U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
<P>
FORM 10-QSB
<P>
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
<P>
For the quarterly period ended June 30, 2000
<P>
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE EXCHANGE ACT
<P>
For the transition period from to
<P>
Commission File No.
<P>
DIAMOND INTERNATIONAL GROUP, INC.
(Name of Small Business Issuer in Its Charter)
<P>
<TABLE>
<S> <C>
Delaware 73-1556428
(State of Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
</TABLE>
<P>
6 Commercial Street, Hicksville, New York 11801
(Address of Principal Executive Offices) (Zip Code)
<P>
(516) 433-3800
(Issuer's Telephone Number, Including Area Code)
<P>
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 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.
<P>
Yes No X
<P>
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest
practicable date: As of August 4, 2000, the Company had
23,000,071 shares of Common Stock outstanding, $0.0001
par value.
<P>
DIAMOND INTERNATIONAL GROUP, INC.
Form 10-QSB Quarterly Report
For the Period Ended June 30, 2000
<P>
<TABLE>
<S> <C>
Page
Part I - FINANCIAL INFORMATION
<P>
Item 1. Financial Statements
<P>
Independent Auditor's Report
<P>
Consolidated Balance Sheets at June 30, 2000
for Diamond International Group, Inc. 1-2
<P>
Consolidated Statements of Operations for the
Three months and six months ended June 30,
2000 and 1999 for Diamond International Group, Inc. 3
<P>
Consolidated Statements of Stockholders' Equity
(Deficiency) for the Six Months Ended June 30, 2000
and 1999 for Diamond International Group, Inc. 4
<P>
Consolidated Statement of Cash Flows for the Six
Months Ended June 30, 2000 and 1999 for Diamond
International Group, Inc. 5
<P>
Notes to Interim Consolidated Financial Statements 6-11
<P>
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations 12
<P>
PART II - OTHER INFORMATION 13
<P>
Item 1. Legal Proceedings 13
<P>
Item 2. Changes in Securities 13
<P>
Item 3. Defaults Upon Senior Securities 13
<P>
Item 4. Submission of Matters to a Vote of Security Holders 13
<P>
Item 5. Other Information 13
<P>
Signatures 13
<P>
</TABLE>
<P>
PART I - FINANCIAL INFORMATION
<P>
Item 1. Financial Statements
<P>
BASIS OF PRESENTATION
<P>
The accompanying reviewed financial statements are
presented in accordance with generally accepted
accounting principles for interim financial information
and the instructions to Form 10-QSB and item 310 under
subpart A of Regulation S-B. Accordingly, they do not
include all of the information and footnotes required by
generally accepted accounting principles for complete
financial statements. The accompanying statements should
be read in conjunction with the audited financial
statements for the years ended December 31, 1999 and
1998. In the opinion of management, all adjustments
(consisting only of normal occurring accruals) considered
necessary in order to make the financial statements not
misleading, have been included. Operating results for
the three months and six months ended June 30, 2000 are
not necessarily indicative of results that may be
expected for the year ending December 31, 2000. The
financial statements are presented on the accrual basis.
<P>
INDEPENDENT AUDITOR'S REPORT
<P>
To the Board of Directors and Stockholders of
Diamond International Group, Inc.
<P>
We have reviewed the accompanying consolidated balance
sheet of Diamond International Group, Inc., as of June
30, 2000, and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows
for the six months then ended, in accordance with
Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified
Public Accountants. All information included in these
financial statements is the representation of the
management of Diamond International Group, Inc.
<P>
A review consists principally of inquiries of company
personnel and analytical procedures applied to financial
data. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion
regarding the consolidated financial statements taken as
a whole. Accordingly, we do not express such an opinion.
<P>
Based on our review, we are not aware of any material
modification that should be made to the June 30, 2000
consolidated financial statements in order for them to be
in conformity with generally accepted accounting
principles.
<P>
The consolidated balance sheet as of December 31, 1999
was audited by us, and we expressed an unqualified
opinion on it in our report dated March 3, 2000, but we
have not performed any auditing procedures since that
date. The accompanying June 30, 1999 consolidated
statements of operations, stockholders equity (deficit)
and cash flows were compiled by us in accordance with
statements on Standards for Accounting and review
Services issued by the American Institute of
Certified Public Accountants. A compilation is limited
to presenting in the form of financial statements
information that is the representation of management. We
have not audited or reviewed the June 30, 1999
consolidated statements of operations, stockholders'
equity (deficit) and cash flows and, accordingly, do not
express an opinion or any other form of assurance on
them. As disclosed in Note 1, management has restated
its June 30, 1999 consolidated financial statements.
<P>
Weisberg, Mole & Company, LLP
Hicksville, New York
July 17, 2000
<P>
DIAMOND INTERNATIONAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<S> <C> <C>
June 30, December 31,
2000 1999
-------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents - Note 1 $ 74,222 $ 79,240
Accounts receivable - note 2 1,353,577 1,267,492
Prepaid expenses 65,314 61,177
--------------------------------
Total current assets 1,493,113 1,407,909
--------------------------------
FIXED ASSETS - notes 1 and 3
Furniture and fixtures 591,025 591,025
Machinery and equipment 861,907 746,762
Leasehold improvements 803,664 758,083
Delivery equipment 33,844 33,844
Equipment held under capital leases 972,585 927,421
--------------------------------
3,263,025 3,057,135
Less: Accumulated Depreciation (2,263,020) (2,143,020)
--------------------------------
Fixed Assets, net 1,000,005 914,115
---------------------------------
OTHER ASSETS
<P>
Goodwill - note 1 95,000 -
Security deposits 6,357 6,357
----------------------------------
TOTAL ASSETS $2,594,475 $2,328,381
==================================
</TABLE>
<P>
DIAMOND INTERNATIONAL GROUP, INC.
<P>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<S> <C> <C>
June 30, December 31,
2000 1999
CURRENT LIABILITIES
Loans payable - State Bank of
Long Island - note 3 $ 982,242 $ 940,668
Obligations under capital leases -
current - note 6 165,259 190,898
Accounts payable 423,993 313,440
Accrued expenses and taxes 281,489 467,938
-----------------------------
Total current liabilities 1,852,983 1,912,944
-----------------------------
LONG-TERM LIABILITIES
Loans payable -Stockholders
- Note 4 $ 562,854 $ 564,139
Obligations under capital leases
- long term - note 6 177,356 188,951
-----------------------------
Total long-term liabilities 740,210 753,090
-----------------------------
Total liabilities 2,593,193 2,666,034
-----------------------------
<P>
COMMITMENTS AND CONTINGENCIES - note 6
<P>
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock
$.0001 par value, 100,000,000
shares authorized,23,005,000 shares
issued and outstanding in 2000;
46,000,000 issued and
outstanding in 1999 2,300 4,600
Additional paid-in capital 1,550,237 1,550,237
Accumulated deficit (1,236,255) (1,332,490)
Notes receivable from
stock sales (315,000) (560,000)
-----------------------------
Total Stockholders' Equity (Deficit) 1,282 (337,653)
-----------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $2,594,475 $2,328,381
=============================
</TABLE>
<P>
DIAMOND INTERNATIONAL GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
-----------------------------------------------------------
Fulfillment Income $2,079,245 $1,624,056 $3,712,961 $2,863,871
<P>
Cost of Operations 1,299,665 983,341 2,488,583 1,949,139
-----------------------------------------------------------
Gross Profit 779,580 640,715 1,224,378 914,732
<P>
Selling, general and
administrative expenses 427,654 431,264 876,809 849,714
-----------------------------------------------------------
Income before
other expenses 351,926 209,451 347,569 65,018
-----------------------------------------------------------
OTHER EXPENSES
Interest expense 72,714 59,390 130,809 124,298
Depreciation and
amortization 60,000 60,000 120,000 120,000
Registration and
issuance costs - 60,000 - 60,000
------------------------------------------------------------
<P>
Total Other Expenses 132,714 179,390 250,809 304,298
------------------------------------------------------------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES 219,212 30,061 96,760 (239,280)
<P>
PROVISION FOR INCOME TAXES -
notes 1 and 8 - - 525 325
-------------------------------------------------------------
NET INCOME (LOSS) $ 219,212 $ 30,061 $ 96,235 (239,605)
==============================================================
<P>
BASIC AND DILUTED INCOME (LOSS)
PER COMMON SHARE
- note 1 $ 0.01 $ 0.00 $ 0.00 $ (0.01)
==============================================================
<P>
See notes to financial statements
</TABLE>
<P>
DIAMOND INTERNATIONAL GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Notes
Additional Receivable
Common Paid-In Accumulated from Stock
Shares Stock Capital Deficit Sales Total
--------------------------------------------------------------------
Balance at
January 1, 1999 20,200,000 $2,020 $550,517 $(919,558) $ - $
(367,021)
<P>
Issuance of
common stock 800,000 80 159,920 - - 160,000
<P>
Exercising of
warrants 2,000,000 200 839,800 - (840,000) -
<P>
Net Loss - - - (239,605) - (239,605)
--------------------------------------------------------------------
<P>
Balance at
June 30, 1999 23,000,000 2,300 1,550,237 (1,159,163) (840,000)(446,626)
=======================================================================
<P>
Balance at
January 1, 2000 46,000,000 4,600 1,550,237 (1,332,490) (560,000)(337,653)
<P>
Repayment of
notes receivable - - - - 245,000 245,000
<P>
Retirement of
common stock (23,000,000) (2,300) - - - (2,300)
<P>
Purchase of
Segway I Corp. 5,000 - - - - -
<P>
Net Income - - - 96,235 - 96,235
---------------------------------------------------------------------
<P>
Balance at
June 30, 2000 23,005,000 $ 2,300 $1,550,237 $(1,236,255) $(315,000) 1,282
=========================================================================
<P>
See notes to financial statements
</TABLE>
<P>
DIAMOND INTERNATIONAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
<TABLE>
<S> <C> <C>
2000 1999
------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 96,235 $ (239,605)
------------------------------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depreciation and amortization 120,000 120,000
Changes in assets and liabilities:
Accounts receivable (86,085) 138,578
Prepaid expenses (4,137) 15,455
Security deposits - 1,626
Accounts payable 110,553 (25,130)
Accrued expenses and taxes (186,449) (8,950)
Customer deposits - 252
----------------------------------
Total adjustments (46,118) 241,831
----------------------------------
Net Cash Provided by Operating Activities 50,117 2,226
<P>
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of machinery and equipment (130,817) (37,000)
Purchase of Segway I Corp. (95,000) -
----------------------------------
Net Cash Used in Investing Activities (225,817) (37,000)
----------------------------------
<P>
CASH FLOW FROM FINANCING ACTIVITIES
Change in loan payable - State Bank
of Long Island 41,574 (81,786)
Principal payments of capital
lease obligations (112,307) (97,737)
Proceeds from issuance of common stock - 160,000
Retirement of common stock (2,300)
Proceeds from exercising of warrants 245,000 -
Proceeds from loans payable - shareholders (1,285) 80,000
----------------------------------
Net Cash Provided by Financing Activities 170,682 60,477
<P>
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (5,018) 25,703
<P>
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 79,240 30,630
----------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 74,222 $ 56,333
=================================
<P>
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 130,809 $124,298
=================================
State income tax paid $ 525 $ 325
=================================
New capital lease obligations $ 75,073 $ -
=================================
<P>
See notes to financial statements
</TABLE>
<P>
DIAMOND INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
<P>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
<P>
Nature of Business
------------------
<P>
Diamond International Group, Inc. ("Diamond") was
incorporated on November 5, 1998 for the express purpose
of acquiring all of the outstanding common stock of H.Y.
Applied Inter-Data Services, Inc. ("Hyaid"). Hyaid
operates a computerized order fulfillment service for
clients in the direct mail order business.
<P>
On January 29, 1999, Diamond acquired all for the
outstanding common stock of Hyaid in exchange for
18,462,404 shares of newly issued Diamond common stock.
This acquisition has been accounted for as a pooling of
interests.
<P>
Principals of Consolidation
---------------------------
<P>
The consolidated financial statements include the
accounts of Diamond and Hyaid (together, the "Company").
All significant intercompany accounts and transactions
have been eliminated.
<P>
Issuance of Common Stock
-------------------------
<P>
In March 1999, Diamond executed an offering consisting of
400,000 units at $.40 per unit. Each unit consists of 2
shares of common stock and one stock purchase warrant
which enables the holder to purchase 5 shares of common
stock at $.42 per share. In connection with this
offering, Diamond raised $100,000, net of registration
and issuance costs of $60,000. The warrants were
exercised in April, 1999. Diamond issued the stock to
the warrant holders in exchange for a note in the amount
of $840,000. The note is secured by stock. In September
1999, Diamond issued 23,000,000 shares of stock to a
major stockholder in exchange for services rendered. The
stockholder retired the shares in May 2000.
<P>
Acquisition
-----------
<P>
On June 9, 2000, Diamond acquired all of the outstanding
common stock of Segway I Corp. ("Segway") for $95,000 and
5,000 shares of Diamond common stock. Prior to being
acquired, Segway was subject to the reporting
requirements of the Securities Exchange Act of 1934 ( the
"Act"). Pursuant to the acquisition, the Company is now
subject to the reporting requirements of the Act.
Accordingly, the Company has filed a report with the
Securities and Exchange Commission reporting this
acquisition.
<P>
In connection with the acquisition, the Company recorded
goodwill for the excess of the cost over the fair market
value of the net assets acquired in the amount of
$95,000. Goodwill is being amortized over fifteen years
using the straight-line method.
<P>
<PAGE>
DIAMOND INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
<P>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
<P>
Use of Estimates
----------------
<P>
The preparation of the financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that effect
the amounts reported in the financial statements and
accompanying notes. Actual results could differ from
those estimates.
<P>
Revenue Recognition
-------------------
<P>
Revenue is recorded upon the performance of fulfillment
and other services for the Company's clients. Revenue
from reimbursable expenses is recorded in the same period
as the corresponding expenses.
<P>
Concentrations
---------------
<P>
Sales to three major customers during the six months
ended June 30, 2000 amounted to 38%, 15% and 14% of
sales. Sales to three major customers during the six
months ended June 30, 1999 amounted to 19%, 18% and 15%
of sales.
<P>
Fixed Assets and Leases
-----------------------
<P>
Fixed assets are recorded at cost and are depreciated
using the straight-line method over the estimated useful
lives of the assets, generally 3 to 10 years. Computer
and office equipment that are acquired under leases that
meet certain criteria evidencing substantive ownership by
the Company are capitalized and the related capital lease
obligations are included in current and long-term
liabilities. Related amortization and interest are
charged to expense over the lease term. Leases not
meeting the criteria are accounted for as operating
leases, with rent payments being charged to expense as
incurred.
<P>
Income Taxes
-------------
<P>
Diamond applies the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 requires a company to
recognize deferred tax liabilities and assets for the
expected future tax consequences of events that have been
recognized in a company's financial statements or tax
returns. Under this method, deferred tax liabilities and
assets are determined based on the difference between the
financial statements carrying amounts and tax bases of
assets and liabilities using enacted tax rates in effect
in the years in which the differences are expected to
reverse. Differences between taxable income and income
for financial statement purposes result from the
recognition of certain income and expenses items for tax
purposes in periods which differ from those used for
financial statement purposes.
<P>
Prior to the acquisition by Diamond on January 29, 1999,
Hyaid had elected to be taxed as an "S" Corporation.
Accordingly, no provision for federal income taxes was
recorded as income or loss from the corporation flowed
through to the shareholder. Pursuant to the acquisition,
Hyaid forfeited its "S" Corporation status. As a result,
effective January 30, 1999, Hyaid follows the principles
of SFAS 109.
<P>
<PAGE>
DIAMOND INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
<P>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
<P>
Advertising
-----------
<P>
The Company expenses advertising costs as they are
incurred.
<P>
Customer Deposits
-----------------
<P>
The Company maintains a policy of requiring their
customers to advance deposits for postage and presort
charges. The customer deposits are reduced as postage
charges are incurred and are increased when the customer
replenishes their advances.
<P>
Cash and Cash Equivalents
-------------------------
<P>
The Company considers all short-term investments with an
original maturity of three months or less to be cash
equivalents.
<P>
Earnings per Share
------------------
<P>
The calculation of earnings per share is based upon the
weighted average number of common shares outstanding as
follows:
<TABLE>
<S> <C>
Three months ended June 30, 2000 30,666,667
Three months ended June 30, 1999 23,000,000
Six Months ended June 30, 2000 38,333,333
Six months ended June 30, 1999 21,733,333
</TABLE>
<P>
The effect of exercising the outstanding warrants would
have an anti-dilutive effect on the Company.
Accordingly, basic and diluted earnings per share are the
same for the three months ended June 30, 2000 and 1999
and the six months ended June 30, 2000 and 1999.
<P>
Restatement of June 30, 1999 Consolidated Financial
Statements
---------------------------------------------------
<P>
The June 30, 1999 financial statements were initially
prepared and issued as Hyaid stand-alone financial
statements. Accordingly, all the accounts and activity
of Diamond were omitted. The result of this omission was
to ignore the pooling of interests between Diamond and
Hyaid, exclude $60,000 of registration costs, and
erroneous state an intercompany payable of $100,000 to
Diamond as additional paid in capital. The June 30, 1999
consolidated financial statements included herein have
been restated to reflect this change in entity and to
correct the related exclusions and misstatements.
<P>
NOTE 2 - ACCOUNTS RECEIVABLE
<P>
At June 30, 2000 accounts receivable from three major
customers amounted to 27%, 22% and 21% of total accounts
receivable.
<P>
<PAGE>
DIAMOND INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
<P>
NOTE 3 - LOAN PAYABLE - STATE BANK OF LONG ISLAND
<P>
The Company entered into a revolving line of credit dated
July 30, 1999 with the State Bank of Long Island ( the
"Line of Credit") in the amount of $1,100,000. The Line
of Credit provides for advances subject to a limit of 80%
of eligible accounts receivable, as defined. Repayments
of interest must be made on a monthly basis at the rate
of 2.5% per annum in excess of State Bank of Long
Island's prime rate of interest. Principal payments are
payable on demand at any time during the term of the Line
of Credit. The Line of Credit is secured by a security
interest in all of the assets of the Company, as well as
a $200,000 life insurance policy on the shareholder of
the Company. Additionally, advances by a stockholder in
the amount of $327,500 have been subordinated to this
loan (Note 4).
<P>
The Line of Credit provides for certain covenants which
(a) prevent the Company from incurring, without prior
written consent, capital expenditures in excess of
$100,000 per year, (b) prevent the Company from paying
cash dividends to its stockholders and (c) report the
operating results of the Company on a timely basis.
<P>
The Line of Credit expired on May 31, 2000 and was
renewed on June 13, 2000. The renewed Line of Credit
expires on April 30, 2001. Terms of the renewed Line of
Credit provide for a reduced advance limit of 70% of
eligible accounts receivable, as defined. Additionally,
the subordinated advances due to a stockholder of the
Company have been increased to $467,000.
<P>
NOTE 4 - LOANS PAYABLE - STOCKHOLDERS
<P>
As of June 30, 2000, the primary stockholder of the
Company made unsecured advances to the Company for
working capital purposes aggregating $562,854. Interest
expense has not been imputed on the advances. In
connection with the Line of Credit (Note 3), $467,000 of
these advances have been subordinated.
<P>
NOTE 5 - RELATED PARTY TRANSACTIONS
<P>
During the six months ended June 30, 2000 and 1999, the
Company paid salaries and other fees to its primary
stockholder in the approximate amount of $171,000 and
$160,000, respectively.
<P>
NOTE 6 - COMMITMENTS AND CONTINGENCIES
<P>
The Company has entered into various non-cancelable
capital lease agreements for computer and office
equipment. The Company has also entered into non-
cancelable operating lease agreements for their three
operating facilities and computer equipment. The lease
expires in varying periods through 2003. Rent expense
recorded under such operating leases amounted to $227,495
and $196,326 for the six months ended June 30, 2000 and
1999, respectively.
<P>
<PAGE>
DIAMOND INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
<P>
NOTE 6 - COMMITMENTS AND CONTINGENCIES (Continued)
<P>
Future minimum lease payments at June 30, 2000 are as
follows:
<TABLE>
<S> <C> <C>
Capital Operating
Year Ended Leases Leases
<P>
June 30, 2001 $ 202,632 $ 168,429
June 30, 2002 145,657 176,967
June 30, 2003 23,200 78,878
June 30, 2004 19,640 10,490
June 30, 2005 14,391 -
----------------------------------------
Total Minimum Lease Payments 405,520 $ 434,764
Less: Amount Representing Interest (62,905) ---------------
---------------
<P>
Present Value of Minimum Lease Payments $ 342,615
===============
</TABLE>
<P>
Accumulated amortization for assets under capital leases
was $641,998 as of June 30, 2000.
<P>
Going Concern
--------------
<P>
As shown in the accompanying financial statements, as of
June 30, 2000, the Company's current liabilities exceeded
its current assets by $359,870. This factor creates an
uncertainty as to the Company's ability to continue as a
going concern. The Company's plans include vigorous cost
controls, aggressive marketing strategies and additional
financing on an as needed basis.
<P>
NOTE 7 - PROFIT SHARING PLAN
<P>
The Company maintains a 401(k) plan for substantially all
full time employees of the Company. Employer
contributions are voluntary and at the discretion of the
stockholder. The Company did not contribute to the plan
for the six months ended June 30, 2000 and 1999.
<P>
<PAGE>
DIAMOND INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
<P>
NOTE 8 - INCOME TAXES
<P>
The provision for income taxes for the six months ended
June 30, 2000 is as follows:
<TABLE>
<S> <C> <C>
Federal State
------- -----
Current $21,148 $9,233
Deferred (21,148) (8,708)
------------------------
$ 0 $ 525
====== =====
</TABLE>
<P>
A reconciliation of the tax provision at the federal
statutory rate to the effective tax rate is as follows:
<TABLE>
<S> <C>
Tax provision at federal statutory rate 34.0%
Net operating loss carryforward (34.0%)
--------
0.0%
========
</TABLE>
<P>
Deferred tax assets are comprised of the following at
June 30, 2000:
<TABLE>
<S> <C> <C>
Federal State
------- -------
Net operating loss carryforward $ 62,736 $ 16,607
Less: Valuation Allowance (62,736) (16,607)
------- --------
$ 0 $ 0
======== ========
</TABLE>
<P>
Net operating loss carryforwards for federal income taxes
of approximately $281,000 expire in the year 2019.
<P>
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations
<P>
DIAMOND INTERNATIONAL GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
<P>
Forward-Looking Statements
--------------------------
<P>
Forward-looking statements, based on management's current
views and assumptions, are made throughout the
Management's Discussion and Analysis and elsewhere in
this report to stockholders. These statements are subject
to certain risks and uncertainties that could cause
actual results to differ materially from historical
results and those presently anticipated or projected.
Among the factors that may affect operating results are
the following: success of the Company's change in focus;
competitive environment; and general economic conditions.
<P>
Results of Operations
---------------------
<P>
<TABLE>
<S> <C> <C>
Quarter Ended June 30,
2000 1999
---- ----
Net Sales $ 2,079,245 $ 1,624,056
<P>
Cost of Operating 1,299,665 983,341
<P>
Gross Profit 779,580 640,715
<P>
Selling, General and
Administrative
Expenses 427,654 431,264
</TABLE>
<P>
Revenues from operations during the three
months ended June 30, 2000 were $2,079,245 as compared to
$1,624,056 for the three months ended June 30, 1999. The
increase in sales was due to an increase in
correspondence sources provided for selected
clients.(See Future Outlook).
<P>
Selling, general and administrative expenses decreased to
$427,654 for the three months ended June 30, 2000 as
compared to $431,264 for the three months ended June 30,
1999. This decrease is not significant and no major
fluctuations of the components of selling, general and
administrative expenses were used.
<P>
Liquidity
---------
<P>
<TABLE>
<S> <C> <C>
Six Months Ended June 30,
2000 1999
---- ----
<P>
Net Cash Used in Operations $ 50,117 $ 2,226
<P>
Working Capital (360,000) (373,000)
</TABLE>
<P>
Net cash flow used in operations increased from $2,226
during the six months ended June 30, 2000 to $50,117
during the six months ended June 30, 1999. This increase
was primarily due to the increase in net income effect by
the timing of collections and payments.
<P>
The Company had a working capital of $360,000 as of June
30, 2000 as compared to a working capital of $373,000 as
of June 30, 1999. The increase in working capital is due
to the net positive cash flow from operations offset by
the timing of expected payments on capital lease
obligations.
<P>
Future Outlook
--------------
<P>
The Company is aggressively looking for profitable
companies to acquire as well as to joint venture and/or
partner with all in the direct mail marketing sales and
servicing industry. The businesses that the Company
acquires, joint venture and/or partners with will be
mainly in the area of product sales either in the direct
mail, space, internet, infomercial and other large scale
consumer penetration mediums. This is the most natural
fit, given the experiences of management in the success
running of types of businesses and the proprietary
software and systems developed to service these
businesses. We are optimistic that our Company will be
profitable for the remainder of this year with a far more
profitable year in 2001.
<P>
Part II. OTHER INFORMATION
<P>
Item 1. Legal Proceedings
<P>
The Company is not involved in any legal proceedings.
<P>
Item 2. Changes in Securities. Richard Levinson retired
23,000,000 shares of his common stock.
<P>
Item 3. Defaults Upon Senior Securities. Not
applicable.
<P>
Item 4. Submission of Matters to a Vote of Security
Holders.
<P>
On June 9, 2000 the shareholders of the Company approved
the Stock Acquisition and Reorganization Agreement with
Segway I Corp. and the issuance of 5,000 shares of the
Company to Segway I shareholders in accordance therewith.
To date such shares have not been issued.
<P>
Item 5. Other information. None.
<P>
Item 6. Exhibits and reports on Form 8-K. On June 20,
2000, the Company filed an 8-K12G(3) with the Securities
and Exchange Commission. (SEC File No. 000-29461)
<P>
Exhibit 27 Financial data schedule electronic filing
only.
<P>
SIGNATURES
<P>
Pursuant to the requirements of section 13 or 15(d) of
the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed in its behalf by the
undersigned, thereunto duly authorized, on August 14,
2000.
<P>
DIAMOND INTERNATIONAL GROUP,
INC.
(Registrant)
Date: August 14, 2000 /s/ Richard Levinson
-------------------------------
Richard Levinson
Chairman and President
<P>
