SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 24, 1996
DIGITAL DATA NETWORKS, INC.
(Exact name of registrant as specified in its charter)
Washington 0-27704 91-1426372
(State of Incorporation) (Commission File No.) (I.R.S. Employer
Identification Number)
3102 Maple Avenue, Suite 230
Dallas, Texas 75201
(Address of principal executive offices)
(214) 969-7200
(Registrant's telephone number, including area code)
<PAGE>
ITEM 7. Financial Statements and Exhibits.
(a) & (b) Audited financial statements of
Pro.Net Communications, Inc. for the fiscal
years ended September 30, 1995 and 1994, and
the unaudited six-month interim period ended
March 31, 1996, as reported in the
Registrant's Form 8K dated June 18, 1996.
(c) Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DIGITAL DATA NETWORKS, INC.
Date: October 24, 1996 By: /s/ Richard J. Boeglin
------------------------
Richard J. Boeglin,
V.P., Finance and Operations
<PAGE>
PRO.NET COMMUNICATIONS INC.
FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
MARCH 31, 1996
<PAGE>
PRO.NET COMMUNICATIONS INC.
BALANCE SHEETS
(Expressed in Canadian Dollars)
<TABLE>
<CAPTION>
(Unaudited)
March 31, September 30, September 30,
1996 1995 1994
ASSETS
Current
<S> <C> <C> <C>
Cash and cash equivalents $ 78,101 $ 56,296 $ 41,024
Funds held in trust 4,000 4,000 -
Accounts receivable 38,390 18,454 7,646
Investment tax credit recoverable 89,194 76,005 -
Prepaid expenses and deposits 6,125 589 109
-------------- -------------- --------------
Total current assets 215,810 155,344 48,779
Capital assets (Note 3) 56,046 38,267 35,454
-------------- -------------- --------------
Total assets $ 271,856 $ 193,611 $ 84,233
==================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable $ 142,390 $ 79,178 $ 4,177
Deferred revenue 27,672 17,468 -
Due to related parties (Note 6) 221,809 198,250 -
-------------- -------------- -----------
Total current liabilities 391,871 294,896 4,177
-------------- -------------- --------------
Shareholders' equity Capital stock (Note 4)
Authorized
100,000,000 common shares without par value
Issued and outstanding
4,400,000 common shares (September 30,
1994 - 2,000,000; September 30,
1995 - 2,200,000) 397,000 287,000 212,000
Accumulated deficit (517,015) (388,285) (131,944)
-------------- -------------- --------------
Total shareholders' equity (deficiency) (120,015) (101,285) 80,056
-------------- -------------- --------------
Total liabilities and shareholders' equity $ (271,856) $ 193,611 $ 84,233
==================================================================================================================
</TABLE>
Approved by the Directors:
Director /s/ Peter Ciccone Director
The accompanying notes are an integral part of these financial statements.
<PAGE>
PRO.NET COMMUNICATIONS INC.
STATEMENTS OF OPERATIONS
(Expressed in Canadian Dollars)
<TABLE>
<CAPTION>
From
(Unaudited) Incorporation on
Six Month April 21,
Period Ended Year Ended 1994 to
March 31, September 30, September 30,
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE $ 93,616 $ 112,718 $ 35
COST OF REVENUE 93,350 130,260 27,376
-------------- -------------- --------------
GROSS PROFIT (LOSS) 266 (17,542) (27,341)
-------------- -------------- --------------
EXPENSES
Bad debts 3,135 3,169 -
Depreciation and amortization 8,565 5,137 2,489
Interest and bank charges 1,635 3,785 21
Management fees 31,500 55,500 -
Office 9,287 11,276 15,343
Professional fees 12,610 6,835 2,649
Rent 4,851 9,730 5,595
Research and development (Note 5) 47,104 124,930 58,471
Telephone 5,308 9,164 3,190
Travel and promotion 10,435 22,403 8,474
Wages and benefits - - 8,371
-------------- -------------- --------------
Total operating expenses 134,430 251,929 104,603
-------------- -------------- --------------
Loss from operations (134,164) (269,471) (131,944)
OTHER INCOME 5,434 13,130 -
-------------- -------------- -----------
Net loss for the period $ (128,730) $ (256,341) $ (131,944)
========================================================================================================================
Loss per share $ (0.03)$ (0.13)$ (0.09)
================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
PRO.NET COMMUNICATIONS INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
(Expressed in Canadian Dollars)
<TABLE>
<CAPTION>
Deficit
Accumulated
During the Total
Number Development Shareholders'
of Shares Amount Stage Equity
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balances at April 21, 1994 - $ - $ - $ -
Issued for cash
at $0.01 per share 1,200,000 12,000 12,000
at $0.25 per share 800,000 200,000 200,000
Net loss for the period (131,944) (131,944)
-------------- -------------- -------------- --------------
Balances at September 30, 1994 2,000,000 212,000 (131,944) 80,056
Issued for cash
at $0.50 per share 100,000 50,000 50,000
at $0.25 per share 100,000 25,000 25,000
Net loss for the period (256,341) (256,341)
-------------- -------------- -------------- --------------
Balances at September 30, 1995 2,200,000 287,000 (388,285) (101,285)
Issued for cash
at $0.05 per share 2,200,000 110,000 110,000
Net loss for the period (128,730) (128,730)
-------------- -------------- -------------- --------------
Balances at March 31, 1996 4,400,000 $ 397,000 $ (517,015) $ (120,015)
========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
PRO.NET COMMUNICATIONS INC.
STATEMENTS OF CASH FLOWS
(Expressed in Canadian Dollars)
<TABLE>
<CAPTION>
From
(Unaudited) Incorporation on
Six Month April 21,
Period Ended Year Ended 1994 to
March 31, September 30, September 30,
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss for the period $ (128,730) $ (258,686) $ (131,944)
Adjustments to reconcile net loss for the period
to net cash used in operating activities
Depreciation and amortization 15,538 18,093 9,121
Changes in operating assets and liabilities
Accounts receivable (16,864) (13,880) (7,646)
Investment tax credit recoverable (13,189) (76,005) -
Prepaid expenses (5,536) (480) (109)
Accounts payable 60,140 78,073 4,177
Deferred revenue 10,204 17,468 -
-------------- -------------- -----------
Net cash used for operating activities (78,437) (235,417) (126,401)
-------------- -------------- --------------
INVESTING ACTIVITIES
Purchase of capital assets (33,317) (18,561) (44,575)
-------------- -------------- --------------
FINANCING ACTIVITIES
Proceeds from issuance of capital stock 110,000 75,000 212,000
Advances from related parties 23,559 198,250 -
Funds held in trust - (4,000) -
-------------- -------------- -----------
133,559 269,250 212,000
- ------------------------------------------------------------------------------------- -------------- --------------
Increase in cash and cash equivalents 21,805 15,272 41,024
Cash and cash equivalents, beginning of period 56,296 41,024 -
-------------- -------------- ----------
Cash and cash equivalents, end of period $ 78,101 $ 56,296 $ 41,024
=======================================================================================================================
</TABLE>
Supplemental disclosures: None
The accompanying notes are an integral part of these financial statements.
<PAGE>
PRO.NET COMMUNICATIONS INC.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
MARCH 31, 1996
1. NATURE OF OPERATIONS
Pro.Net Communications Inc. was incorporated under the laws of British
Columbia, Canada on April 21, 1994. The Company's principal line of
business includes providing Internet access services.
2. SIGNIFICANT ACCOUNTING POLICIES
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those
estimates.
Cash and cash equivalents
Cash and cash equivalents include highly liquid investments with
original maturities of three months or less.
Capital assets
Capital assets are recorded at cost. Depreciation is provided over the
estimated useful lives on the declining balance method at the following
rates:
Furniture and fixtures 20%
Computer equipment 30%
Computer software 100%
Capitalized software costs
Financial accounting standards provide for capitalization of certain
software development costs after technical feasibility of the software
is attained. No such costs have been capitalized to date because the
impact on the financial statements would not be material.
Advertising costs
Advertising costs are expensed in the period incurred. Included in
travel and promotion are advertising costs of $541 (September 30, 1995 -
$1,720; September 30, 1994 - $Nil).
Revenue recognition
Revenue is derived from providing Internet access services, developing
world wide web sites, training and consulting. Revenues from providing
Internet access services are recognized 50% in the month the customer
signs up for services, the remainder is recognized on a straight-line
basis over the term of the contract, generally one year. To the extent
that the Company receives payment for Internet access in advance of
providing the service, such prepaid amounts are recorded as deferred
revenue until the service is provided. Revenues from developing world
wide web sites, training and consulting are recognized in the period in
which these services are performed.
The Company will sell its products throughout the world, however, the
most significant geographical area is Canada. The Company performs
ongoing credit evaluations of its customers and generally does not
require collateral on domestic sales.
<PAGE>
PRO.NET COMMUNICATIONS INC.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
MARCH 31, 1996
2. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Government assistance
Investment tax credits for Scientific Research and Development expenses
from Revenue Canada are included in income in the year the related
research and development expenses are incurred. Other government grants
relating to research and development expense are recorded as a reduction
of expenses when the related expenditures are incurred.
Foreign currency translation
The Company translates foreign currency transactions and balances using
the temporal method. Under this method, monetary assets and liabilities
are translated at period-end rates whereas non-monetary assets and
liabilities are recorded at rates prevailing at the transaction dates.
Revenue and expenses are translated at the average monthly rate
throughout the period. Currency gains and losses are reflected in the
results of operations for the periods and were not significant. The
Company records all transactions in Canadian dollars because primarily
all of it's business activity is in Canada.
Loss per share
Loss per share is based on the weighted average number of common shares
outstanding during the period. For the periods ended March 31, 1996,
September 30, 1995 and 1994, the weighted average number of shares
outstanding were 3,907,104, 2,055,342, and 1,506,173, respectively.
Fully diluted loss per share considers the dilutive impact of the
conversion of outstanding stock options and warrants as if the events
had occurred at the beginning of the period. For the periods ended March
31, 1996, September 30, 1995 and 1994, this calculation proved to be
anti-dilutive.
New accounting standards
In March 1995, the Financial Accounting Standards Board issued SFAS 121,
"Accounting for Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of", effective for fiscal years beginning after
December 15, 1995. SFAS 121 requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by
those assets are less than the assets' carrying amount. SFAS 121 also
addresses the accounting for long-lived assets that are expected to be
disposed of. The Company does not believe, based on current
circumstances, the effect of adoption of SFAS 121 will be material.
In October 1995, the Financial Accounting Standards Board issued SFAS
123, "Accounting for Stock-Based Compensation", effective for fiscal
years beginning after December 15, 1995. SFAS 123 establishes the fair
value based method of accounting for stock-based compensation
arrangements, under which compensation cost is determined using the fair
value of the stock option at the grant date and is recognized over the
periods in which the related services are rendered. If the Company were
to retain its current intrinsic value based method, as allowed by SFAS
123, it will be required to disclose the pro forma effect of adopting
the fair value based method. The Company does not plan to adopt the fair
value based method.
United States Generally Accepted Accounting Principles
Accounting under United States and Canadian generally accepted
accounting principles is substantially the same with respect to the
accounting principles used by the Company in the preparation of these
financial statements.
<PAGE>
PRO.NET COMMUNICATIONS INC.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
MARCH 31, 1996
3. CAPITAL ASSETS
<TABLE>
<CAPTION>
(Unaudited)
March 31, September 30, September 30,
1996 1995 1994
------------------------------------------------
<S> <C> <C> <C>
Furniture and fixtures $ 17,114 $ 2,144 $ 80
Computer software 6,966 6,966 6,966
Computer equipment 72,373 54,026 37,529
-------------- -------------- --------------
96,453 63,136 44,575
Accumulated depreciation (40,407) (24,869) (9,121)
-------------- -------------- --------------
$ 56,046 $ 38,267 $ 35,454
================================================
</TABLE>
4. CAPITAL STOCK
<TABLE>
<CAPTION>
Number of
Common Shares Amount
------------------------------
Authorized
100,000,000 common shares without par value
Issued
<S> <C> <C>
Balance at April 21, 1994 - $ -
Issued for cash
Private placement 2,000,000 212,000
-------------- --------------
Balance at September 30, 1994 2,000,000 212,000
Issued for cash
Private placement 200,000 75,000
-------------- --------------
Balance at September 30, 1995 2,200,000 287,000
Issued for cash
Private placement 2,200,000 110,000
-------------- --------------
Balance at March 31, 1996 4,400,000 $ 397,000
============================================================================================================
</TABLE>
As at March 31, 1996, the Company had stock options outstanding enabling
the holders to acquire up to 840,000 common shares at $0.25 per share to
the earlier of June 27, 1996 or the directors approving the application
to list the Company's shares on a stock exchange.
<PAGE>
PRO.NET COMMUNICATIONS INC.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
MARCH 31, 1996
5. RESEARCH AND DEVELOPMENT
<TABLE>
<CAPTION>
(Unaudited)
March 31, September 30, September 30,
1996 1995 1994
-----------------------------------------------
<S> <C> <C> <C>
Depreciation and amortization $ 6,973 $ 10,611 $ 6,632
Consulting 48,750 126,000 24,650
Wages and benefits 4,570 54,101 22,500
Office and general - 36,246 4,689
Investment tax credit on research and development (13,189) (102,028) -
------------- -------------- -----------
$ 47,104 $ 124,930 $ 58,471
===============================================
</TABLE>
6. RELATED PARTY TRANSACTIONS
The Company entered into the following transactions with related
parties:
a) Paid $31,500 (September 30, 1995 - $55,500; September 30, 1994 -
$Nil) in management fees to directors of the Company.
b) Paid $14,200 (September 30, 1995 - $12,569; September 30, 1994 -
$Nil) for acquisition of computer equipment and furniture and
fixtures from directors of the Company.
Due to related parties is comprised of loans made to the Company by
certain directors. The loans are non-interest bearing, unsecured and
have no stated terms of repayment.
7. INCOME TAXES
The Company has non-capital losses in excess of $300,000 which are
available to offset future taxable income, the potential benefits of
which are not reflected in these financial statements.
8. SEGMENTED INFORMATION
The Company currently conducts substantially all of its operations in
Canada in one business segment.
