-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IigVgv8uvmzM/QvdbR+rs6QqVanrTtU8aMV1h+ry5r6LMmLQWrSZmI5WghAkFPyi uTt39/KoCZSFL4APNzN1Yw== 0001020568-02-000012.txt : 20020814 0001020568-02-000012.hdr.sgml : 20020814 20020814143600 ACCESSION NUMBER: 0001020568-02-000012 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DISTINCTIVE DEVICES INC CENTRAL INDEX KEY: 0000059963 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATIONS EQUIPMENT, NEC [3669] IRS NUMBER: 131999951 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-02749 FILM NUMBER: 02734822 BUSINESS ADDRESS: STREET 1: ONE BRIDGE PLAZA SUITE 100 CITY: FORT LEE STATE: NJ ZIP: 07024 BUSINESS PHONE: 5612744233 MAIL ADDRESS: STREET 1: ONE BRIDGE PLAZA SUSITE 100 CITY: FORT LEE STATE: NJ ZIP: 07024 FORMER COMPANY: FORMER CONFORMED NAME: LMC DATA INC DATE OF NAME CHANGE: 19761021 10QSB 1 ddq63.txt 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, 2002 ( ) 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 N/A (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( ) 19,134,824 shares of issuer's common stock, $.05 par value, were outstanding at July 31, 2002. Issuer has no other class of common equity. CONTENTS Page PART I - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS Condensed Consolidated Balance Sheet-- June 30, 2002 3 Condensed Consolidated Statements Of Operations-- Three months and six months ended June 30, 2002 and 2001 February 5, 1998 (Inception) to June 30, 2002 4 Condensed Consolidated Statements Of Changes In Stockholders' Equity-- Inception to June 30, 2002 5 Condensed Consolidated Statements Of Cash Flows-- Six months ended June 30, 2002 and 2001 February 5, 1998 (Inception) to June 30, 2002 6 Notes To The Condensed Consolidated Financial Statements 7 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 10 PART II - OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K 12 SIGNATURES 12 2 PART I - FINANCIAL INFORMATION Item 1. - FINANCIAL STATEMENTS DISTINCTIVE DEVICES, INC. AND SUBSIDIARIES (Development Stage Companies) CONDENSED CONSOLIDATED BALANCE SHEET (unaudited) June 30, 2002 ---- ASSETS Current Assets Cash and cash equivalents $ 40,494 Accounts receivable 645,945 Inventories 12,579 Prepaid Expenses 1,911 Assets of discontinued operations and assets held for sale 88,375 ------- Total Current Assets 789,304 Property and equipment, net 290,091 Goodwill 11,221 Other assets 32,439 ------- $ 1,123,055 ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable and accrued liabilities $ 274,415 Accrued professional fees 26,967 ------- Total Current Liabilities 301,382 Convertible subordinated debentures 400,000 ------- Total Liabilities 701,382 ------- Minority interest 2,116 ------- Stockholders' Equity Convertible preferred stock Series C, $1 par; 1,000,000 shares authorized; 10,000 outstanding 10,000 Common stock, $.05 par; 20,000,000 shares authorized; 19,134,824 shares outstanding 956,741 Additional paid-in capital 3,549,680 Deficit accumulated during the development stage (4,096,864) --------- 419,557 -------- Total Stockholders' Equity $ 1,123.055 ========= The accompanying notes are an integral part of these financial statements. 3 DISTINCTIVE DEVICES, INC. AND SUBSIDIARIES (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 2002 2001* 2002 2001* June 30, 2002 ---- ---- ---- ---- ------------- Revenue Operating $ 360,805 $ - $ 798,595 $ - $ 798,595 Other - - - - 35,888 Cost of goods sold (335,253) - (719,979) - (719,979) Operating expenses (189,918) (247,235) (395,454) (572,632) (2,461,215) ------- ------- ------- ------- --------- Operating loss (164,366) (247,235) (316,838) (572,632) (2,346,711) ------- ------- ------- Other income (expense): Interest expense (20,000) - (20,000) - (20,000) Interest and other income 276 5,054 2,340 14,417 101,815 Loss on disposal of equipment - - - - (6,500) ------ ------ ------ ------ ------- Other income (expense), net (19,724) 5,054 (17,660) 14,417 75,315 ------ ----- ------ ------ ------- (184,090) (242,181) (334,498) (558,215) (2,271,396) Minority interest - - - - 191,866 ------- ------- ------- ------- --------- Loss from continuing operations (184,090) (242,181) (334,498) (558,215) (2,079,530) ------- ------- ------- ------- --------- Discontinued operations: Loss from discontinued operations, net of tax benefit of $0 after valuation allowance - - - - (1,605,078) Loss on sale and write-down of assets from discontinued operations, net of tax benefit of $0 after valuation allowance (19,543) (48,084) (58,784) (48,084) (412,256) ------ ------ ------ ------ ------- Loss from discontinued operations (19,543) (48,084) (58,784) (48,084) (2,017,334) ------ ------ ------ ------ --------- Net loss $ (203,633) $ (290,265) $ (393,282) $ (606,299) $(4,096,864) ======= ======= ======= ======= ========= Weighted average shares of common stock outstanding (1) 19,134,824 17,355,448 19,134,824 17,335,631 13,082,161 ========== ========== ========== ========== ========== Loss per share - basic and diluted: Loss from continuing operations $ (0.01) $ (0.02) $ (0.02) $ (0.03) $ (0.16) Loss from discontinued operations - - - - (0.15) ---- ---- ---- ---- ---- Net loss per share - basic and diluted $ (0.01) $ (0.02) $ (0.02) $ (0.03) $ (0.31) ==== ==== ==== ==== ====
(1) The weighted average shares of common stock outstanding are not adjusted for potential effects of the Company's convertible preferred stock or its convertible subordinated debentures because of their antidilutive effect. *During the six months ended June 30, 2001, the Company primarily focused its efforts in one segment, developing its wireless ISP business which has been discontinued (Note 11). The accompanying notes are an integral part of these financial statements. 4 DISTINCTIVE DEVICES, INC. AND SUBSIDIARIES (Development Stage Companies) CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited)
Addi- Deficit Total Preferred tional Shares Accumulated Stock Stock Common Stock Paid-in to be During the Devel- Holders' Shares Amount Shares Amount Capital Issued opment Stage Equity ------ ------ ------- ------ ------ ------ ----------- ------ Initial issuance of shares for cash - $ - 6,000,000 $ 300,000 $ (299,700) $ - $ - $ 300 Net loss - 1998 - - - - - - (195) (195) ------ ------ ---------- ------- --------- ------ -------- ----------- Balance at December 31, 1998 - - 6,000,000 300,000 (299,700) - (195) 105 Issuance of shares for cash - - 2,051,340 102,567 699,597 - - 802,164 Acquisition of net assets on recapitalization - - 4,119,902 205,995 (1,666) - - 204,329 Issuance of shares for finder's fee - - 121,712 6,086 85,198 - - 91,284 Net loss - 1999 - - - - - - (606,764) (606,764) ------ ------ ---------- ------- ------- ------ ------- ------- Balance at December 31, 1999 - - 12,292,954 614,648 483,429 - (606,959) 491,118 Issuance of shares for cash - - 3,156,810 157,841 2,998,969 - - 3,156,810 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 - 73,034 Reduction of minority interest - - - - - - 21,193 21,193 Net loss - 2000 - - - - - - (1,783,914) (1,783,914) ------ ------ ---------- ------ ------ ------ --------- --------- Balance at December 31, 2000 - - 17,163,404 858,170 3,396,717 73,034 (2,369,680) 1,958,241 Issuance of shares for acquisition of minority interest - - 182,460 9,123 (9,123) - - - Issuance of shares for finder's fee - - 18,960 948 72,086 (73,034) - - Issuance of shares for acquisition of shares of subsidiary - - 1,770,000 88,500 - - - 88,500 Exchange of common for preferred shares 10,000 10,000 (1,250,000) (62,500) 52,500 - - - Issuance of shares for cash - - 1,250,000 62,500 37,500 - - 100,000 Net loss - 2001 - - - - - - (1,333,902) (1,333,902) ------ ------ ---------- ------ ------ ------- --------- --------- Balance at December 31, 2001 10,000 10,000 19,134,824 956,741 3,549,680 - (3,703,582) 812,839 Net loss - - - - - - (393,282) (393,282) ------ ------ ---------- ------- --------- ------- ------- Balance at June 30, 2002 10,000 $10,000 19,134,824 $ 956,741 $3,549,680 $ - $(4,096,864) $(419,557) ====== ====== ========== ======= ========= ====== =========
The accompanying notes are an integral part of these financial statements. 5 DISTINCTIVE DEVICES, INC. AND SUBSIDIARIES (Development Stage Companies) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Period From February 5, 1998 Six Months Ended June 30, (Inception) to 2002 2001 June 30, 2002 Cash flows from operating activities $ (717,404) $ (469,878) $(2,627,913) ------- ------- --------- Cash flows from investing activities: Acquisition of equipment (57,316) (12,256) (922,673) Proceeds from sale of equipment - - 2,500 Issuance of notes receivable - (8,000) (20,000) Payments received on notes receivable - - 20,000 Cash received on acquiring Webpulse - - 13,117 Cash effect of recapitalization - - 398,904 -------- ------ ------- Net cash used in investing activities (57,316) (20,256) (508,152) ------- ------- ------- Cash flows from financing activities: Issuance of convertible debentures - - 400,000 Minority interest - - 2,116 Issuance of common stock - - 4,254,265 -------- ------- --------- Net cash provided by financing activities - - 4,656,381 -------- ------- --------- Increase (decrease) in cash from continuing operations (774,720) (490,134) 1,520,316 ------- ------- --------- Net cash provided by (used in) discontinued operations 125,256 - (1,479,822) ------- ------ --------- Cash - Beginning of period 689,958 985,032 - ------- ------- --------- End of period $ 40,494 $494,898 $ 40,494 ====== ======= ====== The accompanying notes are an integral part of these financial statements. 6 DISTINCTIVE DEVICES, INC. AND SUBSIDIARIES (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. and its subsidiaries, Webpulse Consulting, Inc., Distinctive Devices (India), PLC (96.6% owned), International Gemsource, Inc. and EagleView Industries, Inc. EagleView is inactive. NOTE 2: 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 accounting principles generally accepted in the United States of America for complete financial statements. The annual financial statements of the Company as of December 31, 2001 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, 2002 and the results of operations for the three months and six months and the period from February 5, 1998 (inception) to June 30, 2002, and cash flows for the six months ended June 30, 2002 and 2001 and the period from February 5, 1998 (inception) to June 30, 2002. The results of operations and cash flows for the six-month period are not necessarily indicative of the results of operations or cash flows for the year ending December 31, 2002. NOTE 3: REVENUE RECOGNITION Product sales are recognized when an agreement of sale exists, product delivery has occurred, pricing is final or determinable, and collection is reasonably assured. NOTE 4. INVENTORIES Inventories consist primarily of gemstones, held by a subsidiary. Inventories are stated at cost, which approximates market, on the first-in, first-out, basis. NOTE 5. ASSETS HELD FOR SALE Assets held for sale represent equipment and inventories related to the Company's discontinued wireless ISP operations which have been segregated and written down to their net realizable value. During the six months ended June 30, 2002, certain assets held for sale were sold resulting in a loss of $58,784. NOTE 6. CONVERTIBLE SUBORDINATED DEBENTURES The Company has $400,000 principal amount of 10% convertible subordinated debentures outstanding (the "Debentures") which mature in 2006. The Debentures are convertible into common stock at the holder's option at conversion prices ranging from $0.25 in 2002 to $0.75 in 7 DISTINCTIVE DEVICES, INC. AND SUBSIDIARIES (Development Stage Companies) NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 6. CONVERTIBLE SUBORDINATED DEBENTURES (continued) 2006, subject to an increase in the authorized common share capital. The Debentures may be redeemed by the Company, in whole or in part, at percentages of principal amount ranging from 105% in 2002 to 101.25% in 2006. The Debentures are subordinated to obligations for money borrowed from financial institutions. NOTE 7. CAPITAL STRUCTURE Convertible 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. The Company has designated 60,000 shares as Series C convertible preferred stock of which 10,000 shares are outstanding. Each such share is convertible into 125 shares of common stock and all such shares outstanding will be automatically converted, on that basis, to common stock following shareholder approval of an increase in common share capital to a number of common shares sufficient for conversion of all outstanding shares of Series C preferred stock. Until such approval, each Series C preferred share has voting, dividend and liquidation rights equivalent to 125 shares of common stock. Common Stock - ----------- The Company has 20,000,000 authorized shares of common stock, par value $.05. Common stock has one vote per share for 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. NOTE 8. NEW SUBSIDIARY In January 2002, the Company organized International Gemsource, Inc., a Delaware corporation, based in the Company's offices in Fort Lee, New Jersey. The subsidiary is engaged in trading rough and polished gemstones. NOTE 9. GOING CONCERN As shown in the accompanying financial statements, the Company incurred net losses of $203,633, $393,282 and $4,096,864 during the three months and six months ended June 30, 2002, and the period from February 5, 1998 (inception) to June 30, 2002, respectively. The Company's working capital at June 30, 2002 of approximately $488,000 is not sufficient to fund operations at the current level. These factors raise a substantial doubt about the Company's ability to continue as a going concern. Management of the Company is considering acquiring or merging with an operating company, commencing new operations and obtaining financing through the issuance of debt and stock. The ability of the Company to continue as a going concern is dependent on management's ability to continue to obtain financing, to successfully implement its business plan and to establish 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. 8 DISTINCTIVE DEVICES, INC. AND SUBSIDIARIES (Development Stage Companies) NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 10. SEGMENT INFORMATION The Company reports segments based upon the management approach. The management approach designates the internal reporting that is used by management for making operating decisions and assessing performance. For the three months and six months ended June 30, 2002, the Company operated three segments, Distribution of RTA Equipment, Gemstone Trading and Software Development.
Distribution of RTA Gemstone Software Equipment Trading Development Corporate Consolidated --------- ------- ----------- --------- ------------ For the three months ended June 30, 2002: Revenue $157,796 $201,767 $ 1,242 $ - $ 360,805 Operating income (loss) 19,311 16* (49,246) (134,447) (164,366) Other income (expense) - - 41 (19,765) (19,724) Income (loss) from continuing operations 19,311 16* (49,205) (154,212) (184,090) For the six months ended June 30, 2002: Revenue 374,614 422,739 1,242 - 798,595 Operating income (loss) 44,698 56* (95,854) (265,738) (316,838) Other income (expense) - - 345 (18,005) (17,660) Income (loss) from continuing operations 44,698 56* (95,509) (283,743) (334,498) Assets 212,905 454,024 195,688** 260,438*** 1,123,055
*Operating income and income from continuing operations have been reduced by a parent company charge for sales and office services of $5,000 in the three months, and $32,500 in the six months, ended June 30, 2002. **Includes assets of DDI-India, located in India, of $96,854. ***Includes assets held for sale of $88,375. 9 DISTINCTIVE DEVICES, INC. AND SUBSIDIARIES (Development Stage Companies) NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 11. DISCONTINUED OPERATIONS On July 2, 2001, the Board of Directors of the Company approved the discontinuation of its wireless ISP business operations. Accordingly, the Company segregated the assets, liabilities and operating expenses as of September 30, 2001. NOTE 12. SUBSEQUENT EVENTS On August 1, 2002, the Company designated 250,000 shares as Series D Convertible Preferred Stock, par value $1. On August 6, 2002, 173,333 such shares were sold for $650,000 cash. At such time as stockholders approve an increase in, and/or a reverse split of, the Company's common share capital, sufficient in amount to provide for conversion of all preferred shares outstanding (including a revision in par value per common share), each Series D preferred share will be automatically converted into 125 shares of common stock. Until such approval, each Series D share has voting and dividend rights equivalent to 125 shares of common stock and a preference of $3.75 per share in the event of liquidation. The Company recently filed preliminary proxy materials with the Securities and Exchange Commission with respect to a Special Meeting of Shareholders to consider the foregoing recapitalization, and other matters. The date for the meeting will be established, and all shareholders will be notified, following clearance of this filing. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Plan of Operation - ----------------- Efforts continue to further develop markets for Company products and services, in three principal segments: hardware and software solutions, gemstone trading and sales of DSL telephone equipment. While markets for software, servers and telephonic equipment are currently severely depressed in North America and Western Europe, this does not appear to be true in India and Russia, where our efforts are primarily directed. Our subsidiary in India is in negotiations with several substantial customer prospects regarding the sale of hardware and software solutions involving equipment provided under our reseller agreements with Sun Microsystems, Citrix Systems and Baan (of Germany). In another development, arrangements were recently completed with Hughes Escort Communications to receive educational classroom courses provided, via satellite, by the University of Phoenix, a leading provider of such courses which lead to the granting of B.S. and advanced degrees. Classrooms in Bombay will be managed by our subsidiary. 10 Gemstone trading activity continues. We are considering participation, with a major mining firm, in a Russian joint venture to produce cut and polished diamonds. Through the Company's contacts in India, experienced personnel would be recruited for this activity. India is the world's leading producer of cut and polished gemstones. Sales of telephonic DSL equipment continue. We are considering the purchase of assets from creditors of an Indian company that manufactures such equipment. The company was formerly affiliated with Real Time Access, Inc ("RTA"), of Livermore, California, now in Chapter 11 bankruptcy proceedings. We have had an agreement to distribute RTA products in four countries in Eastern Europe since September 2001. The purchase would assure the Company of an ongoing production source for DSL equipment. If concluded, the purchase would be undertaken by our Indian subsidiary with funds provided by the Company from its recent private placement (see Note 12 to the within financial statements). Operating Results - ----------------- Sales for the six months ended June 30, 2002 approximated $799,000 and were somewhat lower in the June quarter ($361,000) than in the preceding March quarter ($438,000). For the six month period, the loss from continuing operations amounted to $334,498 and the net loss, including losses from discontinued operations, amounted to $393,282. This compares to a net loss of $606,299 incurred in the prior year six-month period. Among other factors, lowered losses reflect, in large part, a substantial reduction in operating expenses to $395,454 in the latest six-month period from $572,632 a year earlier. Cash realized from the disposal of equipment intended for use in our discontinued ISP wireless operation amounted to $125,256 in the six month period ended June 30, 2002. During the same period, a $58,784 loss was recognized with respect to the disposal of this ISP equipment, of which $4,125 was a write-down of equipment to its net realizable value. Liquidity - --------- Working capital at June 30, 2002. approximated $488,000. This amount was subsequently increased by $650,000 following the private placement of preferred stock (see Note 12 to the within financial statements). Even so, unless sales increase markedly, and profits are realized, additional working capital will be needed. If so, the Company will seek to place additional amounts of debentures or capital stock. No assurance can be given, however, that a future placement of securities can be accomplished, or would not be dilutive to current shareholders. Risks and Uncertainties - ----------------------- The Company is subject to all the risks inherent in an early stage company in the software, systems, telecommunications and Internet industries. These risks include, but are not limited to, a limited operating history, limited resources, dependence upon consumer and business acceptance of the products and services, the changes taking place in the electronic commerce industry and the general economic climate. The Company's operating results may be materially affected by the foregoing factors. 11 STATEMENTS CONTAINED HEREIN AND ELSEWHERE IN THIS REPORT 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. PART II OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 3.1* Certificate of Amendment to the Certificate of Incorporation dated August 1, 2002. 10.1* Stock Purchase Agreement, dated as of July 31, 2002, between Registrant and Shrikant C. Mehta with respect to the purchase of Series D Convertible Preferred Stock. 99* Statement Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *filed herewith (b) A Report on Form 8-K was filed for an event of April 16, 2002, reporting in Item 4 a change in the Company's independent accountants. 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 12, 2002 By: /s/ SANJAY MODY ---------------------- Sanjay Mody President and CEO Treasurer and CFO 12 EX-10 3 ex10-1.txt Exhibit: 10.1 STOCK PURCHASE AGREEMENT AGREEMENT dated as of July 31, 2002, between Distinctive Devices, Inc., a New York corporation, having an address at One Bridge Plaza, Suite 100, Fort Lee, NJ 07024 (the "Company"), and Shrikant C. Mehta, having his office address at 354 Indusco Court, Troy MI 48083 (the "Purchaser"). BACKGROUND The Company has designated 250,000 shares of its Preferred Stock, $1.00 par value, as Series D Convertible Preferred Stock, (the "Series D Preferred Stock"). The Purchaser desires to purchase 173,333 shares (the "Purchased Shares?) of the authorized Series D Preferred Stock from the Company, and the Company desires to sell the Purchased Shares to the Purchaser, on the terms and conditions set forth below. NOW, THEREFORE, the parties hereto for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged hereby, agree as follows: 1. Sale of Series D Preferred Stock: Purchase Price. 1.1 Sale. Subject to the terms and conditions set forth herein, the Purchaser hereby purchases 173,333 shares of Series D Preferred Stock from the Company constituting the Purchased Shares, and the Company hereby sells the Purchased Shares to the Purchaser for the aggregate purchase price of $650,000 (the "Purchase Price"). Pursuant to ?912(c)(1) of the New York Business Corporation Law, the Board of Directors of the Company approves of the purchase of the Purchased Shares by the Purchaser 1.2 Closing. The closing (the "Closing?) of the transaction contemplated hereby is taking place simultaneously with the execution and delivery of this Agreement. At the Closing, the parties are making the following deliveries to each other: (a) The Company is delivering to the Purchaser a certificate registered in the name of the Purchaser representing all of the Purchased Shares, receipt of which Is acknowledged by the Purchaser; and (b) The Purchaser is delivering the Purchase Price to the Company by check or wire transfer to an account designated by the Company, receipt of which is acknowledged by the Company. 2. Representations. Warranties and Covenants of the Company. The Company represents and warrants to the Purchaser that: 2.1 Organization: Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of New York. The Company is duly qualified or licensed to do business as a foreign corporation in good standing in every jurisdiction where the character of its properties, owned or leased, or the nature of its activities make such qualification necessary. 2.2 Corporate Power The Company has all requisite corporate power to enter into this Agreement, to sell the Purchased Shares and to carry out and perform its obligations under the terms of this Agreement. All corporate action on the part of the Company necessary for the authorization, execution, delivery and performance by the Company of this Agreement and for the authorization, issuance and delivery of the Purchased Shares issuable upon payment therefore has been taken. This Agreement constitutes a valid and binding agreement of the Company enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally and general principles of equity. 2.3 No Restrictive Agreements. The issuance and delivery of the Purchased Shares to the Purchaser is not subject to any preemptive rights. Upon the delivery of the Purchased Shares, the Purchaser will acquire the beneficial and legal, valid and indefeasible title to the Purchased Shares, free and clear of all pledges, liens, charges, claims or options of any kind, except for restrictions on transfer under the Securities Act of 1933, as amended (the? Securities Act?), and applicable state securities laws. 2.4 Capitalization The Company's authorized capital stock consists of 20,000,000 shares of Common Stock, $.05 par value (the "Common Stock"), of which 19,134,824 shares are issued and outstanding, and 1,000,000 shares of Preferred Stock, 60,000 shares of which have been designated as Series C Preferred Stock, of which 10,000 shares are issued and outstanding, and 250,000 shares of which have been designated as Series D, none of which is outstanding. All of the issued and outstanding shares of Common Stock and Series C Preferred Stock are validly issued, fully paid and non-assessable. The Purchased Shares being issued to the Purchaser pursuant to this Agreement upon issuance will be validly issued, fully paid and non-assessable shares of Series D Preferred Stock. The shares of Common Stock underlying the conversion rights of the Purchased Shares upon conversion in accordance with the terms of the Series D Preferred Stock and after a recapitalization (the "Recapitalization") of the Common Stock increasing the number of authorized shares and reducing the par value to $.00l per share, upon issuance will be validly issued, fully paid and non-assessable shares of Common Stock. 2.5 SEC Reports. The Company is subject to filing reports with the Securities and Exchange Commission pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The information in the Company's annual report on Form l0-KSB for the fiscal year ended December 31, 2001 and Form 10-QSB for the fiscal quarter ended March 31, 2002 is in all material respects complete and correct. 2.6 Stockholders Meeting. The Company shall use its best efforts to promptly call and hold a Special Meeting of Shareholder in accordance with the New York Business Corporation Law and the Exchange Act, at which Meeting the shareholders will vote upon the Recapitalization as described in Section 2.4, a proposed reverse stock split of the Common Stock, a proposed corporate migration to the State of Delaware, and such other matters as the Company's Board of Directors may propose. 3 Representations and Warranties of the Purchaser. The Purchaser represents and warrants to the Company that: 3.1 Knowledge. As a member of the Board of Directors of the Company, the Purchaser is aware of the current business, prospects and financial condition of the Company and the market for its Common Stock, has reviewed the reports recently filed by the Company under the Exchange Act, and has had the opportunity to discuss the Company's prospects with its management. In addition, the Purchaser understands the restrictions on resale or other transfer of the Series D Shares (and any underlying shares of Common Stock), as they have not been registered under the Securities Act. 3.2 Authority. The Purchaser has the power and authority to enter into this Agreement and to purchase the Series D Preferred Stock, and the purchase is consistent with his investment objectives. 4. Preemptive Rights. 4.1 Right. If at any time and from time to time, for a period of eighteen (18) months from the date of this Agreement, the Board of Directors authorizes the Company to sell (the "Sale"), solely for cash, shares of Common Stock (the "Shares"), or shares of Preferred Stock or other securities (the "Derivative Securities") that are exercisable for, convertible into or exchangeable for shares of Common Stock in a private placement transaction pursuant to the exemption from registration under Regulation D of the Securities Act, the Company shall send a written notice to the Purchaser of such authorization (the ?Notice of Preemptive Rights") offering the Purchaser the right to participate in such Sale. For purposes of this Section, a "Sale" shall not include (a) an issuance of Shares directly or underlying options or other rights granted to employees, officers, consultants or directors under an agreement or an employee benefit plan or otherwise as incentive or compensation, (b) an issuance of Shares either directly or underlying Derivative Securities in whole or in part in consideration for services, (c) the issuance as part of an acquisition transaction, (d) an issuance to a party who the Board of Directors determines would be a strategically important shareholder, or (e) upon the exercise of any Derivative Securities which were outstanding on the date of this Agreement. Any Shares not purchased by the Purchaser pursuant to this Section 4 may be sold, issued or granted within ninety (90) days after deliver of the Notice of Preemptive Rights, at the same price and terms as offered for sale to the Purchaser hereunder. 4.2 Notice of Preemptive Right. The Notice of Preemptive Rights shall specify the total aggregate number of Shares to be issued, the price and other terms of the proposed Sale, the amount of Shares or Derivative Securities to which the Purchaser is entitled to purchase and the period during which the Purchaser may elect to participate in the purchase. The Notice of Preemptive Rights shall be sent to the Purchaser at least ten (10) days prior to the anticipated closing date of the Sale. If the Purchaser desires to participate in the Sale, the Purchaser shall notify the Company by sending a notice of acceptance, which must be received by the Company within the time period specified in the applicable Notice of Preemptive Rights. 4.3 Effectiveness. The purpose of the preemptive right in this Section 4 is to accommodate the Purchaser?s desire to have the opportunity to maintain his beneficial percentage interest (on a fully diluted basis) in the Company's Common Stock upon certain issuances by the Company. If (i) the Purchaser fails to purchase at least fifty percent (50%) of the Shares or Derivative Securities offered in the Notice of Preemptive Rights in any Sale which closes, or (ii) the Purchaser sells or otherwise disposes of fifty percent (50%) of the securities beneficially owned by him upon the closing of the Purchase herein, the Purchaser?s rights under this Section 4 shall terminate with respect to any subsequent Sale. 5 Miscellaneous 5.1 Survival. All representations and warranties and other agreements made by the Company and the Purchaser in this Agreement shall survive the Closing for a period of one (1) year. 5.2 Additional Action. Each of the Purchaser and the Company shall, upon the request of the other, from time to time, execute and deliver promptly to the other party all instruments and documents of further assurances or otherwise and will do any and all such acts and things as may be reasonably required to carry out the obligations of such party hereunder and to consummate the transactions contemplated hereby 5.3 Successor and Assigns. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective estates, heirs, executors, successors and assigns. 5.4 Governing Law. The laws of the State of New York shall in all respects govern this Agreement, without giving effect to the principles of conflicts of law thereof 5.5 Entire Agreement. This Agreement constitutes the entire arrangement between the parties with respect to the subject matter herein and cannot be changed, modified, discharged or terminated except by a writing signed by the party against whom enforcement of any change, modification, discharge or termination is sought. 5.6 Waiver. No waiver shall be deemed to be made by any party of any of his rights hereunder unless the same shall be in writing, and each waiver, if any, shall be a waiver only with respect to the specific instance involved and shall in no way impair the rights of the waiving party of the obligations of the other party in any other respect at any other time. 5.7 Notices. Any notice, demand or other communication to be given hereunder by either party to the other shall be in writing and shall be mailed by certified mail, return receipt requested, sent by recognized overnight courier or delivered against receipt to the party to whom it is to be given to the address of such party set forth in the preamble to this Agreement (or to such other address as the party shall have furnished in accordance with the provisions of this Section 5.7). 5.8 Captions. The captions used in this Agreement are for convenience only and shall not be deemed as, or construed as, a part of this Agreement. 5.9 Counterparts, Facsimile Execution. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the Same instrument. Facisimile execution and delivery of this Agreement is legal, valid and binding execution and delivery for all purposes. IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase Agreement as of the date first above written Distincitive Devices, Inc. /s/ Sanjay S. Mody ------------------ By: Sanjay S. Mody Title: President & CEO /s/ Shrikant C. Mehta --------------------- EX-3 4 ex-31.txt EXHIBIT 3.1 CERTIFICATE OF AMENDMENT OF DISTINCTIVE DEVICES, INC. (Pursuant to Section 805 of the New York Business Corporation Law) Pursuant to the provisions of Section 805 of the Business Corporation Law, the undersigned hereby certifies as follows: 1. The name of the corporation is Distinctive Devices, Inc., a corporation organized and existing under the laws of the State of New York (the ?Corporation?). The Corporation was formed under the name of Leasatronic Machine Corp. 2. The Certificate of Incorporation of the Corporation was filed by the Department of state on May 5, 1961. 3. The Certificate of Incorporation of the Corporation, now in full force and effect, is hereby amended by the amended by the addition to Article THIRD of a provision stating the number, designation, relative rights, preferences and limitations of a Series D Preferred Stock of the par value of $1.00 each, as fixed by the Board of Directors before the issuance of such Series, under authority vested in the Board of Directors in the Certificate of Incorporation, and as permitted by Section 502 of the Business Corporation Law, as follows: (g) Series D Preferred Stock There is hereby created a series of preferred shares of the corporation designated 'Series D Preferred Stock? consisting of 250,000 shares (hereinafter called the 'Series D Preferred Stock'). Such number of shares constituting the Series D Preferred Stock may be increased or decreased from time to time by the Board of Directors, in accordance with the authority contained in the Certificate of Incorporation, in respect of any unissued shares of such series, provided that the aggregate number of shares constituting such series, together with all other series of preferred shares, shall in no event exceed the aggregate number of shares of Preferred Stock authorized in this Certificate of Incorporation. The relative rights, preferences and limitations of the Series D Preferred Stock are as set forth in the Certificate of Incorporation as heretofore amended, and, in addition, are as follows: (I) General. All shares of Series D Preferred Stock shall be identical with each other in all respects. All shares of Series D Preferred Stock shall be of such rank as to any other outstanding series of Preferred Stock, if any, of the Corporation as to dividends and as to distributions upon liquidation, dissolution or winding up, as shall be provided herein and in the resolutions of the Board of Directors of the Corporation creating such other series of Preferred Stock. (2) Conversion 2.1 Conversion. Following the approval by the Corporation's shareholders of an amendment to the Certificate of Incorporation increasing the number of authorized shares of Common Stock to a number sufficient for conversion of all of outstanding shares of Series D Preferred Stock into authorized but unissued shares of Common Stock and reducing the par value of the Common Stock to $.01 per share (the "Charter Amendment?), and effective on the date that the Charter Amendment is filed with the New York Secretary of State, each outstanding share of Series D Preferred Stock shall automatically be converted into shares of Common Stock at the rate (the "Conversion Rate?) of one hundred and twenty five (125) shares of Common Stock for each one (1) share of Series D Preferred Stock, subject to an adjustment in subparagraph 2.2 below. The date of such conversion is referred to herein as the "Conversion Date? 2.2 Adjustment. In the event of a stock split (forward or reverse), stock dividend, reorganization, recapitalization or other event affecting the Common Stock or the Series D Preferred Stock, the Board of Directors of the Corporation shall make an equitable adjustment in the Conversion Rate, if necessary to reflect such event in order to preserve the foregoing Conversion Rate. In the case of any capital reorganization of the Corporation, or any consolidation or merger of the Corporation with or into another corporation, or any sale or conveyance to another corporation of all or substantially all of the property of the Corporation, the holder of each share of Series D Preferred Stock then outstanding shall have the right thereafter to convert such share into the kind and amount of shares of stock and other securities and property receivable upon such reorganization, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock of the Corporation into which such share of Series D Preferred Stock might have been converted immediately prior to such reorganization, consolidation, merger, sale or conveyance, and shall have no further conversion rights under these provisions; and any such resulting or surviving corporation shall expressly assume the obligation to deliver, upon the exercise of the conversion privilege, such shares, securities or property as the holders of the Series D Preferred Stock shall be entitled to receive pursuant to the provisions hereof. In the case securities or property other than Common Stock shall be issuable or deliverable upon conversion as aforesaid, then all references in this subparagraph 2.2 Common Stock shall be deemed to apply, so far as appropriate and as nearly as may be, to such other securities or property. The provisions of this subparagraph shall apply to successive stock, splits, stock dividends, reorganizations, recapitalizations or other events affecting the Common Stock or the Series D Preferred Stock. Whenever the Conversion Rate and/or the securities issuable upon conversion is adjusted as herein provided, the Corporation shall give notice to the holders of the Series D Preferred Stock of such adjustment setting forth the new Conversion Rate and the number of shares of Common Stock (or other securities) issuable upon conversion and a brief statement of the facts requiring such adjustment and the computation by which such adjustment was made. 2.3 Procedure for Conversion. Immediately following the Conversion Date, the Corporation shall send notice to each holder of Series D Preferred Stock advising the holder of the conversion and requesting that the holder surrender at the principal office of the Corporation (or at such other place as the Board of Directors of the Corporation shall have designated for such purpose) the certificate or certificates for the holder?s shares of Series D Preferred Stock properly endorsed in blank for transfer or accompanied by a proper instrument of assignment or transfer in blank and bearing any necessary transfer tax stamps thereto affixed and cancelled, together with a written request stating the name or names in which the holder wishes the certificate or certificates for shares of Common Stock to be issued. Promptly after receiving the documents specified in the immediately preceding sentence, the Corporation shall cause the transfer agent to deliver to such holder of Series D Preferred Stock or to the holder's nominee or nominees, a certificate or certificates for the number of full shares of Common Stock to which the holder shall be entitled as aforesaid. 2.4 No fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of series D Preferred Stock. In lieu of fractional shares, the number of shares of Common Stock issuable upon conversion shall be rounded up or down to the nearest whole share of Common Stock. 2.5 Effect of Conversion. All shares of Series D Preferred Stock which shall have been converted as provided in this paragraph (2) shall no longer be deemed to be outstanding as of the Conversion Date and all rights with respect to such shares shall forthwith cease and terminate except for the right of the holders thereof to receive full shares of Common Stock, and such shares shall return to the status of authorized but unissued Preferred Stock of no designated series and shall not be issuable by the Corporation as Series D Preferred Stock. (3) Voting Rights. 3.1 Generally. Except as set forth in Subparagraph 3.2 below, (x) the holder of each issued and outstanding share of Series D Preferred stock shall have the right to cast one hundred and twenty five (125) votes (or such other votes per share equal to the Conversion Rate on the record date for voting) on every matter duly brought before the holders of Common Stock at all meetings of shareholders of the Corporation to be held prior to the Conversion Date; and (y) the holders of Series D Preferred Stock and the holders of Common Stock shall vote together as one class on all matters submitted to a vote of the shareholders of the Corporation provided, however, that with respect to a shareholder vote on the Charter Amendment, each record holder of the Series D Preferred Stock shall vote all of his shares of series D Preferred Stock in the same proportion to the proportion that the holders of the Common Stock voted their shares of Common Stock in favor of, against or abstained with respect to the shares of Common Stock actually voted on the Charter Amendment. 3.2 Separate Vote. The holders of a majority of the outstanding Series D Preferred Stock, voting as a separate class and having one vote per share, shall be required to approve: (a) the amendment of the terms and conditions of the Series D Preferred Stock; (b) the issuance of any securities with rights, preferences and privileges (the "Preferences") superior to the Preferences of the Series D Preferred Stock; or (c) the redemption of any Common Stock of the Corporation. (4) Dividends. The holder of each issued and outstanding share of Series D Preferred stock shall have the right to participate in all dividends declared with respect to the Common stock, on an as converted to Common Stock basis, as determined on the date on which any such dividends are declared. (5) Liquidation Preference. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the corporation (a ?Liquidation?), the Series D Preferred Stock shall be senior to all other equity securities of the Corporation and shall be entitled to receive, prior and in preference to any payments to any of the holders of any other equity securities, for each share of Series D Preferred stock then held by them an amount equal to $3.75 per share (adjusted for share combinations or subdivisions, stock dividends, stock splits or other restructuring or recapitalization of the corporation). If the assests of the Corporation shall be insufficient to permit the payment to the holders of the Series D Preferred Stock their full preferential amount, then the entire assests of the corporation shall be distributed pro-rata among the holders of the Series D Preferred Stock inproportion to the preferential amount each such holder is otherwise entitled to receive. Neither the consolidation or merger of the Corporation into or with another corporation or corporations, nor the sale of all or substantially all of the Corporation?s assests, nor the distribution to the shareholders of the Corporation of all or substantially all of the consideration for such sale, unless such consideration (apart from assumption of liabilities) or the net proceeds thereof consists substantially in cash, shall be deemed a Liquidation. (6) Redemption. The holders of the Series D Preferred Stock shall have no right to require the Corporation to redeem all or any part of their shares of Series D Preferred Stock. 4. This amendment was authorized by the Board of Directors at a duly hold meeting of the board. IN WITNESS WHEREOF, the undersigned has caused this Certificate of Amendment to be executed by a duly authorized officer on the 29th day of July, 2002. s/s/ Sanjay Mody ---------------- Name: Sanjay Mody Title: President EX-99 5 ex99x.txt Exhibit 99 Statement Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 The undersigned SANJAY MODY, the President, Chief Executive Officer, Treasurer and Chief Financial Officer of DISTINCTIVE DEVICES, INC. (the ?Company?), DOES HEREBY CERTIFY that: 1 The Company's Quarterly Report on Form 10-QSB for the quarter ended June 30, 2002 (the ?Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and 2 The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. IN WITNESS WHEREOF, the undersigned has executed this Statement this 12th day of August, 2002. /s/ Sanjay Mody --------------- By: Sanjay Mody President, Chief Executive Officer, Treasure and Chief Financial Officer Distinctive Devices, Inc -----END PRIVACY-ENHANCED MESSAGE-----