U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB SEC File No:
33-14982-LA
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2000.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO ___________
DIGITAL D.J. HOLDINGS, INC.
---------------------------
(Exact name of registrant as specified in its charter)
Nevada 33-14982-LA 77-0530472
------ ----------- ----------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
657 Third Street, San Francisco, California 94107
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(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: (415) 597-8878
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(Former name or former address, if changed since last report)
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 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. [X] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date:
14,017,526 Shares as of the date of this report.
Transitional Small Business Disclosure Format (check one): [ ] Yes [X] No
1
DIGITAL D.J. HOLDINGS, INC.
Form 10-QSB for the Quarter ended December 31, 2000
Table of Contents
Page
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PART 1 - ITEM 2..............................................................4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR DIGITAL D.J. HOLDINGS, INC................4
CAUTION REGARDING FORWARD-LOOKING INFORMATION...........................4
OVERVIEW OF THE COMPANY.................................................4
PART II - OTHER INFORMATION..................................................7
ITEM 1 - LEGAL PROCEEDINGS..............................................7
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS......................7
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES................................7
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............7
ITEM 5 - OTHER INFORMATION..............................................7
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K...............................8
SIGNATURE...............................................................8
2
PART 1 - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR DIGITAL D.J. HOLDINGS, INC.
The following discussion of the financial conditions and results of
operations of the Company should be read in conjunction with the financial
statements, including notes thereto, for the Company.
CAUTION REGARDING FORWARD-LOOKING INFORMATION
- ---------------------------------------------
This quarterly report contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of the Company
or management as well as assumptions made by and information currently available
to the Company or management. When used in this document, the words
"anticipate," "believe," "estimate," "expect" and "intend" and similar
expressions, as they relate to the Company or its management, are intended to
identify forward- looking statements. Such statements reflect the current view
of the Company regarding future events and are subject to certain risks,
uncertainties and assumptions, including the risks or uncertainties noted.
Should one or more of these risks or uncertainties materialize, or should
underlying assumption prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, estimated, expected or
intended. In each instance, forward-looking information should be considered in
light of the accompanying meaningful cautionary statements herein.
OVERVIEW OF THE COMPANY
Digital D.J. Holdings, Inc. (the "Company") was incorporated as "Golden
Queens Mining Company" on July 31, 1986 under the laws of the State of Nevada,
primarily for the purpose of exploration, development and production of certain
mining properties located in Esmeralda County, Nevada. In July, 1987, the
Company changed its name to "Breakthrough Electronics, Inc.," terminated its
activities in the mining business, and began efforts to develop and market
electronic products, including a telephone device designed to screen telephone
calls, acquired from its then President. This business was terminated several
years ago. On November 22, 1999, the Company acquired Digital D.J., Inc.,
pursuant to a reverse triangular merger in a transaction in which approximately
12,466,992 shares of the Company's common stock were issued to the shareholders
of Digital D.J., Inc. (the "Reorganization"). The Reorganization resulted in
control of the Company transferring from the former shareholders to the former
shareholders of Digital D.J., Inc. The terms and conditions of the
Reorganization are set forth in the Company's Form 8-K filed with the Commission
for the period beginning on November 22, 1999.
Digital DJ Inc. was incorporated in December 1991. Its primary business
activity was the development and marketing of a digital data system that
provides a variety of information services to radio listeners using FM
subcarrier technology. On April 1, 1999, the Company established a wholly owned
subsidiary, FM Intelligent Transportation Systems, Inc. (FMITS), which provided
a traffic information service in the mobile market.
3
On August 30, 2000, the Company's shareholders and its Board of
Directors voted to distribute the majority of the outstanding shares of each of
the Company's subsidiaries, Digital D.J., Inc., a California corporation ("DDJ
California"), Latin American Subcarrier Services, a California corporation
("LASS"), European Licensing Group, a California corporation ("ELG") and
Domestic Transmission Technologies, a California corporation ("DTT"), to the
Company's shareholders. Ninety-five percent (95%) of the outstanding shares of
each of the subsidiaries were distributed to the shareholders, ratably, based
upon their ownership interest. Approximately 13,316,649 shares of DDJ California
and approximately 532,666 shares of each of DTT, LASS and ELG were distributed
to the Company's shareholders. The Company retained approximately 700,877 shares
of DDJ California and approximately 28,035 shares of each of ELG, LASS and DTT.
The shareholders and the Board of Directors also voted to amend the Company's
Articles of Incorporation to change the Company's name to Digital Holdings,
Inc., and to conduct a twenty-five for one reverse stock split of the Company's
common stock. After distributing out ninety-five percent (95%) of the core
businesses of the Company to its shareholders, the Company elected to seek other
acquisition candidates and to sell up to 1,000,000 shares of its common stock
for up to $.10 per share, to be paid in goods, services or cash. For financial
reporting purposes, the Company was considered the successor to the historical
Digital D.J. Holdings, Inc., and Subsidiaries and the Company was considered a
newly organized entity on August 30, 2000, the date negotiations relating to the
reorganization was approved by the shareholders. The accompanying Company's
financial statements do not include any of the historical operations related to
the operations of the Digital D.J. Holdings, Inc., and Subsidiaries prior to
August 30, 2000. The Company has not yet completed its private placements and
has not conducted any operations, has had no revenues and minimal expenses in
the quarter ended December 31, 2000.
Results of Operations
As of December 31, 2000, the Company is in the development stage. Until
August 30, 2000, the Company was primarily engaged in research and development
activities. On August 30, the Company elected to divest its operating subsidiary
and search for an acquisition candidate. Accordingly, the accompanying
consolidated statements of operations should not be regarded as typical for
normal periods of operation. The Company's development stage status, recurring
net losses and capital deficit raise substantial doubt about its ability to
continue as a going concern. Additional financing or restructuring of its
liabilities will be required in order for the Company to complete its
development stage activities. Management hopes that it will be able to obtain
such financing from new investors, and restructure its liabilities.
The Company had no operations or revenues, or significant assets or
liabilities since it divested its operating subsidiaries in August 2000. The
Company had minimal activities at the operating subsidiary level from the period
between July 1, 2000 and August 30, 2000. Thereafter, the Company's activities
related only to the actions necessary to complete the divestiture of the
operating subsidiaries.
4
Three Months Ended December 31, 2000
Revenue. The Company had no revenues during the quarter ended December
31, 2000. The decrease in revenue is the result of the lack of new sales in the
quarter ended December 31, 2000 and the previous divestiture of its operating
subsidiaries.
Cost of Sales. The Company incurred no cost of sales for the quarter
ended December 31, 2000. This decrease is primarily due to the fact that the
Company did not sell any new products during the quarter ended December 31,
2000.
Gross Profit. The Company experienced no gross profit for the three
months ended December 31, 2000. The gross profit percentage decrease is
attributed to the fact that the Company had minimal cost of sales for the
revenues incurred in the three months ended December 31, 2000.
Operating Expenses. The Company had minimal operating expenses for the
three months ended December 31, 2000 of $155.
Liquidity and Capital Resources
Cash and cash equivalents and net working capital (deficit) totaled
$-0- and ($81,650), respectively, as of December 31, 2000. The primary source of
cash has been net proceeds generated from debt financings. The Company has
relied upon loan proceeds from convertible promissory notes to fund its
operations during the periods discussed. The Company received $25,070 in debt
financing for the three months ended December 31, 2000, respectively.
The Company has only minimal existing cash and cash equivalents and no
cash flow from operations. The Company will have to rely upon cash raised
through private placements or loans from its shareholders or others to meet the
Company's presently anticipated working capital needs for the next 13 months.
The Company will be required to obtain additional funds, if available, through
borrowings or equity financings. There can be no assurance that such capital
will be available on acceptable terms. If the Company is unable to obtain
sufficient financing, it may be unable to continue to operate.
Material Changes in Operations
The Company has had no material change in operation during the quarter
ended December 31, 2000.
Year 2000 Compliance
The Company experienced no Year 2000 complications with its products or
services and experienced no problems due to Year 2000 complications with any of
its key customers, licensees, licensors or vendors.
5
PART II- OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company is not a party to or aware of any legal proceeding,
involving the Company and the Company is not aware of any proceedings involving
any of the Company's directors, officers, agents, representatives or persons
that beneficially own 5% or more of the Company's voting securities.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5 - OTHER INFORMATION
Change In Registrant's Certifying Accountant
Effective February 15, 2001, the Company has engaged the accounting
firm of Hansen, Barnett & Maxwell as its principal accountants and the
accounting firm of Singer, Lewak, Greenbaum & Goldstein has been dismissed, as
of February 15, 2001.
The Singer, Lewak, Greenbaum & Goldstein previous reports contained a
qualification as to the Registrant's ability to continue as a going concern,
however, such qualifications were unrelated to the dismissal.
The decision to change accountants was recommended by the Company's
Board of Directors.
During the two most recent fiscal years and any interim period
preceding the former accountants' dismissal, there were no disagreements with
the former accountants on any matter of accounting principals or practices,
financial statements, the disclosure, or auditing scope or procedure, which
disagreement, if not resolved to the satisfaction of the former accountants,
would have caused them to make a reference to the subject matter of the
disagreement in connection with their reports.
6
The Registrant has provided the former accountant with a copy of this
report that the former accountant received no later than the day that this
report is filed with the Commission. The Registrant has requested the former
accountants to furnish the Registrant with a letter addressed to the Commission
stating whether they agree with the statements made by the Registrant in
response to this Item and, if not, stating the respects in which they do not
agree. The Registrant shall request the former accountants to provide the letter
as promptly as possible so that the Registrant can file the letter with the
Commission within ten business days after the filing of this report.
Notwithstanding the ten business day period, the Registrant will file the letter
by amendment within two business days of receipt.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
The Company's financial statements for the periods described herein are
attached.
7
DIGITAL D.J. HOLDINGS, INC.
(A Development Stage Enterprise)
INDEX TO FINANCIAL STATEMENTS
Page
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Balance Sheet - December 31, 2000 F-1
Statements of Operations for the Quarter Ended December 31, 2000 and
for the Cumulative Period from August 30, 2000
through December 31, 2000 F-2
Statements of Stockholders' Deficit for the Period from August 30
(Date of Reorganization) through December 31,
2000, and for the Quarter Ended December 31, 2000 F-3
Statements of Cash Flows for the Quarter Ended December 31, 2000 and
for the Cumulative Period from August 30, 2000
through December 31, 2000 F-4
Notes to Financial Statements F-5
DIGITAL D.J. HOLDINGS, INC.
(A Development Stage Enterprise)
BALANCE SHEET
December 31, 2000
ASSETS
Current Assets $ --
--------
Investments at Cost --
--------
Total Assets $ --
========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accrued expenses $ 56,580
Advances payable 25,070
--------
Total Current Liabilities 81,650
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Stockholders' Deficit
Preferred Stock, no par value
6,000,000 shares authorized
no shares issued and outstanding --
Common stock, $0.001 par value
50,000,000 shares authorized
560,701 shares issued and outstanding 561
Deficit paid-in capital (82,056)
Deficit accumulated during the development stage (155)
--------
Total Stockholders' Deficit (81,650)
--------
Total Liabilities and Stockholders' Deficit $ --
========
The accompanying notes are an integral part of these financial statements.
F - 1
DIGITAL D.J. HOLDINGS, INC.
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS
Cumulative From
August 30, 2000
For the (Date of Reorganization)
Quarter Ended Through
December 31, 2000 December 31, 2000
--------------- ---------------
Sales $ -- $ --
Cost of Sales -- --
Gross Profit -- --
General and Administrative Expenses 155 155
--------------- ---------------
Net Loss $ 155 $ 155
=============== ===============
The accompanying notes are an integral part of these financial statements.
F - 2
DIGITAL D.J. HOLDINGS, INC.
(A Development Stage Enterprise)
STATEMENTS OF STOCKHOLDERS' DEFICIT
Deficit
Accumulated
Deficit During the Total
Common Stock Paid-In Development Stockholders'
Shares Amount Capital Stage Deficit
------------- -------------- ------------- -------------- -------------
Balance - August 30, 2000
(Date of Reorganization) 560,701 $ 561 $ (82,056) $ -- $ (81,495)
Net loss from reorganization
through December 31, 2000 -- -- -- (155) (155)
------------- -------------- ------------- -------------- -------------
Balance - December 31, 2000 560,701 $ 561 $ (82,056) $ (155) $ (81,650)
============= ============== ============= ============== =============
The accompanying notes are an integral part of these financial statements.
F - 3
DIGITAL D.J. HOLDINGS, INC.
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS
Cumulative From
August 30, 2000
For the (Date of Reorganization)
Quarter Ended Through
December 31, 2000 December 31, 2000
--------------- ---------------
Cash Flows From Operating Activities
Net Loss $ (155) $ (155)
Adjustments to reconcile net loss to
net cash used in operating activities:
Change in accrued expenses (24,915) (24,915)
Change in advances payable 25,070 25,070
--------------- ---------------
Net Cash Used In Operating Activities -- --
Cash - Beginning of Period -- --
--------------- ---------------
Cash - End of Period $ -- $ --
=============== ===============
The accompanying notes are an integral part of these financial statements.
F - 4
DIGITAL D.J. HOLDINGS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BUSINESS AND ORGANIZATION
Digital Holdings, Inc. (the "Company") was incorporated as "Golden Queens Mining
Company" on July 31, 1986 under the law of the State of Nevada, primarily for
the purpose of exploration, development and production of certain mining
properties located in Esmeralda County, Nevada. In July, 1987, the Company
changed its name to "Breakthrough Electronics, Inc.", terminated its activities
in the mining business, and began efforts to develop and market electronic
product. This business was terminated several years ago. On November 22, 1999,
the Company acquired Digital DJ, Inc., pursuant to a reverse triangle merger .
This merger resulted in control of the Company transferring from the former
shareholders to the former shareholders of Digital DJ Inc. Digital DJ Inc. was
incorporated in December 1991. Its primary business activity was the development
and marketing of a digital data system that provides a variety of information
services to radio listeners using FM subcarrier technology.
On August 30, 2000, the Company's shareholders and its Board of Directors voted
to distribute the majority of the outstanding shares of each of the Company's
subsidiaries. Ninety-five percent (95%) of the outstanding shares of each of the
subsidiaries were distributed to the shareholders, ratably, based upon their
ownership interest. The Company elected a new Board of Directors and changed its
name to Digital Holdings, Inc.
For financial reporting purposes, the Digital Holdings, Inc. was considered the
successor to the historical Digital DJ Holdings, Inc. and Subsidiaries and the
Company was considered a newly organized entity on August 30, 2000, the date
negotiations relating to the reorganization was approved by the shareholders.
The accompanying financial statements do not include any of the historical
operations related to the operations of the Digital DJ Holdings, Inc. and
Subsidiaries prior to August 30, 2000.
The Company is currently considered a development stage enterprise whose purpose
is to seek merger and acquisition candidates.
NOTE 2 - COMMON STOCK
On August 30, 2000, the Board of Directors authorized a 1-for-25 reverse stock
split of the Company's $0.001 par value common stock. The resulting reverse
split will reduce the outstanding shares of common stock from approximately
14,017,526 to 560,701. The Company also proposed to conduct a private placement
of up to 2,000,000 shares of common stock to sustain its operations while it
seeks merger and acquisition candidates. The reverse split and the issuance of
additional shares of common stock will have a substantial dilutive effect upon
the shareholders' interests in the Company. The accompanying financial
statements have been restated to reflect the reverse stock split. The Company
has not yet changed its name and the name Digital Holdings, Inc. is no longer
available in Nevada.
F - 5
DIGITAL D.J. HOLDINGS, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - INVESTMENTS AT COST
After the reorganization on August 30, 2000, the Company retains five percent
(5%) ownership interest in each of the subsidiaries. From this reorganization,
the subsidiaries took over the liabilities of the Company. Therefore, the
Company's investments in these subsidiaries are carried on the books at zero
(The cost to the Company).
F - 6
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.
February 15, 2000 DIGITAL D.J. HOLDINGS, INC.
By: /s/ Thomas Takahisa
-----------------------
Thomas Takahisa, President
8