UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT
For the transition period from ____ to ____
Commission file number 0-2749
DISTINCTIVE DEVICES, INC.
(Name of small business issuer in its charter)
New York 13-1999951
(State of incorporation or organization) (IRS Identification No.)
110 E. Atlantic Avenue, Suite 230, Delray Beach, Florida 33444
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (516) 274-4233
1324 Motor Parkway, Suite 134, Hauppauge, New York 11788
(Issuer's former address)
Year ended February 28
(Issuer's former fiscal year)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes(X) No( )
12,292,954 shares of issuer's common stock, $.05 par value, were outstanding at
September 30, 1999. Issuer has no other class of common equity.
DISTINCTIVE DEVICES, INC. AND SUBSIDIARY
(A Development Stage Company)
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Consolidated balance sheets--
September 30, 1999 and December 31, 1998 3
Consolidated statements of operations--
Three and nine months ended September 30, 1999
Inception to September 30, 1999 4
Consolidated statement of changes in stockholders'
equity--
Nine months ended September 30, 1999 5
Consolidated statements of cash flows--
Nine months ended September 30, 1999
Inception to September 30, 1999 6
Notes to financial statements--
September 30, 1999 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9
PART II - OTHER INFORMATION
Item 2. CHANGES IN SECURITIES 11
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES 13
2
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
DISTINCTIVE DEVICES, INC.AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
September 30, 1999 December 31, 1998
CURRENT ASSETS
Cash $ 807,010 $ 5
Due from Related Parties 8,636 100
-------- ---------
Total Current Assets 815,646 105
PROPERTY AND EQUIPMENT, net 60,956
OTHER ASSETS 4,154
-------- --------
$ 880,756 $ 105
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable
and accrued liabilities $ 121,709 $
-------- --------
MINORITY INTEREST 107,324
-------- --------
STOCKHOLDERS' EQUITY
Common Stock, Par Value $.05
Authorized 20,000,000 Shares 614,648 300
Additional Paid-In Capital 476,687
Deficit Accumulated During the
Development Stage (439,612) (195)
-------- --------
651,723 105
-------- --------
$ 880,756 $ 105
======== ========
The Accompanying Notes are an Integral Part of these Financial Statements.
3
DISTINCTIVE DEVICES, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1999
(unaudited)
Period From
Nine Months Three Months February 5, 1998
Ended Ended (Inception to)
September 30, September 30, September 30,
1999 1999 1999
------------ ---------- ----------
Revenue $ $ $
---------- ---------- ---------
General and Administrative
Expenses 443,294 159,883 443,489
---------- ---------- ---------
Loss from Operations Before
Other Revenue (443,294) (159,883) (443,489)
Interest and Other Income 3,877 3,877 3,877
--------- --------- ---------
Net Loss $(439,417) $(156,006) $(439,612)
========= ========= =========
Net Loss Per Common Share
(Basic and Diluted) $ (.04) $ (.01) $ (.04)
========= ========= =========
Weighted Average Number of
Common Shares Outstanding 12,292,954 12,292,954 12,292,954
========== ========== ==========
The Accompanying Notes are an Integral Part of these Financial Statements.
DISTINCTIVE DEVICES, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1999
(unaudited)
Deficit
Accumulated
Additional During the
Common Stock Paid-In Development
Shares Amount Capital Stage
------ ------ ---------- -----------
Balance at
December 31, 1998 (a) 3,000,000 $ 300 $ $ (195)
Retro-active restatement
for recapitalization 3,000,000 299,700
Discount on share
restatement (299,700)
--------- ------- -------- ---------
Restated balance at
December 31, 1998 6,000,000 300 (195)
Reversal of discount on
share restatement 299,700 (299,700)
Issuance of Shares
for cash 2,051,340 102,567 891,463
Acquisition of assets on
consolidation 4,241,614 212,081 (115,076)
Net Loss (439,417)
---------- ------- -------- --------
Balance at
September 30, 1999 12,292,954 $614,648 $476,687 $(439,612)
========== ======= ======= =========
(a) Information relative to Distinctive Devices, Inc. prior to August 10, 1999
has not been included in this statement. The information has been omitted
since, as a result of the August 10, 1999 recapitalization, it would not be
relevant to an understanding of the Company's current activities.
The Accompanying Notes are an Integral Part of these Financial Statements.
DISTINCTIVE DEVICES, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999
(unaudited)
Period From
Nine Months February 5, 1998
Ended (Inception) to
September 30, September 30,
1999 1999
------------ ----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (439,417) $ (439,612)
Adjustments to Reconcile Net (loss)
to Net Cash Used in Operating
activities:
Depreciation expense 4,833 4,833
Change in Assets
(Increase) in Other Assets (4,154) (4,154)
Increase in Accounts Payable 121,709 l21,709
------- -------
Net Cash Used in Operating
Activities (317,029) (317,224)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (65,789) (65,789)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Common Stock 994,030 994,330
Advance to Related Parties (8,536) (8,636)
Net Assets Received on Recapitalization 204,329 204,329
-------- --------
Net Cash Provided by Financing
Activities 1,189,823 1,190,023
--------- ---------
Increase in Cash 807,005 807,010
Cash:
Beginning 5 0
--------- ---------
Ending $ 807,010 $ 807,010
========= =========
The Accompanying Notes are an Integral Part of these Financial Statements
6
DISTINCTIVE DEVICES, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The accompanying unaudited consolidated financial statements include the
accounts of Distinctive Devices, Inc. ("DDI") and its subsidiary, EagleView
Industries, Inc. (EagleView), and have been prepared in accordance with
generally accepted accounting principles for interim financial information and
the instructions to Form 10-QSB and Article 10 of Regulation S-X. Accordingly,
they do not include all information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments considered necessary for a fair
presentation have been included. Operating results for the nine-month period
ended September 30, 1999 are not necessarily indicative of results that may be
expected for the year ended December 31, 1999. For further information refer
to the financial statements and footnotes thereto included in the Company's
annual report on Form 10-KSB for the statements and footnotes thereto included
in the Company's annual report on Form 10-KSB for the year ended February 28,
1999 and information included in Form 8-K/A dated August 10, 1999.
Organization
Eagle View was incorporated in Florida on February 5, 1998. EagleView at
December 31, 1998, was a wholly owned Subsidiary of EagleView Technologies,
Inc. (EVT), a Florida corporation and a company in the telecommunications
industry. EagleView was established to engage in the development and
implementation of high quality, low cost bandwidth wireless connectivity for
Internet, data and video telecommunications services. Currently, EagleView is
focusing on high-speed digital wireless Ethernet and Internet access systems.
As of September 30, 1999, EagleView was in the development stage, planned
operations have not commenced and its activities were limited to the
establishment of the Corporation.
Net Loss Per Share
Basic and diluted net loss per share represents net loss divided by the
weighted average number of shares outstanding for the period. In calculating
the net loss per share, effect has been given to the issuance of the 8,173,052
shares as a result of the recapitalization (Note 2).
NOTE 2: RECAPITALIZATION
On August 10, 1999, DDI acquired 80.7% of the outstanding common stock of
EagleView. DDI issued 8,051,340 shares of its common stock to certain
stockholders of EagleView on a two for one basis as part of the acquisition
plus 121,712 shares of common stock as a finder's fee to an individual. The
stock exchange agreement also provides that within thirteen months following
the closing date, DDI will offer to exchange additional shares of the common
stock for the balance of EagleView common stock and that DDI will issue, as
additional finder's fee, such number of shares which will equal 1% of the
common shares issued in exchange for the balance of the EagleView common stock.
As a result of this transaction, control of the corporation was effectively
changed and at September 30, 1999, EVT owned approximately 60% of DDI. For
accounting purposes, the acquisition has been treated as a recapitalization of
EagleView with EagleView as the acquirer (reverse acquisition), consequently,
goodwill has not been recorded on the merger.
Information relative to DDI prior to August 10, 1999 has been omitted from
these consolidated financial statements since, as a result of the
recapitalization, such information is not relevant to an understanding of the
Company's current activities. In addition, quarterly information for the
quarter ended September 30, 1998 for EagleView was not significant and
therefore has been omitted.
NOTE 3: PRIVATE PLACEMENT
EagleView began offering October 1, 1998, in a private placement, 2,000,000
shares of its $.0001 par value common stock, at a price of $.50 per share. The
shares were offered on a best efforts basis with no minimum. The offering
terminated August 10, 1999 upon completion of the recapitalization (Note 2).
During the nine months ending September 30, 1999, EagleView issued 1,988,060
shares of common stock for $994,030 in cash.
NOTE 4: RELATED PARTY TRANSACTIONS
Net advances to EVT for working capital aggregated $2,849 at September 30,
1999. In addition, EagleView has made advances on behalf of a company, in
which the president of EagleView is a stockholder, of $5,200 at September 30,
1999. These advances are non-interest bearing, unsecured and provide no set
repayment terms.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
On August 10, 1999, Distinctive Devices, Inc. ("DDI" or "the Company")
acquired an 80.7% equity interest in EagleView Industries, Inc., a Florida
corporation ("EagleView"), in exchange for 8,051,340 shares of our common
stock. Control of the Company thereby passed to EagleView Technologies, Inc.,
a Florida corporation ("EVT"). EVT held 74.4% of EagleView prior to the
acquisition and now holds 60.4% of our outstanding shares. Mr. Michael J.
Paolini is the principal shareholder of EVT and is now the President and Chief
Executive Officer of the Company.
In connection with the acquisition we also issued 121,712 shares as
finder's compensation and further agreed to issue within thirteen months of the
acquisition date, above, an additional 1,944,028 shares, including finder's
compensation, in exchange for the remaining equity of EagleView.
For accounting purposes the transaction has been handled as a
recapitalization of EagleView and a reverse acquisition of DDI by EagleView
(see Note 2 to the within financial statements). As a consequence we have
adopted EagleView's calendar fiscal year, for tax and financial reporting
purposes, in place of DDI's fiscal year which heretofore ended in February. It
is intended that EagleView shall operate as a DDI subsidiary for the
foreseeable future.
EagleView is a development stage company, organized in February 1998, and
has had no operating revenue to date. Utilizing an antenna array system
developed by Mr. Paolini and EagleView, we intend to provide low cost, broad
bandwidth, wireless connectivity for Internet, data and
video-telecommunications services. Mr. Paolini, who holds several
telecommunications patents, has filed a patent application with respect to the
antenna array system and proprietary aspects of the system technology is
available to the Company on a royalty-free basis.
On October 7, 1999, EagleView entered into a strategic alliance with
Verio, Inc. (NASDAQ: VRIO), a leading Web-hosting company and provider of
high-speed Internet connectivity in 170 countries. Verio is the exclusive
business Web-hosting provider for AOL and CompuServe, among others.
Under this alliance EagleView intends to provide wireless Internet
connectivity for Verio customers who do not have access to trunk lines or local
loops, or who are in locales where access is overly-costly or is not currently
available. It is planned that Verio-EagleView wireless service will be
launched in the next few months in the New York City area.
Recently, EagleView was named as an authorized reseller for BreezeCom, the
exclusive U.S. marketer of the wireless equipment used in EagleView's antenna
array system.
RESULTS OF OPERATIONS
For the nine-month period ended September 30, 1999, a net loss of
approximately $440,000 was incurred on a consolidated basis as though the
combination of DDI and EagleView had occurred January 1, 1999. EagleView's
development stage expenses for the period were in like amount. As explained in
Note 2 to the financial statements, DDI's income and expenses prior to the
acquisition date of August 10, 1999, were not included in the consolidated
results. DDI has had no operating activities since its businesses were sold in
1996.
FINANCIAL CONDITION
EagleView's development stage expenses were funded by the sale, on a
private basis, of its common stock for cash consideration approximating $1
million (see Note 3 to the financial statements). Given EagleView's intention
to launch wireless services in the New York City area within the next few
months, and the new equipment purchases required in connection therewith, funds
currently held by the Company should be sufficient in amount to cover operating
expenses, including such purchases, for the next six months. Aside from
current liabilities, the Company has no debt.
To provide future funding for the expansion of wireless services to other
areas, preliminary discussions are underway with prospective investment
sources. It is too early to predict the investment terms that might be
proposed by such investors but these may entail the issuance of additional
shares of our common stock.
OTHER MATTERS
Statements in this report concerning future events, results, performance,
expectations or intentions are forward-looking statements. Actual developments
or results may differ materially from those expressed or implied by such
statements as a consequence of known or unknown risks, uncertainties and/or
other factors.
PART II - OTHER INFORMATION
Item 2. CHANGES IN SECURITIES
(c) As reported by the registrant in its Current Report on Form 8-K dated
August 10, 1999, on August 10, 1999, pursuant to a Stock Exchange Agreement, as
amended (the "Agreement"), between the registrant and six persons holding 80.7%
of the outstanding shares of common stock of EagleView Industries, Inc.
("EagleView"), the registrant acquired such outstanding shares of common stock
of EagleView in exchange for the issue of 8,051,340 shares of the registrant's
common stock.
In connection with services rendered by James W. Wolff to the registrant
as a finder in introducing EagleView to the registrant, the registrant issued
to him a finder's fee of 121,712 shares of the registrant's common stock, a
number equal to one percent (1%) of the registrant's common stock outstanding
immediately following the closing of the acquisition of the EagleView shares.
In connection with this transaction and pursuant to the terms of both the
Agreement and the Contract with James W. Wolff, each of the six shareholders of
EagleView and James W. Wolff agreed that the shares of common stock of the
registrant being acquired by each was being taken for investment purposes only
and not with a view to the distribution of such shares. Further, each
acknowledged that the shares of registrant's common stock which they were to
receive were "restricted securities" as such term is defined under Rule 144 and
that no sale or transfer of such shares would be made unless registered under
the Securities Act of 1933, as amended, or transferred pursuant to an exemption
from such registration. A legend to the effect of the immediately preceding
sentence was placed on each certificate evidencing the shares so issued.
By reason of the number of persons involved in the transactions described
above, and on the basis of representations and warranties set forth in the
Agreement by each of the shareholders of EagleView and Mr. Wolff, the issue of
registrant's shares to the shareholders of EagleView and Mr. Wolff were exempt
from registration under the Securities Act of 1933, as amended, by reason of
Section 4(2) of such Act as transactions by an issuer not involving any public
offer.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Index of Exhibits
Exhibit Page
2 Plan of Acquisition (incorporated by reference) 13
19 Reports furnished to security holders
(incorporated by reference) 13
(b) Reports on Form 8-K
(i) A Report on Form 8-K dated June 18, 1999 was filed June
22, 1999 with respect to the execution of a definitive
agreement among registrant and certain shareholders of
EagleView which provided for the exchange of registrant's
common stock for the common stock of EagleView held by
such shareholders.
(ii) A Report on Form 8-K dated August 10, 1999 was filed
August 24, 1999 with respect to the closing of the above-
mentioned stock exchange transaction, as more fully
described herein in Part I, Item 2, of this Report.
(iii) A Report on Form 8-K/A dated August 10, 1999 was filed
October 4, 1999 which provided audited financial
statements of EagleView from inception, February 5, 1998,
to December 31, 1998, unaudited statements of EagleView
for the six months ended June 30, 1999, unaudited
statements of registrant for the seven months ended June
30, 1999 and the unaudited proforma consolidated
statements of registrant and EagleView for the interim
period ended June 30, 1999.
(iv) A Report on Form 8-K dated September 23, 1999 was filed
October 5, 1999 with respect to a change in registrant's
fiscal year which previously ended February 28 or 29, to
a calendar fiscal year ending December 31.
(v) No other Report on Form 8-K was filed dated during the four-month period
covered by this Quarterly Report.
(c) Exhibits
Exhibit 2. Plan of Acquisition
The Stock Exchange Agreement, dated June 18, 1999, is incorporated herein
by reference to the Exhibits to the Report on Form 8-K dated June 18, 1999 and
filed June 22, 1999.
The Amendment to the Stock Exchange Agreement, dated August 6, 1999, is
incorporated herein by reference to the Exhibits to the Schedule 13D dated
August 10, 1999 and filed August 24, 1999 on behalf of EagleView Technologies,
Inc., EagleView Properties, Inc., Michael J. Paolini and Kimberly Paolini.
For changes in registrant's financial condition and stockholders' equity
resulting from the acquisition, reference is made to the financial statements
herein, at Part I, Item 1, of this Report.
Exhibit 19. Reports furnished to Securityholders
An Information Statement Pursuant to Section 14(f) of the Securities
Exchange Act of 1934 and Rule 14(f)(1) thereunder was filed with the Commission
on August 11, 1999 and is incorporated herein by reference. The Statement was
mailed or delivered to registrant's security holders on or about August 13,
1999.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DISTINCTIVE DEVICES, INC.
Dated: November 8, 1999 by: /s/EARL M. ANDERSON, JR.
Earl M. Anderson, Jr.
Chief Financial Officer
Vice President and Secretary
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 9-MOS
[FISCAL-YEAR-END] DEC-31-1999
[PERIOD-END] SEP-30-1999
[CASH] 807,010
[SECURITIES] 0
[RECEIVABLES] 8,636
[ALLOWANCES] 0
[INVENTORY] 0
[CURRENT-ASSETS] 815,646
[PP&E] 68,437
[DEPRECIATION] (7,481)
[TOTAL-ASSETS] 880,756
[CURRENT-LIABILITIES] 121,709
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 614,648
[OTHER-SE] 476,687
[TOTAL-LIABILITY-AND-EQUITY] 880,756
[SALES] 0
[TOTAL-REVENUES] 3,877
[CGS] 0
[TOTAL-COSTS] 0
[OTHER-EXPENSES] 443,294
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 0
[INCOME-PRETAX] (439,417)
[INCOME-TAX] 0
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (439,417)
[EPS-BASIC] (0.04)
[EPS-DILUTED] (0.04)
</TABLE>
