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 Quarter year ended June 30, 2000
Commission File Number: 000-28481
DIGITAL VIDEO DISPLAY TECHNOLOGY CORP.
(Exact name of registrant as specified in its charter)
Nevada 86-0891931
(State of organization) (I.R.S. Employer Identification No.)
590 Madison Avenue- 21st Floor
New York New York 10022
(Address of principal executive offices)
Company's telephone number, including area code: (212) 521-4075
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 and (2) has been
subject to such filing requirements for the past 90 days. Yes /x/
Securities registered under Section 12(g) of the Exchange Act:
There are 23,250,000 shares of common stock outstanding as of June 30, 2000. The
shares are traded on the OTC Bulletin Board, under the symbol "DVDT".
<PAGE>
TABLE OF CONTENTS
-------------------
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
ITEM 2 MANAGEMENT'S DISCUSSION OF OPERATIONS AND FINANCIAL
CONDITION
PART II OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORMS 8-K
ITEM 7 SIGNATURES
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PART II OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORMS 8-K
(a) The exhibits required by Item 601 of Regulation S-B are attached
hereto.
(b) The registrant filed a report on Form 8-KSB on August 11,
2000, reporting the rescission of the merger agreement
between the registrant and eMedia3, Inc., and the change
in control of the registrant from Randy Moss to Lee Edmondson,
all pursuant to Items 1 and 2 of Form 8-KSB.
<PAGE>
ITEM 7 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.
DIGITAL VIDEO DISPLAY TECHNOLOGY CORP.
Date /s/ LEE EDMONDSON
------------------------- ------------------------------------
Lee Edmondson, President and CEO
<PAGE>
DIGITAL VIDEO DISPLAY TECHNOLOGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE SIX MONTHS
AND THE THREE MONTHS ENDED
JUNE 30, 2000,
WITH
REVIEW REPORT OF
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
TABLE OF CONTENTS
Accountants' Review Report....................................................2
Balance Sheet.................................................................3
Statements of Operations......................................................4
Statements of Stockholders' Equity............................................5
Statements of Cash Flows......................................................6
Notes to Financial Statements.................................................8
Management Discussion and Analyses...........................................14
<PAGE>
MARK BAILEY & CO. LTD.
Certified Public Accountants
Management Consultants
OFFICE ADDRESS: MAILING ADDRESS:
1495 Ridgeview Drive, Ste. 200 Phone: 775/332.4200 P.O. Box 6060
Reno, Nevada 89509-6634 Fax: 775/332.4210 Reno, Nevada 89513
August 7, 2000
Board of Directors
Digital Video Display Technology Corporation
We have reviewed the accompanying balance sheets of Digital Video Display
Technology Corporation (a Company in the development stage) as of June 30, 2000,
and the related statements of operations and stockholders' equity for the six
months and the three months then ended, and the statement of cash flows for the
six months then ended, in accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of Certified Public
Accountants. All information included in these financial statements is the
representation of the management of Digital Video Display Technology
Corporation.
A review consists principally of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, with the exception of the matter described in the following
paragraph, we are not aware of any material modifications that should be made to
the accompanying financial statements in order for them to be in conformity with
generally accepted accounting principles.
The Company declined to present a statement of cash flows for the three months
ended June 30, 2000. Presentation of such statement summarizing the Company's
operating, investing and financing activities is required by generally accepted
accounting principles.
As discussed in Note 1, certain conditions indicate that the Company may be
unable to continue as a going concern. The accompanying financial statements do
not include any adjustments to the financial statements that might be necessary
should the Company be unable to continue as a going concern.
Mark Bailey & Co., Ltd.
Reno, Nevada
-2-
<PAGE>
<TABLE>
<CAPTION>
DIGITAL VIDEO DISPLAY TECHNOLOGY CORPORATION
(A Company in the Development Stage)
BALANCE SHEET
-------------
June 30, 2000
ASSETS
------
June 30, 2000
-------------
<S> <C>
Fixed Assets
------------
Computers $ 65,203
Accumulated depreciation (3,259)
----------
Total fixed assets 61,944
----------
Other Assets
------------
Deposits 14,925
of $485,260) -
----------
Total other assets 14,925
----------
Total assets $ 76,869
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities
-------------------
Accounts payable $ 384,282
Line of credit 494,425
Related party payable 217,500
Wages payable 101,842
Accrued expenses 35,424
----------
Total current and total liabilities 1,233,473
----------
Commitments and Contingencies
-----------------------------
Shareholders' Equity
--------------------
Common stock, $.001 par value, 100,000,000 shares
authorized, 21,348,000 shares issued and outstanding 21,348
Additional paid-in capital 249,287
Deficit accumulated during the development stage (1,427,239)
----------
Total shareholders' equity (1,156,604)
----------
Total liabilities and shareholders' equity $ 76,869
==========
The Accompanying Notes are an Integral Part of These Financial Statements
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
DIGITAL VIDEO DISPLAY TECHNOLOGY CORPORATION
(A Company in the Development Stage)
STATEMENTS OF OPERATIONS
------------------------
Six Three
Cumulative During Months Ended Months Ended
Development Stage June 30, 2000 June 30, 2000
----------------- ------------- -------------
<S> <C> <C> <C>
Revenue
-------
Operating Costs and Expenses
----------------------------
Consulting $ (581,161) $(375,958) $(300,958)
Research and development (179,027) (20,000) (20,000)
Wages (112,255) (112,255) (112,255)
Operating and administrative expense (594,593) (231,500) (214,905)
Interest expense (42,260) (23,198) (14,792)
----------- --------- ---------
Total operating costs and expenses (1,529,055) (766,170) (661,669)
Non-operating Income
--------------------
Dividend income 1,212 951 412
Gain on cancellation of contracts 100,604 90,604 90,604
----------- --------- ---------
Total non-operating income 101,816 91,555 91,016
Net loss $(1,427,239) $(674,615) $(570,653)
=========== ========= =========
Loss per share (0.0677) (0.0317) (0.0268)
=========== ========= =========
The Accompanying Notes are an Integral Part of These Financial Statements
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
DIGITAL VIDEO DISPLAY TECHNOLOGY CORPORATION
(A Company in the Development Stage)
STATEMENTS OF STOCKHOLDERS' EQUITY
----------------------------------
For the Six Months and the Three Months Ended June 30, 2000
Accumulated
Common Stock ADditional Deficit During
---------------------- Paid-in Development Total
Shares Amount Capital Stage Equity
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1999 23,250,000 23,250 193,885 (752,624) (535,489)
Cancellation of shares in February 2000 (2,000,000) (2,000) (18,000) - (20,000)
Net loss for three months ended March 31, 2000 - - - (103,962) (103,962)
---------------------------------------------------------------------
Balance at March 31, 2000 21,250,000 21,250 175,885 (856,586) (659,451)
Shares issued June 13, 2000 98,000 98 73,402 73,500
Net (loss) for three months ended June 30, 2000 (570,653) (570,653)
---------------------------------------------------------------------
Balance at June 30, 2000 21,348,000 21,348 249,287 $ (1,427,239) $(1,156,604)
=====================================================================
The Accompanying Notes are an Integral Part of These Financial Statements.
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
DIGITAL VIDEO DISPLAY TECHNOLOGY CORPORATION
(A Company in the Development Stage)
STATEMENTS OF CASH FLOW
-----------------------
For the Six Months Ended June 30, 2000
Cumulative During Six Months Ended
Development Stage June 30, 2000
----------------- ----------------
<S> <C> <C>
Cash Flows from Operating Activities
Net loss $ (1,427,239) $ (674,615)
Adjustments to reconcile net loss to net
cash used in operating activities
Amortization and depreciation expense 19,759 3,259
Gain on write off on capital asset (16,500) (16,500)
Increase in interest receivable - 11
Increase in deferred tax asset (485,260) (229,369)
Increase in accounts payable 340,145 133,692
Increase in related party payable 217,500 110,000
Increase in interest payable 35,424 23,198
Increase in wages payable 85,004 85,004
Increase in payroll tax payable 16,838 16,838
Increase in deferred tax valuation allowance 485,260 229,369
Expenses paid by issuance of
common stock 76,000 73,500
------------ ----------
Net cash used in operating activities (653,069) (245,613)
------------ ----------
Cash Flows from Investing Activities
Deposit paid (14,925) (14,325)
Purchase of fixed assets (65,203) (65,203)
------------ ----------
Net cash used in investing activities (80,128) (79,528)
------------ ----------
Cash Flows from Financing Activities
Proceeds received from issuance of stock 194,635 -
Proceeds from bank overdraft 44,137 44,137
Proceeds received from line of credit 494,425 278,925
------------ ----------
Net cash provided by financing activities 733,197 323,062
------------ ----------
Net increase (decrease) in cash - (2,079)
Cash at December 31, 1999
and August 1, 1997 - 2,079
------------ ----------
Cash at June 30, 2000 $ - $ -
============ ==========
The Accompanying Notes are an Integral Part of These Financial Statements
</TABLE>
-6-
<PAGE>
DIGITAL VIDEO DISPLAY TECHNOLOGY CORPORATION
(A Company in the Development Stage)
STATEMENTS OF CASH FLOWS
For the Six Months and the Three Months Ended June 30, 2000
SUPPLEMENTARY INFORMATION
In February 1999, the Company issued 2,000,000 shares of common stock, with a
fair market value of $20,000, in exchange for patent rights to Digital Video
Display computer technology. In addition, the Company incurred a patent right
payable in the amount of $250,000. In February 2000, these shares of common
stock and the agreement were canceled.
In June 2000, the Company issued 98,000 shares of common stock, with a fair
market value of $73,500, for consulting services.
No amounts were actually paid for either interest or income taxes for the six
months ended June 30, 2000.
-7-
<PAGE>
DIGITAL VIDEO DISPLAY TECHNOLOGY CORPORATION
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Company was incorporated in the State of Nevada on August 1, 1997,
under the name Meximed Industries, Inc. The Company is in the
development stage as its operations principally involve research and
development, market analysis, and other business planning activities,
and no revenue has been generated from its business activities. In
January 1999, the Company changed its name to Digital Video Display
Technology Corporation. The Company intends to create a Digital Video
Display jukebox system for distribution in Canada and the United
States.
These financial statements have been prepared assuming that the Company
will continue as a going concern. The Company is currently in the
development stage, and existing cash and available credit are
insufficient to fund the Company's cash flow needs for the next year.
As discussed in Note 3, on April 15, 1999, an unrelated third party
extended the Company a line of credit, which is due in March 2001. The
Company plans to raise additional capital in the near future through
private placements, ranging from $6,000,000 to $8,000,000.
The preparation of financial statements for the three-month and
six-month periods ended June 30, 2000, have been prepared by the
Company without audit by the Company's independent auditors. In the
opinion of the Company's management, all adjustments necessary to
present fairly the financial position, results of operations, and cash
flows of the Company as of June 30, 2000 and for the periods then ended
have been made. Those adjustments consist only of normal and recurring
adjustments.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
-8-
<PAGE>
DIGITAL VIDEO DISPLAY TECHNOLOGY CORPORATION
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents. As of June 30, 2000, the Company
held no cash equivalents.
FIXED ASSETS
Depreciation expense is provided for on a straight-line basis over the
estimated useful lives of owned assets.
RENT EXPENSE
For the six months and the three months ended June 30, 2000, the total
rent expense was $30,445 and $29,690, respectively.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred. Such costs
were $20,000 for both the six months and the three months ended June
30, 2000.
STATEMENT PRESENTATION
The March 31, 2000, amounts have been reclassified to conform to the
June 30, 2000, presentation.
EARNINGS PER SHARE
Basic earnings per share for each period is computed by dividing net
loss by the weighted average number of shares of common stock
outstanding during the period.
2. FEDERAL INCOME TAXES
The Company recognizes deferred tax liabilities and benefits for the
expected future tax impact of transactions that have been accounted for
differently for book and tax purposes.
Deferred tax benefits and liabilities are calculated using enacted tax
rates in effect for the year in which the differences are expected to
reverse. A valuation allowance has been
-9-
<PAGE>
DIGITAL VIDEO DISPLAY TECHNOLOGY CORPORATION
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
2. FEDERAL INCOME TAXES (CONTINUED)
provided to reduce the asset to the amount of tax benefit management
believes it will realize.
The following is a schedule of the composition of the provision for
income taxes:
<TABLE>
<CAPTION>
JUNE 30, 2000
-------------
<S> <C>
Deferred noncurrent tax asset $ 485,260
Valuation allowance (485,260)
---------
Total provision for income taxes $ -0-
==========
</TABLE>
The net change in the valuation account was $229,369 and $194,022 for
the six months and the three months ended June 30, 2000, respectively.
Deferred federal and state income taxes consist of future tax benefits
attributed to loss carryforwards of $674,615 and $570,653 for the six
months and the three months ended June 30, 2000. At June 30, 2000, the
Company had the following unused net operating losses for regular
income tax purposes:
<TABLE>
<CAPTION>
EXPIRES NET OPERATING LOSS
------- ------------------
<S> <C>
2017 $ 998
2018 34,513
2019 717,313
2020 $ 674,615
</TABLE>
3. LINE OF CREDIT
During the year ended December 31, 1999, an unrelated third party
issued the Company an unsecured $500,000 line of credit. The line of
credit carries interest at 12% per annum and is due in March 2001. The
balance outstanding at June 30, 2000, was $494,425.
-10-
<PAGE>
DIGITAL VIDEO DISPLAY TECHNOLOGY CORPORATION
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
4. RELATED PARTY TRANSACTIONS
In March 1999, the Company issued an option to purchase 500,000 shares
of common stock at $2.50 per share to the President, CEO and Director
of the Company. The option expires March 31, 2001 (see Note 7). In
March 1999, the Company entered into a consulting agreement with the
President, and included in operating and administrative expenses for
the six months and the three months ended June 30, 2000, are consulting
fees paid to the President of $90,000 and $45,000, respectively. The
Company has also expensed $40,000 in consulting fees paid to the Chief
Operating Officer for the six months and the three months ended June
30, 2000, as well as $37,500 in legal fees paid to a Director of the
Company.
In April 1999, the Company issued an option to purchase 500,000 shares
of common stock at $4.00 per share to a Director of the Company. The
option expires April 30, 2009, (see Note 7).
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Accounting Standards Board ("FASB") Statement No. 107,
"Disclosure About Fair Value of Financial Instruments" is a part of a
continuing process by the FASB to improve information on financial
statements. The following methods and assumptions were used by the
Company in estimating its fair value disclosures for such financial
instruments as defined by the Statement.
The carrying amounts reported in the balance sheets for accounts
payable approximate fair value at June 30, 2000, as the payables mature
in less than one year.
The estimated fair values of the line of credit are not materially
different from the carrying values for financial statement purposes at
June 30, 2000.
-11-
<PAGE>
DIGITAL VIDEO DISPLAY TECHNOLOGY CORPORATION
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
6. STOCKHOLDERS' EQUITY
In February 1999, the Company issued 2,000,000 shares of common stock,
with a fair market value of $20,000, for the patent rights to a jukebox
entertainment system. In February 2000, the Company canceled the
2,000,000 shares of common stock previously issued for the patent
rights.
In June 2000, the Company issued and delivered 98,000 shares of common
stock to an unrelated third party at $0.75 per share, for a total of
$73,500. The value of the shares was determined by taking an average of
the closing share price, on the (over-the-counter) exchange, over the
previous five days per the agreement.
7. STOCK OPTIONS
The Company issued an option to purchase 500,000 shares of common stock
at $2.50 per share, to the President, CEO, and Director. The option
expires March 31, 2001 (see Note 4). The Company also issued an option
to purchase 500,000 shares of common stock at $4.00 a share to a
Director. The option expires April 30, 2009 (see Note 4).
The Company issued an option to purchase 150,000 shares of common stock
at $2.50 per share to an unrelated third party in exchange for
consulting services. The options expired unexercised on April 1, 2000.
The option price for all stock options exceeded the fair market value
of the stock at the grant date; accordingly, no compensation costs have
been recognized. The fair market value of the stock options is $0.
In March and April 2000, the Company entered into several employment
agreements that include stock options for certain directors and
employees. These options have been granted at $5.00 per share of the
Company's common stock and will become exercisable at specific times
according to a plan to be created by the Compensation Committee.
-12-
<PAGE>
DIGITAL VIDEO DISPLAY TECHNOLOGY CORPORATION
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
8. OBLIGATIONS UNDER LEASE
At June 30, 2000, the Company occupies leased premises in Las Vegas and
Los Angeles.
The following schedule shows future minimum lease payments required for
operating leases that have noncancelable lease terms in excess of one
year as of June 30, 2000:
<TABLE>
<CAPTION>
OPERATING
LEASES
------
<S> <C>
2001 $ 79,144
2002 81,518
2003 69,622
2004 -0-
2005 -0-
Later years -0-
---------
Total minimum lease payments $ 230,284
=========
</TABLE>
-13-
<PAGE>
PART 1
ITEM 2 MANAGEMENT DISCUSSION AND ANALYSES
======================================
Forward-Looking Statements
--------------------------
This Form 10-QSB contains forward-looking statements that involve risks and
uncertainties. The statements contained in this document that are not purely
historical are forward-looking statements, including without limitation,
statements regarding the Company's expectations, beliefs, plans, intentions,
projections or strategies regarding the future. All forward-looking statements
included in this document are based on information available to the Company on
the date hereof, and the Company assumes no obligation to update any such
forward-looking statements. The Company's actual results may differ materially
as a result of certain factors, including those set forth elsewhere in this
document. These forward-looking statements are made under the safe-harbor
provisions of applicable securities laws, rules and regulations.
Selected Consolidated Financial Data
---------------------------------------
The following historical financial data for the period from inception through
June 30, 2000 was derived from the historical consolidated financial statements
of Company that have been audited by Mark Bailey & Co., Ltd., Certified Public
Accountants and independent auditors (the Financial Statements).
14
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA:
------------------
Current Assets 6-30-00 12-31-99
-------------- ========== ==========
<S> <C> <C>
Cash $ 0 $ 2,079
Interest receivable $ 0 $ 11
Fixed assets $ 61,944 $ -
---------- ----------
$ 61,944 $ 2,090
Other Assets
------------
Deposits $ 14,925 $ 600
Other assets (net of accumulated
Amortization of $21,000 and $16,500)
$ 0 $ 253,500
---------- ---------
Total assets $ 76,869 $ 256,190
========== =========
Current Liabilities
-------------------
Accounts payable $ 384,282 $ 206,453
Related party payable $ 217,500 $ 107,500
Interest payable $ 0 $ 12,226
Line of credit (Note 4) $ 494,425 $ 215,500
Patent right payable $ 0 $ 250,000
Wages payable $ 101,842 $ 0
Accrued expenses $ 35,424 $ 0
---------- ---------
Total liabilities $1,233,473 $ 791,679
---------- ---------
Total shareholders'
equity $(1,156,604) $ (535,489)
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS DATA:
------------------------------
From Six Mos. Three Mos.
Inception to Ended Ended
June 30, June 30, June 30,
2000 2000 2000
------------- --------- -----------
<S> <C> <C> <C>
Revenue $ - $ - $ -
-------
Costs and Expenses
------------------
Operating and
Administrative expense (1,467,036) (739,713) (648,118)
Amortization expense (19,759) (3,259) 1,241
Interest Expense (42,260) (23,198) (14,792)
----------- ---------- ------------
Total Operating cost (1,529,055) (766,170) (661,669)
And expenses
Non Operating Income 101,816 91,555 91,016
----------- ---------- ------------
Net Loss $(1,427,239) $(674,615) $ (570,653)
=========== ========== ============
Loss per share $ (0.0677) $ (0.0317) $ (0.0268)
=========== ========== ============
</TABLE>
16
<PAGE>
Results of Operations
-----------------------
Limited Operating History; Accumulated Deficit; Need for Additional Capital
There is limited historical financial information about the Company upon which
to base an evaluation of the Company's performance or to make a decision
regarding an investment in shares of the Company's Common Stock. The Company has
an accumulated deficit of $1,427,239 through June 30, 2000. The Company's cash
decreased from $2,079 at December 31, 1999 to $0 at June 30, 2000.
Three Months Ended June 30, 2000 Compared to Three Months Ended
June 30, 1999
The Company has not yet realized any revenue from its business operations.
Operating and administrative expenses from inception to the six months ended
June 30, 2000 were $1,467,036, and represent the majority of the Company's net
loss to date.
Net cash provided by financing activities increased from $215,500 for the six
months ended June 30, 1999 to $494,425 for the period ended June 30, 2000, as a
result of proceeds in the amount of $278,925 received from Line of Credit.
The Company's net loss for the period from inception to June 30, 2000 was a
deficit of $1,427,239, or a deficit of $.0677 per share, based on 23,250,000
weighted average shares outstanding at June 30, 2000. Since there have been no
revenues realized since inception, no comparison of net loss is made.
Liquidity and Capital Resources
----------------------------------
Due to the infant stage of its operations, substantial ongoing investment in
software development, and expenditures required to build the appropriate
infrastructure to support expected future growth, The Company has been
substantially dependent on private placements of its equity securities and a
bank line of credit to fund its cash requirements.
Net cash used in operating activities increased $245,613 for the six month
period ending June 30,200 to $653,069 for the period from inception to June 30,
2000.
As of June 30, 2000, the Company had total assets of $76,869 and total
liabilities of $1,233,473.
17
