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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 March 31, 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:
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 June 12, 2000: 4,408,250
shares
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TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Balance Sheets
Statements of Operations
Statements of Cash Flows
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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Item 1. Financial Statements.
DIRECT III MARKETING, INC.
Balance Sheet
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March 31, December 31,
2000 1999
(Unaudited) (Audited)
ASSETS
<S> <C> <C>
Current assets:
Cash $ 1,365,592 $ 742
Accounts Receivable 1,200 1,566
Prepaid expenses 31,524 37,694
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Total current assets 1,398,316 40,002
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Property and equipment, net 15,144 13,802
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Other assets 4,924 4,924
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Total assets $ 1,418,384 $ 58,728
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 17,428 $ 25,363
Accrued expenses 19,559 36,108
Notes payable 250,000 250,000
Other current liabilities -- 55,100
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Total current liabilities 286,987 366,571
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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 4,408 3,741
Additional paid in capital 1,870,592 278,759
Retained deficit (528,942) (379,546)
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1,346,058 (97,046)
Less notes receivable from stockholders (214,661) (210,797)
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Total stockholders' equity 1,131,397 (307,843)
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Total liabilities and stockholders' equity $ 1,418,384 $ 58,728
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DIRECT III MARKETING, INC.
Statement of Operations
For the Quarter Ended March 31, 2000
(Unaudited)
Revenue $ --
Operating expenses:
General and administrative 106,125
Legal and professional 40,229
Interest expense 8,384
Depreciation 862
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Total operating expenses 155,600
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Operating loss (155,600)
Other income - interest income 7,004
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Loss before income tax provision (148,596)
Income tax provision 800
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Net loss $ (149,396)
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Net loss per share:
Basic $ 0.039
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Diluted $ 0.039
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Weighted average common shares outstanding:
Basic 3,856,151
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Diluted 3,856,151
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DIRECT III MARKETING, INC.
Statement of Stockholders' Equity
For the Quarter Ended March 31, 2000
(Unaudited)
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<CAPTION>
Common Stock
Number of Additional Retained
Shares Amount Paid in Capital (Deficit) Total
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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)
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Balance 4,408,250 4,408 1,870,592 (528,942) 1,346,058
Notes receivable
from stockholders' (214,661) (214,661)
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Balance
March 31, 2000 4,408,250 $ 4,408 $ 1,655,931 $ (528,942) $ 1,131,397
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DIRECT III MARKETING, INC.
Statement of Cash Flows
For the Quarter Ended March 31, 2000
(Unaudited)
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<CAPTION>
<S> <C>
Cash flows from operating activities:
Net loss $ (149,396)
Adjustments to reconcile net loss to net cash
used by operations:
Depreciation and amortization 862
(Increase) decrease in assets:
Accounts receivable 366
Prepaid expenses 6,170
Increase (decrease) in liabilities:
Accounts payable (7,936)
Accrued expenses (16,549)
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Net cash used by operating activities (166,483)
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Cash flows from investing activities:
Acquisition of property and equipment (2,203)
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Net cash used in investing activities (2,203)
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Cash flows from financing activities:
Payment of credit facility (55,100)
Notes receivable from stockholders (3,864)
Proceeds from issuance of stock 1,592,500
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Net cash provided by financing activities 1,533,536
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Net increase in cash 1,364,850
Cash and cash equivalents at beginning of period 742
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Cash and cash equivalents at end of period $ 1,365,592
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DIRECT III MARKETING, INC.
Notes to Financial Statements
March 31, 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. (See Note
4 - Subsequent Events)
Note 4 - Subsequent Events
During April 2000, the Company advanced $350,000 to a Company that it
has agreed to acquire for $1,000,000 and 500,000 shares of common
stock. The agreement 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
acquisition is to be accounted for under the purchase method of
accounting.
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
Revenue
We have not generated any revenues from inception and don't anticipate
generating any revenues until an acquisition is consummated.
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General and Administrative Expenses
We incurred general and administrative expenses of $106,000 and $24,000
for the three months ended March 2000 and 1999, respectively. The increase in
general and administrative expenses in 2000 from 1999 was due to a full three
months in business in 2000.
We anticipate that we will incur increased general and administrative
expenses as we move closer to making acquisitions.
Legal and Professional Expenses
We incurred legal and professional expenses of $40,229 and $0 for the
three months ended March 2000, and 1999, respectively. The increase in general
and administrative expenses in 2000 from 1999 was attributable to expenses
incurred in analyzing potential acquisitions.
We anticipate that we will incur increased legal and professional
expenses as we explore more acquisitions.
Interest Expense
We incurred interest expense of $8,384 and $0 for the three months
ended March 2000, and 1999, respectively. The increase in interest expense is
due to investor notes in the amount of $250,000.
We anticipate that we will pay the notes in full during the second
quarter and, as such, interest expense will be reduced accordingly.
Interest Income
Interest income was $7,004 and $0 for the three months ended March 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.
Net Losses
We incurred net losses of $149,000 and $24,000 for the three months
ended March 2000 and 1999, respectively. The increase in net losses in 2000 from
1999 was attributable to increased operating expenses as the result of a full
three months of operations in the quarter ended March 31, 2000.
Liquidity and Capital Resources
At March 31, 2000, we had cash of approximately $1,366,000. Since
inception we have financed our operations from debt and equity financings.
During the three months ended March 31, 2000, we used cash of approximately
$166,000 to fund our operating activities, principally caused by the net loss of
$149,000. In addition, during the three months ended 2000 we used approximately
$2,200 to fund our investing activities, principally caused by the acquisition
of property and equipment.
On March 31, 2000, the Company completed the sale of stock through a
private placement. The net 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 March 31, 2000, to
meet expenses in the foreseeable future. However, should an acquisition be
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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
In March 2000, we issued 667,000 shares of Common Stock at $2.50 per
share raising, net of transaction fees, $1,592,000 of cash for the operating
needs of the Company.
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.
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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: June 12, 2000 By: /s/ Robert deRose
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Robert deRose,
President and Chief Executive Officer
(Principal Executive Officer)
Date: June 12, 2000 By: /s/ James G. Clark
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James G. Clark,
Chief Financial Officer
(Principal Financial and Accounting Officer)
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Exhibit Index
Exhibit
Number Description
27 Financial Data Schedule.
