FORM 10-QSB
Securities And Exchange Commission
Washington, D.C. 20549
[X] Quarterly Report Pursuant To Section 13 Or 15(D) Of The Securities Act
Of 1934
For The Quarterly Period Ended September 30, 2000.
[ ] Transition Report Under Section 13 Or 15(D) Of The Securities Exchange
Act Of 1934
For The Transition Period From ________ To ________.
Commission File Number 333-31238
DDR Systems, Inc.
(Exact Name Of Registrant As Specified In Its Charter)
Washington 52-2219677
(State Or Other Jurisdiction Of (I.R.S. Employer
Incorporation Or Organization) Identification No.)
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)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes No X
The number of outstanding shares of the issuer's common stock, $0.001 par
value, as of September 30, 2000 was 12,300,000.
<PAGE>
<TABLE>
<CAPTION>
Table Of Contents
Part I
<S> <C>
Item 1. Financial Statements . . . . . . . . . . . . 1
Item 2. Plan Of Operation . . . . . . . . . . . . . . 10
Part Ii
Item 6 Exhibits and Reports on Form 8-K . . . . . . . 12
Signatures . . . . . . . . . . . . . . . . . . . . . 12
Index To Exhibits . . . . . . . . . . . . . . . . . . 13
</TABLE>
[This Space Has Been Intentionally Left Blank]
<PAGE>
<TABLE>
<CAPTION>
Part I
Item 1. Financial Statements
<S> <C>
Unaudited Balance Sheet At September 30, 2000 And 1999 . . . . . . . . . . . . . . 1
Unaudited Statement Of Operations And Accumulated Deficit For The Nine Months
Ended September 30, 2000 And June 3, 1999 (Date Of Inception) To September 30, 2000 2
Unaudited Statement Of Stockholders Equity For The Nine Months Ended
September 30, 2000 And June 3, 1999 (Date Of Inception) To September 30, 2000. . . 3
Unaudited Statement Of Cash Flows For The Nine Months Ended September 30, 2000
And June 3, 1999 (Date Of Inception) To September 30, 2000 . . . . . . . . . . . . 4
Notes To Unaudited Financial Statement . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DDR Systems, Inc.
(A Development Stage Company)
Balance Sheet
(Unaudited)
As At September 30
==========================================================================================
2000 1999
------------------------------------------------------------------------------------------
Assets
Current
<S> <C> <C>
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,188 $ -
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 2,131 -
--------- --------
34,319 -
Capital Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,802 9,768
--------- --------
$ 42,121 9,768
==========================================================================================
Liabilities And Shareholders' Equity
Current
Accounts payable and accrued liabilities. . . . . . . . . . . . . . $ 500 $ -
--------- --------
Shareholders' Equity
Capital stock
Authorized
20,000,000 preferred shares with a par value of $.001 per share
100,000,000 common shares with a par value of $.001 per share
Issued
12,300,000 common shares. . . . . . . . . . . . . . . . . . . . 12,300 10,000
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . 101,200 -
Deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (71,879) (232)
--------- --------
41,621 9,768
--------- --------
$ 42,121 9,768
==========================================================================================
</TABLE>
Prepared By Management
1
<PAGE>
<TABLE>
<CAPTION>
DDR Systems, Inc.
(A Development Stage Company)
Statement of Operations and Deficit
(Unaudited)
=====================================================================================================
For the period from For the period from
For the nine-month The date of inception The date of inception
Period ended On June 3, 1999 On June 3, 1999
September 30, To September 30, To September 30,
2000 1999 2000
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $ 10,000 $ - $ 10,000
--------------------- ----------------------- -----------------------
Expenses
Amortization 2,405 232 4,275
Bank charges and interest 231 - 231
Communication 714 - 1,231
Consulting fees 12,043 - 12,043
Marketing and promotion 27,857 - 30,315
Office - - 13
Professional fees 16,867 - 20,867
Travel 2,826 - 12,904
--------------------- ----------------------- -----------------------
62,943 232 81,879
--------------------- ----------------------- -----------------------
Net Income For The Period (52,943) (232) (71,879)
Deficit, Beginning of Period (18,936) - -
--------------------- ----------------------- -----------------------
Deficit End Of Period $ (71,879) $ (232) $ (71,879)
=====================================================================================================
Loss Per Share $ (0.006) $ (0.000) $ (0.006)
=====================================================================================================
</TABLE>
Prepared By Management
2
<PAGE>
<TABLE>
<CAPTION>
DDR SYSTEMS, INC.
(A Development Stage Company)
Statement of Shareholders' Equity
(Unaudited)
--------------------------------------------------------------------------------------
Common shares
--------------------------
Number Additional
of shares Amount Paid-in Capital
--------------------------------------------------------------------------------------
<S> <C> <C> <C>
As at June 3, 1999 - $ - $ -
Shares issued during the period 10,000,000 10,000 -
------------- ----------- ----------------
As at June 30, 1999 10,000,000 10,000 -
------------- ----------- ----------------
Shares issued during the period - - -
------------- ----------- ----------------
As at September 30, 1999 10,000,000 10,000 -
Shares issued during the period for cash 2,300,000 2,300 101,200
------------- ----------- ----------------
As at December 31, 1999 12,300,000 12,300 101,200
Shares issued during the period - - -
------------- ----------- ----------------
As at September 30, 2000 12,300,000 $ 12,300 $ 101,200
======================================================================================
</TABLE>
Prepared By Management
3
<PAGE>
<TABLE>
<CAPTION>
DDR Systems, Inc.
(A Development Stage Company)
Statement of Cash Flows
(Unaudited)
=======================================================================================================================
For the period from For the period from
For the nine-month The date of inception The date of inception
Period ended On June 3, 1999 On June 3, 1999
September 30, To September 30, To September 30,
2000 1999 2000
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities $ (52,943) $ (232) $ (71,879)
Net loss for the period
Item not affecting cash
Amortization of capital assets 2,405 232 4,275
--------------------- ----------------------- -----------------------
(50,538) - (67,604)
--------------------- ----------------------- -----------------------
Changes In Non-Cash Working Capital Items
Prepaid expenses (2,131) - (2,131)
Accounts payable and accrued liabilities (18,643) - 500
--------------------- ----------------------- -----------------------
(20,774) - (1,631)
--------------------- ----------------------- -----------------------
(71,312) - (69,235)
--------------------- ----------------------- -----------------------
Cash Flows From Investing Activities
Purchase of capital assets - - (2,077)
--------------------- ----------------------- -----------------------
Cash Flows From Financing Activities
Issuance of capital stock - - 12,300
Increase in paid-in capital - - 101,200
--------------------- ----------------------- -----------------------
- - 103,500
--------------------- ----------------------- -----------------------
Increase (Decrease) In Cash For The Period (71,312) - 32,188
Cash, Beginning Of Period 103,500 - -
--------------------- ----------------------- -----------------------
Cash, end of period $ 32,188 $ - $ 32,188
Supplemental Disclosure:
Non-cash investing and financing activities
License Agreement Acquired Through
Issuance Of Capital Stock $ - $ - $ 10,000
</TABLE>
No significant amounts of interest or taxes were paid during the periods shown
above.
Prepared By Management
4
<PAGE>
[This Page Has Been Intentionally Left Blank]
5
<PAGE>
DDR Systems, Inc.
(A Development Stage Company)
Notes To Financial Statements (Unaudited)
For The Nine Months Ended September 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).
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.
6
<PAGE>
DDR Systems, Inc.
(A Development Stage Company)
Notes To Financial Statements (Unaudited)
For The Nine Months Ended September 30, 2000
--------------------------------------------------------------------------------
Note A - Organization And Summary Of Significant Accounting Policies
(Continued)
Summary of Significant Accounting Principles (Continued)
-------------------------------------------------------------
d. License agreement
-----------------------
The license agreement with Reach Technologies Inc. has been capitalized and cost
and is 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.
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.
7
<PAGE>
DDR Systems, Inc.
(A Development Stage Company)
Notes To Financial Statements (Unaudited)
For The Nine Months Ended September 30, 2000
--------------------------------------------------------------------------------
Note B - License Agreement (Continued)
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 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.
Reach Technologies Inc. may change the price on a 30 days' notice.
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.
8
<PAGE>
DDR SYSTEMS, INC.
(A Development Stage Company)
Notes To Financial Statements (Unaudited)
For The Nine Months Ended September 30, 2000
--------------------------------------------------------------------------------
Note D - Net Operating Loss Carryforward
The Company's net operating loss for the nine months ended September 30, 2000 of
$51,640 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.
9
<PAGE>
Item 2. Plan Of Operation
This quarterly report on Form 10-QSB contains forward-looking statements, which
are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements involve risks
and uncertainties that could cause actual results to differ materially from the
forward-looking statements. You should not place undue reliance on
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may", "will", "should", "expects", "plans",
"anticipates", "believes", "estimated", "predicts", "potential", or "continue"
or the negative of such terms or other comparable terminology. These statements
are only predictions and involve known and unknown risks, uncertainties, and
other factors that may cause DDR Systems, Inc.'s actual results, levels of
activity, performance, or achievements to be materially different from any
future results, levels of activity, performance, or achievements expressed or
implied by such forward-looking statements. These factors include, among other
things, those discussed in this quarterly report on Form 10-QSB and in DDR
Systems, Inc.'s other filings with the SEC. Although DDR Systems, Inc. believes
that the expectations reflected in the forward-looking statements are
reasonable, forward-looking statements are inherently uncertain, and DDR
Systems, Inc. cannot guarantee future results, levels of activity, performance,
or achievements. DDR Systems, Inc. is under no duty to update any of the
forward-looking statements in this quarterly report on Form 10-QSB to conform
forward-looking statements to actual results. All forward-looking statements
should be considered in light of these risks and uncertainties.
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. principal business, at present, is the marketing of its
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.
10
<PAGE>
DDR Systems, Inc.'s plan of operation for the next twelve months is to complete
a market analysis, and then begin marketing the licensed product line. 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.
Results Of Operations
Sales
DDR Systems, Inc. has generated minor revenues from operations during the
periods covered by this Form 10-QSB.
Losses
Net losses for the nine months ended September 30, 2000, increased to $52,942
from $ 232 for the nine months ended September 30, 1999. The increase in losses
was primarily attributable to market research and the costs associated with DDR
Systems, Inc.'s registration statement.
DDR Systems, Inc. expects to continue to incur losses at least through fiscal
year 2000 and there can be no assurance that DDR Systems, Inc. will achieve or
maintain profitability, generate revenue or sustain future growth.
Liquidity And Capital Resources
DDR Systems, Inc. has funded its cash needs over the periods covered by this
Form 10-QSB with cash on hand. It is anticipated that the cash on hand of
$32,188 will be sufficient to satisfy cash requirements over the next twelve
months.
Capital Expenditures
DDR Systems, Inc. made no capital expenditures over the period covered by this
report. There are no planned capital expenditure in the next twelve months.
Employees
Other than hiring one commission sales staff, DDR Systems, Inc. expects no
significant changes in its number of employees.
11
<PAGE>
PART II
Item 6. Exhibits And Reports On Form 8-K
(A) Exhibits
No. Description
--- -----------
27.1 Financial Data Schedule
(B) Reports On Form 8-K. No Reports Were Filed On Form 8-K During This
Quarter.
Signatures
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DDR Systems, Inc.
Date: 10/9/00
/s/ Glenn Jones
-----------------
Glenn Jones
President & Director
12
<PAGE>
Index To Exhibits
Exhibit
No. Description Page No.
27.1 Financial Data Schedule
13
<PAGE>
