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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 June 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:
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 30, 2000: 4,410,250 shares
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TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Balance Sheet 3
Statements of Operations 4
Statements of Cash Flows 7
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings --
Item 2. Changes in Securities 11
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 11
SIGNATURES 12
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Item 1. Financial Statements.
DIRECT III MARKETING, INC.
Balance Sheet
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 596,670 $ 742
Accounts receivable 383 1,566
Prepaid expenses 21,344 37,694
Note receivable 350,000 --
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Total current assets 968,397 40,002
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Property and equipment, net 14,209 13,802
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Other assets 69,438 4,924
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Total assets $ 1,052,044 $ 58,728
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 29,866 $ 25,363
Accrued expenses 300 36,108
Notes payable 8,974 250,000
Other current liabilities -- 55,100
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Total current liabilities 39,140 366,571
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Commitments and contingencies -- --
Stockholders' deficit:
Preferred stock-$.001 par value, 10,000,000 shares authorized -- --
Common stock-$.001 par value, 40,000,000 shares authorized
4,410,250 and 3,741,250 shares issued and outstanding,
respectively 4,410 3,741
Additional paid in capital 1,875,590 278,759
Retained deficit (648,570) (379,546)
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1,231,430 (97,046)
Less notes receivable from stockholders (218,526) (210,797)
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Total stockholders' deficit 1,012,904 (307,843)
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Total liabilities and stockholders' equity $ 1,052,044 $ 58,728
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</TABLE>
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DIRECT III MARKETING, INC.
Statement of Operations
For the Three Months Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
Revenue $ -- $ --
Operating expenses:
General and administrative 106,031 90,758
Professional fees 23,953 22,603
Interest expense 6,532 --
Depreciation 935 825
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Total operating expenses 137,451 114,186
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Operating loss (137,451) (114,186)
Other income - interest income 17,823 1,381
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Loss before income tax provision (119,628) (112,805)
Income tax provision -- --
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Net loss $ (119,628) $ (112,805)
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Net loss per share:
Basic $ 0.027 $ 0.045
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Diluted $ 0.027 $ 0.045
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Weighted average common shares outstanding:
Basic 4,408,294 2,507,333
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Diluted 4,408,294 2,507,333
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</TABLE>
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DIRECT III MARKETING, INC.
Statement of Operations
For the Six Months Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
Revenue $ -- $ --
Operating expenses:
General and administrative 212,156 114,917
Legal and professional 64,182 22,603
Interest expense 14,916 --
Depreciation 1,797 1,045
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Total operating expenses 293,051 138,565
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Operating loss (293,051) (138,565)
Other income - interest income 24,827 1,381
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Loss before income tax provision (268,224) (137,184)
Income tax provision 800 800
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Net loss $ (269,024) $ (137,984)
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Net loss per share:
Basic $ 0.065 $ 0.082
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Diluted $ 0.065 $ 0.082
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Weighted average common shares outstanding:
Basic 4,132,327 1,678,000
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Diluted 4,132,327 1,678,000
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</TABLE>
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DIRECT III MARKETING, INC.
Statement of Stockholders' Equity
June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Number of
Shares Amount Paid in Capital (Deficit) Total
--------- ----------- --------------- ----------- -----------
<S> <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)
--------- ----------- ----------- ----------- -----------
4,410,250 4,410 1,875,590 (648,570) 1,231,430
Notes receivable
from stockholders' (218,526) (218,526)
--------- ----------- ----------- ----------- -----------
Balance
June 30, 2000 4,410,250 $ 4,410 $ 1,657,064 $ (648,570) $ 1,012,904
========= =========== =========== =========== ===========
</TABLE>
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DIRECT III MARKETING, INC.
Statement of Cash Flows
For the Six Months Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
Cash flows from operating activities:
Net loss $ (269,024) $ (137,984)
Adjustments to reconcile net loss to net cash
used by operations:
Depreciation and amortization 1,797 1,045
(Increase) decrease in assets:
Accounts receivable 1,183 --
Prepaid expenses 16,350 (4,118)
Other assets (64,515) (4,924)
Increase (decrease) in liabilities:
Accounts payable 4,504 26,107
Accrued expenses (26,835) 800
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Net cash used by operating activities (336,540) (119,074)
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Cash flows from investing activities:
Note receivable related to planned acquisition (350,000) --
Acquisition of property and equipment (2,203) (16,497)
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Net cash used in investing activities (352,203) (16,497)
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Cash flows from financing activities:
Payment of note payable and credit facility (305,100) --
Proceeds from credit facility -- 127,204
Notes receivable from stockholders (7,729) (50,849)
Proceeds from issuance of stock 1,597,500 130,000
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Net cash provided by financing activities 1,284,671 206,355
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Net increase in cash 595,928 70,784
Cash and cash equivalents at beginning of period 742 --
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Cash and cash equivalents at end of period $ 596,670 $ 70,784
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</TABLE>
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Direct III Marketing, Inc.
Notes to Financial Statements
June 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 a development stage
company prior to 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 acquistion 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 of stock were
issued at $2.50 per share, resulting in proceeds of $5,000.
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
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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 June 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
$106,000 and $91,000 for the three months ended June 2000 and 1999,
respectively. The increase in general and administrative expenses in the second
quarter of 2000 as compared to 1999 was due to additional expenses related to
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 $6,532 and $0 for the three months
ended June 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 $17,823 and $1,381 for the three months ended June
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.
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For the six months ended June 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
$212,000 and $115,000 for the six months ended June 2000 and 1999, respectively.
The increase in general and administrative expenses in the first six months of
2000 as compared to 1999 was due to additional expenses related to 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 $14,916 and $0 for the six months ended
June 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 $24,827 and $1,381 for the six months ended June
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 April 1, 2000 to June 30, 2000, the Company
incurred a net loss of approximately $120,000 compared to a net loss of
approximately $113,000 for the same period in 1999. For the period from January
1, 2000 to June 30, 2000, the Company incurred a net loss of approximately
$269,000 compared to a net loss of approximately $138,000 for the same period in
1999.The increase in net losses in 2000 from 1999 was attributable to increased
expenses related to potential acquisitions.
Liquidity and Capital Resources
At June 30, 2000, we had cash of approximately $597,000. Since
inception we have financed our operations from debt and equity financings.
During the three months ended June 30, 2000, we used cash of approximately
$164,000 to fund our operating activities, due to the net loss of $120,000 and
capitalized expenditures relating to possible acquisitions. In addition, during
the three months ended June 30, 2000 we used approximately $350,000 related to a
planned acquisition.
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.
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We believe that we have sufficient cash on hand at June 30, 2000, to
meet expenses in the foreseeable future. However, additional funds maybe
required for additional acquisitions 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 May 2000, we issued 2,000 shares of Common Stock at $2.50 per share
raising $5,000 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: August 11, 2000 By: /s/ Robert deRose
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Robert deRose,
President and Chief Executive Officer
(Principal Executive Officer)
Date: August 11, 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
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27 Financial Data Schedule.
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