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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarter Ended September 30, 2000.
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____ to _____
Commission file number:
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DIRECT III MARKETING, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 33-0851387
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
12760 High Bluff Drive, Suite 210, San Diego, California 92130
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(Address of Principal Executive Offices)
(858) 793-4151
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 [ ]
Transitional Small Business Format: YES [ ] NO [X]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Common Stock, $0.001 par value, outstanding on September 30, 2000:
4,410,250 shares
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TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Balance Sheet 3
Statements of Operations 4
Statement of Stockholders Equity 6
Statements of Cash Flows 7
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of 9
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 2. Changes in Securities 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES
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DIRECT III MARKETING, INC.
Balance Sheet
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
(Unaudited) (Audited)
ASSETS
<S> <C> <C>
Current assets:
Cash $ 475,583 $ 742
Accounts receivable 1,932 1,566
Prepaid expenses 10,231 37,694
Note receivable 350,000 --
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Total current assets 837,746 40,002
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Property and equipment, net 16,111 13,802
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Other assets 100,744 4,924
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Total assets $ 954,601 $ 58,728
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 25,288 $ 25,363
Accrued expenses 32,099 36,108
Notes payable -- 250,000
Other current liabilities -- 55,100
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Total current liabilities 57,387 366,571
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Commitments and contingencies -- --
Stockholders' equity:
Preferred stock-$.001 par value, 10,000,000 shares authorized -- --
Common stock-$.001 par value, 40,000,000 shares authorized
4,408,250 and 3,741,250 shares issued and outstanding,
respectively 4,410 3,741
Additional paid in capital 1,875,590 278,759
Retained deficit (760,353) (379,546)
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1,119,647 (97,046)
Less notes receivable from stockholders (222,433) (210,797)
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Total stockholders' equity 897,214 (307,843)
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Total liabilities and stockholders' equity $ 954,601 $ 58,728
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</TABLE>
3
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DIRECT III MARKETING, INC.
Statement of Operations
For the Three Months Ended September 30, 2000 and 1999
(Unaudited)
2000 1999
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Revenue $ -- $ --
Operating expenses:
General and administrative 93,899 75,329
Legal and professional 28,481 25,475
Interest expense 154 --
Depreciation 1,033 825
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Total operating expenses 123,567 101,629
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Operating loss (123,567) (101,629)
Other income - interest income 11,784 1,572
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Loss before income tax provision (111,783) (100,057)
Income tax provision -- --
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Net loss $ (111,783) $ (100,057)
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Net loss per share:
Basic $ 0.025 $ 0.039
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Diluted $ 0.025 $ 0.039
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Weighted average common shares outstanding:
Basic 4,410,250 2,560,983
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Diluted 4,410,250 2,560,983
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4
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DIRECT III MARKETING, INC.
Statement of Operations
For the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
2000 1999
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Revenue $ -- $ --
Operating expenses:
General and administrative 306,056 190,246
Legal and professional 92,662 48,078
Interest expense 15,070 --
Depreciation 2,829 1,870
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Total operating expenses 416,617 240,194
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Operating loss (416,617) (240,194)
Other income - interest income 36,610 2,953
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Loss before income tax provision (380,007) (237,241)
Income tax provision 800 800
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Net loss $ (380,807) $ (238,041)
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Net loss per share:
Basic $ 0.090 $ 0.121
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Diluted $ 0.090 $ 0.121
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Weighted average common shares outstanding:
Basic 4,217,189 1,972,328
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Diluted 4,217,189 1,972,328
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5
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DIRECT III MARKETING, INC.
Statement of Stockholders' Equity
For the Nine Months Ended September 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Number of
Shares Amount Paid in Capital (Deficit) Total
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance
December 31, 1999 3,741,250 $ 3,741 $ 278,759 $ (379,546) $ (97,046)
Issuance of stock, net of
stock issuance costs 667,000 667 1,591,833 1,592,500
Net loss
March 31, 2000 (149,396) (149,396)
--------- ----------- ----------- ----------- -----------
Balance 4,408,250 4,408 1,870,592 (528,942) 1,346,058
Issuance of stock, net of
stock issuance costs 2,000 2 4,998 5,000
Net loss
June 30, 2000 (119,628) (119,628)
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Balance 4,410,250 4,410 1,875,590 (648,570) 1,231,430
Net loss
September 30, 2000 (111,783) (111,783)
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Balance 4,410,250 4,410 1,875,590 (760,353) 1,119,647
Notes receivable
from stockholders (222,433) (222,433)
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Balance
September 30, 2000 4,410,250 $ 4,410 $ 1,653,157 $ (760,353) $ 897,214
========= =========== =========== =========== ===========
</TABLE>
6
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DIRECT III MARKETING, INC.
Statement of Cash Flows
For the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
Cash flows from operating activities:
Net loss $ (380,807) $ (238,041)
Adjustments to reconcile net loss to net cash
used by operations:
Depreciation and amortization 2,829 1,870
(Increase) decrease in assets:
Accounts receivable (366) (3,869)
Prepaid expenses 27,463 --
Other assets (95,820) (4,924)
Increase (decrease) in liabilities:
Accounts payable (75) 25,068
Accrued expenses (4,009) 800
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Net cash used by operating activities (450,785) (219,096)
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Cash flows from investing activities:
Note receivable related to planned acquisition (350,000)
Acquisition of property and equipment (5,138) (16,497)
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Net cash used in investing activities (355,138) (16,497)
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Cash flows from financing activities:
Payment of note payable and credit facility (305,100) 164,705
Proceeds from credit facility -- --
Notes receivable from stockholders (11,636) (51,824)
Proceeds from issuance of stock 1,597,500 180,000
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Net cash provided by financing activities 1,280,764 292,881
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Net increase in cash 474,841 57,288
Cash and cash equivalents at beginning of period 742 --
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Cash and cash equivalents at end of period $ 475,583 $ 57,288
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</TABLE>
7
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Direct III Marketing, Inc.
Notes to Financial Statements
September 30, 2000
(Unaudited)
Note 1 - Statement of Accounting Principles
The financial results included in this report are stated in conformity
with accounting principles generally accepted in the United States and
are unaudited but include all normal recurring adjustments that Direct
III Marketing, Inc., considers necessary for a fair presentation of the
results for such periods. These interim figures are not necessarily
indicative of results for a full year.
Refer to the financial statements and notes in the Form 10SB, filed
March 17, 2000, for the year ended December 31, 1999 for additional
details of the financial position of Direct III Marketing, Inc., as
well as a description of the accounting policies which have been
continued without material change. The details included in the notes
have not changed except as a result of normal transactions in the
interim and the events mentioned in the footnotes below.
Certain prior period amounts have been reclassified to conform to the
current period presentation.
Note 2 - Organization
Direct III Marketing, Inc. (the Company), was in the development stage
prior to the quarter ended March 31, 2000.
Note 3 - Liquidity and Business Risk
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. The Company's ability to
continue business in its present form is subject to a variety of
factors, which include, among other things, the Company's ability to
raise working capital and to generate profitable operations.
Note 4 - Note Receivable
During April 2000, the Company advanced $350,000 to a company with
which it has a signed letter of intent to acquire for $1,000,000 and
500,000 shares of common stock. The letter of intent also contains
provisions for the issuance of an additional 2,500,000 shares of stock
of Direct III Marketing, Inc. to the acquired company based upon
specified earnings parameters. The planned acquisition is to be
accounted for under the purchase method of accounting. Professional
fees related to this acqusition have been capitalized as other assets.
Note 5 - Sale of Common Stock
On March 31, 2000, the Company completed the sale of stock through a
private placement. The proceeds from the issuance of stock were
$1,592,500 at $2.50 per share. In May 2000, 2,000 shares were issued at
$2.50 per share, resulting in proceeds of $5,000.
8
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion should be read in conjunction with, and is
qualified in its entirety by, the Financial Statements and the Notes thereto
included in this report. This discussion contains certain forward-looking
statements that involve substantial risks and uncertainties. When used in this
report, the words "anticipate," "believe," "estimate," "expect" and similar
expressions as they relate to the Company or its management are intended to
identify such forward-looking statements. The Company's actual results,
performance or achievements could differ materially from those expressed in, or
implied by, these forward-looking statements. Historical operating results are
not necessarily indicative of the trends in operating results for any further
period.
We were organized and commenced operations in March 1999. To this day,
our efforts have been principally devoted to identifying acquisitions of
companies in the marketing business and raising capital.
Our plan of operation for the next 12 months will consist of continuing
to search for acquisitions which meet the company's business model.
Our actual merger activities may vary significantly from current plans
depending on numerous factors, including changes in the costs of such activities
from current estimates, determinations as to commercial potential and the status
of the competitive marketplace. The focus and direction of our operations will
also be dependent upon the establishment of agreeable arrangements with other
companies, the availability of financing and other factors.
RESULTS OF OPERATIONS
For the Three Months ended September 30, 2000 and 1999
Revenue
We have not generated any revenues from inception and don't anticipate
generating any revenues until an acquisition is consummated.
General and Administrative Expenses
We incurred general and administrative expenses of $94,000 and $75,000
for the three months ended September 30, 2000 and 1999, respectively. The
increase in general and administrative expenses in the third quarter of 2000
from 1999 was due to additional expenses incurred performing due diligence on
potential acquisitions in 2000.
Legal and Professional Expenses
Legal and professional fees are related to potential acquisitions and
have been capitalized as other assets.
Interest Expense
We incurred interest expense of $154 and $0 for the three months ended
September 30, 2000, and 1999, respectively.
9
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Interest Income
Interest income was $11,784 and $1,572 for the three months ended
September 30, 2000 and 1999, respectively. The increase in interest income is
due to the increase in available cash balances resulting from the sale of stock
through a private placement.
For the Nine Months ended September 30, 2000 and 1999
Revenue
We have not generated any revenues from inception and don't anticipate
generating any revenues until an acquisition is consummated.
General and Administrative Expenses
We incurred general and administrative expenses of approximately
$306,000 and $190,000 for the nine months ended September 30, 2000 and 1999,
respectively. The increase in general and administrative expenses in the first
nine months of 2000 as compared to 1999 was due to additional expenses incurred
performing due diligence of potential acquisitions in 2000.
Legal and Professional Expenses
Legal and professional fees are related to potential acquisitions and
have been capitalized as other assets.
Interest Expense
We incurred interest expense of $15,070 and $0 for the nine months
ended September 30, 2000, and 1999, respectively. The increase in interest
expense is due to investor notes payable in the amount of $250,000.
Interest Income
Interest income was $36,610 and $2,953 for the nine months ended
September 30, 2000 and 1999, respectively. The increase in interest income is
due to the increase in available cash resulting from the sale of stock through a
private placement.
Net Losses
For the period from July 1, 2000 to September 30, 2000, the Company
incurred a net loss of approximately $112,000 compared to a net loss of
approximately $100,000 for the same period in 1999. For the period from January
1, 2000 to September 30, 2000, the Company incurred a net loss of approximately
$381,000 compared to a net loss of approximately $238,000 for the same period in
1999. The increase in net losses in 2000 from 1999 was attributable to increased
operating expenses incurred in analysis and due diligence of potential
acquisitions.
10
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Liquidity and Capital Resources
At September 30, 2000, we had cash of approximately $476,000. Since
inception we have financed our operations from debt and equity financings.
During the three months ended September 30, 2000, we used cash of approximately
$121,000 to fund our operating activities, due to the net loss of approximately
$112,000 and capitalized expenditures relating to possible acquisitions.
On March 31, 2000, the Company completed a sale of stock through a
private placement. The proceeds from the issuance of stock were $1,592,500 at a
purchase price of $2.50 per share.
We believe that we have sufficient cash on hand at September 30, 2000,
to meet expenses in the foreseeable future. However, should an acquisition be
completed, additional funds would be required and there can be no assurance that
we will generate sufficient revenues, if any, to fund such acquisitions or that
any required financings will be available, through bank borrowings, debt or
equity offerings, or otherwise, on acceptable terms or at all.
PART II. OTHER INFORMATION
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
There were no issuances of stock during the quarter ending September
30, 2000.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit No. Description
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27 Financial Data Schedule
(b) We did not file any reports on Form 8-K during the quarter for
which this report is filed.
11
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SIGNATURES
In accordance with Section 13 or 15(d) 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.
DIRECT III MARKETING, INC.
Date: November 14, 2000 By: /s/ Robert deRose
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Robert deRose,
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 14, 2000 By: /s/ James G. Clark
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James G. Clark,
Chief Financial Officer
(Principal Financial and Accounting Officer)
12
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Exhibit Index
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Exhibit
Number Description
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27 Financial Data Schedule.
