10QSB 1 ddq6-01.txt DISTINCTIVE DEVICES FORM 10-QSB JUNE 30, 2001 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 ( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT For the transition period from ____ to ____ Commission file number 0-2749 DISTINCTIVE DEVICES, INC. (Name of small business issuer in its charter) New York 13-1999951 (State of incorporation or organization) (IRS Identification No.) One Bridge Plaza, Ste. 100, Fort Lee, NJ 07024 (Address of principal executive offices) (Zip Code) Issuer's telephone number: (201)363-9922 110 E. Atlantic Ave., Ste. 240, Delray Beach, FL 33444 (Issuer's former address) 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( ) 17,364,824 shares of issuer's common stock, $.05 par value, were outstanding at July 31, 2001. Issuer has no other class of common equity. INDEX Page PART I - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS Condensed Consolidated Balance Sheet-- June 30, 2001 3 Condensed Consolidated Statements Of Operations-- Three months and six months ended June 30, 2001 and 2000 February 5, 1998 ( Inception) to June 30, 2001 4 Condensed Consolidated Statements Of Changes In Stockholders' Equity-- Inception to June 30, 2001 5 Condensed Consolidated Statements Of Cash Flows-- Six months ended June 30, 2001 and 2000 February 5, 1998 (Inception) to June 30, 2001 6 Notes To The Condensed Consolidated Financial Statements 7 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 9 PART II - OTHER INFORMATION Item 5. OTHER INFORMATION 11 Item 6. EXHIBITS AND REPORTS ON FORM 8-K 11 SIGNATURES 11 [2] PART I - FINANCIAL INFORMATION Item 1. - FINANCIAL STATEMENTS DISTINCTIVE DEVICES, INC. AND SUBSIDIARY (Development Stage Companies) CONDENSED CONSOLIDATED BALANCE SHEET (unaudited) June 30, 2001 ASSETS CURRENT ASSETS Cash $ 494,898 Other Receivables 32,190 Loans Receivable 23,000 Inventories 282,637 Prepaid Expenses 2,875 ------- Total Current Assets 835,600 PROPERTY AND EQUIPMENT, Net 521,942 OTHER ASSETS 20,800 --------- $ 1,378,342 ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable and Accrued Liabilities $ 8,889 Accrued Accounting Fees 16,903 --------- Total Current Liabilities 25,792 --------- COMMITMENTS MINORITY INTEREST - STOCKHOLDERS' EQUITY Preferred Stock, Par Value $1; Authorized 1,000,000 Shares, Issued 0 Shares - Common Stock, Par Value $.05; Authorized 20,000,000 Shares 868,241 Additional Paid-In Capital 3,460,288 Deficit Accumulated During the Development Stage (2,975,979) --------- 1,352,550 --------- $ 1,378,342 ========= The Accompanying Notes are an Integral Part of These Financial Statements [3] DISTINCTIVE DEVICES, INC. AND SUBSIDIARY (Development Stage Companies) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Period From February 5,1998 Three Months Ended June 30, Six Months Ended June 30, (Inception) to 2001 2000 2001 2000 June 30, 2001 Revenue $ - $ - $ - $ - $ - General and Administrative Expenses 247,235 606,768 572,632 1,106,543 3,205,774 ------- ------- ------- --------- --------- Operating Loss (247,235) (606,768) (572,632) (1,106,543) (3,205,774) ------- ------- ------- --------- --------- Other Income and Expense Interest and Other Income 5,054 26,345 14,417 32,544 92,513 Loss on Disposal of Assets (48,084) - (48,084) - (54,584) ------ ------ ------ ------ ------ Total Other Income and Expense (43,030) 26,345 (33,667) 32,544 37,929 ------ ------ ------ ------ ------ (290,265) (580,423) (606,299) (1,073,999) (3,167,845) Minority Interest - - - 51,628 170,673 ------- ------- ------- --------- --------- Net Loss $ (290,265) $ (580,423) $ (606,299) $(1,022,371) $(2,997,172) ======= ======= ======= ========= ========= Weighted Average Shares Of Common Stock Outstanding 17,355,448 17,163,404 17,335,631 15,838,826 11,485,463 ========== ========== ========== ========== ========== Loss Per Share - Basic and Diluted $ (0.02) $ (0.03) $ (0.03) $ (0.06) $ (0.26) ==== ==== ==== ==== ==== The Accompanying Notes are an Integral Part of These Financial Statements
[4] DISTINCTIVE DEVICES, INC. AND SUBSIDIARY (Development Stage Companies) CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited)
Deficit Additional Shares Accumulated Common Stock Paid-in to be During the Shares Amount Capital Issued Development Stage Initial Issuance for Cash 6,000,000 $ 300,000 $ (299,700) $ - $ - Net Loss - - - - (195) --------- ------- ------ ----- --- Balance at December 31, 1998 6,000,000 300,000 (299,700) - (195) Issuance of Shares for Cash 2,051,340 102,567 699,597 - - Acquisition of Net Assets on Recapitalization 4,119,902 205,995 (1,666) - - Issuance of Shares for Finder's Fee 121,712 6,086 85,198 - - Net Loss - - - - (606,764) ---------- ------- ------- ----- ------- Balance at December 31, 1999 12,292,954 614,648 483,429 - (606,959) Issuance of Shares for Cash 3,156,810 157,841 2,998,969 - - Issuance of Shares for Acquisition of Minority Interest 1,713,640 85,681 (85,681) - - Shares to be Issued for Finder's Fee - - - 73,034 - Reduction of Minority Interest - - - - 21,193 Net Loss - - - - (1,783,914) ---------- -------- --------- ------ --------- Balance at December 31, 2000 17,163,404 858,170 3,396,717 73,034 (2,369,680) Issuance of Shares for Acquisition Of Minority Interest 182,460 9,123 (9,123) - - Issuance of Shares for Finder's Fee 18,960 948 72,694 (73,034) - Net Loss - - - - (606,299) ---------- ------- --------- ------ --------- Balance at June 30, 2001 17,364,824 $ 868,241 $ 3,460,288 $ - $(2,975,979) ========== ======= ========= ====== =========
The Accompanying Notes are an Integral Part of These Financial Statements [5] DISTINCTIVE DEVICES, INC. AND SUBSIDIARY (Development Stage Companies) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Period From February 5, 1998 Six Months Ended June 30, (Inception) to 2001 2000 June 30, 2001 CASH FLOWS FROM OPERATING ACTIVITIES $ (469,878) $(1,471,427) $(3,260,201) ------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Property and Equipment (12,256) (661,350) (774,445) Proceeds from the Sale of Property and Equipment - - 2,500 Issuance of Notes Receivable (8,000) - (28,000) Payments Received on Notes Receivable - - 5,000 Cash Effect of Recapitalization - - $ (396,041) ----- ----- ------- Net Cash Used in Investing Activities (20,256) (661,350) (396,041) ------ ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from Issuance of Common Stock - 3,156,810 4,151,140 ------ --------- --------- Increase in Cash (490,134) 1,024,033 494,898 Cash: Beginning 985,032 429,259 - ------- ------- ------- Ending $ 494,898 $ 1,453,292 $ 494,898 ======= ========= =======
The Accompanying Notes are an Integral Part of These Financial Statements [6] DISTINCTIVE DEVICES, INC. AND SUBSIDIARY (Development Stage Companies) NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: BASIS OF CONSOLIDATION The accompanying unaudited condensed consolidated financial statements include the accounts of Distinctive Devices, Inc. ("DDI") and its subsidiary, EagleView Industries, Inc. (EagleView) (collectively the "Company"). NOTE 2. NATURE OF BUSINESS The Company has determined to set aside its domestic wireless ISP business plans, and to pursue software development and systems integration businesses. NOTE 3: INTERIM FINANCIAL DATA In the opinion of management, the accompanying unaudited financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission and generally accepted accounting principles for interim financial information. These financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The annual financial statements of the Company as of December 31, 2000 should be read in conjunction with these statements. The financial information included herein has not been audited. However, management believes the accompanying unaudited interim financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the consolidated financial position of the Company as of June 30, 2001 and the results of their operations for the three and six months and the period from February 5, 1998 (inception) to June 30, 2001, and cash flows for the six months ended June 30, 2001 and 2000 and the period from February 5, 1998 (inception) to June 30, 2001. The results of operations and cash flows for the period are not necessarily indicative of the results of operations or cash flows for the year ending December 31, 2001. NOTE 4: CAPITAL STRUCTURE Preferred Stock The Company has 1,000,000 shares of preferred stock (par value $1) authorized. The Board has authority to issue the shares in one or more series and to fix the designation preferences, powers and other rights as it deems appropriate. No shares of preferred stock have been issued. Common Stock The Company has 20,000,000 shares of common stock (par value $.05) authorized. Common stock has one vote per share for the election of directors and all other matters submitted to a vote of stockholders. Shares of common stock do not have cumulative voting, preemptive, redemption or conversion rights. [7] DISTINCTIVE DEVICES, INC. AND SUBSIDIARY (Development Stage Companies) NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 5: MINORITY INTEREST During the six months ended June 30, 2001, DDI exchanged 182,460 shares of its common stock for 91,230 shares of EagleView common stock held by minority shareholders. As a result of this transaction, at June 30, 2001, DDI owned approximately 99.7% of the outstanding shares of EagleView. As this is a continuation of the August 10, 1999 recapitalization, no goodwill has been recorded and only an adjustment to additional paid-in capital has been made for the resultant differences in par value. NOTE 6: GOING CONCERN As shown in the accompanying financial statements, the Company incurred net losses of $290,265, $606,299 and $2,997,172 during the three months and six months ended June 30, 2001, and the period from February 5, 1998 (inception) to June 30, 2001, respectively. The Company's working capital at June 30, 2001 of approximately $810,000 is not sufficient to fund continuing operations at the current level. These factors create a substantial doubt about the Company's ability to continue as a going concern. Management of the Company is considering various plans including commencing operations, reducing expenses, the acquiring of or merging with an operating company and obtain financing through the issuance of debt and stock. The Company is contemplating offering in a private placement, units consisting of convertible debentures and common stock. The contemplated $3,000,000 offering is currently planned to consist of 600,000 five dollar units, aggregating $2,400,000 of convertible debentures and 4,800,000 shares of DDI's common stock. Each five-dollar unit would consist of a four-dollar 10% convertible debenture and eight shares of DDI's common stock. The debentures would have a five-year maturity, and would be convertible into shares of DDI's common stock at prices ranging from $0.50 to $1.50. The placement would become effective upon the Company's receipt of a minimum of $1,000,000 in subscriptions. The ability of the Company to continue as a going concern is dependent on their ability to continue to obtain financing, the successful implementation of management's plan and the establishment of profitable operations. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. NOTE 7: RELOCATION The Company has closed its Delray Beach, Florida and New York City locations, and has relocated its operations to Fort Lee, New Jersey. The Company is in the process of attempting to terminate certain of its leases. [8] Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION At a meeting of directors held on May 15, 2001, Mr. Sanjay Mody, 43, was elected President, CEO, Treasurer and CFO of the Company, replacing Mr. James Wolff who resigned these positions while remaining a director. Mr. Mody has been a director and shareholder of the Company since March 2000. He has been an active investor in several technology companies over the past eighteen months and prior thereto served for four years as Vice President of Laidlaw Global Securities in New York City. At the meeting, two nominees, proposed by Mr. Mody, were added to the Board of Directors, namely, Mr. Shrikant Mehta and Mr. William Walles. Mr. Mehta is the founder of Combine International, Inc., a multi-million dollar business engaged in the manufacture and distribution of fine jewelry, and Internet Operations Center, Inc., engaged in web hosting and Internet professional services. He serves both companies as CEO and President and both are based in the Detroit, Michigan area. Mr. Mehta has founded a number of companies including Inknowvator, Inc., I*Logic, Inc., The POM Group, Inc. and Lenderlive.com. He currently serves as a director of these and other corporations. He holds Bachelor and Master Degrees in Electronics. Mr. Walles recently founded VIEWige, in Newport Coast, California, a general contractor providing services to assist large corporations, and other entities, in fulfilling Internet objectives by providing better and speedier interaction with customers, employees and shareholders. Previously he served as President of Combine International, Inc. and earlier, in advanced manufacturing technology assignments with Ford Motor Company. He holds a B.S. Degree in Mechanical Engineering and a M.S. Degree in Engineering Management. In mid-June, our offices in Delray Beach, Florida were closed and headquarters were relocated to space occupied by Mr. Mody in Fort Lee, New Jersey. While the within financial statements disclose a steady decline in expenses and losses for the periods covered in this Report, to the date hereof the Company has not realized any revenues from operations. Additional funding will be needed to carry out the Plan of Operation, below, and this requirement is addressed in the Subsequent Events section which follows. Plan of Operation The Company has abandoned its earlier plan to provide wireless Internet connectivity services in the New York City area. Given the recent precipitous drop in rates charged for Internet access by competitors, including local telephone companies, it would be uneconomic to pursue this activity. However, the equipment and inventory acquired to undertake New York operations may have value in foreign locations and we are investigating several such prospects. We intend to shift our business focus to software development. Mr. Mody, a native of India, has numerous contacts in the software and telecommunications industries in that country which, we believe, will prove beneficial to the Company in the near future. India is well known for the low cost and high quality of its locally engineered software products and we believe that acquisition [9] of a firm or organization in that industry can be accomplished. With such an "in house" software development capability, marketing efforts in the U.S., and elsewhere, can be undertaken. Working relationships with prospective acquirees enable us to garner business beforehand, evidenced by the Company's first revenue producing purchase order, issued this month by a U.S. customer, for software development valued at $200,000. While our principal activity is now the marketing of customized software for systems integration and other applications, we are actively pursuing uses for our wireless Internet capabilities in two locations in Eastern Europe, both involving national or provincial governmental agencies. Subsequent Events A Private Offering Memorandum has been prepared with respect to the sale of $1 to $3 million in new Company securities. Up to 600,000 units will be offered at $5.00 per unit, each consisting of (i) $4.00 principal amount of 10% Convertible Debentures and (ii) eight (8) shares of Common Stock, $.05 par value. The Debentures will mature in five years during which term they will be convertible into Common Stock at prices ranging from $0.50 per share in the first year to $1.50 per share in the fifth. Funds will be available to the Company upon the minimum sale of $1,000,000 of such securities. We are in the final stages of negotiating an OEM and Distributor agreement with Realtime Access Inc. for marketing their high-end Voice and Data access products for telephone companies, which are constantly upgrading their networks to provide high-speed data on existing infrastructure. This premier product provides a "last mile solution" for telecom companies to provide high-speed data and voice on the same platform simultaneously. The Company will have exclusive marketing rights in Russia, Bulgaria, Ukraine and Turkey. Mr. Mody is a founding Director of Realtime Access Inc. The agreement is expected to be signed later this month. Future Funding At June 30, 2001, the Company's cash balances approximated $500,000. This sum may not be sufficient to fund operations for the next twelve months, absent meaningful revenues and/or successful completion of the Private Offering described above. IN ADDITION TO THE FOREGOING UNCERTAINTY, READERS ARE ADVISED THAT STATEMENTS CONTAINED HEREIN CONCERNING FUTURE ACTIVITIES, PERFORMANCE OR INTENTIONS ARE FORWARD-LOOKING STATEMENTS WHICH, BY THEIR NATURE, INVOLVE RISK AND UNCERTAINTY BECAUSE THEY RELATE TO EVENTS, AND DEPEND ON CIRCUMSTANCES, THAT WILL OCCUR IN THE FUTURE, MANY OF WHICH ARE NOT WITHIN THE COMPANY'S CONTROL. ACTUAL RESULTS AND EVENTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY SUCH STATEMENTS AS THE RESULT OF KNOWN OR UNKNOWN RISKS, UNCERTAINTIES AND/OR OTHER FACTORS AND THERE CAN BE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE CORRECT. [10] PART II OTHER INFORMATION Item 5. OTHER INFORMATION A Notification of Late Filing on Form 12b-25 was filed on August 14, 2001, in order to obtain an extension of time for the filing of this Report on Form 10-QSB. Item 6. EXHIBITS AND REPORTS ON FORM 8-K A Report on Form 8-K was filed, dated May 15, 2001, which reported the change in the Company's principal executive officer and the addition of two directors, as described in Item 2 of this Report. No other report on Form 8-K was filed during the quarter ended June 30, 2001. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DISTINCTIVE DEVICES, INC. (Registrant) Dated: August 17, 2001 By: /s/ SANJAY MODY Sanjay Mody President and Treasurer Chief Executive Officer Chief Financial Officer [11]