UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(X) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number 0-2749
DISTINCTIVE DEVICES, INC.
(Name of small business issuer in its charter)
New York
(State of incorporation or organization)
13-1999951
(I.R.S. Identification No.)
110 E. Atlantic Avenue, Suite 230, Delray Beach, Florida 33444
(Address of principal executive offices)
Issuer's telephone number: (561)274-4233
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.05 per share
(Title of class)
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( )
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. (X)
Issuer is a development stage company and had no operating revenues for the
fiscal year ended December 31, 1999. Non-operating revenues for the year were
$11,800.
The aggregate market value of voting stock held by non-affiliates of the issuer
approximated $32,300,000 as of February 29, 2000, computed by reference to the
average of the bid and asked prices for such stock as reported by the National
Quotation Bureau.
15,444,264 shares of issuer's common stock, $.05 par value, were outstanding at
February 29, 2000. Issuer had no other class of common equity.
DOCUMENTS INCORPORATED BY REFERENCE: None
This Annual Report on Form 10-KSB has 31 pages. The Exhibit Index (Item 13(a))
is at page 16.
INDEX
PART I Page
Item 1. DESCRIPTION OF BUSINESS 4
Item 2. DESCRIPTION OF PROPERTIES 7
Item 3. LEGAL PROCEEDINGS 8
Item 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 8
PART II
Item 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 8
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION 9
Item 7. FINANCIAL STATMENTS 10
Index to Financial Statements F-1
Report of Independent Auditors F-2
Financial Statements F-3
Notes to Financial Statements F-7
Item 8. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE 10
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF
THE EXCHANGE ACT 10
Item 10. EXECUTIVE COMPENSATION 12
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 13
Item 12. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS 15
Item 13. EXHIBITS AND REPORTS ON FORM 8-K 15
SIGNATURES 18
PART I
Item 1. DESCRIPTION OF THE BUSINESS
1999 Acquisition and Background
Distinctive Devices, Inc. is a New York corporation organized in 1961 (herein
referred to as "we", "our", "issuer" or "the Company"). Originally a third
party lessor of IBM keypunch equipment (which became obsolete in the 1970s), we
later imported and manufactured consumer electronic products, primarily soil
and water test instruments. That business was sold in 1996 (see our Report on
Form 10-KSB for the fiscal year ended February 28, 1997). Following a search
for a suitable merger partner, we acquired an 80.7% equity interest in
EagleView Industries, Inc. ("Eagleview") on August 10, 1999.
In exchange for this interest, we issued 8,051,340 shares of our common stock
to EagleView's parent, EagleView Technologies, Inc. ("EVT") and certain other
EagleView shareholders. We also issued 121,712 shares as a finder's fee. As a
result, EVT became the holder of 7,421,340 shares, or 60.37%, of our common
stock and thereby assumed control of the Company. Further, Michael J. Paolini,
President and principal shareholder of EVT, became President and Chief
Executive Officer of the Company and the Company moved its offices from
Hauppauge, New York to Delray Beach, Florida.
At the closing of the exchange transaction, and pursuant to provisions of the
related definitive agreement, two of the Company's directors resigned, namely,
Joanne L. Kalt and James R. Hawk, and the EagleView shareholders who were
parties to the agreement, including EVT, designated four persons who were
elected to serve as directors, namely, Mr. Paolini, Alfred M. Carroccia, Jr.,
Executive Vice President of EVT, and two incumbent directors, Earl M. Anderson,
Jr. and Walter E. Freeman. Mr. Carroccia subsequently resigned, in February
2000.
For accounting purposes, the acquisition was treated as a recapitalization of
EagleView with EagleView as the acquirer (reverse acquisition). Also, we
adopted EagleView's fiscal year which ends December 31 (formerly February 28).
The Stock Exchange Agreement further provides that, within thirteen months of
the acquisition date (August 10, 1999), we will offer to exchange 1,924,780
shares of our common stock for the remaining 19.3% of EagleView's outstanding
shares. The exchange ratio will be two shares of our stock for each EagleView
share, the same ratio utilized for the 80.7% acquisition. An added 19,248
shares will be payable to the finder, assuming that all remaining EagleView
shares are tendered in response to the offer.
EagleView Industries, Inc. ("EagleView")
EagleView is a Florida corporation organized in February 1998 to develop an
antenna array system (the "System") intended to provide low cost, two-way,
broad bandwidth microwave connectivity for Internet, data and
video-telecommunications services. The System would make available to
subscribers a high speed, wireless "last mile" connection to the Internet,
bypassing the local loop, or landline, connection offered by local telephone
companies.
EagleView has had no operating revenues, to the date of this Report.
The System utilizes frequency bandwidths which are regulated by the Federal
Communications Commission ("FCC"), but operations, within these bands, do not
require FCC licensing. The Company plans to erect custom-designed antenna
array towers to provide wireless service to metropolitan areas, in the U.S. and
elsewhere. The first of these towers is now in place, intended to provide
service to subscribers in Manhattan, New York City, and northern New Jersey
(see "Subsequent Events" at Item 6 of this Report).
The System's operation is dependent upon line-of-sight contact between the
antenna array tower and a small transceiver device installed at the
subscriber's premises, either inside a window or outside the subscriber's
building. The System can provide wireless connection service to a multiplicity
of users from a single antenna array tower and has an effective range of about
40 miles.
The equipment which controls transmissions and reception at the System's
antenna tower and at subscriber's premises is manufactured abroad and
distributed by a U.S. company. The tower antennas and other System components
are available from a number of U.S. and foreign sources. To date, no delays
have been experienced in obtaining such equipment as needed.
Operation of the System requires access, at the tower location, to high speed,
broad bandwidth, Internet service, known as T-3. While regional telephone
companies and other providers offer this service, in most, if not all, major
U.S. metropolitan areas, the final connection, between the Internet and the
customer, is via a local loop owned and operated by a regional telephone
company. Thus far, we have been unable to obtain this level of service in the
New York City area. (For more information, see Subsequent Events, below).
Mr. Paolini, who holds several telecommunications patents, is the principal
architect of the System. He filed a patent application with respect thereto in
1998. Subsequently, he assigned all rights in the technology and patents to
EVT. Pursuant to the terms of an agreement executed June 1, 1999, EVT granted
to EagleView an exclusive license to all rights to the System's technology,
including patent rights, if issued, on a royalty-free basis for the term of the
patent.
Our principal competitors will be telephone companies who offer local loop
connections to T-3 Internet service in markets which we choose to enter. A
number of companies have recently announced plans to offer a similar service
utilizing antenna towers assembled by a U.S. company. To our knowledge, such
towers are more costly than ours, employ a different modulation, or
communication, design, and can service fewer subscribers from a single tower
location.
The Company is engaged in telecommunications, a single industry segment.
Subsequent Events
During January and February 2000, we raised $3,151,310 in new equity capital by
way of a private placement of restricted common stock at $1.00 per share. This
sum is sufficient to meet working capital needs for a year, or more, and to
implement our current plan of operations (see Item 6 of this Report). The
private placement was terminated February 29, 2000.
Also, during January and February, we erected an antenna array tower atop a
building in Union City, New Jersey, intended to provide wireless Internet
access for prospective subscribers located in Manhattan and northeast New
Jersey. Construction costs were covered by equity capital available to the
Company.
The System has been tested in "point-to-point" demonstrations to several sites
in Manhattan. Tests have been conducted utilizing T-1 access to the Internet,
which is available at our Union City location. However, full use of the
System, for "point-to-multipoint" operations, requires Internet access at the
T-3 level.
Some time ago we placed an order for T-3 Internet access with MCIWorldcom
("MCI"), for service at our Union City location. While promised an early
connection, it has not yet been made available. In the New York City area, MCI
Internet services are delivered via a local loop connection. The loop is owned
and operated by a subsidiary of Bell Atlantic, the local regional telephone
company. At last report, we were advised by MCI that Bell Atlantic reports
that it is temporarily out of local loop T-3 facilities in New Jersey.
In case we encounter further delays in establishing a T-3 Internet connection
via the local loop, we are exploring alternative means of obtaining T-3 access.
Commercial operations in the New York City area cannot begin until such access
is established.
No significant costs were incurred in the erection of our New Jersey tower in
order to comply with federal, state or local environmental laws, nor are such
laws expected to effect tower operations.
Currently, the Company has eleven employees, nine on a full-time basis.
Item 2. DESCRIPTION OF PROPERTIES
For the last ten months of 1999, lease expense was $1,400 per month, plus
taxes, operating expenses and common area maintenance charges, for the
Company's headquarters premises located in a multi-story office building in
Delray Beach, Florida. The lease expires in 2004.
In December 1999, a lease was entered into for roof rights and office space
atop and in a multi-store building located in Union City, New Jersey. The
lease expires in 2004 and includes renewal options. In March 2000, the Company
leased additional space at its Delray Beach headquarters.
Assuming no other leases are entered into, aggregate rental expense for 2000
should approximate $6,200 per month including taxes, operating expenses and
common area maintenance. All existing leases are subject to annual rental
increases ranging from 3% to 5%.
Item 3. LEGAL PROCEEDINGS
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fiscal year
ended December 31, 1999.
PART II
Item 5. MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Issuer's common stock, $.05 par value, is traded over-the-counter under the
symbol DDEV. Quotations are reported in the OTC Bulletin Board and the
National Quotation Bureau Pink Sheets. We have no other equity security
outstanding.
Information furnished by the National Quotation Bureau reports the range of
high and low bid quotations for each quarterly period during the two most
recent fiscal years, as set forth below. Quotations represent prices between
dealers and do not include retail mark-up, mark-down or commissions, and may
not represent actual transactions.
Bid Prices
1999 1998
----------- -----------
High Low High Low
Fiscal quarter ended:
March 31 0.26 0.15 0.17 0.16
June 30 0.94 0.26 0.27 0.17
September 30 0.94 0.53 0.21 0.21
December 31 4.00 0.69 0.21 0.13
At February 29, 2000, our common stock was held by approximately 1,600 holders
of record. We estimate that an added 300 to 400 persons hold our stock in
Street Name.
The Company has never paid a dividend on its common stock and there is no plan
to do so in the foreseeable future.
8
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
Plan of Operation
The operating plan for the next twelve months envisions (i) securing access to
T-3 Internet service at our New Jersey tower location and, when such access is
available, (ii) commencement of commercial operations in the New York City
area, (iii) adding video-conferencing to our service offerings and (iv) the
possible erection of another array tower, facing the east side of Manhattan, to
better serve prospective subscribers in that locale. We also intend to
formulate plans for entering a second U.S. metropolitan market, as yet to be
selected.
Funds on hand are sufficient to implement the foregoing plan, given that our
private placement, early this year, raised more than $3 million in new equity
(see Subsequent Events at Item 1 of this Report).
Additional funding may be needed to implement entry into a second U.S. market.
Such funding will be needed to enter added markets. Technical personnel will
be needed, as well, to facilitate expansion to key cities.
Research and development costs are largely behind, given completion of our
first array tower in New Jersey. The only significant equipment purchase
contemplated, at this time, relates to the possible construction of a second
array tower in the New York City area, mentioned above. Some increase in
employees will be required if we move beyond the New York City market.
Risks and Uncertainties
Please refer to Note 1 to the within Financial Statements.
STATEMENTS CONTAINED HEREIN AND ELSEWHERE IN THIS REPORT CONCERNING FUTURE
ACTIVITIES, PERFORMANCE OR INTENTIONS ARE FORWARD-LOOKING STATEMENTS WHICH, BY
THEIR NATURE, INVOLVE RISK AND UNCERTAINTY BECAUSE THEY RELATE TO EVENTS, AND
DEPEND ON CIRCUMSTANCES, THAT WILL OCCUR IN THE FUTURE, MANY OF WHICH ARE NOT
WITHIN THE COMPANY'S CONTROL. ACTUAL RESULTS AND EVENTS MAY DIFFER MATERIALLY
FROM THOSE EXPRESSED OR IMPLIED BY SUCH STATEMENTS AS THE RESULT OF KNOWN OR
UNKNOWN RISKS, UNCERTAINTIES AND/OR OTHER FACTORS AND THERE CAN BE NO ASSURANCE
THAT SUCH EXPECTATIONS WILL PROVE CORRECT.
9
Item 7. FINANCIAL STATEMENTS
The consolidated financial statements of the Company are filed under this Item,
beginning at page F-1 of this Report.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Distinctive Devices, Inc. and Subsidiary
(Development Stage Companies)
Delray Beach, Florida
We have audited the accompanying consolidated balance sheets of Distinctive
Devices, Inc. and Subsidiary (Development Stage Companies) as of December 31,
1999 and 1998, and the related consolidated statements of operations, changes
in stockholders' equity, and cash flows for the year ended December 31, 1999
and from February 5, 1998 (inception) to December 31, 1998 and 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
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
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Distinctive
Devices, Inc. and Subsidiary as of December 31, 1999 and 1998, and the results
of their operations and their cash flows for the year ended December 31, 1999
and from February 5, 1998 (inception) to December 31, 1998 and 1999, in
conformity with generally accepted accounting principles.
GOLDSTEIN LEWIN & CO.
Boca Raton, Florida
March 3, 2000
DISTINCTIVE DEVICES, INC. AND SUBSIDIARY
(Development Stage Companies)
CONSOLIDATED BALANCE SHEETS
December 31,
1998 1999
ASSETS
CURRENT ASSETS
Cash $ 5 $ 429,259
Due from Related Parties 100
------ --------
Total Current Assets 105 429,259
PROPERTY AND EQUIPMENT, Net 238,705
OTHER ASSETS 5,203
------ -------
$ 105 $ 673,167
====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable and Accrued Liabilities $ $ 2,714
Accrued Legal Fees 11,514
Due to Related Parties 95,000
------ -------
Total Current Liabilities 109,228
------ -------
COMMITMENTS
MINORITY INTEREST 72,821
------ -------
STOCKHOLDERS' EQUITY
Common Stock, Par Value $.05; Authorized
20,000,000 Shares 300,000 614,648
Additional Paid-In Capital (299,700) 483,429
Deficit Accumulated During
the Development Stage (195) (606,959)
------- -------
105 491,118
------- -------
$ 105 $ 673,167
====== =======
DISTINCTIVE DEVICES, INC. AND SUBSIDIARY
(Development Stage Companies)
CONSOLIDATED STATEMENTS OF OPERATIONS
Period From February 5, 1998
Year Ended (Inception) to December 31,
December 31, 1999 1998 1999
Revenue $ $ $
General and Administrative
Expenses 737,609 195 737,804
------- ------- -------
Operating Loss (737,609) (195) (737,804)
Interest and Other Income 11,800 11,800
------- ------- -------
(725,809) (195) (726,004)
Minority Interest 119,045 119,045
------- ------- -------
Net Loss $ (606,764) $ (195) $ (606,959)
Weighted Average Shares of
Common Stock Outstanding 8,496,751 6,000,000 7,313,133
--------- --------- ---------
Loss Per Share -
Basic and Diluted $ (0.07) $ (0.00) $ (0.08)
========= ========= =========
DISTINCTIVE DEVICES, INC. AND SUBSIDIARY
(Development Stage Companies)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Additional Deficit Accumulated
Common Stock Paid-In During the
Shares Amount Capital Development Stage
Initial Issuance
of Shares for Cash 6,000,000 $ 300,000 $(299,700) $
Net Loss (195)
--------- ------- ------- -------
Balance at
December 31, 1998 6,000,000 300,000 (299,700) (195)
Issuance of Shares
for Cash (Notes 3 and 4) 2,051,340 102,567 699,597
Acquisition of Net
Assets on
Recapitalization (Note 3)4,119,902 205,995 (1,666)
Issuance of Shares
for Services 121,712 6,086 85,198
Net Loss (606,764)
--------- ------- ------- -------
Balance at
December 31, 1999 12,292,954 $ 614,648 $ 483,429 $ (606,959)
DISTINCTIVE DEVICES, INC. AND SUBSIDIARY
(Development Stage Companies)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED FEBRUARY 5, 1998 (INCEPTION)
DECEMBER 31, TO DECEMBER 31,
1999 1998 1999
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) $(606,764 $ (195) $ (606,959)
Adjustments to Reconcile Net (Loss) to Net
Cash Used in Operating Activities:
Depreciation Expense 11,048 11,048
Minority Interest in Net Loss (119,045) (119,045)
Issuance of Shares for Services 91,284 91,284
Change in Assets and Liabilities,
Net of the Effect
of the Recapitalization
(Increase) Decrease in:
Due from Related Party 100 (100)
Other Assets (2,198) (2,198)
Increase in:
Accounts Payable 14,228 14,228
Due to Related Parties (102,700) (102,700)
------- ------- -------
Net Cash Used in Operating Activities (714,047) (295) (714,342)
======= ======= =======
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (249,633) (249,633)
Cash Effect of Recapitalization 398,904 398,904
------- ------- -------
Net Cash Used in Investing Activities 149,271 149,271
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Common Stock 994,030 300 994,330
------- ------- -------
Increase in Cash 429,254 5 429,259
Cash:
Beginning 5
------- ------- ------
Ending $ 429,259 $ 5 $ 429,259
======= ======= =======
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
In Conjunction with the Recapitalization, Assets Acquired
and Liabilities Assumed Were as Follows:
Assets Acquired $ 402,029 $ 402,029
======= =======
Liabilities Assumed $ 197,700 $ 197,700
======= =======
Issuance of Shares for Services $ 91,284 $ 91,284
======= =======
</TABLE>
DISTINCTIVE DEVICES, INC. AND SUBSIDIARY
(Development Stage Companies)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Consolidation
The consolidated financial statements include the accounts of Distinctive
Devices, Inc. ("DDI") and its subsidiary, EagleView Industries, Inc.
(EagleView) (collectively, the "Company"). All significant intercompany
accounts and transactions have been eliminated in consolidation. EagleView was
incorporated in Florida on February 5, 1998.
EagleView prior to August 10, 1999 (Note 3) was a 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 broad 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 December 31, 1999, EagleView was in the
development stage, planned operations have not commenced and its activities
were limited to the establishment of the Corporation.
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.
Risk and Uncertainties
The Company is subject to all of the risks inherent in an early stage company
in the telecommunications and Internet industry. These risks include, but are
not limited to, a limited operating history, limited management resources,
dependence upon a consumer acceptance of wireless services and the Internet,
wireless services and Internet related security risks and the changing nature
of the electronic commerce industry. The Company's operating results may be
materially affected by the foregoing factors.
Cash Equivalents
For purposes of the statements of cash flows, the Company considers all
short-term investments purchased with an original maturity of three months or
less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost and depreciated on a straight-line
basis over the assets' estimated useful lives.
Accounting Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain 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 reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
New Accounting Standards
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. The new
statement requires all derivatives to be recorded on the balance sheet at fair
value and establishes new accounting rules for hedging instruments. The
statement is effective for years beginning after June 15, 2000 (as amended by
SFAS 137). The Company is assessing the impact this statement will have on the
financial statements.
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 excluding the loss
attributed to the minority interest.
Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable, accounts payable, accrued
liabilities and liabilities to related parties approximate fair value because
of the short maturity of the instruments and the provision, if any, for what
management believes to be adequate reserves for potential losses.
Long-Lived Assets
The Company reviews for the impairment of long-lived assets whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. An impairment loss would be recognized when estimated future
cash flows expected to result from the use of the asset and its eventual
disposition is less than its carrying amount.
Concentration Of Credit Risk
The Company at times has cash in banks in excess of FDIC insurance limits and
places its temporary cash investments with high credit quality financial
institutions.
NOTE 2: PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1999:
Lives
In Years
Furniture $ 9,212 10
Technical Equipment 167,649 5
Computer Equipment 72,892 5
-------
249,753
Less: Accumulated Depreciation 11,048
-------
$ 238,705
=======
NOTE 3: 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 an
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 December 31, 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. The share amounts have been
retroactively restated to reflect the conversion, on the two for one basis,
with an adjustment to additional paid-in capital for the resultant differences
in par value. Prior to the reorganization, DDI had 4,119,902 shares
outstanding.
NOTE 4: PRIVATE PLACEMENT
On October 1, 1998, EagleView began offering 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 3).
During the year ended December 31, 1999, EagleView issued 1,988,060 shares of
its common stock for $994,030 in cash.
NOTE 5: INCOME TAXES
The deficit accumulated during the development stage, February 5, 1998
(inception) through December 31, 1999 of approximately $601,000 is capitalized
for income tax purposes as accumulated start-up costs, and is to be amortized
over a sixty-month period beginning upon commencement of operations. The
Company has recorded a valuation allowance of approximately $225,000 with
respect to any future tax benefits arising from the amortization of the
development costs due to the uncertainty of their ultimate realization.
NOTE 6: COMMITMENTS
Licensing Agreement
The Company has entered into a licensing agreement with EVT. The Agreement
provides for the Company to have the exclusive use of certain technology for a
nominal fee of $1 per month.
Management Agreement
The Company has entered into a management agreement with EVT, whereby EVT will
provide management, accounting and administrative services for a fee of $8,000
per month. The Agreement is effective January 1, 1999, and has no fixed
termination date. Management fees aggregate $96,000, $96,000 and $0 for the
year ended December 31, 1999, and the periods from February 5, 1998 (inception)
to December 31, 1999 and 1998, respectively.
Operating Leases
The Company has entered into noncancelable operating leases for facilities in
Florida and New Jersey. The leases provide for monthly base rents plus tax,
operating expenses and common area maintenance. The base rents of the leases
are subject to annual increases of 5%. The leases expire in 2004. The New
Jersey lease provides for two five-year renewal options. Subsequent to
December 31, 1999, the Company entered into a noncancelable lease for
additional office space in Florida, providing for monthly base rent plus tax,
operating expenses and common area maintenance. The base rent is subject to
annual increases of 3% and expires in 2005.
Future minimum lease payments under the noncancelable operating leases for each
of the years subsequent to December 31, 1999 is as follows:
Year Ending December 31,
2000 $ 54,932
2001 60,526
2002 63,165
2003 65,923
2004 50,428
2005 3,560
-------
$ 298,534
=======
Rent expense aggregated $19,434, $19,434 and $0 for the year ended December 31,
1999, and the periods from February 5, 1998, (inception) to December 31, 1999
and 1998, respectively.
NOTE 7: RELATED PARTIES
At December 31, 1999, $95,000 represents severance pay due to the former
President and former Secretary of the Company incurred prior to the
recapitalization.
NOTE 8: SUBSEQUENT EVENT
Private Placement
In 2000, the Company offered shares of its $0.05 par value common stock in a
private placement. The shares were offered on a best efforts basis at a
subscription price of $1 per share. As of February 29, 2000, the Company had
placed $3,151,310 in shares.
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
At a Board Meeting held November 23, 1999, directors designated Goldstein Lewin
& Co., Boca Raton, Florida, as the Company's Certifying Accountants to replace
the Company's former accounting firm located in New York. Goldstein Lewin &
Co. has served as independent accountants to EagleView since its inception and
EagleView is the Company's sole operating activity. Following the Meeting, and
at our request, the former accounting firm submitted its resignation.
Audit reports issued by our current and former independent accountants for
either of the past two fiscal years did not contain any adverse opinion or
disclaimer of opinion, nor were such reports modified in any way, nor were
there any disagreements with the firms on any matter of accounting principles
or practices, financial disclosure or audit scope or procedures.
We held discussions with representatives of Goldstein Lewin & Co., at various
times, with respect to (i) the manner in which the exchange of stock on August
10, 1999, would be recorded for accounting purposes, (ii) the resulting
decision to treat the transaction as a reverse acquisition and recapitalization
of EagleView, (iii) the change in the Company's fiscal year from February 28 to
December 31 and (iv) the consequent change in filing dates for the Company's
future Reports on Form 10-QSB.
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS:
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Positions Held and Family
Name Age Duration of Service Relationship
- ------------------ --- ------------------- -----------
Michael J. Paolini 58 Director since 1999 None
President since 1999
Treasurer since 2000
0
Sanjay S. Mody 42 Director since 2000 None
Executive Vice President
since 2000
Earl M. Anderson, Jr. 75 Director since 1982 None
Vice President & Secretary
since 1999
David R. Anderson 50 Director since 2000 None
Vice President
since 2000
Kevin R. Cihelka 49 Director since 2000 None
Vice President
since 2000
Walter E. Freeman 75 Director since 1983 None
The term of office of all directors will expire at the next Annual Meeting of
Stockholders and when their respective successors have been duly elected and
qualified. Officers serve at the pleasure of the directors. Aside from the
Audit Committee, the board has no standing committees. The following
information provides a brief account of the business experience of the
directors and officers and their principal occupations during the past five
years.
Mr. Paolini has been President of EagleView since its inception and President
of the Company since August 10, 1999. He also serves as President of
EagleView's parent, EVT. He has over thirty years' experience in the design,
manufacture and implementation of satellite, cable and microwave systems. He
is considered to be an expert in these fields and he holds several
telecommunication patents. Mr. Paolini has filed patent applications covering
the Company's antenna array system which, if granted, will be available to the
Company on a royalty-free basis. Mr. Paolini serves as the Company's Chief
Executive Officer and Chief Financial Officer.
Mr. Mody joined the Company in March 2000 as a director and as Chief Operating
Officer. Prior thereto he served for four years as a Vice President of Laidlaw
Global Securities, Inc., New York City. Before that, he served for one year as
a Vice President of Dean Witter & Co. He holds equity interests in technology
companies in his native India.
Mr. Earl M. Anderson has acted as an independent management consultant for more
than thirty years. He served as the Company's President for twenty years,
prior to its acquisition of EagleView last year. He is a director of Sunair
Electronics, Inc., an unaffiliated company and a manufacturer of high
frequency, single sideband, radio equipment.
Mr. David R. Anderson has served for the past twelve years as a
telecommunications consultant with assignments involving Internet service
providers, microwave distribution, cellular phones and broadcast TV and radio.
He was employed by EagleView in 1999.
Mr. Cihelka has more than ten years experience in wireless industry marketing
and finance. He was Vice President of EVT from 1993 to 1997, when he joined
EagleView, EVT's subsidiary.
Mr. Freeman has acted as a financial consultant and bank management advisor, in
Alexandria, Virginia, since 1982. He is the Chairman and sole member of the
Company's Audit Committee.
Based solely upon a review of information furnished to the Company during the
most recent fiscal year, including written representations, no director,
officer or beneficial owner of more than ten percent of the Company's common
stock failed to file on a timely basis reports required by Section 16(a) of the
Exchange Act during the most recent fiscal year.
Item 10. EXECUTIVE COMPENSATION
The following table sets forth compensation paid or accrued to the chief
executive officer. No director or officer received compensation exceeding
$100,000 for any of the last three completed fiscal years.
SUMMARY COMPENSATION TABLE
Name and Principal All Other
Position Year Paid Deferred Total Compensation
- ------------------ ---- ---- -------- ----- ------------
Michael J. Paolini 1999 $96,000(1) ----- $96,000(1) None
President and CEO
Earl M. Anderson, Jr. 1998 $12,000 ----- $12,000 None
President and CEO 1997 $13,000 ----- $13,000 None
12
(1) EagleView has a management services agreement with EVT, its
former parent, whereunder Mr. Paolini, who is also EVT's
President, will devote 90% of his business time to
EagleView operations. Thereunder, EagleView pays EVT
$8,000 monthly for the services of Mr. Paolini and his
wife, Kimberly Paolini, who handles internal accounting
functions for EagleView.
Compensation does not include benefits which may be deemed personal, the amount
of which cannot be precisely determined. No stock options or stock
appreciation rights were granted in 1999.
Compensation of $1,000 was paid to a non-employee director in 1999. One board
meeting was held during the year at which attendance was 100%. Other matters
requiring board action were taken by the unanimous written consent of
directors, in lieu of a meeting.
Except for the management services agreement described in Note 1, above, the
Company has no formal compensatory plan or contract, with respect to the
employment, resignation, retirement or termination of any director or officer,
nor arising from a change in control of the Company.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
The following table identifies each person (including any 'group', as that term
is used in the Exchange Act) who is known to the Company to be the beneficial
owner of more than five percent of the Company's voting securities as of
February 29, 2000.
Title of Name and Address of Amount and Nature of Percent of
Class Beneficial Owner Beneficial Owner (1) Class (2)
- -------- ------------------ --------------------- ----------
Common EagleView Technologies, Inc.(3) 7,421,340 shares 48.05%
Stock, 110 E. Atlantic Ave., Ste. 230
$.05 Delray Beach, FL 33444
par
value EagleView Properties, Inc. (3) 7,421,340 shares 48.05%
110 E. Atlantic Ave., Ste. 230
Delray Beach, FL 33444
Michael J. Paolini (3) 7,421,340 shares 48.05%
110 E. Atlantic Ave., Ste. 230
Delray Beach, FL 33444
Kimberly Paolini (3) 7,421,340 shares 48.05%
110 E. Atlantic Ave., Ste. 230
Delray Beach, FL 33444
Earl M. Anderson, Jr. 904,500 shares 5.86%
21693 Town Place Drive
Boca Raton, FL 33433
(b) Security Ownership of Management
The following table sets forth the number of common shares owned by directors,
and by all directors and officers as a group, as of February 29, 2000.
Title of Name and Address of Amount and Nature of Percent of
Class Beneficial Owner Beneficial Owner (1) Class (2)
- -------- ------------------ --------------------- ----------
Common Michael J. Paolini (3) 7,421,340 shares 48.05%
Stock, 110 E. Atlantic Ave., Ste. 230
$.05 Delray Beach, FL 33444
par
value Sanjay S. Mody 750,000 shares 4.86%
35 Harvard Street
Closter, NJ 07624
Earl M. Anderson, Jr. 904,500 shares 5.86%
21693 Town Place Drive
Boca Raton, FL 33433
Walter E. Freeman 30,000 shares 0.19%
921 Croton Drive
Alexandria, VA 22308
Directors and Officers 9,105,840 shares 58.96%
as a group (6 persons)
(1) Unless otherwise noted, we believe that all persons named
in the tables have sole voting and investment power with
respect to all shares owned by them.
(2) Based upon 15,444,264 shares outstanding at February 29,
2000.
4
(3) EagleView Properties, Inc., ("Properties") a Florida corporation, owns
79.58% of the outstanding common stock of EVT. Mr. Paolini owns 51% of
Properties' outstanding shares and his wife, Kimberly Paolini, owns 24%. He is
a director and President of Properties. Each of Michael and Kimberly Paolini
are deemed to be beneficial owners of the Properties shares owned by the other.
Accordingly, each is deemed to be the owner of 75% of Properties' outstanding
stock. Consequently, each of Properties, Michael and Kimberly Paolini, by
reason of their ability to control the voting of the Company shares held by
EVT, may be deemed to be the beneficial owner of the Company stock held by EVT.
Each of Michael and Kimberly Paolini disclaim beneficial ownership of
Properties shares owned by the other. Further, they each disclaim ownership of
the common stock of the Company deemed to be beneficially owned by Properties.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There have been no transactions during the past two years, nor have any been
proposed, to which the Company was or is to be a party and in which any
director, officer, director nominee or five percent security holder had, or is
to have, a direct or indirect material interest, except for the issuance of
7,421,340 shares of our common stock to EVT, a corporation controlled by Mr.
Paolini, as described in Item 1 of this Report.
Currently, 48.05% of our outstanding common stock is held by EVT which, in
turn, is 79.58% owned by Properties which, in turn, is 51% owned by Mr.
Paolini. For further information, refer to Note 3 to the preceding Item 12 of
this Report.
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits and index of exhibits
The following exhibits are included in Item 13(c). Other exhibits have been
omitted since the required information is not applicable to registrant.
Exhibit Page
2 Plan of Acquisition (incorporated by reference) 16
3 Certificate of incorporation and by-laws (incorporated by reference).
17
4 Instruments defining the rights of holders,
(incorporated by reference). 17
11 Statement re: computation of per share earnings 17
16 Letter on change in certifying accountants
(incorporated by reference) 18
21 Subsidiaries of the registrant 18
27 Financial Data Schedule
(b) Reports on Form 8-K
The following reports on Form 8K were filed during the fourth quarter of the
period for which this Annual Report is filed.
(i) Report on Form 8-K/A dated August 10, 1999, filed October 24, 1999 re:
Financial Statements
(ii) Report on Form 8-K dated November 23, 1999, filed December 6, 1999 re:
Change in Certifying Accountants
(c) Exhibits
Exhibit 2. Plan of Acquisition
The acquisition of an 80.7% equity interest in EagleView on August 10, 1999, is
described in Item 1 of this Report, which is incorporated herein by reference.
For further information, the following filings are also incorporated herein by
reference.
(i) Report on Form 8-K dated June 18, 1999, filed June 22, 1999, re:
Definitive Stock Exchange Agreement.
(ii) Schedule 13D dated August 10, 1999, filed August 24, 1999, re: Amendment
to Definitive Stock Exchange Agreement.
(iii) Report on Form 8-K dated August 10, 1999, filed August 24, 1999, re:
Change in Control and Finder's Fee Agreement.
(iv) Schedule 14(f) dated August 11, 1999, filed August 13, 1999, re:
Information Statement.
(v) Report on Form 8-K/A dated August 10, 1999, filed October 24, 1999, re:
Financial Statements and Change in Fiscal Year.
(vi) Report on Form 10-QSB for the quarter ended September 30, 1999, filed
November 8, 1999.
(vii) Report on Form 8-K dated November 23, 1999, filed December 6, 1999, re:
Change in Certifying Accountants.
Exhibit 3: Certificate of Incorporation and by-laws
(i) The Certificate of Incorporation of registrant consists of the Restated
Certificate of Incorporation dated June 21, 1965 and Certificates of Amendment
thereof dated October 21, 1969, August 1, 1973, September 9, 1974, and August
25, 1976, which are incorporated herein by reference to Exhibit 3(a) to
registrant's Annual Report on Form 10-K for the year ended February 28, 1981;
and
Certificate of Amendment of the Certificate of Incorporation dated
September 16, 1983, is incorporated herein by reference to Exhibit 3(a) to
registrant's Annual Report on Form 10-K for the year ended February 29, 1984.
(ii) The Corporate By-Laws of registrant are incorporated herein by reference
to Exhibit 3(b) to registrant's Annual Report on Form 10-K for the year ended
February 28, 1981.
Exhibit 4: Instruments defining the rights of holders
The Common Stock Certificate of registrant is incorporated herein by reference
to Exhibit 4(a) to registrant's Annual Report on Form 10-K for the year ended
February 28, 1981.
Exhibit 11. Statement re: computation of per share earnings
Year ended December 31,
l999 l998
---- ----
Net(loss) $(606,764) $(195)
Weighted average number of common
shares outstanding 8,496,751 6,000,000
Net (loss) per common share
(basic and diluted) $(0.07) $(0.00)
Exhibit 16. Letter on Change in Certifying Accountants
The Letter on Change in Certifying Accountants is incorporated herein by
reference to registrant's Report on Form 8-K dated November 23, 1999, filed
December 6, 1999.
Exhibit 21. Subsidiaries of the registrant
The Company has one subsidiary, EagleView, a Florida corporation.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DISTINCTIVE DEVICES, INC.
(Registrant)
March 27, 2000 by: /s/ MICHAEL J. PAOLINI
----------------------
Michael J. Paolini
President and Treasurer
Chief Executive Officer
Chief Financial Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
March 28, 2000 /s/ SANJAY S. MODY
------------------
Sanjay S. Mody
Director
Executive Vice President
Chief Operating Officer
March 27, 2000 /s/ EARL M. ANDERSON, JR.
-------------------------
Earl M. Anderson, Jr.
Director and Vice President
and Secretary
March 27, 2000 /s/ DAVID R. ANDERSON
---------------------
David R. Anderson
Director and Vice President
March 27, 2000 /s/ KEVIN R. CIHELKA
--------------------
Kevin R. Cihelka
Director and Vice President
March 28, 2000 /s/ WALTER E. FREEMAN
---------------------
Walter E. Freeman
Director
March 27, 2000 /s/ MICHAEL J. PAOLINI
----------------------
Michael J. Paolini
Director, President,
Treasurer, Chief Executive
and Chief Financial Officer
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1999
[PERIOD-END] DEC-31-1999
[CASH] 429,259
[SECURITIES] 0
[RECEIVABLES] 0
[ALLOWANCES] 0
[INVENTORY] 0
[CURRENT-ASSETS] 429,259
[PP&E] 249,753
[DEPRECIATION] 11,048
[TOTAL-ASSETS] 673,167
[CURRENT-LIABILITIES] 109,228
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 614,648
[OTHER-SE] 123,530
[TOTAL-LIABILITY-AND-EQUITY] 673,167
[SALES] 0
[TOTAL-REVENUES] 0
[CGS] 0
[TOTAL-COSTS] 0
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 0
[INCOME-PRETAX] (606,764)
[INCOME-TAX] 0
[INCOME-CONTINUING] (606,764)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (606,764)
[EPS-BASIC] (0.07)
[EPS-DILUTED] (0.07)
</TABLE>
