REGISTRATION NO. 333-31238
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
DDR SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
WASHINGTON 4822 522219677
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL INCORPORATION IDENTIFICATION NO.)
OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
3650 WEST 30TH AVE
VANCOUVER, BRITISH COLUMBIA V6S 1W8, CANADA
(604) 732-0623
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
AGENT FOR SERVICE: WITH A COPY TO:
GLENN JONES, PRESIDENT JAMES L. VANDEBERG
DDR SYSTEMS, INC. OGDEN MURPHY WALLACE
3650 WEST 30TH AVE #2100-1601 5TH AVENUE
VANCOUVER, BRITISH COLUMBIA V6S 1W8, CANADA SEATTLE, WASHINGTON 98101
(604)732-0623 (604)224-3310 (206)447-7000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act, check
the following box. [x]
<PAGE>
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
TITLE OF EACH PROPOSED PROPOSED
CLASS OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO TO BE OFFERING PRICE AGGREGATE REGISTRATION
BE REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE
------------- ---------------- ------------------- --------------- -------------
<S> <C> <C> <C> <C>
Common stock 2,300,000 shares $0.045 per share(1) $ 103,500.00 $ 27.33
<FN>
(1) No exchange or over-the-counter market exists for DDR Systems, Inc.'s
common stock. No sale of DDR Systems, Inc.'s common stock has ever been sold from
one investor to another and the last issue of stock from treasury occurred on
December 5, 1999, when a total of 2,300,000 shares of DDR Systems, Inc. common
stock were sold at a price of $0.045 per share. DDR Systems, Inc. believes this
transaction supports a bona fide estimate of $0.045 per share as the maximum
offering price solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(a) under the Securities Act of 1933.
</TABLE>
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to such section 8(a), may determine.
<PAGE>
WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. ALTHOUGH WE ARE
PERMITTED BY US FEDERAL SECURITIES LAW TO OFFER THESE SECURITIES USING THIS
PROSPECTUS, WE MAY NOT SELL THEM OR ACCEPT YOUR OFFER TO BUY THEM UNTIL THE
DOCUMENTATION FILED WITH THE SEC RELATING TO THESE SECURITIES HAS BEEN DECLARED
EFFECTIVE BY THE SEC. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
OR OUR SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION
WHERE THAT WOULD NOT BE PERMITTED OR LEGAL.
Subject To Completion - August 14, 2000
PROSPECTUS
AUGUST 14, 2000
DDR SYSTEMS, INC.
3650 WEST 30TH AVE
VANCOUVER, BRITISH COLUMBIA V6S 1W8, CANADA
(604) 732-0623
2,300,000 Shares of Common Stock
to be sold by current shareholders
- This is the resale of common stock of DDR Systems, Inc., by selling
shareholders
- No public market currently exists for shares of DDR Systems, Inc.'s common
stock.
- None of the proceeds from the sale of stock in this offering will be
available to DDR Systems, Inc.
- No sale of DDR Systems, Inc.'s common stock has ever been sold from one
investor to another and the last issue of stock from treasury
occurred on December 5, 1999, when a total of 2,300,000 shares of DDR
Systems, Inc. common stock were sold at a price of $0.045 per share.
The price of the shares will be determined through negotiations between
the buyers and sellers.
This is not an underwritten offering, and DDR Systems, Inc.'s stock is not
listed on any national securities exchange or the NASDAQ Stock Market.
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 1.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS.
NOR HAVE THEY MADE, NOR WILL THEY MAKE, ANY DETERMINATION AS TO WHETHER ANYONE
SHOULD BUY THESE SECURITIES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
<TABLE>
<CAPTION>
Table Of Contents
<S> <C>
Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Determination of Offering Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Dilution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Selling Shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Plan of Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Description of Capital Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Interests of Named Experts and Counsel. . . . . . . . . . . . . . . . . . . . . . . . 12
Description of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Description of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Market Price of and Dividends on Capital Stock and Other Stockholder Matters. . . . . 18
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Management's Discussion and Analysis of Financial Condition and Results of Operations 20
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 21
Directors and Executive Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Security Ownership of Certain Beneficial Owners and Management. . . . . . . . . . . . 23
Certain Relationships and Related Transactions. . . . . . . . . . . . . . . . . . . . 23
Disclosure of Commission Position on Indemnification for Securities Act Liabilities . 24
Index to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this prospectus before purchasing the common stock of
DDR Systems, Inc. Investing in DDR Systems, Inc.'s common stock involves a high
degree of risk.
DDR SYSTEMS, INC. IS IN ITS EARLIEST STAGES OF DEVELOPMENT AND MAY NEVER BECOME
PROFITABLE
DDR SYSTEMS, INC. is in the extreme early stages of development and could fail
before implementing its business plan. It must be regarded as a "start up"
venture that will incur net losses for the foreseeable future. DDR has no
operating history or revenues from operations, and it faces unforeseen costs,
expenses, problems and difficulties that could easily prevent it from ever
becoming profitable.
Sufficient Penetration Of Recorder Technology To The Existing Marketplace May
Not Be Possible
DDR Systems, Inc. has licensed a product line consisting of high-tech
instruments that are used to record information transferred from distant sources
like aircraft and satellites. Simply put the recorders are high speed tape
recorders that are capable of recording information relayed by several types of
satellites and aircraft. The recorder operates basically the same as a VCR with
all the same play, fast forward, rewind, etc. functions. (See "Description of
Business - The License") Once marketing begins there is no guarantee that the
marketplace will be sufficiently penetrated so that DDR Systems, Inc. will
become profitable. Any failure to establish sufficient market penetration of the
recording technology application would prevent DDR Systems, Inc. from
implementing its business plan, and could cause its stock to be worthless.
DDR SYSTEMS, INC. MAY LOSE ITS REACH TECHNOLOGIES INC. LICENSE IF IT FAILS TO
MEET ITS MINIMUM PURCHASE REQUIREMENTS
DDR Systems, Inc. may be unable to meet the minimum purchase requirements under
its license with Reach Technologies Inc., which could result in the loss of its
license. This could prevent DDR Systems, Inc. from implementing its business
plan, and could cause its stock to be worthless. DDR Systems, Inc. currently has
no prospective purchasers lined up, it does not intend to meet its minimum
purchase requirement simply by stockpiling an inventory of the Reach
Technologies Inc. licensed product line. If DDR Systems, Inc. does not meet its
minimum purchase requirement it would be deemed to be in default under its
License Agreement with Reach Technologies IncReach Technologies Inc. would then
be able to terminate DDR Systems, Inc.'s license rights to the Reach
Technologies Inc. licensed product line.
1
<PAGE>
INCREASES IN THE REACH TECHNOLOGIES INC. LICENSED PRODUCT LINE PRICES COULD
DESTROY DDR SYSTEMS, INC.'S POTENTIAL FOR FUTURE PROFITABILITY
Any material price increases by Reach Technologies Inc. could decrease or
eliminate DDR Systems, Inc.'s potential profitability. Reach Technologies Inc.
has the right to increase the Reach Technologies Inc. licensed product line
prices on 30 days notice by revising its published pricing schedule.
DDR SYSTEMS, INC. MAY DILUTE EXISTING SHAREHOLDERS BY COMPENSATING SERVICE
PROVIDERS BY ISSUING STOCK
DDR Systems, Inc. might seek to compensate providers of services by issuance of
stock in lieu of cash. Any such stock issuance would dilute ownership interests
of shareholders. For example, it is possible that DDR Systems, Inc. would grant
stock to compensate its marketing and sales personnel with stock options.
Irrespective of whether DDR Systems, Inc.'s cash assets prove to be inadequate
to meet its operational needs, DDR Systems, Inc. might seek to compensate
providers of services by issuance of stock in lieu of cash, which again would
dilute ownership interests of shareholders.
COMPETITORS COULD DEVELOP ALTERNATIVE AND MORE COST-EFFECTIVE DATA RECORDER
PRODUCTS TO COMPETE DIRECTLY IN THE MARKETPLACE, WHICH COULD DESTROY DDR
SYSTEMS, INC.'S POTENTIAL FOR FUTURE PROFITABILITY
DDR Systems, Inc.'s products compete against those of other established
companies, some of which have greater financial, marketing and other resources
than those of DDR Systems, Inc. These competitors may be able to institute and
sustain price wars, or develop products that could perform similar to or better
than the Reach Technologies Inc. licensed product line, resulting in a reduction
of DDR Systems, Inc.'s share of the market and limiting or eliminating the
profitability. In addition, there are no significant barriers to new
competitors entering the market place.
DDR SYSTEMS, INC.'S SIGNIFICANT SHAREHOLDER COULD SELL HIS CONTROL BLOCK TO AN
OUTSIDE PARTY RESULTING IN A POSSIBLE CHANGE IN BUSINESS NOT CONSIDERED BY OTHER
SHAREHOLDERS
DDR Systems, Inc.'s significant shareholder, Glenn Jones, could sell his control
block to an outside party resulting in a majority of the voting power being
transferred to the purchaser(s). The result could be that new shareholder(s)
would control DDR Systems, Inc. and persons unknown could replace DDR Systems,
Inc.'s management. It is uncertain whether any such replacements would continue
to implement DDR Systems, Inc.'s current business plan.
HEAVY DEPENDENCE ON ONE INDIVIDUAL WHO WILL NOT DEVOTE HIS FULL TIME AND
ATTENTION TO DDR SYSTEMS, INC.'S AFFAIRS COULD RESULT IN DELAYS OR BUSINESS
FAILURE
Glenn Jones is serving as President and a Director. Loss of Mr. Jones's
services may hamper DDR Systems, Inc.'s ability to implement its business plan,
and could cause its stock to be worthless. DDR Systems, Inc. has found that Mr.
Jones's inability to devote his full time and attention to DDR Systems, Inc.'s
affairs has resulted in delays in progress towards the implementation of its
business plan. Mr. Jones's inability to devote his full time and attention to
2
<PAGE>
DDR Systems, Inc.'s affairs may also result in a failure to implement its
business plan. DDR Systems, Inc. is heavily dependent upon the skills, talents
and abilities of Mr. Jones to implement its business plan. Because investors
will not be able to evaluate the merits of DDR Systems, Inc.'s business
decisions, they should carefully and critically assess Mr. Jones's background.
See "Directors and Executive Officers".
HEAVY DEPENDENCE ON ONE INDIVIDUAL WHO HAS LITTLE MARKETING EXPERIENCE COULD
RESULT IN DELAYS OR BUSINESS FAILURE
Because of lack of marketing experience, DDR Systems, Inc. may overestimate the
marketability of the Reach Technologies Inc. licensed product line and may
underestimate the costs and difficulties associated with selling and
distributing the Reach Technologies Inc. licensed product line. Any such
unanticipated costs or difficulties could prevent DDR Systems, Inc. from
implementing its business plan, thereby limiting its profitability and
decreasing the value of its stock. Mr. Jones has no experience in implementing
an extensive sales campaign for the Reach Technologies Inc. licensed product
line. Mr. Jones is not a sales or marketing professional by trade.
DDR SYSTEMS, INC. DOES NOT HAVE ANY EMPLOYMENT AGREEMENTS WITH ITS OFFICERS AND
DIRECTORS LEAVING THE POSSIBILITY OPEN THAT ONE OR MORE COULD LEAVE AND COMPETE
WITH DDR SYSTEMS, INC.
If DDR Systems, Inc. loses the services of its president, Mr. Jones or its Chief
Financial Officer, Ms. Finnigan, or if one or both should decide to join a
competitor or otherwise compete directly or indirectly with DDR Systems, Inc.,
technical or financial information could be used or provided to a competitor
causing DDR Systems, Inc.'s stock to be worthless. DDR Systems, Inc. does not
have an employment agreement with Mr. Jones or Ms. Finnigan. As a result, there
is no assurance that they will continue to manage DDR Systems, Inc.'s affairs in
the future.
DDR SYSTEMS, INC. HAS NOT OBTAINED KEY MAN LIFE INSURANCE FOR ITS OFFICERS AND
DIRECTORS LEAVING THE POSSIBILITY DDR SYSTEMS, INC. MAY NOT RECOVER FROM THE
INCAPACITATION OF AN OFFICER OR DIRECTOR
DDR Systems, Inc. has not obtained a key man life insurance policy on either its
president, Mr. Jones or its Chief Financial Officer, Ms. Finnigan. As a result,
DDR Systems, Inc. may not be able to replace either Mr. Jones or Ms. Finnigan
should a serious accident befall one or both of them.
DDR SYSTEMS, INC. MAY CONSIDER BUSINESS COMBINATIONS RESULTING IN A POSSIBLE
CHANGE IN BUSINESS NOT CONSIDERED BY OTHER SHAREHOLDERS
DDR Systems, Inc. may make investments in or acquire complementary products,
technologies and businesses, or a business completely unrelated to DDR Systems,
Inc.'s current business plan. Acquisition of a completely unrelated business
would result in a change of business not contemplated by existing shareholders.
3
<PAGE>
DDR Systems, Inc. may consider a future financing or business combination that,
because of the size of the related stock issuance, would result in a majority of
the voting power being transferred to the investor(s). The result could be that
new shareholder(s) would control DDR Systems, Inc. and persons unknown could
replace DDR Systems, Inc.'s management. It is uncertain whether any such
replacements would continue to implement DDR Systems, Inc.'s current business
plan and in any event may result in a new management team not considered by
existing shareholders. DDR Systems, Inc. has had no discussions with third
parties regarding business opportunities and there currently are no business
acquisitions that are probable.
DDR SYSTEMS, INC. MAY ENTER IN TO NEW LINE OF BUSINESS WHICH INVESTORS COULD NOT
EVALUATE RESULTING IN A POSSIBLE CHANGE IN BUSINESS NOT CONSIDERED BY OTHER
SHAREHOLDERS
In the event of a business combination, acquisition, or change in shareholder
control, DDR may enter in to a new line of business which an investor did not
anticipate and in which that investor may not want to participate. DDR may make
investments in or acquire complementary products, technologies and businesses,
or businesses completely unrelated to DDR's current business plan. Similarly,
an asset acquisition or business combination would likely include the issuance
of a significant amount of DDR's common stock, which may result in a majority of
the voting power being transferred to new investors. New investors may replace
DDR's management. New management may decide not to continue to implement DDR's
current business plan, and may decide to enter into a business completely
unrelated to DDR's current business plan which an investor did not anticipate
and in which that investor may not want to participate. In such case, an
investor could not only lose its entire investment, but could lose its entire
investment on a business decision it did not get to evaluate at the time of
investing in DDR.
POTENTIAL BUSINESS COMBINATIONS COULD BE DIFFICULT TO INTEGRATE AND DISRUPT
BUSINESS.
If DDR Systems, Inc. acquires a company, it could face difficulties in
assimilating that company's personnel and operations. Acquisitions also involve
the need for integration into existing administration, services marketing, and
support efforts. These acquisitions and investments could disrupt its ongoing
business, distract management and employees and increase its expenses. In
addition, the key personnel of the acquired company may decide not to work for
DDR Systems, Inc. Any amortization of goodwill or other assets, or other charges
resulting from the costs of these acquisitions, could increase DDR Systems,
Inc.'s operating costs.
POTENTIAL BUSINESS COMBINATIONS COULD INCREASE OPERATING COSTS AND COULD DESTROY
DDR SYSTEMS, INC.'S POTENTIAL FOR FUTURE PROFITABILITY
DDR Systems, Inc. cannot predict the extent to which its liquidity and capital
resources will be diminished prior to consummation of a business combination or
whether its capital will be further depleted by the operation losses (if any) of
a business entity that is acquired.
4
<PAGE>
DDR SYSTEMS, INC. MAY UNDERTAKE INVESTMENT RISKS THAT ARE DILUTIVE AND THAT
COULD ADVERSELY IMPACT FUTURE EARNINGS PER SHARE
Any asset acquisition or business combination would likely include the issuance
of a significant amount of DDR Systems, Inc.'s common stock, which would dilute
the ownership interest of holders of existing shares of DDR Systems, Inc.'s
common stock.
DDR SYSTEMS, INC. MAY UNDERTAKE INVESTMENT RISKS THAT SHAREHOLDERS MIGHT NOT
OTHERWISE ACCEPT
DDR Systems, Inc.'s stockholders could lose their entire investment on a
business decision they did not get to evaluate at the time of investing in DDR
Systems, IncDepending on the nature of the transaction, DDR Systems, Inc.'s
stockholders may not have an opportunity to vote on whether to approve it. As a
result, DDR Systems, Inc.'s management could enter into a transaction that an
investor would not want to invest in.
CONFLICTS OF INTEREST BETWEEN DDR SYSTEMS' SIGNIFICANT SHAREHOLDER AND THE
COMPANY COULD RESULT IN ADVERSE TREATMENT
Glenn Jones, DDR Systems' majority shareholder, is a one-third owner in Reach
Technologies, the licensor of the technology which forms the basis of DDR
Systems' business plan. As a result, Mr. Jones has a potential conflict of
interest between his investment and role in DDR Systems and his investment in
Reach Technologies, which may result in Mr. Jones' making decisions which may be
more favorable to Reach Technologies than to DDR Systems. There is no procedure
in place, which would allow Mr. Jones to resolve potential conflicts in an
arms-length fashion. Any adverse decisions could limit or eliminate DDR
Systems' profitability.
DDR SYSTEMS, INC. HAS NO OPERATING HISTORY AND FINANCIAL RESULTS ARE UNCERTAIN
There is no assurance that DDR Systems, Inc. will provide a return on investment
in the future. DDR Systems, Inc. has not achieved profitability, and expects to
incur net losses for the foreseeable future. As a result of DDR Systems, Inc.'s
limited operating history, it is difficult to accurately forecast its potential
revenue, and there is no meaningful historical financial data upon which to base
planned operating expenses. DDR Systems, Inc. is a relatively young company with
no history of earnings or profits, its revenue and income potential is unproved
and its business model is still emerging.
DDR SYSTEMS, INC.'S MAY NOT ACHIEVE OR SUSTAIN FAVORABLE OPERATING RESULTS
If DDR Systems, Inc. does not become profitable, it may be unable to maintain
its Reach Technologies Inc. License, which would eliminate its sole product
line. If DDR Systems, Inc. does achieve profitability, it cannot be certain
that it will sustain or increase it. An investor in DDR Systems, Inc.'s common
stock must consider the risks and difficulties frequently encountered by early
stage companies in new and rapidly evolving markets. DDR Systems, Inc.'s
5
<PAGE>
ability to achieve and then sustain favorable operating results will depend on a
number of factors, including costs related to:
- identifying prospective purchasers,
- marketing to prospective purchasers, and
- initial product discounts, if any.
SIGNIFICANT OPERATION EXPENDITURES MAY PREVENT DDR SYSTEMS, INC. FROM ACHIEVING
PROFITABILITY
DDR Systems, Inc. expects to significantly increase its operating expenses in
order to market and distribute the Reach Technologies Inc. licensed product
line. In addition, Reach Technologies Inc. has the right to increase its prices
to DDR Systems, Inc. on 30 days notice. As a result it may not generate enough
revenue to achieve profitability.
DDR SYSTEMS, INC. MAY NEED ADDITIONAL FINANCING WHICH MIGHT RANK AHEAD OF
SHAREHOLDER'S INTERESTS AND IN THE EVENT OF A BANKRUPTCY SHAREHOLDERS COULD LOSE
THEIR ENTIRE INVESTMENT
If DDR Systems, Inc. raises additional funds through the issuance of equity,
equity-related or convertible debt securities, these securities may have rights,
preferences or privileges senior to those of the rights of its common stock and
its stockholders may experience additional dilution. In the event of a
bankruptcy shareholders could loose their entire investments as a result of the
senior preferences or privileges. DDR Systems, Inc. has very limited funds, and
its funds may be inadequate to implement its business plan. DDR Systems, Inc.
may require additional working capital to fund its business.
DDR SYSTEMS, INC. MAY NOT BE ABLE TO RAISE ADDITIONAL FINANCING IF NEEDED FOR
ITS BUSINESS AND IN THE EVENT OF A BANKRUPTCY SHAREHOLDERS COULD LOSE THEIR
ENTIRE INVESTMENT
DDR Systems, Inc.'s ultimate success will depend on its ability to raise
additional capital. Failure to raise the neces-sary funds in a timely fashion
will severely limit DDR Systems, Inc.'s operations and it would be unable to
implement its business plan. No commitments to provide additional funds have
been made by management or other shareholders. DDR Systems, Inc. has not
investigated the availability, source or terms that might govern the acquisition
of additional financing. When additional capital is needed, there is no
assurance that funds will be available from any source or, if available, that
they can be obtained on terms acceptable to DDR Systems, Inc.
DDR SYSTEMS, INC. HAS NOT TAKEN ANY STEPS TO HAVE ITS COMMON STOCK LISTED ON THE
OTC BULLETIN BOARD, HAS NO IMMEDIATE PLANS TO DO SO AND THUS THERE IS NO
GUARANTEE OF APPROVAL FOR LISTING, AND ACCORDINGLY SHAREHOLDERS MAY HAVE
DIFFICULTY SELLING THEIR SHARES.
6
<PAGE>
There is no guarantee that DDR Systems, Inc. Will be approved for listing on the
bulletin board, and accordingly shareholders may have difficulty selling their
shares without considerable delay, if at all. DDR Systems, Inc. Has not taken
any steps to have its shares listed on the OTC bulletin board and has no
immediate plans to do so. Although DDR Systems, Inc. Intends to apply to have
its shares traded on the OTC bulletin board shortly after it has a sufficient
number of shareholders to interest a market maker in making a market in its
securities there is no guarantee that this will occur.
DDR SYSTEMS, INC. COMMON STOCK HAS NO PRIOR MARKET, AND PRICES MAY DECLINE AFTER
THE OFFERING
There is no public market for DDR Systems, Inc.'s common stock and no assurance
can be given that a market will develop or that any shareholder will be able to
liquidate his investment without considerable delay, if at all. The trading
market price of DDR Systems, Inc.'s common stock may decline below the offering
price. If a market should develop, the price may be highly volatile. In
addition, an active public market for DDR Systems, Inc.'s common stock may not
develop or be sustained. All of DDR Systems, Inc.'s outstanding shares, except
for those of Glenn Jones's, are being registered for sale pursuant to this
offering. If DDR Systems, Inc.'s selling stockholders sell substantial amounts
of common stock in the public market, the market price of DDR Systems, Inc.'s
common stock could fall. Factors such as those discussed in this "Risk Factors"
section may have a significant impact on the market price of DDR Systems, Inc.'s
securities. Owing to the low price of the securities many brokerage firms may
not be willing to effect transactions in the securities. Even if a purchaser
finds a broker willing to effect a transaction in DDR Systems, Inc.'s common
stock, the combination of brokerage commissions, state transfer taxes, if any,
and other selling costs may exceed the selling price. Further, many lending
institutions will not permit the use of such securities as collateral for loans.
Thus, a purchaser may be unable to sell or otherwise realize the value invested
in DDR Systems, Inc. stock.
INVESTORS MAY FACE SIGNIFICANT RESTRICTIONS ON THE RESALE OF DDR SYSTEMS, INC.
STOCK DUE TO STATE BLUE SKY LAWS
Because DDR Systems, Inc.'s securities have not been registered for resale under
the blue sky laws of any state, the holders of such shares and those persons
desiring to purchase them in any trading market that may develop in the future
should be aware that there may be significant state blue sky law restrictions on
the ability of investors to sell and on purchasers to buy DDR Systems, Inc.'s
securities. Investors may be unable to sell their stock in DDR Systems, Inc.
Accordingly, investors should consider the secondary market for DDR Systems,
Inc.'s securities to be a limited one. Investors may be unable to resell their
stock without the significant expense of state registration or qualification.
INVESTORS MAY FACE SIGNIFICANT RESTRICTIONS ON THE RESALE OF DDR SYSTEMS, INC.
STOCK DUE TO FEDERAL PENNY STOCK REGULATIONS
7
<PAGE>
Because DDR Systems, Inc.'s securities will constitute "penny stock" within the
meaning of the rules may affect the ability of owners of DDR Systems, Inc.'s
shares to resell their securities . The Securities and Exchange Commission has
adopted a number of rules to regulate "penny stocks." Such rules include Rules
3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the
Securities and Exchange Act of 1934. The rules require broker-dealers to make
certain disclosures regarding penny stocks to potential buyers, and make a
determination based upon information provided by the potential buyer about such
buyer's suitability for investing in penny stocks. Because DDR Systems, Inc.'s
securities will constitute "penny stock" within the meaning of the rules, the
rules would apply to DDR Systems, Inc. and its securitiesand there may be a
limited market for penny stocks, due to the regulatory burdens on
broker-dealers.
INVESTORS MAY FACE SIGNIFICANT RESTRICTIONS ON THE RESALE OF DDR SYSTEMS, INC.
STOCK DUE TO THE WAY IN WHICH STOCK TRADES ARE HANDLED BY BROKER-DEALERS
Because of large broker-dealer spreads, investors may be unable to sell the
stock immediately back to the broker-dealer at the same price the broker-dealer
sold the stock to the investor. In some cases, the stock may fall quickly in
value. Investors may be unable to reap any profit from any sale of the stock, if
they can sell it at all. The market among broker-dealers may not be active.
Investors in penny stock often are unable to sell stock back to the dealer that
sold them the stock. The mark ups or commissions charged by the broker-dealers
may be greater than any profit a seller may make.
THE MARKET FOR PENNY STOCKS HAS SUFFERED IN RECENT YEARS FROM PATTERNS OF FRAUD
AND ABUSE WHICH MAY CAUSE INVESTORS TO LOSE THEIR INVESTMENT
Shareholders should be aware that, according to the Securities and Exchange
Commission Release No. 34-29093, the market for penny stocks has suffered in
recent years from patterns of fraud and abuse which could cause investors to
lose their entire investment. Such patterns include:
- control of the market for the security by one or a few broker-dealers that
are often related to the promoter or issuer;
- manipulation of prices through prearranged matching of purchases and sales
and false and misleading press releases;
- "boiler room" practices involving high pressure sales tactics and
unrealistic price projections by inexperienced sales persons;
- excessive and undisclosed bid-ask differentials and markups by selling
broker-dealers; and
- the wholesale dumping of the same securities by promoters and
broker-dealers after prices have been manipulated to a desired level, along with
the inevitable collapse of those prices with consequent investor losses.
8
<PAGE>
OTHER RISKS
YOU SHOULD NOT RELY ON FORWARD-LOOKING STATEMENTS BECAUSE THEY ARE INHERENTLY
UNCERTAIN
This prospectus contains forward-looking statements that involve risks and
uncertainties. DDR Systems, Inc.'s actual results could differ materially from
those anticipated in these forward-looking statements for many reasons,
including the risks faced by DDR Systems, Inc. described in "Risk Factors" and
elsewhere in this prospectus. We use words such as "anticipates", "believes",
"plans", "expects", "future", "intends" and similar expressions to identify
these forward-looking statements. Prospective investors should not place undue
reliance on these forward-looking statements, which apply only as of the date of
this prospectus.
USE OF PROCEEDS
This prospectus is part of a registration statement that permits selling
shareholders to sell their shares on a continuous or delayed basis in the
future. Because this prospectus is solely for the purpose of selling
shareholders, DDR Systems, Inc. will not receive any proceeds from the sale of
stock being offered. Proceeds from the original offering of $113,500 were raised
for the purpose of providing working capital.
DETERMINATION OF OFFERING PRICE
This offering is solely for the purpose of allowing DDR Systems, Inc.'s
shareholders to sell their stock. The selling shareholders may sell their
shares when the registration statement becomes effective, or they may elect to
sell some or all of their shares at a later date. As the market develops, the
selling shareholders will determine the price for the stock. DDR Systems, Inc.
has 12,300,000 shares of common stock issued and outstanding, of which
10,000,000 shares were issued on June 3, 1999 at $0.001 per share, and 2,300,000
shares were issued on December 5, 1999. All stock was issued based on a
valuation by the Board of Directors. No sale of DDR Systems, Inc.'s common
stock has ever been sold from one investor to another and the last issue of
stock from treasury occurred on December 5, 1999, when a total of 2,300,000
shares of DDR Systems, Inc. common stock were sold at a price of $0.045 per
share.
DILUTION
This offering is for sales of stock by existing DDR Systems, Inc. shareholders
on a continuous or delayed basis in the future. Sales of common stock by
shareholders will not result in any substantial change to the net tangible book
value per share before and after the distribution of shares by the selling
shareholders. There will be no change in net tangible book value per share
attributable to cash payments made by purchasers of the shares being offered.
Prospective investors should be aware, however, that the price of DDR Systems,
Inc.'s shares may not bear any rational relationship to net tangible book value
per share.
9
<PAGE>
SELLING SHAREHOLDERS
The following are the shareholders for whose accounts the shares are being
offered; the amount of securities owned by such shareholder prior to this
offering; the amount to be offered for such shareholder's account; and the
amount to be owned by such shareholder following completion of the offering.
Other than as disclosed below, no selling shareholder holds or has held during
the past three years any position, office, or other material relationship with
DDR Systems, Inc.
<TABLE>
<CAPTION>
Number of
Position with Number of Number of Shares After
Name Company Shares Owned Shares Offered Sale(1)
------------------- ------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
Green Grove Trading None 575,000 575,000 0
Limited
World Wise Traders None 575,000 575,000 0
Limited
Gauntlett Limited None 575,000 575,000 0
Valonia Limited None 575,000 575,000 0
<FN>
(1) This table assumes that each of the above named shareholders will sell all
of its shares available for sale during the effectiveness of the registration
statement that includes this prospectus. Shareholders are not required to sell
their shares. See "Plan of Distribution."
</TABLE>
PLAN OF DISTRIBUTION
This is not an underwritten offering. This prospectus is part of a registration
statement that permits selling shareholders to sell their shares on a continuous
or delayed basis in the future. Selling shareholders may sell their shares to
the public when the registration statement becomes effective, or they may elect
to sell some or all of their shares at a later date. DDR Systems, Inc. has not
committed to keep the registration statement effective for any set period of
time.
While the registration statement is effective, selling shareholders may sell
their shares directly to the public, without the aid of a broker or dealer, or
they may sell their shares through a broker or dealer if DDR Systems, Inc.'s
stock is authorized for inclusion on the OTC bulletin board. Any commission,
fee or other compensation of a broker or dealer would depend on the brokers or
dealers involved in the transaction. The selling shareholders have not entered
into any arrangements, or understandings with any brokers or dealers to
facilitate the sale of DDR Systems, Inc.'s stock.
No public market currently exists for shares of DDR Systems, Inc.'s common
stock. DDR Systems, Inc. intends to apply to have its shares traded on the OTC
bulletin board under the symbol "DDRS". DDR Systems, Inc. has not taken any
actions to have its shares traded on the OTC bulletin board. DDR Systems, Inc.
10
<PAGE>
intends to apply to have its shares traded on the OTC bulletin board immediately
after it has met the listing standards for the OTC bulletin board as set out by
the National Association of Stock Dealers. In the case of DDR Systems, Inc.
these listing standards are:
- An effective Registration Statement Under The Securities Act of 1933
- To remain current with its quarterly and annual report filings with the
Securities and Exchange Commission
- At least one market maker to make a market in its securities
Other than to remain current with its quarterly and annual report filings, DDR
Systems, Inc. needs to achieve a sufficient number of shareholders to interest a
market maker in making a market in its securities. There is no minimum number of
shareholders required for a stock to trade on the OTC Bulleting Board. DDR
Systems anticipates that a registered offering by its selling shareholders may
result in its stock being held by enough shareholders to interest a market maker
to make a market in trading DDR Systems' stock.
DESCRIPTION OF CAPITAL STOCK
DDR Systems, Inc.'s authorized capital consists of 100,000,000 shares of common
stock, par value $.001 per share and 20,000,000 of preferred stock, par value
$.001 per share. Immediately prior to this offering, 12,300,000 common shares
were issued and outstanding. Each record holder of common stock is entitled to
one vote for each share held on all matters properly submitted to the
shareholders for their vote. The articles of incorporation do not permit
cumulative voting for the election of directors, and shareholders do not have
any preemptive rights to purchase shares in any future issuance of DDR Systems,
Inc.'s common stock.
Because the holders of shares of DDR Systems, Inc.'s common stock do not have
cumulative voting rights, the holders of more than 50% of DDR Systems, Inc.'s
outstanding shares, voting for the election of directors, can elect all of the
directors to be elected, if they so choose. In such event, the holders of the
remaining shares will not be able to elect any of DDR Systems, Inc.'s directors.
The holders of shares of common stock are entitled to dividends, out of funds
legally available therefor, when and as declared by the Board of Directors. The
Board of Directors has never declared a dividend and does not anticipate
declaring a dividend in the future. In the event of liquidation, dissolution or
winding up of the affairs of DDR Systems, Inc., holders are entitled to receive,
ratably, the net assets of DDR Systems, Inc. available to shareholders after
payment of all creditors.
To the extent that additional shares of DDR Systems, Inc.'s common stock are
issued, the relative interests of existing shareholders may be diluted.
INTERESTS OF NAMED EXPERTS AND COUNSEL
11
<PAGE>
Neither Bedinger & Co (Auditors) or Ogden Murphy Wallace (Legal Counsel) was
employed on a contingent basis in connection with the registration or offering
of DDR Systems, Inc.'s common stock.
DESCRIPTION OF BUSINESS
GENERAL
DDR Systems, Inc. was incorporated under the laws of the State of Washington on
June 3, 1999, and is in its early developmental and promotional stages. To
date, DDR Systems, Inc.'s only activities have been organizational, directed at
acquiring its principal asset, raising its initial capital and developing its
business plan. DDR Systems, Inc. has not commenced commercial operations. DDR
Systems, Inc. has no full time employees and owns no real estate.
PRODUCT DESCRIPTION
DDR Systems, Inc.'s principal asset is a licensed product line consisting of
high-tech instruments that are used to record information transferred from
distant sources like aircraft and satellites. Simply put the recorders are high
speed tape recorders that are capable of recording information relayed by
several types of satellites and aircraft. Some of the data that can be recorded
include fuel consumption, engine rotation per minute, time, pictures recorded by
cameras, load stresses recorded by sensors and the status of various equipment
on the craft such as batteries or radar. The recorder operates basically the
same as a VCR with all the same play, fast-forward, rewind, record, scheduled
operation, and other similar functions. The product line is unique in that it
can record information from satellites at speeds required by those satellites.
The licensed product line consists of recorders capable of recording at speeds
up to 40 Megabits per second. The recorders are configured for both laboratory
and onsite use. Models consist of laboratory, rack mount and portable versions.
THE LICENSE
On June 3, 1999, DDR Systems, Inc. acquired from Reach Technologies Inc. the
rights to distribute the Reach Technologies Inc. recorder product line for the
purpose of selling the product in the marketplace. DDR Systems, Inc., which at
the time was owned by DDR Systems, Inc.'s president, Glenn Jones, a one third
shareholder in Reach Technologies Inc., paid for the license by issuing stock to
the shareholder in Reach Technologies Inc. There were no negotiations between
the parties with regard to the acquisition.
DDR Systems, Inc.'s business plan is to conduct a market analysis, and then hire
sales staff to begin marketing the licenced product line. DDR Systems, Inc.
anticipates that the market analysis will take about 5 months with hiring of
sales staff and marketing of the product line beginning in September 2000.
12
<PAGE>
Under its license with Reach Technologies Inc., DDR Systems, Inc. has the
exclusive right to distribute and market the Reach Technologies Inc. licensed
product line in Washington DC, Virginia, West Virginia, Maryland, Pennsylvania,
New York, Connecticut, Massachusetts, Vermont, New Hampshire, Maine, Ohio,
Kentucky and Tennessee for an initial period beginning June 3, 1999, expiring
January 31, 2003. To retain this right, DDR Systems, Inc. must purchase a
minimum amount of product based on pricing established in the license agreement
during each of the three years of its license, beginning February 1, 2000. DDR
Systems, Inc. is required to purchase $50,000 of the product by January 31,
2001, and a further $100,000 by January 31, 2002, and a further $100,000 by 2003
to retain its license. DDR Systems, Inc. intends to meet these contract minimums
by hiring sales staff whose qualifications are commensurate with those
determined by the marketing analysis. The current price to DDR Systems, Inc. for
the product line is as follows:
<TABLE>
<CAPTION>
WHOLESALE
PRICE
PRODUCT MODEL NUMBER (US DOLLARS)
------------------------------ ------------ ------------
<S> <C> <C>
DIGITAL DATA RECORDER
(BENCHTOP)
DAT based recorder DDR-4mm 12,170
Exabyte based recorder DDR-8mm 13,650
DLT based recorder DDR-DLT 16,700
DIGITAL DATA RECORDER
(PORTABLE)
(PRICE DOES NOT INCLUDE IBM
LAPTOP PC)
DAT based recorder DDR-P-4mm 12,170
Exabyte based portable DDR-P-8mm 13,220
DIGITAL DATA RECORDER
(OPTIONS)
RS-422 I/O option (2 channels) DDR-RS422 870
Differential ECL I/O option DDR-ECL 870
Additional PCM Channel DDR-PCM 3,480
IRIG Time Code input option DDR-IRIG 1,740
GPS Time input option DDR-GPS 2,610
2 GB High Speed Disk option DDR-Disk-2GB 870
4 GB High Speed Disk option DDR-Disk-4GB 1,300
Shipping case for portable DDR-Case 390
</TABLE>
Reach Technologies Inc. may change the price on 30 days' notice.
13
<PAGE>
The license agreement may be renewed by DDR Systems, Inc. for additional three
year periods so long as DDR Systems, Inc. is not in default. Any renewal
agreement will be subject to the same minimum purchase requirement structure
except that the minimum purchase amount in each year would be calculated as the
greater of $120,000 and 65% of DDR Systems, Inc.'s prior years audited revenue.
The agreement may be terminated by DDR Systems, Inc. at any time upon notice to
Reach Technologies Inc., and by Reach Technologies Inc. for cause, which
includes breach of the agreement; the bankruptcy or insolvency of DDR Systems,
Inc.; or the conviction of DDR Systems, Inc., its officers or directors, of any
crime involving moral turpitude.
BACKGROUND TO DEVELOPMENT OF THE PRODUCT
Reach Technologies Inc. began developing its recorder product line in 1993.
These recorders are used in satellite ground station development and operations
as well as aircraft testing. These products, to be sold by DDR Systems, Inc.,
provide low cost portable data recording and playback to the satellite and
aircraft industries. The products do this by relying on high performance
personal computers, advanced digital tape and modern hard disk technology,
custom hardware developments and innovative ways to provide real-time data
handling capabilities to the non real-time Microsoft Windows 98 environment and
in the Windows NT environment. The fastest product is in a range that satisfies
the needs of many existing satellite systems.
The fields of science and technology that are involved in the technology
include:
- Digital data recording devices;
- computer software (real-time systems and graphical user interfaces); and
- custom and off-the-shelf computer hardware.
The technology is proprietary and not patented. The technology behind the
licensed product line was developed when Reach Technologies realized that many
data recorder products were not user friendly and did not support commercially
available off the shelf disk and tape transports. This meant that competitors
had high life cycle costs as a result of expensive media, increased maintenance,
and calibration requirements. By supporting commercially available-off-the-shelf
replacement parts the product line was able to gain a competitive edge against
long established competitors in the industry. All the recorders share the same
architecture and support the same transport devices. The difference between
models is in the maximum sustainable speed for recording and playback of data.
ABOUT THE PRODUCT
DDR Systems, Inc. feels that the recorders' competitive advantage over other
products are its relatively low price and its use of commercially available off
the shelf replacement parts that are easily replaced when worn out and covered
by reputable manufactures warranties.
14
<PAGE>
The recorders are designed for recording data at rates from 0 to 40 Mbps. The
recorders are used to record and play data. The recorders feature a design that
supports the generation, manipulation, and analysis of data. Features, like
scheduled operation and flexible Input/Output make the recorder ideal for
operational data collection systems and for system development. The recorder is
based on the standard Intel PC platform running either Windows 98 or Windows NT.
The recorder supports commercially available off the shelf disk and tape
transports with small computer system interfaces. The use of commercially
available off the shelf components provides low life cycle costs as a result of
inexpensive media, reduced maintenance, and no calibration requirements.
Selection of the recording media is based on the maximum data rate, recording
duration, and cost considerations.
SHORT-TERM PLAN OF OPERATION FOR THE PERIOD ENDING DECEMBER 31, 2000
The initial step that DDR Systems, Inc. plans to take is to identify target
companies and develop a sales force to approach these companies. The market for
the product includes aircraft and spacecraft manufacturers, both private and
government, involved in both military and nonmilitary applications and it is
anticipated that these will be the focus of selling efforts. Once target
companies are identified, DDR Systems, Inc. will begin marketing the product. It
will be difficult for a small entrant into this market to gain market share
given the complexity of the industry and potential competition, however DDR
Systems, Inc. believes that the licensed product line can be successfully sold
into the marketplace. In general competitors do not support commercially
available off the shelf components and as a result their products are expensive
to manufacture and support. DDR Systems, Inc.'s licensed product line is less
expensive to manufacture and support. The product line is also priced less than
its competitors. DDR Systems, Inc. believes that with a marketing budget and
with quality product and people it will be able to successfully compete with
larger more established companies and gain market share. The data recorders will
be manufactured by Reach Technologies Inc.
DDR Systems, Inc. does not anticipate requiring additional capital within the
next six months since budgeted expenditures over the this period are less than
cash on hand. After paying accounts payable of $19,143 DDR Systems, Inc. will
have $84,357 to cover the anticipated expenditures over the next six months,
which are summarized below:
15
<PAGE>
- Market Research $ 20,000
- Printing and engraving expenses 5,000
- Attorneys' fees and expenses 20,000
- Accountants' fees and expenses 2,000
- Transfer agent's and registrar's fees and 500
expenses
- Miscellaneous 965
--------
Total $ 48,465
--------
DDR Systems, Inc. plans to cooperate with and future licensees that have license
rights in other territories to establish referral sale relationships. To date no
other company has received a license. DDR Systems, Inc. is therefore unable to
elaborate on what if any those arrangements might be.
Reach Technologies Inc. has indicated that experience shows the typical sales
cycle for the product is 6 to 8 months from lead generation to order. The
license agreement with Reach Technologies Inc. that provides the rights to
distribute the product includes a minimum purchase requirement that must be met
by January 31, 2001, 2002 and 2003. Because the sales cycle is typically long
and the offering under this prospectus is solely for selling shareholders, DDR
Systems, Inc. will need to raise funds to develop its license rights. By
raising additional funds through the sale of common stock or securities
convertible into common stock, the ownership interest of holders of existing
shares of DDR Systems, Inc.'s common stock will be diluted.
Although the product offers low life cycle costs as a result of inexpensive
media, reduced maintenance, and no calibration requirements, there is no
guarantee that the marketplace will conclude that reduced costs are worth not
dealing with established companies already in the marketplace. DDR Systems, Inc.
recognizes this fact. To address this possibility, DDR Systems, Inc. does not
discount other business opportunities that may be available to it, whether in
the form of asset acquisitions or business combinations. DDR Systems, Inc.'s
officer and director, Glenn Jones, may devote a portion of the time he devotes
to DDR Systems, Inc. evaluating business opportunities that may be available.
DDR Systems, Inc. has had no discussions with any third parties regarding
business opportunities. Any asset acquisition or business combination would
likely include the issuance of a significant amount of DDR Systems, Inc.'s
common stock, which would dilute the ownership interest of holders of existing
shares of DDR Systems, Inc.'s common stock.
INDUSTRY CONDITIONS AND COMPETITION
DDR Systems, Inc. is currently aware several products that compete directly in
its primary target market but is unaware of any other product that uses a
standard PC platform running Windows to implement the recorder. It is possible
that another company could develop a similar product that uses a standard PC
platform running Windows to implement the recorder to compete directly with DDR
Systems, Inc.'s product. DDR Systems, Inc. may have to compete with such
companies in the future. DDR Systems, Inc. does not yet know whether the sale of
the product will result in profitability. It does know, however, that if the
application turns out to be successful, it will hold an exclusive license in
16
<PAGE>
Washington DC, Virginia, West Virginia, Maryland, Pennsylvania, New York,
Connecticut, Massachusetts, Vermont, New Hampshire, Maine, Ohio, Kentucky and
for an initial period beginning June 3, 1999, expiring January 31, 2003, as long
as it meets its minimum purchase requirements.
EMPLOYEES
DDR Systems, Inc. is a development stage company and currently has no employees.
DDR Systems, Inc. is currently managed by Glenn Jones, a one third owner in
Reach Technologies (the "Licensor"), and Katherine Finnigan, its only officers
and directors. DDR Systems, Inc. looks to Mr. Jones for his entrepreneurial
skills and talents. His experience includes working with Reach Technologies
Inc. since its inception in 1993. He has spent years working for large high
tech companies like Hewlett Packard (2 years) and Macdonald Dettwiler and
Associates (10 years). DDR Systems, Inc. looks to Ms. Finnigan for her
financial skills and talents. Ms. Finnigan has extensive financial experience,
covering a broad spectrum of businesses. Her experience includes working for a
mutual fund and most recently as the Director of Finance for an Internet service
provider. For a complete discussion of Mr. Jones' and Ms. Finnigan's
experience, please see "Directors and Executive Officers."
Management plans to use consultants, attorneys and accountants as necessary and
does not plan to engage any full-time employees in the near future. Once DDR
Systems, Inc. completes its marketing plan, its priority will shift to
implementing that plan. The marketing plan would focus on two major goals:
identifying the most likely prospects for installing the recorders and retaining
one or more qualified individuals to market product to those prospects. DDR
Systems, Inc. would hire marketing employees based on the projected size of the
market and the compensation necessary to retain qualified sales employees. A
portion of any employee compensation likely would include the right to acquire
stock in DDR Systems, Inc., which would dilute the ownership interest of holders
of existing shares of DDR Systems, Inc.'s common stock.
AVAILABLE INFORMATION
DDR Systems, Inc. has filed with the Securities and Exchange Commission a
registration statement on Form S-1 with respect to the common stock offered by
this prospectus. This prospectus, which constitutes a part of the registration
statement, does not contain all of the information set forth in the registration
statement or the exhibits and schedules which are parts of the registration
statement. For further information with respect to DDR Systems, Inc. and its
common stock, see the registration statement and the exhibits and schedules
thereto. Any document DDR Systems, Inc. files may be read and copied at the
Commission's Public Reference Room located at 450 Fifth Street N.W., Washington
D.C. 20549, and the public reference rooms in New York, New York, and Chicago,
Illinois. Please call the Commission at 1-800-SEC-0330 for further information
about the public reference rooms. DDR Systems, Inc.'s filings with the
Commission are also available to the public from the Commission's website at
http://www.sec.gov.
17
<PAGE>
Upon completion of this offering, DDR Systems, Inc. will become subject to the
information and periodic reporting requirements of the Securities Exchange Act
and, accordingly, will file periodic reports, proxy statements and other
information with the Commission. Such periodic reports, proxy statements and
other information will be available for inspection and copying at the
Commission's public reference rooms, and the website of the Commission referred
to above.
DESCRIPTION OF PROPERTY
DDR Systems, Inc. currently maintains limited office space, occupied by Mr.
Jones, for which it pays no rent. Its address is 3650 West 30th Avenue,
Vancouver, British Columbia V6S 1W8, CANADA, and its phone number is (604) 224
3520. The office space is owned by the wife of a director of Reach Technologies
Inc. DDR Systems, Inc. does not believe that it will need to obtain additional
office space at any time in the foreseeable future until its business plan is
more fully implemented, at which time it may need office facilities. It is
intended that any such facilities would be located in Blaine or Ferndale,
Washington.
LEGAL PROCEEDINGS
DDR Systems, Inc. is not a party to any material pending legal proceedings, and
none of its property is the subject of a pending legal proceeding. Further, the
officer and director knows of no legal proceedings against DDR Systems, Inc. or
its property contemplated by any governmental authority.
MARKET PRICE OF AND DIVIDENDS ON CAPITAL
STOCK AND OTHER SHAREHOLDER MATTERS
No established public trading market exists for DDR Systems, Inc.'s securities.
DDR Systems, Inc. has no common equity subject to outstanding purchase options
or warrants. DDR Systems, Inc. has no securities convertible into its common
equity. There is no common equity that could be sold pursuant to Rule 144 under
the Securities Act or that DDR Systems, Inc. has agreed to register under the
Securities Act for sale by shareholders. Except for this offering, there is no
common equity that is being, or has been publicly proposed to be, publicly
offered by DDR Systems, IncThe principal operations of DDR Systems, Inc. have
not yet commenced.
DDR Systems, Inc. has 12,300,000 shares of common stock issued and outstanding,
of which 10,000,000 shares were issued on June 3, 1999 at $0.001 per share,
2,300,000 shares were issued on December 5, 1999. All stock was issued based
on a valuation by the Board of Directors. No sale of DDR Systems, Inc.'s common
stock has ever been sold from one investor to another and the last issue of
stock from treasury occurred on December 5, 1999, when a total of 2,300,000
shares of DDR Systems, Inc. common stock were sold from treasury at a price of
$0.45 per share.
18
<PAGE>
Upon effectiveness of the registration statement that includes this prospectus,
2.3 million of DDR Systems, Inc.'s 12.3 million outstanding shares will be
eligible for sale.
To date DDR Systems, Inc. has not paid any dividends on its common stock and
does not expect to declare or pay any dividends on its common stock in the
foreseeable future. Payment of any dividends will depend upon DDR Systems,
Inc.'s future earnings, if any, its financial condition, and other factors as
deemed relevant by the Board of Directors.
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements appearing elsewhere in this prospectus.
The statement of operations data set forth below for the period from June 3,
1998, (inception) to the eight months ended, and the balance sheet data at
December 31, 1999, are derived from DDR Systems, Inc.'s audited financial
statements included elsewhere in this prospectus. The historical results are not
necessarily indicative of results to be expected for any future period.
<TABLE>
<CAPTION>
Inception to
December 31, 1999
------------------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Net sales $ Nil
==================
Loss from continuing operations $ 17,066
==================
Loss per share from continuing operations $ Nil
==================
As of
December 31, 1999
BALANCE SHEET DATA:
Total assets $ 105,577
==================
Total liabilities $ 19,143
==================
</TABLE>
DDR Systems, Inc. is in its early developmental and promotional stages. To
date, DDR Systems, Inc.'s only activities have been organizational, directed at
acquiring its principal asset, raising its initial capital and developing its
business plan. DDR Systems, Inc. has not commenced commercial operations. As a
result, the selected financial data presented above bear no resemblance to the
results that DDR Systems, Inc. expects when it begins operations. See "Risk
Factors," "Description of Business" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
During the period from June 3, 1999, (inception) through the seven months ended
December 31, 1999, DDR Systems, Inc. has engaged in no significant operations
other than organizational activities, acquisition of the rights to market the
Reach Technologies Inc. licensed product line and preparation for registration
of its securities under the Securities Act of 1933. No revenues were received
by DDR Systems, Inc. during this period. DDR Systems, Inc. anticipates
generating revenue around October 2000.
For the current fiscal year, DDR Systems, Inc. anticipates incurring a loss as a
result of organizational expenses, expenses associated with registration under
the Securities Act of 1933, and expenses associated with setting up a company
structure to begin implementing its business plan. DDR Systems, Inc. expects
that expenses such as state annual report fees, qualifications to do business
and the like, including related attorney fees, will not exceed $5,000. The costs
associated with filing this registration statement, and DDR Systems, Inc.'s
expenses associated with applying for DDR Systems, Inc.'s shares to trade on the
OTC bulletin board are not expected to exceed $20,000 and will be expensed. The
extent of these costs will depend primarily on the states in which a market
maker would want DDR Systems, Inc.'s shares to be qualified. With respect to
costs of implementing its business plan, it is difficult to estimate DDR
Systems, Inc.'s cost of a market analysis. DDR Systems, Inc. estimates the total
cost of market analysis, assuming difficulty in gathering information and other
unforeseen difficulties, would not exceed $40,000. DDR Systems, Inc. anticipates
that until these procedures are completed, it will not generate revenues, and
may continue to operate at a loss thereafter, depending upon the performance of
the business. DDR Systems, Inc. anticipates that expenditures from inception of
the company to the fiscal year end December 2000 will be approximately to
$100,000. After paying accounts payable of $19,143 the DDR Systems, Inc. will
have $84,357 to cover the above noted anticipated expenditures of $65,000.
Sales staff will be commission based and will therefore be paid out of sales
proceeds. DDR Systems, Inc. therefore anticipates having the resources to
support is operations during the next 12 months.
LIQUIDITY AND CAPITAL RESOURCES
20
<PAGE>
DDR Systems, Inc. remains in the development stage and, since inception, has
experienced no significant change in liquidity or capital resources or
shareholders' equity. Consequently, DDR Systems, Inc.'s balance sheet as of
December 31, 1999, reflects total assets of $115,577 in the form of cash,
furniture and equipment and the license agreement with Reach Technologies Inc.
DDR Systems, Inc. expects to carry out its plan of business discussed above. In
addition, DDR Systems, Inc. may engage in a combination with another business.
DDR Systems, Inc. cannot predict the extent to which its liquidity and capital
resources will be diminished prior to the consummation of a business combination
or whether its capital will be further depleted by the operating losses (if any)
of the business entity with which DDR Systems, Inc. may eventually combine. DDR
Systems, Inc. has not engaged in discussions concerning potential business
combinations and there currently are no business acquisitions that are probable.
DDR Systems, Inc. anticipates that cash on hand will meet short-term cash
requirements. The following table illustrates how DDR Systems, Inc. has budgeted
its cash on hand over the short-term:
- Printing and engraving expenses $ 5,000
- Attorneys' fees and expenses 15,000
- Accountants' fees and expenses 5,000
- Market Research 40,000
- Transfer agent's and registrar's fees and expenses 500
- Working capital 18,857
--------
Total cash on hand $ 84,357
--------
DDR Systems, Inc. will not expand its operations until sales have occurred and
management feels that budgeted sales can support expansion. DDR Systems, Inc.
therefore has no specific long-term capital requirements other than those that
vary with sales. These future costs of sales including product costs and
commissions are payable after the time that DDR Systems, Inc. expects to be paid
by its customer. DDR Systems, Inc. therefore plans to generate sufficient cash
flow from sales to meet its long-term requirements. Although existing cash and
cash flow from sales is expected to fulfill future capital needs, if sales in
the long term are insufficient, DDR Systems, Inc. may need additional capital to
carry out its business plan or to engage in a business combination. In the
event that DDR Systems, Inc. requires more capital, no commitments to provide
additional funds have been made by management or other shareholders.
Accordingly, there can be no assurance that any additional funds will be
available on terms acceptable to DDR Systems, Inc. or at all.
CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Bedinger & Company has served as DDR Systems, Inc.'s independent auditor since
inception, and DDR Systems, Inc. has not had any dispute with Bedinger & Company
over accounting or financial disclosure.
21
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age and position of each director and
executive officer of DDR Systems, Inc.:
NAME AGE POSITION
------------------- --- --------
Glenn Jones 38 President, Secretary, Treasurer, Director
Katherine Finnigan 34 Chief Financial Officer
Mr. Jones became a director and officer of DDR Systems, Inc.'s in June 1999. In
1986, Mr. Jones graduated from the University of British Columbia with a degree
in Electrical Engineering. During the past seven years, Mr. Jones has worked
with Reach Technologies Inc. as a Director and the head of research and
development. While initially working with Reach Technologies, Inc., Mr. Jones
worked for two years as an engineer in the Telcom Test Division of Hewlett
Packard. Mr. Jones has also worked for ten years as an engineer with MacDonald
Dettwiler and Associates (a wholly owned subsidiary of Orbital Sciences Inc.), a
Satellite Ground Station developer. Mr. Jones devotes approximately 40% of his
time to his position in Reach Technologies, Inc., conducting research and
development.
Ms. Finnigan became a director and officer of DDR Systems, Inc.'s in December
1999. During the past 4 years, Ms. Finnigan has worked as the Director of
Finance of Axion Internet, Inc., an Internet service provider. In the prior 2
years, Ms. Finnigan worked in corporate accounting for Planvest financial, a
mutual fund dealer and subsidiary of CM Oliver, Inc. a brokerage house. Prior to
that Ms. Finnigan was the Chief Financial Officer of the Kinsman Rehabilitation
Foundation, a non profit organization. Ms. Finnigan brings extensive financial
experience drawn from the broad spectrum of businesses described above.
The directors named above will serve until the first annual meeting of DDR
Systems, Inc.'s shareholders. Thereafter, directors will be elected for one-year
terms at the annual shareholders' meeting. Officers will hold their positions
at the pleasure of the board of directors. No employment agreements currently
exist or are being contemplated. There is no arrangement or understanding
between the directors and officers of DDR Systems, Inc. and any other person
pursuant to which any director or officer is to be selected as a director or
officer.
The directors and officers of DDR Systems, Inc. will devote their time to DDR
Systems, Inc.'s affairs on an "as needed" basis. As a result, the actual amount
of time that they will devote to DDR Systems, Inc.'s affairs is not consistent
and is likely to vary substantially from month to month.
EXECUTIVE COMPENSATION
No officer or director has received any remuneration from DDR Systems, Inc.
Although there is no current plan in existence, it is possible that DDR Systems,
Inc. will adopt a plan to pay or accrue compensation to its officers and
22
<PAGE>
directors for services related to the implementation of DDR Systems, Inc.'s
business plan. DDR Systems, Inc. has no stock option, retirement, incentive,
defined benefit, actuarial, pension or profit-sharing programs for the benefit
of directors, officers or other employees, but the Board of Directors may
recommend adoption of one or more such programs in the future. DDR Systems,
Inc. has no employment contract or compensatory plan or arrangement with any
executive officer of DDR Systems, Inc. The Directors currently do not receive
any cash compensation from DDR Systems, Inc. for their service as members of the
board of directors. There is no compensation committee, and no compensation
policies have been adopted. See "Certain Relationships and Related
Transactions."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 31, 1999:
- DDR Systems, Inc.'s outstanding common stock owned or beneficially owned
by each executive officer and director;
- DDR Systems, Inc.'s outstanding common stock owned or beneficially owned
by each person who owned of record, or was known by DDR Systems, Inc.
to own beneficially, more than 5% of DDR Systems, Inc.'s common
stock;
- The shareholdings of all executive officers and directors as a group.
<TABLE>
<CAPTION>
Percentage of
Outstanding
Name Shares Owned Shares Owned
<S> <C> <C>
Glenn Jones, President, Secretary, Treasurer, and Director 10,000,000 81.2%
W 12th Ave
Vancouver, B.C. Canada V6
All Executive Officers & Directors As A Group (2 Individual) 10,000,000 81.2%
</TABLE>
All shares are held of record and each record shareholder has sole voting and
investment power. DDR Systems, Inc. knows of no one who has the right to
acquire beneficial ownership in DDR Systems, Inc. common stock. Other than the
sale of DDR Systems, Inc. stock contemplated by this prospectus, there are no
arrangements known to DDR Systems, Inc. the operation of which may at a
subsequent date result in a change of control of DDR Systems, Inc.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as discussed below, no director, executive officer or nominee for
election as a director of DDR Systems, Inc., and no owner of five percent or
more of DDR Systems, Inc.'s outstanding shares or any member of their immediate
family has entered into or proposed any transaction (other than the license
agreement itself) in which the amount involved exceeds $60,000. The initial
shareholder, Glenn Jones, is an one third shareholder in Reach Technologies
Inc., the licenser of DDR Systems, Inc.'s right to distribute the Reach
Technologies Inc. licensed product line. If DDR Systems, Inc. succeeds in
implementing its business plan, DDR Systems, Inc. will make payments to Reach
Technologies Inc. in the future that will exceed $60,000, although the resulting
benefits to Mr. Jones may not exceed $60,000.
23
<PAGE>
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
DDR Systems, Inc.'s bylaws provide that DDR Systems, Inc. will indemnify its
officers and directors for costs and expenses incurred in connection with the
defense of actions, suits, or proceedings against them on account of their being
or having been directors or officers of DDR Systems, Inc., absent a finding of
negligence or misconduct in the performance of duty.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or persons controlling DDR Systems,
Inc. pursuant to the forgoing provisions, DDR Systems, Inc. has been informed
that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in that Act and is,
therefore, unenforceable.
24
<PAGE>
INDEX TO FINANCIAL STATEMENTS
DDR Systems, Inc.
(A Development Stage Company)
SIX MONTHS ENDED JUNE 30, 2000 AND
----------------------------------
JUNE 3, 1999 (DATE OF INCEPTION) TO JUNE 30, 1999
-------------------------------------------------
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Statement of Stockholders' Equity . . . . . . . . . . . . . . . . . . . . F-5
Notes to the Financial Statements . . . . . . . . . . . . . . . . F-6 to F-10
JUNE 3, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
-----------------------------------------------------
Independent Auditor's Report . . . . . . . . . . . . . . . . . . . . . . F-11
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12
Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . F-13
Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . F-14
Statement of Stockholders' Equity . . . . . . . . . . . . . . . . . . . . F-15
Notes to the Financial Statements . . . . . . . . . . . . . . . . F-16 to F-20
F-1
<PAGE>
<TABLE>
<CAPTION>
DDR SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET (UNAUDITED)
As At
--------------------------------------------------------------------------------
June 30, 2000 June 30, 1999
------------- -------------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 53,660 $ -
------------- -------------
TOTAL CURRENT ASSETS 53,660 -
------------- -------------
Furniture & equipment (Note A)
Cost 2,077 -
Accumulated depreciation (450) -
------------- -------------
Net 1,627 -
------------- -------------
License Agreement (Note B)
Cost 10,000 10,000
Accumulated Amortization (3,023) (232)
------------- -------------
Net 6,977 9,768
------------- -------------
TOTAL ASSETS $ 62,264 $ 9,768
============= =============
CURRENT LIABILITIES
Accounts payable and accrued expenses $ - $ -
------------- -------------
TOTAL CURRENT LIABILITIES - -
------------- -------------
COMMITMENT (Note B)
STOCKHOLDERS' EQUITY (Note C)
Preferred stock, par value $.001; 20,000,000
shares authorized; 0 issued and outstanding
Common stock, par value $.001, 100,000,000
shares authorized; issued and outstanding
12,300,000 and 10,000,000 at June 30, 2000
and 1999 respectively. 12,300 10,000
Additional paid in capital 101,200 -
Deficit accumulated
during the development stage (51,236) (232)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 62,264 9,768
------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 62,264 $ 9,768
============= =============
</TABLE>
Prepared by Management
See Notes to Financial Statements
F-2
<PAGE>
<TABLE>
<CAPTION>
DDR SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS AND ACCUMULATED DEFECIT (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
FOR THE PERIOD JUNE 3, 1999 (DATE OF INCEPTION) TO JUNE 30, 2000 AND JUNE 30, 1999
-------------------------------------------------------------------------------------
Six Months June 3, 1999 June 3, 1999
Ended (inception) to (inception) to
June 30, 2000 June 30, 1999 June 30, 2000
--------------- ---------------- ----------------
COSTS AND EXPENSES
------------------
<S> <C> <C> <C>
Bank charges and interest $ 121 $ - $ 121
Communication - - 517
Depreciation and amortization 1,603 232 3,473
Marketing & Promotion 20,857 - 23,315
Office - - 13
Professional Fees 9,719 - 13,719
Travel - - 10,078
--------------- ---------------- ----------------
TOTAL EXPENSES 32,300 232 51,236
--------------- ---------------- ----------------
NET EARNINGS <LOSS> (32,300) (232) (51,236)
DEFICIT AT BEGINNING OF PERIOD (18,936) - -
--------------- ---------------- ----------------
DEFICIT AT END OF PERIOD $ (51,236) $ (232) $ (51,236)
=============== ================ ================
BASIC AND DILUTED $ (0.004) $ (0.000)
=============== ================
LOSS PER SHARE (Note A)
</TABLE>
Prepared by Management
See Notes to Financial Statements
F-3
<PAGE>
<TABLE>
<CAPTION>
DDR SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
FOR THE PERIOD JUNE 3, 1999 (DATE OF INCEPTION) TO JUNE 30, 2000 AND JUNE 30, 1999
----------------------------------------------------------------------------------
Common Stock
---------------------- Additional
Number of Paid-in
Shares Amount Capital
------------ -------- --------
<S> <C> <C> <C>
BALANCES
June 3, 1999 - $ - $ -
Shares issued during the period
Shares issued to acquire license (Note B) 10,000,000 10,000 -
------------ -------- --------
BALANCES
June 30, 1999 10,000,000 10,000 -
Shares issued during the period
Shares issued for cash 2,300,000 2,300 101,200
BALANCES
------------ -------- --------
December 31, 1999 12,300,000 12,300 101,200
BALANCES
June 30, 2000 12,300,000 $ 12,300 $101,200
============ ======== ========
</TABLE>
Prepared by Management
See Notes to Financial Statements
F-4
<PAGE>
<TABLE>
<CAPTION>
DDR SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
FOR THE PERIOD JUNE 3, 1999 (DATE OF INCEPTION) TO JUNE 30, 2000 AND JUNE 30, 1999
--------------------------------------------------------------------------------------------------
Six Months June 3, 1999 June 3, 1999
Ended (inception) to (inception) to
June 30, 2000 June 30, 1999 June 30, 2000
--------------- ---------------- ----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net <loss> $ (32,300) $ (232) $ (51,236)
Adjustments to reconcile net earnings <loss>
to net cash used by operating activities:
Depreciation and amortization 1,603 232 3,473
CHANGES IN CURRENT ASSETS AND CURRENT
ASSETS AND CURRENT LIABILITIES:
Increase in current liabilities:
Accounts payable and accrued expenses (19,143) - -
--------------- ---------------- ----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES (49,840) - (47,763)
--------------- ---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of furniture and equipment - - (2,077)
--------------- ---------------- ----------------
NET CASH <USED> FOR INVESTING ACTIVITIES - - (2,077)
--------------- ---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock - - 103,500
--------------- ---------------- ----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES - - 103,500
--------------- ---------------- ----------------
NET INCREASE IN CASH (49,840) - 53,660
CASH, beginning of period 103,500 - -
--------------- ---------------- ----------------
CASH, end of period $ 53,660 $ - $ 53,660
=============== ================ ================
SUPPLEMENTAL DISCLOSURE:
Noncash investing and financing activities
License agreement acquired by issue of common stock $ 10,000 $ 10,000
================ ================
No significant amounts of interest or taxes were paid during the periods shown above.
</TABLE>
Prepared by Management
See Notes to Financial Statements
F-5
<PAGE>
DDR SYSTEMS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------------------------------
Organization
------------
The Company was incorporated under the laws of the state of Washington on June
3, 1999. On June 3, 1999, the Company entered into a licensing agreement with
Reach Technologies, Inc. a Washington Corporation. Under the terms of this
agreement and concurrent with incorporation, the company issued 10,000,000 of
its common stock to Glenn Jones, the President of Reach Technologies, Inc, The
agreement allows the Company to sell a digital data recorder product line in the
northeastern United States.
The Company's principal business plan is to seek immediate earnings by
exploiting the license agreement with Reach Technologies, Inc. The Company
plans to conduct market analysis, hire sales staff and begin marketing the
Digital Data Recorder product line.
Summary of Significant Accounting Principles
------------------------------------------------
a. Accounting estimates
-------------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
b. Basic earnings per share
-------------------------------
Basic earnings <loss> per share have been calculated in conformity with
Financial Accounting Standards Board Statement No. 128 "Earnings per Share". The
Company has a simple capital structure with no significant potential common
shares. Basic earnings <loss> per share is calculated weighted on the average
number of common shares outstanding each period (2000-12,300,000;
1999-10,000,000).
F-6
<PAGE>
DDR SYSTEMS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
--------------------------------------------------------------------------------
Summary of Significant Accounting Principles (Continued)
-------------------------------------------------------------
c. Office furniture and equipment
-------------------------------------
Office furniture and equipment purchases are capitalized and the cost
depreciated over the estimated useful lives of the related assets, generally
five to seven years. Office furniture and equipment abandoned is written off at
the time of the abandonment.
d. License agreement
----------------------
The license agreement with Reach Technologies Inc. has been capitalized and the
cost will be amortized over the estimate useful life of the asset - three years
and seven months, commencing June 3, 1999.
e. Issuance of Common Stock
-------------------------------
The issuance of common stock for other than cash is recorded by the Company at
managements estimate of the fair value of the assets acquired or service
rendered.
f. Revenue
-----------
Revenue is recognized when product is shipped to the customer.
g. Income taxes
-----------------
No taxes are payable for the seven months ended December 31, 1999. See Note D
regarding the net operating loss carryforward.
h. Functional currency
------------------------
The financial statements are stated in U. S. dollars, which is the functional
currency of the Company.
F-7
<PAGE>
DDR SYSTEMS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
NOTE B - LICENSE AGREEMENT
------------------------------
On June 3, 1999, DDR Systems, Inc acquired from Reach Technologies, Inc. the
rights to distribute the Reach Technologies Inc. Digital Date Recorder product
line for the purpose of selling the product in the telemetry and remote sensing
marketplace. This license has been capitalized based on the estimate of the
fair value of the license received. The licensed product line consists of 0 to
40 Megabit per second Digital Data Recorders that are configured for laboratory
and onsite use. Models consist of laboratory, rack mount and portable versions.
DDR Systems, Inc., which at the time was owned by one investor-participant in
Reach Technologies Inc. paid for the license by issuing stock to the
investor-participant in Reach Technologies, Inc. Under license with Reach
Technologies, Inc., DDR Systems, Inc. has the exclusive right to distribute and
market the Reach Technologies, Inc. licensed product line in Washington DC,
Virginia, West Virginia, Maryland, Pennsylvania, New York, Connecticut,
Massachusetts, Vermont, New Hampshire, Maine, Ohio, Kentucky and Tennessee for
an initial period beginning June 3, 1999, expiring January 31, 2003. To retain
this right, DDR Systems, Inc. must purchase a minimum amount of product based on
pricing established in the license agreement during each of the two years of its
license, beginning February 1, 2000. DDR systems, Inc. is required to purchase
$50,000 for the Reach Technologies Inc. licensed product line by January 31,
2001, a further $100,000 by January 31, 2002, and a further $100,000 by 2003 to
retain its license. The current price for the Reach Technologies Inc. licensed
product line is as follows:
<TABLE>
<CAPTION>
PRODUCT MODEL NUMBER WHOLESALE PRICE
(US DOLLARS)
<S> <C> <C>
DIGITAL DATE RECORDER (BENCHTOP)
DAT based recorder DDR-4mm 12,170
Exabyte based recorder DDR-8mm 13,650
DLT based recorder DDR-DLT 16,700
DIGITAL DATE RECORDER (PORTABLE)
(PRICE DOES NOT INCLUDE IBM LAPTOP PC)
DAT based recorder DDR-P-4mm 12,170
Exabyte based Portable DDR-P-8mm 13,220
DIGITAL DATE RECORDER (OPTIONS)
RS-422 I/O option (2 channels) DDR-RS422 870
F-8
<PAGE>
DDR SYSTEMS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
NOTE B - LICENSE AGREEMENT (Continued)
--------------------------------------
PRODUCT MODEL NUMBER WHOLESALE PRICE
(US DOLLARS)
Differential ECL I/O option DDR-ECL 870
Additional PCM Channel DDR-PCM 3,480
IRIG Time Code input option DDR-IRIG 1,740
GPS Time input option DDR-GPS 2,610
2 GB High Speed Disk option DDR-Disk-2GB 870
4 GB High Speed Disk option DDR-Disk-2GB 1,300
Shipping case for portable DDR-Case 390
</TABLE>
Reach Technologies Inc. may change the price on a 30 days' notice.
The license agreement expires January 31, 2003, and may be renewed by DDR
Systems, Inc. for additional three year periods so long as DDR Systems, Inc. is
not in default. Any renewal agreement will be subject to the same minimum
purchase requirement structure except that the minimum purchase amount in each
year would be calculated as the greater of $120,000 and 65% of DDR Systems,
Inc.'s prior years audited revenue. The agreement may be terminated by DDR
Systems, Inc. at any time upon notice to Reach Technologies Inc., and by Reach
Technologies Inc. for any cause,
which includes breach of the agreement, the bankruptcy or insolvency of DDR
Systems, Inc.; or the conviction of DDR Systems, Inc.; its officers or
directors, of any crime involving moral turpitude.
NOTE C- COMMON STOCK
-----------------------
During the period ended December 31, 1999, the Company issued 12,300,000 shares.
10,000,000 shares were issued at $0.001 per share in exchange for the license
agreement. 2,300,000 shares were issued at $0.045 per share for cash of
$103,500.
F-9
<PAGE>
DDR SYSTEMS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
NOTE D - NET OPERATING LOSS CARRYFORWARD
----------------------------------------------
The Company's net operating loss for the six months ended June 30, 2000 of
$30,697 may be utilized through the year ended December 31, 2020. The Company's
net operating loss for the seven months ended December 31, 1999 of $18,936 may
be utilized through the year ended December 31, 2019. SFAS No. 109 requires a
valuation allowance to be recorded when it is more likely than not that some or
all of the deferred tax assets will not be realized. At December 31, 1999 a
valuation allowance for the full amount of the net deferred tax asset was
recorded because of uncertainties as to the amount of taxable income that would
be generated in future years.
F-10
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
January 21, 2000
Board of Directors
DDR Systems, Inc.
(A Development Stage Company)
Vancouver, B. C. Canada
We have audited the accompanying balance sheet of DDR Systems, Inc. (A
Development Stage Company) (Company), as of December 31, 1999 and the related
statements of operations and accumulated deficit, stockholders' equity and of
cash flows for the period June 3, 1999 (Date of Inception) to December 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements at December 31, 1999 present fairly, in
all material respects, the financial position of DDR Systems, Inc. (A
Development Stage Company) as of December 31, 1999 and the results of its
operations and its cash flows for the period June 3, 1999 (Date of Inception) to
December 31, 1999, in conformity with generally accepted accounting principles.
/s/ Bedinger & Company
Bedinger & Company
Certified Public Accountants
Walnut Creek, California
F-11
<PAGE>
<TABLE>
<CAPTION>
DDR SYSTEMS, INC,
(A Development Stage Company)
BALANCE SHEET
DECEMBER 31, 1999
---------------------------------------------------------------------------------
ASSETS
-------
<S> <C>
CURRENT ASSETS
---------------
Cash $ 103,500
---------
TOTAL CURRENT ASSETS 103,500
---------
Furniture & equipment (Note A)
Cost 2,077
Accumulated depreciation (242)
---------
Net 1,835
---------
License agreement (Note B)
Cost 10,000
Accumulated amortization (1,628)
---------
Net 8,372
---------
TOTAL ASSETS $ 113,707
=========
CURRENT LIABILITIES
--------------------
Accounts payable and accrued expenses $ 19,143
---------
TOTAL CURRENT LIABILITIES 19,143
---------
COMMITMENT (Note B)
STOCKHOLDERS' EQUITY (Note C)
------------------------------
Preferred stock, par value $,001; 20,000,000
shares authorized; 0 issued and outstanding --
Common stock, par value $,001; 100,000,000
shares authorized; issued and outstanding 12,300,000 12,300
Additional paid in capital 101,200
Accumulated deficit (18,936)
---------
TOTAL STOCKHOLDERS' EQUITY 94,564
---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 113,707
=========
</TABLE>
See Notes to Financial Statements
F-12
<PAGE>
DDR SYSTEMS, INC,
(A Development Stage Company)
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE PERIOD JUNE 3, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 3, 1999
(inception) to
COSTS AND EXPENSES December 31, 1999
------------------ -----------------
<S> <C>
Communication $ 517
Depreciation and amortization 1,870
Marketing and promotion 2,458
Office 13
Professional fees 4,000
Travel 10,078
----------
TOTAL EXPENSES 18,936
----------
NET EARNINGS (LOSS) AND ACCUMULATED DEFICIT (18,936)
==========
BASIC AND DILUTED
LOSS PER SHARE (Note A) $ (0.001)
==========
</TABLE>
See Notes to Financial Statements
F-13
<PAGE>
DDR SYSTEMS, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
FOR THE PERIOD JUNE 3, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
------------------------------------------------------------
<TABLE>
<CAPTION>
June 3, 1999
(inception) to
December 31, 1999
-----------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(18,936)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 1,870
CHANGES IN CURRENT ASSETS AND CURRENT LIABILITIES:
Increase in current liabilities:
Accounts payable and accrued expenses 19,143
--------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,077
--------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of furniture
and equipment (2,077)
--------
NET CASH <USED> FOR INVESTING ACTIVITIES (12,077)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 103,500
--------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 113,500
--------
NET INCREASE IN CASH 103,500
CASH, beginning of period -
--------
CASH, end of period $103,500
========
SUPPLEMENTAL DISCLOSURE:
Noncash investing and financing activities
License agreement acquired by issue of common
stock $ 10,000
========
</TABLE>
No significant amounts of interest or taxes were paid during the period shown
above.
See Notes to Financial Statements
F-14
<PAGE>
DDR SYSTEMS, INC,
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD JUNE 3, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
----------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock
------------------------------ Additional
Number of Paid-in
Shares Amount Capital
------------- --------------- --------------
<S> <C> <C> <C>
BALANCES
June 3, 1999 -- $ -- $ --
Shares issued during the period
Shares issued to acquire
license (Note B) 10,000,000 10,000
Shares issued for cash 2,300,000 2,300 101,200
BALANCES
---------- -------- --------
December 31, 1999 12,300,000 $ 12,300 $101,200
========== ======== ========
</TABLE>
See Notes to Financial Statements
F-15
<PAGE>
DDR SYSTEMS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD JUNE 3, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
-------------------------------------------------------------
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
----------------------------------------------------------------
POLICIES
--------
Organization
------------
The Company was incorporated under the laws of the state of Washington on June
3, 1999. On June 3, 1999, the Company entered into a licensing agreement with
Reach Technologies, Inc., a Washington Corporation. Under the terms of this
agreement and concurrent with incorporation, the Company issued 10,000,000 of
its common stock to Glenn Jones, the President of Reach Technologies, Inc, The
agreement allows the Company to sell a digital data recorder product line in the
northeastern United States.
The Company's principal business plan is to seek immediate earnings by
exploiting the license agreement with Reach Technologies, Inc. The Company
plans to conduct market analysis, hire sales staff and begin marketing the
Digital Data Recorder product line.
Summary of Significant Accounting Principles
--------------------------------------------
a. Accounting estimates
-----------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
b. Basic earnings per share
----------------------------
Basic loss per share have been calculated in conformity with Financial
Accounting Standards Board Statement No. 128 "Earnings per Share". The Company
has a simple capital structure with no significant potential common shares.
Basic loss per share is calculated on the weighted average number of common
shares outstanding during the period (1999-12,300,000).
F-16
<PAGE>
DDR SYSTEMS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD JUNE 3, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
-------------------------------------------------------------
NOTE A -ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
-------------------------------------------------------------------------------
Summary of Significant Accounting Principles
--------------------------------------------
c. Office furniture and equipment
----------------------------------
Office furniture and equipment purchases are capitalized and the cost
depreciated over the estimated useful lives of the related assets, generally
five to seven years. Office furniture and equipment abandoned is written off at
the time of the abandonment.
d. License agreement
--------------------
The license agreement with Reach Technologies Inc. has been capitalized and the
cost will be amortized over the estimate useful life of the asset - three years
and seven months, commencing in June 3, 1999.
e. Issuance of Common Stock
---------------------------
The issuance of common stock for other than cash is recorded by the Company at
managements estimate of the fair value of the assets acquired or service
rendered.
f. Revenue
----------
Revenue is recognized when product is shipped to the customer.
g. Income taxes
---------------
No taxes are payable for the seven months ended December 31, 1999. See Note D
regarding the net operating loss carryforward
h. Functional Currency
----------------------
The financial statements are stated in U.S. dollars which is the functional
currency of the Company.
NOTE B - LICENSE AGREEMENT WITH RELATED PARTY
---------------------------------------------
On June 3, 1999, DDR Systems, Inc acquired from Reach Technologies, Inc. the
rights to distribute the Reach Technologies Inc. Digital Date Recorder product
line for the purpose of selling the product in the telemetry and remote sensing
marketplace. This license agreement has been capitalized based on the
transferor's historical cost of the license. The licensed product line consists
of 0 to 40 Megabit per second Digital Data Recorders that are configured for
laboratory and onsite use. Models consist of laboratory, rack mount and portable
versions. DDR Systems, Inc., which at the time was owned by one investor-
participant in Reach Technologies Inc. paid for the license by issuing stock to
the innestar-participant in Reach Technologies, Inc.
F-17
<PAGE>
DDR SYSTEMS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD JUNE 3, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
------------------------------------------------------------
Under license with Reach Technologies, Inc., DDR Systems, Inc. has the exclusive
right to distribute and market the Reach Technologies, Inc. licensed product
line in Washington DC, Virginia, West Virginia, Maryland, Pennsylvania, New
York,
NOTE B - LICENSE AGREEMENT WITH RELATED PARTY (Continued)
----------------------------------------------------------
Connecticut, Massachusetts, Vermont, New Hampshire, Maine, Ohio, Kentucky and
Tennessee for an initial period beginning June 3, 1999, expiring January 31,
2003. To retain this right, DDR Systems, Inc. must purchase a minimum amount of
product based on pricing established in the license agreement during each of the
two years of its license, beginning February 1, 2000. DDR systems, Inc. is
required to purchase $50,000 of the Reach Technologies Inc. licensed product
line by January 31, 2001, a further $100,000 by January 31, 2002, and a further
$100,000 by 2003 to retain its license. The current price for the Reach
Technologies Inc. licensed product line is as follows:
<TABLE>
<CAPTION>
Product Model Number Wholesale Price
(US Dollars)
Digital Date Recorder (benchtop)
<S> <C> <C>
DAT based recorder DDR-4mm $12,170
Exabyte based recorder DDR-8mm 13,650
DLT based recorder DDR-DLT 16,700
Digital Date Recorder (portable)
(price does not include IBM
Laptop PC)
DAT based recorder DDR-P-4mm 12,170
Exabyte based Portable DDR-P-8mm 13,220
Digital Date Recorder (options)
RS-422 I/O option (2 channels) DDR-RS422 870
Differential ECL I/O option DDR-ECL 870
Additional PCM Channel DDR-PCM 3,480
IRIG Time Code input option DDR-IRIG 1,740
GPS Time input option DDR-GPS 2,610
2 GB High Speed Disk option DDR-Disk-2GB 870
4 GB High Speed Disk option DDR-Disk-2GB 1,300
Shipping case for portable DDR-Case 390
</TABLE>
F-18
<PAGE>
DDR SYSTEMS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD JUNE 3, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
--------------------------------------------------------------------------------
Reach Technologies Inc. may change the price on a 30 day notice.
NOTE B -LICENSE AGREEMENT WITH RELATED PARTY (Continued)
---------------------------------------------------------
The license agreement expires January 31, 2003, and may be renewed by DDR
Systems, Inc. for additional three year periods so long as DDR Systems, Inc. is
not in default. Any renewal agreement will be subject to the same minimum
purchase requirement structure except that the minimum purchase amount in each
year would be calculated as the greater of $120,000 and 65% of DDR Systems,
Inc.'s prior years audited revenue. The agreement may be terminated by DDR
Systems, Inc. at any time upon notice to Reach Technologies Inc., and by Reach
Technologies Inc. for any cause, which includes breach of the agreement, the
bankruptcy or insolvency of DDR Systems, Inc.; or the conviction of DDR Systems,
Inc.; or the convictions of DDR Systems, Inc. its officers or directors, of any
crime involving moral turpitude.
NOTE C- COMMON STOCK
---------------------
During the period ended December 31, 1999 the Company issued a total of
12,300,000 shares. 10,000,000 shares were issued at $0.001 per share in exchange
for the license agreement. 2,300,000 shares were issued at $0.045 per share for
cash of $103,500.
NOTE - D NET OPERATING LOSS CARRYFORWARD
-----------------------------------------
The Company's net operating loss for the seven months ended December 31, 1999 of
$18,936 may be utilized through the year ended December 31, 2019. SFAS No. 109
requires a valuation allowance to be recorded when it is more likely than not
that some or all of the deferred tax assets will not be realized. At December
31, 1999 a valuation allowance for the full amount of the net deferred tax asset
was recorded because of uncertainties as to the amount of taxable income that
would be generated in future years.
F-19
<PAGE>
PROSPECTUS
, 2000
----------- --
DDR SYSTEMS, INC.
3650 W. 30TH AVE
VANCOUVER, BRITISH COLUMBIA V6S 1W8, CANADA
(604) 732-0623
2,300,000 Shares of Common Stock
to be sold by current shareholders
DDR Systems, Inc. has not authorized any dealer, salesperson or other person to
give you written information other than this prospectus or to make
representations as to matters not stated in this prospectus. You must not rely
on unauthorized information. This prospectus is not an offer to sell these
securities or a solicitation of your offer to buy the securities in any
jurisdiction where that would not be permitted or legal. Neither the delivery of
this prospectus nor any sales made hereunder after the date of this prospectus
shall create an implication that the information contained herein or the affairs
of DDR Systems, Inc. have not changed since the date hereof.
Until , 2000 (90 days after the date of this prospectus), all
------------- ---
dealers that effect transactions in these shares of common stock may be required
to deliver a prospectus. This is in addition to the dealer's obligation to
deliver a prospectus when acting as an underwriter and with respect to their
unsold allotments or subscriptions.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The securities are being registered for the account of selling shareholders.
All of the following expenses will be borne by DDR Systems, Inc. The amounts set
forth are estimates except for the SEC registration fee:
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee $ 27.33
Printing and engraving expenses 5,000
Attorneys' fees and expenses 20,000
Accountants' fees and expenses 2,000
Transfer agent's and registrar's fees and expenses 500
Miscellaneous 965
----------
Total $28,492.33
----------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to Washington State law, a corporation may indemnify an individual made
a party to a proceeding because the individual is or was a director against
liability incurred in the proceeding if the individual acted in good faith; and
he or she reasonably believed that, in the case of conduct in the individual's
official capacity with the corporation, his or her conduct was in its best
interests; in cases not involving his or her official capacity, his or her
conduct was at least not opposed to its best interests; and in the case of any
criminal proceeding, he or she had no reasonable cause to believe the conduct
was unlawful. A corporation is prohibited from indemnifying a director in
connection with a proceeding by or in the right of the corporation in which the
director was adjudged liable to the corporation, in connection with any other
proceeding charging improper personal benefit to the director, whether or not
involving action in the director's official capacity, in which the director was
adjudged liable on the basis that personal benefit was improperly received by
the director.
The articles of DDR Systems, Inc., filed as Exhibit 3.1, provide that DDR
Systems, Inc. will indemnify its directors to the full extent permitted under
Washington state law. The bylaws of DDR Systems, Inc., filed as Exhibit 3.2,
provide that DDR Systems, Inc. will indemnify and hold harmless each person who
was, is or is threatened to be made a party to or is otherwise involved in any
threatened proceedings by reason of the fact that he or she is or was a Director
or officer of the corporation or is or was serving at the request of the
corporation as a Director, officer, partner, trustee, employee or agent of
another entity, against all losses, claims, damages, liabilities and expenses
actually and reasonably incurred or suffered in connection with such proceeding.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
II-1
<PAGE>
Set forth below is information regarding the issuance and sales of DDR Systems,
Inc.'s securities without registration since its formation. No such sales
involved the use of an underwriter and no commissions were paid in connection
with the sale of any securities.
a. On June 3, 1999, DDR Systems, Inc. issued a total of 10,000,000
shares of common stock to Glenn Jones. The issuance was compensation for the
license of the Reach Technologies Inc. licensed product line rights. The offer
and the sale of the stock were exempt from registration under Rule 504 of
Regulation D under Section 3(b) of the Securities Act of 1933, as amended. If
the exemption under Rule 504 of Regulation D is not available, then DDR Systems,
Inc. believes that this offering is also exempt under Rule 506 and under Section
4(2) of the Securities Act of 1933, as amendedMr. Jones was a founder and
director of DDR Technologies, Inc., and therefore an accredited investor at the
time he received the offer to purchase and at the closing of the purchase of the
stock. Mr. Jones agreed to resell such securities only in accordance with the
provisions of Regulation D, pursuant to registration, or pursuant to an
available exemption from registration. The stock contains a legend to the
effect that transfer is prohibited except in accordance with the provisions of
Regulation D, pursuant to registration, or pursuant to an available exemption
from registration. DDR Systems, Inc. will refuse to register any transfer of
the Stock not made in accordance with the provisions of Regulation D, pursuant
to registration, or pursuant to an available exemption from registration.
b. On December 5, 1999 DDR Systems, Inc. issued a total of 2,300,000
shares of common stock to four foreign corporations. The issuance of the common
stock was exempt from registration under Regulation S. Each entity was a
foreign corporation at the time it received the offer to purchase and at the
closing of the purchase of the stock, and did not acquire the stock for the
account or benefit of any U.S. person. Each corporation agreed to resell such
securities only in accordance with the provisions of Regulation S, pursuant to
registration, or pursuant to an available exemption from registration. The
stock contains a legend to the effect that transfer is prohibited except in
accordance with the provisions of Regulation S, pursuant to registration, or
pursuant to an available exemption from registration. DDR Systems, Inc. will
refuse to register any transfer of the Stock not made in accordance with the
provisions of Regulation S, pursuant to registration, or pursuant to an
available exemption from registration.
Item 16(a). Exhibits.
Exhibit Name Page
Number
3.1* Articles of Incorporation
3.2* Bylaws
4.1* Specimen Share of Common Stock
5.1* Opinion re: Legality
10.1* License Agreement
10.2* Subscription Agreement and Investment
Letter re: Gauntlett Limited
II-2
<PAGE>
10.3* Subscription Agreement and Investment
Letter re: World Wise Traders Limited
10.4* Subscription Agreement and Investment
Letter re: Green Grove Trading Limited
10.5* Subscription Agreement and Investment
Letter re: Valonia Limited
23.1 Consent of Independent Auditors.
23.2* Consent of Counsel (see Exhibit 5.1)
27.1* Financial Data Schedule.
*Previously filed.
ITEM 16(B). FINANCIAL STATEMENT SCHEDULES.
As of December 31, 1999, DDR Systems, Inc.:
- has no valuation or qualifying accounts
- does not have a substantial portion of its business devoted to acquiring
and holding for investment real estate or interests therein
- has no subsidiaries
- has no investments in mortgage loans on real estate.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(a) To include any prospectus required by section 10(a)(3) of the Securities
Act of 1933;
(b) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
II-3
<PAGE>
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is , therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Vancouver, Province of
British Columbia, CANADA, on August 14, 2000.
DDR SYSTEMS, INC.
/s/ Glenn Jones
-------------------------
By Glenn Jones
Its President
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
/s/ Glenn Jones President, Secretary, Treasurer, and Director
-----------------
Glenn Jones August 14, 2000
/s/ Katherine Finnigan Chief Financial Officer
-----------------------
Katherine Finnigan August 14, 2000
II-5
<PAGE>
