all current and future business relationships with Integritas.



Significant Customers



Through September 30, 2005, we received the majority of our revenues through sales of our products by three divisions of Albertsons®: the Salt Lake division, the Denver division, and the Vacaville, California division. We believe that we have a good relationship with these divisions. Additionally, we have received purchase orders from additional divisions of Albertsons®. Also, we have received orders from ATA Retail Services. Further, we have received orders from Marden Inc., for distribution into the new Wal-Mart® Motorcycle Modular.  In June 2005, we began shipments of the Stain PenTM product to the Flying J Travel Plaza chain. We continue to develop many different outlets for our unique line of products.



Principal Suppliers



The principal suppliers of the raw materials we use to manufacture our products include Michelman Incorporated, Norman Fox & Co., Chemcentral Inc., and VoPak USA.  We believe that we have good relationships with our suppliers.



COMPETITION



The market for cleaning products is intensely competitive and dominated by a small number of large, well-established and well-financed companies. All of the competitors have longer operating histories and greater financial, technical, sales and marketing resources than does the Company. In addition, we also face competition from potential new entrants into the market who may develop new cleaning products. We cannot guarantee that the Company will be able to compete successfully against current and future competitors or that competitive pressures will not result in price reductions, reduced operating margins and loss of market share, any one of which could seriously harm our business.  We also cannot guarantee that the life cycle of the products of the Company will be sufficient for it to realize profitability.



DESCRIPTION OF PROPERTY



Source Direct purchased a manufacturing facility in February 2005 located at 4323 Commerce Circle, Idaho Falls, Idaho. The property consists of approximately 3,780 square feet of office space, and approximately 10,000 square feet of warehouse and manufacturing space.  The Company anticipates that the new facilities will be suitable, appropriate, and adequate for its needs for the foreseeable future. Our monthly obligation for principal and interest payments for this facility total $5,882.



We currently own the following trademarks and web domains:



Trademarks:

Simply Wow®

Stain PenTM

PromptTM

Works On The Spot®





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Web Domains:

·

http://www.simplywow.com

·

http://www.worksonthespot.com

·

http://www.multipurposecleaner.com

·

http://www.stainpen.com

·

http://www.stainstick.com

·

http://www.laundrystain.com

·

http://www.organicsimplywow.com



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.



·

The financial statements of the Company include a "going concern" limitation.

·

The Company has a limited operating history and may require additional funding.

·

The Company has not applied for a patent on its products.

·

The loss of the services of current management would have a material negative impact on the operations of the Company.

·

The Company will be in competition with a number of other companies, which may be better financed than the Company.

·

There is no active public market for the common stock of the Company.

·

The Companys shares are designated as penny stock.

·

The market for the Companys shares is volatile.

·

Future issuances of stock could adversely affect holders of the Companys common stock.



The risks and uncertainties described in this section are not the only ones facing Source Direct. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. If any of the foregoing risks actually occur, our business, financial condition, or results of operations could be materially adversely affected. In such case, the trading price of our common stock could decline.



Financial Condition and Changes in Financial Condition



Revenues for the quarter ended September 30, 2005, totaled $59,376. These revenues were primarily generated from purchase orders from various retail stores including Albertsons®, Wal-Mart®, ATA Retail Services and the Flying J Travel Plaza chain. We anticipate receiving additional orders from these sources 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 $39,426, which resulted in a gross profit margin of $19,950 or 33.6% of sales. Revenues for the prior year quarter totaled $33,498 with a gross margin of $15,378.



Operating expenses for the quarter ended September 30, 2005 totaled $283,563. Compensation related expenses were $93,250. Travel, advertising and marketing expenses incurred for product promotion and general business activities totaled $119,548. We incurred $19,599 in legal and accounting related expenses as a result of the various marketing agreements we entered into and expenses related to fulfilling our filing requirements with the SEC. Research and development expenses totaled $981 for the quarter. The remaining expenses were incurred for general business purposes.



Operating expenses for the quarter ended September 30, 2004 totaled $178,248. 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.





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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.



Liquidity and Capital Resources:



Since inception to September 30, 2005, we have funded our operations from the sale of securities and loans.



During the quarter ended September 30, 2004, we sold 3,500,000 shares of our common stock for total proceeds of $350,000.



During the quarter ended December 31, 2004, we sold 3,005,000 shares of our common stock for total proceeds of $305,000.



During the quarter ended March 31, 2005, we sold 949,600 shares of our common stock for total proceeds of $94,980.



We have utilized the proceeds from these stock sales to fund our various marketing and promotion efforts and general business activities.



We have also funded our operations with loans from individuals. As of September 30, 2005, we were indebted to three individuals for a total amount of $129,263 including accrued interest.



On January 13, 2005, the Company entered into agreements to purchase a new headquarters building. The purchase price for the property was $800,000. Pursuant to the terms of a promissory note, the Company was required to pay $5,882.19 on or before March 3, 2005, and the same amount on or before the third of each month thereafter. The Company had made the required payments through the date of this Report.  The Note bears interest at a rate of 8.5%, and matures and comes due on January 13, 2006.



The property consists of approximately 3,780 square feet of office space, and approximately 10,000 square feet of warehouse and manufacturing space. The remaining debt on this property totaled $765,000 as of September 30, 2005.



At September 30, 2005, we had cash of $5,561, and net working capital of $252,060.  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 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.



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 similar or ancillary products 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.





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Because we are in our startup phase, 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. We will need additional capital for any current or future expansion of our operations we might undertake. If we do not obtain funding, we will have to discontinue our current business plan. We do not believe traditional sources of funding such as bank loans would be available for these expenses, and therefore anticipate that if additional funding is required, such funding would be in the form of private lending arrangements or equity investment in the company.



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.



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, 2005. 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 to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms.



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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, 2005, that has materially affected, or is reasonably likely to affect, the Companys internal control over financial reporting.



PART II OTHER INFORMATION



ITEM 2.  UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS



During the quarter ended September 30, 2005, a shareholder exercised a total of 1,503,600 warrants at $0.125 per share.  These shares have not yet been issued in certificate form, as per request of the shareholder.



ITEM 5. OTHER INFORMATION



During the quarter ended September 30, 2005 a shareholder loaned the Company $905.  The loan is unsecured, due on demand, and non-interest bearing.



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



a.  Exhibits



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



b.  Reports on Form 8-K



On July 27, 2005, the Company filed a Current Report on Form 8-K relating to the termination of marketing distribution agreements with Benper, S.A. de C.V., Impact Sales and MediaCorp QVC.



On September 15, 2005, the Company filed a Current Report on Form 8-K relating to the termination of the business relationship with Integritas Inc.









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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 14, 2005 |  | By: /s/ Deren Z. Smith                                                           
|                         |  | Deren Z. Smith, President (Principal executive officer)                          
|                         |  |                                                                                  
|Date:  November 14, 2005 |  | By: /s/ Kevin Arave                                                              
|                         |  | Kevin Arave, Treasurer (Principal financial officer and chief accounting officer)
|                         |  |                                                                                  





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