<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
1ST Amendment
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR 12(g) OF THE SECURITIES ACT OF 1934
DIVERSIFIED MARKETING SERVICES, INC.
------------------------------------
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
NEVADA 88-0350120
------ ----------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
902 EAST 18TH STREET, NATIONAL CITY, CA 91950-4739
- --------------------------------------- ----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(619)699-1738
- -------------
(ISSUER'S TELEPHONE NUMBER)
SECURITIES TO BE REGISTERED UNDER SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
-------------------------------- --------------------------------------
-------------------------------- --------------------------------------
SECURITIES TO BE REGISTERED UNDER SECTION 12(g) OF THE ACT:
Common Stock - .001 Par Value
-----------------------------
(TITLE OF CLASS)
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PART 1
ITEM 1
DESCRIPTION OF THE BUSINESS
General
Diversified Marketing Services, Inc. is filing this Form 10-SB on a voluntary
basis in order to make Diversified Marketing Services' financial information
equally available to any interested parties or investors and meet certain
listing requirements for publicly traded securities on the OTC Electronic
Bulletin Board which is sponsored by the National Association of Securities
Dealers (NASD). The Company anticipates filing an information statement with a
sponsoring NASD Broker-Dealer for listing of its securities on the OTC
Electronic Bulletin Board upon completion of the Company's comment period for
this Form 10-SB filing.
Business Development
Diversified Marketing Services, Inc. was incorporated in Nevada on December 12,
1995 for the purpose of developing third party motor vehicle title and
registration offices in California and throughout the Western United States.
During 1996, the Company raised capital through the sale of common stock to
investors in order to meet its obligations for timely state filings and taxes.
In Management's experience in Southern California, urban economic conditions
such as slow growth and high unemployment beginning in 1991 corresponded with a
reduction in the growth rate of vehicle registrations and transfers through 1996
and induced Management to delay the implementation of its business plan.
Beginning in 1997, Management witnessed a significant improvement in Southern
California's overall vehicle registration business. In December 1998 the board
of directors voted to seek additional capital and implement the Company's
business plan.
There have been no bankruptcy, receivership or similar proceedings.
There have been no material reclassifications, mergers, consolidations, or
purchase or sale of a significant amount of assets not in the ordinary course of
business.
Business of the Issuer
In December 1998, the Company determined it would complete the development of
its third party motor vehicle title and registration services business plan.
These comprehensive services involve all of the responsibilities of a typical
state motor vehicle department office, including providing the urban public
market everything from drivers licenses to the issuance of vehicle license
plates. Management based its decision to proceed with its business plan on three
factors: favorable United States economic growth projections, growth in motor
vehicle registrations in Western states, and legislative changes in Western
states allowing more third party motor vehicle title and registration services.
For over ten years, the state of California has issued licenses to third party
businesses to offer
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motor vehicle title and registration services normally handled by the Department
of Motor Vehicles. The states of Texas, New Mexico, and Nevada have similar
third party state services programs. Arizona has expanded its third party state
services program to include almost all services previously performed solely by
its Motor Vehicle Division offices, including issuing driver's licenses, written
tests, road tests, vision tests, vehicle titles, plates, tabs, registration, and
inspections. Oregon is scheduled to begin preliminary third party motor vehicle
title and registration services in the year 2000.
Summary of Western States third party vehicle title and registration services
currently authorized by state:
<TABLE>
<CAPTION>
Drivers Licenses, License
State Vehicle Title & Registration Plates
----- ---------------------------- -------------------------
<S> <C> <C>
Arizona Authorized Authorized
California Authorized
Nevada Authorized
New Mexico Authorized
Texas Authorized
</TABLE>
States have outsourced functions traditionally handled by state bureaucracies in
order to achieve cost savings and provide better service, this competitive model
encourages third party businesses to cut state vehicle and licensing compliance
costs and service customers more efficiently and humanely. Management believes
the Company can help states reduce their vehicle and licensing compliance costs
because the Company's overhead is lower due to smaller offices and staff size.
Management believes it will be able to service customers more efficiently and
humanely due to its employee training and emphasis on treating customers in a
kind and courteous manner. The Company's Management has over ten years
experience in management and administration of third party motor vehicle title
and registration offices in California catering to a target market niche of
urban core customers. These customers have repeatedly complimented Management on
its speed in document processing and its employees' kind and courteous service.
Over the next twelve months the Company intends to take the following steps in
order to make its services available in the Western market: raise capital of
$700,000 to $800,000 through the sale of equity securities via a private
placement during months one through twelve, open four offices in San Diego
County with a budget of $80,000 for purchase of fixed assets, $120,000 for
salaries, and $180,000 for advertising and other operating expenses during
months seven through nine, and open four offices in Los Angeles County during
months ten through twelve with a budget of $80,000 for purchase of fixed assets,
$96,000 for salaries, and $152,000 for advertising and other operating expenses.
During months one through seven, the Company will register with the State of
California to be a third party vehicle registration provider for all of its
California offices. This process takes approximately sixty days and costs
approximately $200 in total State fees. The process includes securing two bonds
per office at a cost of approximately $500 per office, and a background check of
all officers to include a fingerprint check and financial background review. The
license requires a minimum of one officer of the corporation to take a six month
training class, however, the Company's president already holds a license from
the State of California due to his greater than ten year experience in this
business. The president's extensive experience and State approved license are
the basis for
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Management's belief that the Company will be able to meet its business plan
license requirements in a timely manner. The license granted by the State of
California is state-wide and nonexclusive. It is a perpetual license subject to
State of California daily computer monitoring of license holder transactions,
unscheduled audits, and annual reviews of financial records. Other Western
states have similar license requirements to California's, however, the Company
will not expand into any other state until after its first year of operations.
Management plans to expand into Arizona in year two of its operations.
Management has not taken any concrete steps to implement its business plan
pending the Company's capital funding through the sale of equity securities.
The Company has no new product or service planned or announced to the public.
The size and financial strength of the Company's primary competitor, the
Automobile Club of Southern California is substantially greater than those of
the Company. Management is aware the Automobile Club of Southern California has
been providing third party vehicle registration services in excess of the last
ten years, but has no direct knowledge of the total number of years that company
has provided such services in California. Management is aware of other material
competitors in the third party vehicle registration business in California, such
as Payless Registration Services in San Diego and All American Registration
Service in Los Angeles. Management is aware of material competitors in Phoenix,
Arizona such as Arizona Motor Vehicle Title, and in Dallas, Texas such as USA
Auto Titles. Although Management has limited access to in-depth information
regarding the operations of the Company's competitors, Management believes that
the Company can effectively compete because of Management's extensive knowledge
of third party motor vehicle title and registration services in California
gained from over ten years of experience in this business while marketing these
services to urban customers. In Management's experience, these customers use
third party motor vehicle title and registration services instead of State run
motor vehicle offices because it saves them time and, expressed through customer
comments to Management, because they desire to be treated in a kind and
courteous manner. The Company's service fees will depend upon complexity and
time involved in processing and will be in a range from $75 to $300 in addition
to State fees. The Company does not plan to market it's services to rural
residents.
Management is not aware of any significant barriers to the Company's entry into
the third party motor vehicle title and registration market, however, the
Company at this time has no market share of this market.
The Company will use state approved supplies, such as driver's licenses, vehicle
registration forms, license plates and tags provided under contract from each
state's motor vehicle licensing department or state licensed suppliers. State
application and information request forms will be delivered to the Company by
overnight delivery services such as FEDEX at a cost of approximately $.25 per
form. State driver's licenses, license plates and tags are available through a
local motor vehicle department location and are stored in an approved safe with
electronic alarm system for security. Management estimates the cost of the safe
and security system to be approximately $1,000.
In California, the Company will use state supplied software and Microsoft Office
software running on an Intel Pentium III system including high speed modem and
printer at a cost of approximately $5,000. This system allows direct access,
with security codes, to the State's mainframe computer system. Arizona requires
similar equipment and software utilizing
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Microsoft's NT operating system at a cost of approximately $5,500. While the
Company has researched requirements of the states of California, Texas, New
Mexico, Nevada, Arizona, and Oregon regarding their state approved supplies, at
this time the Company has no formal contracts with any states or state suppliers
and will not initiate negotiations with any states or their potential suppliers
until such time as the Company has sufficient funding per its business plan.
The Company intends to sell its services to a broad base of urban customers
within Southern California during the first year and throughout the Western
United States within three years and will not depend on any one or a few major
customers.
Other than common office materials, the Company will utilize only materials and
supplies designed and mandated by each state. The Company has no current or
future business plans involving patents, trademarks, franchises, concessions,
royalty agreements, or labor contracts.
The Company's business is not subject to material regulation by federal
governmental agencies. With the exception of the state of Texas, the only
governmental approval the Company requires is a license from each state in which
the Company intends to provide its third party motor vehicle title and
registration services. In Texas, the license approval process for the Company's
proposed business is granted in each county by the County Tax Assessor's Office.
The Company's Management personnel are familiar with license requirements for
each state in its business plan and believe the Company will qualify for
necessary licenses in each state and will be able to timely secure licenses in
accordance with the Company's business plan. Management has made informal
inquiries and contact with the responsible motor vehicle departments in each
state in its business plan and will secure California licensing covering each
new Company office beginning in month six of its business plan contingent upon
sufficient funding from the Company's securities sales. Management intends to
secure necessary licenses in each additional state beginning in year two of the
Company's business plan.
All research and development costs since inception have been immaterial in cost
and will not be passed on to customers.
The Company's only employees are its two officers who will devote as much time
as the board of directors determines is necessary to manage the affairs of the
Company. The officers intend to work on a full time basis when the Company is
able to provide proper remuneration as discussed in Item 6, "Executive
Compensation".
While Management believes its estimates of projected occurrences and events are
within the timetable of its business plan, there can be no guarantees or
assurances that the results anticipated will occur.
Year 2000 Disclosure
Computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruption of normal business activities.
The Company's Management has hands-on familiarity with all of the software that
will be utilized
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in its business plan and has confirmation from third party suppliers that its
proposed software is certified Year 2000 compatible for all of its computing
requirements. In addition, proposed suppliers of office equipment for the
Company's business plan have confirmed that embedded technology systems such as
micro processors in telephone systems and other non-computer devices that will
be purchased per the Company's business plan are already Year 2000 compatible.
The Company's business plan anticipates dealing only with one state motor
vehicle department in the year 2000, the State of California's Department of
Motor Vehicles. The California Department of Motor Vehicles has confirmed its
computing systems are already Year 2000 compatible.
While the Company has made what it believes to be adequate inquiries of the its
software suppliers and the State of California as to Year 2000 compliance, there
can be no guarantee that the State of California and software suppliers will be
adequately prepared for every possible contingent Year 2000 software problem,
which could have minor or material adverse effects on the Company's results of
operations. In a reasonably likely worst case scenario, the Company may be
temporarily unable to access the State's main frame computer system. The Company
may experience minor or material adverse cash flow effects depending on the
length of time of the reasonably likely worst case scenario. In order to
continue operations, Management may resort to manually preparing documents and
hand delivering these documents to the State motor vehicle department offices
for processing. In the unlikely event the State is unable to access its own main
frame computer system, Management may decide to reduce operations to match the
reduced cash flow from sales or seek additional equity funding.
The Company currently anticipates purchasing new off-the-shelf Year 2000
compatible software by December 31, 1999, which is prior to any anticipated
impact on its operating systems. The total cost of this new software is not
anticipated to be a material expense to the Company at this time.
ITEM 2
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Plan of Operation
The Company's current cash balance is $1,521. Management believes the current
cash balance is sufficient to fund the current minimum level of operations
through December 1999, however, in order to advance the Company's business plan
the Company must raise capital through the sale of equity securities. To date,
the Company has sold $4,800 in equity securities and used approximately $2,800
for professional services, $300 for licenses and fees, and $120 for office
supplies and postage. Sales of the Company's equity securities have allowed the
Company to maintain a positive cash flow balance.
During the next twelve months, Management's business plan is for the Company to
take the following steps to offer its third party motor vehicle title and
registration services in California: raise capital of $700,000 to $800,000
through the sale of equity securities via a private placement during months one
through twelve, open four offices in San Diego County with a budget of $80,000
for purchase of fixed assets, $120,000 for salaries, and $180,000 for
advertising and other operating expenses during months seven through nine, and
open four offices in Los Angeles County during months ten through twelve with a
budget of $80,000 for
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purchase of fixed assets, $96,000 for salaries, and $152,000 for advertising and
other operating expenses. Management has not taken any concrete steps to
implement its business plan pending the Company's capital funding through the
sale of equity securities. After raising capital, Management intends to utilize
its experience in operating third party vehicle title and registration offices
to implement its business plan, hire staff personnel through personal contacts,
rent commercial space in San Diego and Los Angeles Counties, purchase furniture
and equipment, and begin operations. The Company intends to use its equity
capital to fund the Company's business plan as cash flow from sales is estimated
to begin within thirty days after the Company opens each business office in
months seven through twelve. The Company will face considerable risk in each of
its business plan steps, such as difficulty of renting adequate office
facilities within its budget, difficulty of hiring competent personnel within
its budget, difficulty in completing necessary personnel training within time
limits, and a shortfall of funding due to the Company's inability to raise
capital in the equity securities market. If no funding is received during the
next twelve months, the Company will be forced to rely on its existing cash in
the bank and funds loaned by the directors and officers. The Company's officers
and directors have no formal commitments or arrangements to advance or loan
funds to the Company. In such a restricted cash flow scenario, the Company would
be unable to complete its business plan steps, and would, instead, delay all
cash intensive activities. Without necessary cash flow, the Company would be
dormant during the next twelve months, or until such time as necessary funds
could be raised in the equity securities market.
There are no current plans for additional product research and development. The
Company plans to purchase approximately $160,000 in furniture, computers and
software during the next twelve months from proceeds of its equity security
sales. The Company's business plan provides for an increase of thirty two
employees during the next twelve months.
Results of Operations
There were no revenues from sales for the period ended May 31, 1999. The Company
sustained a net loss of $3,279 for the period ended May 31, 1999. Losses were
primarily attributable to professional fees and expenditures for the operations
of the corporation.
Liquidity and Capital Resources
As of May 31, 1999, the Company had $1520.60 cash on hand and in the bank. The
primary costs and operating expenses for the period ended May 31, 1999 were
operating expenses of $429 and professional fees of $2,850.
ITEM 3
DESCRIPTION OF PROPERTY
The Company's principal executive office address is 902 E. 18th Street, National
City, CA 91950. The principal executive office and telephone number are provided
by an officer of the corporation at no cost. Management considers the Company's
current principal office space arrangement adequate for current and short-term
estimated growth.
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ITEM 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth information on the ownership of the Company's
voting securities by Officers, Directors and major shareholders as well as those
who own beneficially more than five percent of the Company's common stock
through the most current date - May 31,1999:
<TABLE>
<CAPTION>
Title Of Name & Amount & Percent
Class Address Nature of owner Owned
- ----- ------- --------------- -------
<S> <C> <C> <C>
Common Fernando Carranza 4,545,000(a) 40.4%
902 E. 18th Street
National City, CA 91950
Common Jackie L. Kruger 4,545,000(b) 40.4%
1274 Bostonia Street
El Cajon, CA 92021
Total Shares Owned by Officers & Directors
As a Group 9,090,000 80.8%
</TABLE>
(a) Mr. Carranza received 4,545,000 shares of the Company's common stock for
work on the Company's business plan on March 15, 1999.
(b) Ms. Kruger received for administrative services 10,000 shares of the
Company's common stock on March 15, 1996, an additional 100 shares were
issued to her on March 15, 1998 as a correction to the issuance of stock
dated March 15, 1996. 90,900 shares of the Company's common stock were
issued to her per a 10:1 stock split on December 31, 1998 and an
additional 4,444,000 shares were issued to her per a 45:1 stock split on
February 8, 1999.
ITEM 5
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS,
AND CONTROL PERSONS
The Directors and Officers of the Company, all of those whose one year terms
will expire 4/3/00, or at such a time as their successors shall be elected and
qualified are as follows:
<TABLE>
<CAPTION>
Name & Address Age Position Date First Elected Term Expires
- -------------- --- -------- ------------------ ------------
<S> <C> <C> <C> <C>
Fernando Carranza 49 President, 3/15/99 4/3/00
902 E. 18th Street Director
National City, CA 91950
</TABLE>
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<TABLE>
<CAPTION>
Name & Address Age Position Date First Elected Term Expires
- -------------- --- -------- ------------------ ------------
<S> <C> <C> <C> <C>
Jackie L. Kruger 43 Sec/Treas 3/15/96 4/3/00
1274 Bostonia Street Director
El Cajon, CA 92021
</TABLE>
Each of the foregoing persons may be deemed a "promoter" of the Company, as that
term is defined in the rules and regulations promulgated under the securities
and Exchange Act of 1933.
Directors are elected to serve until the next annual meeting of stockholders and
until their successors have been elected and qualified. Officers are appointed
to serve until the meeting of the Board of Directors following the next annual
meeting of stockholders and until their successors have been elected and
qualified.
No Executive Officer or Director of the Corporation has been the subject of any
Order, Judgement, or Decree of any Court of competent jurisdiction, of any
regulatory agency enjoining him from acting as an investment advisor,
underwriter, broker or dealer in the securities industry, or as an affiliated
person, director or employee of an investment company, bank, savings and loan
association, or insurance company or from engaging in or continuing any conduct
or practice in connection with any such activity or in connection with the
purchase or sale of any securities nor has any such person been the subject of
any Order of a State authority barring or suspending for more than sixty (60)
days, the right of such a person to be engaged in such activities or to be
associated with such activities.
No Executive Officer or Director of the Corporation has been convicted in any
criminal proceeding (excluding traffic violations) or is the subject of a
criminal proceeding which is currently pending.
No Executive Officer or Director of the Corporation is the subject of any
pending legal proceedings.
Resumes
Fernando Carranza, President & Director
1989 - Current President, Director, Carranko Group, Inc., dba Express
Registration. Company provides third party motor vehicle title
and registration services, including Department of Motor
Vehicles license hearing representation, vehicle seizure
resolution proceedings, and vehicle code violation hearing
representation for urban clients in National City, California.
Jackie L. Kruger, Secretary, Treasurer & Director
1994 - Current Independent Contractor providing bookkeeping and tax services to
a variety of businesses clients in California and Nevada
including third party motor vehicle title and registration
services.
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ITEM 6
EXECUTIVE COMPENSATION
The company's current officers receive no compensation.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Other
Name & (annual Restricted LTIP All other
principle Salary Bonus compen- stock Options Payouts compen-
position Year ($) ($) sation($) awards($) SARs ($) sation($)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
F Carranza 1996 -0- -0- -0- -0- -0- -0- -0-
President 1997 -0- -0- -0- -0- -0- -0- -0-
1998 -0- -0- -0- -0- -0- -0- -0-
J Kruger 1996 -0- -0- -0- -0- -0- -0- -0-
Director 1997 -0- -0- -0- -0- -0- -0- -0-
1998 -0- -0- -0- -0- -0- -0- -0-
</TABLE>
There are no current employment agreements between the Company and its executive
officers.
The Directors and Principal Officers have worked with no remuneration until such
time as the Company receives sufficient revenues necessary to provide proper
salaries to all Officers and compensation for Directors' participation. The
Officers and the Board of Directors have the responsibility to determine the
timing of remuneration for key personnel based upon such factors as positive
cash flow to include stock sales, product sales, estimated cash expenditures,
accounts receivable, accounts payable, notes payable, and a cash balance of not
less than $10,000 at each month end. When positive cash flow reaches $10,000 at
each month end and appears sustainable the board of directors will readdress
compensation for key personnel and enact a plan at that time which will that
benefits the Company as a whole. At this time, management cannot accurately
estimate when sufficient revenues will occur to implement this compensation, or
the exact amount of compensation.
There are no annuity, pension or retirement benefits proposed to be paid to
officers, directors or employees of the Corporation in the event of retirement
at normal retirement date pursuant to any presently existing plan provided or
contributed to by the Corporation or any of its subsidiaries, if any.
ITEM 7
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Carranza received 4,545,000 shares of the Company's common stock for work on
the Company's business plan on March 15, 1999.
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Ms. Kruger received for administrative services 10,000 shares of the Company's
common stock on March 15, 1996, an additional 100 shares were issued to her on
March 15, 1998 as a correction to the issuance of stock dated March 15, 1996.
90,900 shares of the Company's common stock were issued to her per a stock split
on December 31, 1998 and an additional 4,444,000 shares were issued to her per a
stock split on February 8, 1999.
The terms of these stock issuances were as fair to the Company, in Management's
opinion, as could have been made with an unaffiliated third party.
The officers currently devote an immaterial amount of time to manage the affairs
of the Company. The officers intend to work on a full time basis when the
Company is able to provide proper remuneration as discussed in Item 6,
"Executive Compensation".
ITEM 8
DESCRIPTION OF SECURITIES
The Company's Certificate of Incorporation authorizes the issuance of 50,000,000
Shares of Common Stock, .001 par value per share. There is no preferred stock
authorized. Holders of shares of Common Stock are entitled to one vote for each
share on all matters to be voted on by the stockholders. Holders of Common Stock
have cumulative voting rights. Holders of shares of Common Stock are entitled to
share ratably in dividends, if any, as may be declared, from time to time by the
Board of Directors in its discretion, from funds legally available therefor. In
the event of a liquidation, dissolution, or winding up of the Company, the
holders of shares of Common Stock are entitled to share pro rata all assets
remaining after payment in full of all liabilities. Holders of Common Stock have
no preemptive or other subscription rights, and there are no conversion rights
or redemption or sinking fund provisions with respect to such shares. All of the
outstanding Common Stock is, and the shares offered by the Company pursuant to
this offering will be, when issued and delivered, fully paid and non-assessable.
The Securities and Exchange Commission has adopted Rule 15g-9 which established
the definition of a "penny stock", for the purposes relevant to the Company, as
any equity security that has a market price of less than $5.00 per share or with
an exercise price of less than $5.00 per share, subject to certain exceptions.
For any transaction involving a penny stock, unless exempt, the rules require:
(I) that a broker or dealer approve a person's account for transactions in penny
stocks; and (ii) the broker or dealer receive from the investor a written
agreement to the transaction, setting forth the identity and quantity of the
penny stock to be purchased. In order to approve a person's account for
transactions in penny stocks, the broker or dealer must (I) obtain financial
information and investment experience objectives of the person; and (ii) make a
reasonable determination that the transactions in penny stocks are suitable for
that person and the person has sufficient knowledge and experience in financial
matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prepared by the Commission relating to the penny
stock market, which, in highlight form, (I) sets forth the basis on which the
broker or dealer made the suitability determination; and (ii) that the broker or
dealer received a signed, written agreement from the investor prior to the
transaction. Disclosure also has to be made about the risks of investing in
penny stocks in both public offerings and in secondary trading and about the
commissions payable to both the broker-dealer and the registered
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representative, current quotations for the securities and the rights and
remedies available to an investor in cases of fraud in penny stock transactions.
Finally, monthly statements have to be sent disclosing recent price information
for the penny stock held in the account and information on the limited market in
penny stocks.
PART II
ITEM 1
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND OTHER SHAREHOLDER MATTERS
The Company plans to file for trading on the OTC Electronic Bulletin Board which
is sponsored by the National Association of Securities Dealers (NASD). The OTC
Electronic Bulletin Board is a network of security dealers who buy and sell
stock. The dealers are connected by a computer network which provides
information on current "bids" and "asks" as well as volume information.
As of the date of this filing, there is no public market for the Company's
securities. As of May 31, 1999, the Company had 48 shareholders of record. The
Company has paid no cash dividends. The Company has no outstanding options. The
Company has no plans to register any of its securities under the Securities Act
for sale by security holders. There is no public offering of equity and there is
no proposed public offering of equity.
ITEM 2
LEGAL PROCEEDINGS
The Company is not currently involved in any legal proceedings and is not aware
of any pending or potential legal actions.
ITEM 3
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
CONTROL AND FINANCIAL DISCLOSURE
None.
ITEM 4
RECENT SALES OF UNREGISTERED SECURITIES
On March 15, 1996, the shareholders authorized the issuance of 10,100 shares of
common stock for services to each of the officers and directors of the Company
for a total of 20,200 Rule 144 shares. The Company relied upon Section 4(2) of
Securities Act of 1993, as amended (the "Act"). The Company issued the shares in
satisfaction of management services rendered to officers and directors, which
does not constitute a public offering.
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From the period of approximately August 1, 1996 until September 30, 1996, the
Company offered and sold 4,800 shares at $1.00 per share to non-affiliated
private investors. The Company relied upon Section 4(2) of the Securities Act of
1993, as amended (the "Act"). Each prospective investor was given a private
placement memorandum designed to disclose all material aspects of an investment
in the Company, including the business, management, offering details, risk
factors and financial statements. Each investor also completed a subscription
confirmation letter and private placement subscription agreement whereby the
investors certified that they were purchasing the shares for their own accounts,
with investment intent and that each investor was either "accredited", or were
"sophisticated" purchasers, having prior investment experience or education, and
having adequate and reasonable opportunity and access to any corporate
information necessary to make an informed investment decision. This offering was
not accompanied by general advertisement or general solicitation and the shares
were issued with a Rule 144 restrictive legend.
On March 15, 1998, the shareholders authorized the issuance of 100 shares of
common stock for services to each of the officers and directors of the Company
for a total of 200 Rule 144 shares to correct the issuance by the Company of
only 20,000 shares. The Company relied upon Section 4(2) of Securities Act of
1993, as amended (the "Act") for this issuance. The Company issued the shares in
satisfaction of management services rendered to officers and directors, which
does not constitute a public offering.
On December 31, 1998, the Board of Directors authorized a forward stock split of
9 to 1 resulting in a total of 250,000 shares of common stock issued and
outstanding.
On February 8, 1999, the Board of Directors authorized a forward stock split of
44 to 1 resulting in a total of 11,250,000 shares of common stock issued and
outstanding.
ITEM 5
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's By-Laws allow for the indemnification of Company Officers and
Directors in regard to their carrying out the duties of their offices. The
By-Laws also allow for reimbursement of certain legal defenses.
As to indemnification for liabilities arising under the Securities Act of 1933
for directors, officers or persons controlling the Company, the Company has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy and unenforceable.
PART F/S
The audited financial statements of the Company for the years ended December 31,
1997 and 1998, and the period ended February 28, 1999 and related notes which
are included in this offering have been examined by Barry L. Friedman, PC, and
have been so included in reliance upon the opinion of such accountants given
upon their authority as an expert in auditing and accounting.
13
<PAGE> 14
PART III
EXHIBITS
<TABLE>
<S> <C> <C>
Exhibit 2 Plan of acquisition, reorganization or liquidation None
Exhibit 3(i) Articles of Incorporation Included in Original Filing
Exhibit 3(ii) Bylaws Included in Original Filing
Exhibit 4 Instruments defining the rights of holders None
Exhibit 7 Opinion re: liquidation preference None
Exhibit 9 Voting Trust Agreement None
Exhibit 10 Material contracts None
Exhibit 11 Statement re: computation of per share earnings See Financial Stmts.
Exhibit 14 Material foreign patents None
Exhibit 16 Letter on change of certifying accountant None
Exhibit 21 Subsidiaries of the registrant None
Exhibit 23 Consent of experts and counsel Included in Original Filing
Exhibit 24 Power of Attorney None
Exhibit 27 Financial Data Schedule Included in Original Filing
Exhibit 28 Reports furnished to State insurance agencies None
</TABLE>
SIGNATURES
In accordance with Section 12 of the Securities and Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Diversified Marketing Services, Inc.
Date 8/24/99 By /s/ FERNANDO CARRANZA
------------------- ---------------------------------------
Fernando Carranza, President & Director
Date 8/24/99 By /s/ JACKIE L. KRUGER
------------------- ---------------------------------------
Jackie L. Kruger, Sec/Treas & Director
14
<PAGE> 15
DIVERSIFIED MARKETING SERVICES, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
FEBRUARY 28, 1999
DECEMBER 31, 1998
DECEMBER 31, 1997
<PAGE> 16
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE #
------
<S> <C>
INDEPENDENT AUDITORS REPORT ..............................................1
ASSETS ...................................................................2
LIABILITIES AND STOCKHOLDERS EQUITY ......................................3
STATEMENT OF OPERATIONS ..................................................4
STATEMENT OF STOCKHOLDERS EQUITY .........................................5
STATEMENT OF CASH FLOWS ..................................................6
NOTES TO FINANCIAL STATEMENTS ............................................7 - 10
</TABLE>
<PAGE> 17
BARRY L. FRIEDMAN, P.C.
Certified Public Accountant
1582 TULITA DRIVE OFFICE (702) 361-8414
LAS VEGAS, NEVADA 89123 FAX NO. (702) 896-0278
INDEPENDENT AUDITORS' REPORT
Board of Directors March 10, 1999
Diversified Marketing Services, Inc.
National City, California
I have audited the accompanying Balance Sheets of Diversified Marketing
Services, Inc., (A Development Stage Company), as of February 28, 1999, December
31, 1998, and December 31, 1997, and the related statements of operations,
stockholders' equity and cash flows for the period January 1, 1999, to February
28, 1999, the two years ended December 31, 1998, and December 31, 1997, and the
period December 12, 1995 (inception) to February 28, 1999. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Diversified
Marketing Services, Inc., (A Development Stage Company), as of February 28,
1999, December 31, 1998, and December 31, 1997, and the related statements of
operations, stockholders' equity and cash flows for the period January 1, 1999,
to February 28, 1999, the two years ended December 31, 1998, and December 31,
1997, and the period December 12, 1995 (inception) to February 28, 1999, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note #5 to the
financial statements, the Company has no established source of revenue. This
raises substantial doubt about its ability to continue as a going concern.
Management's plan in regard to these matters are also described in Note #5. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
- --------------------------------
Barry L. Friedman
Certified Public Accountant
<PAGE> 18
DIVERSIFIED MARKETING SERVICES, INC.
(A Development Stage Company)
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
February December December
28, 1999 31, 1998 31, 1997
-------- -------- --------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash $4,759 $4,800 $4,800
------ ------ ------
TOTAL CURRENT ASSETS $4,759 $4,800 $4,800
------ ------ ------
OTHER ASSETS: $ 0 $ 0 $ 0
------ ------ ------
TOTAL OTHER ASSETS $ 0 $ 0 $ 0
------ ------ ------
TOTAL ASSETS $4,759 $4,800 $4,800
====== ====== ======
</TABLE>
See accompanying notes to financial statements & audit report
-F2-
<PAGE> 19
DIVERSIFIED MARKETING SERVICES, INC.
(A Development Stage Company)
BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
February December December
28, 1999 31, 1998 31, 1997
-------- -------- --------
<S> <C> <C> <C>
CURRENT LIABILITIES: $ 0 $ 0 $ 0
------- ------- -------
TOTAL CURRENT LIABILITIES $ 0 $ 0 $ 0
------- ------- -------
STOCKHOLDERS' EQUITY:
Common stock, no par value,
authorized 25,000 shares;
issued and outstanding at
December 31, 1997-24,800 shares $ 5,000
Common stock, $0.001 par value
authorized 50,000,000 shares
issued and outstanding at
December 31, 1998-250,000 shares $ 250
February 28, 1999-11,250,000 shares $11,250
Additional paid-in capital -6,248 4,752 0
Deficit accumulated during
development stage -243 -202 -200
------- ------- -------
TOTAL STOCKHOLDER'S EQUITY $ 4,759 $ 4,800 $ 4,800
------- ------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 4,759 $ 4,800 $ 4,800
======= ======= =======
</TABLE>
See accompanying notes to financial statements & audit report
-F3-
<PAGE> 20
DIVERSIFIED MARKETING SERVICES, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
1-Jan Year Year 12-Dec-95
1999 to Ended Ended (inception)
28-Feb 31-Dec 31-Dec 28-Feb
1999 1998 1997 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INCOME:
Revenue $ 0 $ 0 $ 0 $ 0
----------- ----------- ----------- -----------
EXPENSES:
General, Selling
and Administrative $ 41 $ 2 $ 0 $ 243
----------- ----------- ----------- -----------
Total Expenses $ 41 $ 2 $ 0 $ 243
Net Profit/Loss ( - ) $ -41 $ -2 $ 0 $ -243
=========== =========== =========== ===========
Net Profit/Loss ( - )
per weighted
share (Note 1) $ NIL $ NIL $ NIL $ NIL
=========== =========== =========== ===========
Weighted average
number of common
shares outstanding 11,250,000 11,250,000 11,250,000 11,250,000
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements & audit report
-F4-
<PAGE> 21
DIVERSIFIED MARKETING SERVICES, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional
Common Stock paid-in Retained
Shares Amount capital Earnings
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 24,800 $ 5,000 $ 0 $ -200
Net loss year ended
December 31, 1997 0
---------- ---------- ---------- ----------
Balance, December 31, 1997 24,800 $ 5,000 $ 0 $ -200
March 15, 1998
Stock Issued for Services 200 +2
December 15, 1998
Changed par Value
No Par to $0.001 -4,977 +4,977
December 31, 1998
Forward Stock Split 10:1 225,000 +225 -225
Net loss year ended
December 31, 1998 -2
---------- ---------- ---------- ----------
Balance, December 31, 1998 250,000 $ 250 $ 4,752 $ -202
February 8, 1999
Forward Stock Split 45:1 11,000,000 $ 11,000 -$11,000
Net loss January 1, 1999 to
February 28, 1999 -41
---------- ---------- ---------- ----------
Balance - February 28, 1999 11,250,000 11,250 -6,248 -243
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements & audit report
-F5-
<PAGE> 22
DIVERSIFIED MARKETING SERVICES, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
1-Jan Year Year 12-Dec-95
1999 to Ended Ended (inception)
28-Feb 31-Dec 31-Dec 28-Feb
1999 1998 1997 1999
------ ------ ------ ---------
<S> <C> <C> <C> <C>
Cash Flows from
Operating Activities:
Net Loss $ -41 $ -2 $ 0 $ -243
Adjustment to
reconcile net loss
to net cash provided
by operating activities
Issue Common Stock for Svc 0 2 0 202
Changes in assets and liabilities: 0 0 0 0
------ ------ ------ ------
Net cash used in operating activities $ -41 $ 0 $ 0 $ -41
Cash Flows from investing activities 0 0 0 0
Cash Flows from Financing Activities:
Issuance of common stock for cash 0 0 0 4,800
------ ------ ------ ------
Net increase (decrease) in cash $ -41 $ 0 $ 0 4,759
Cash, beginning of period 4,800 4,800 4,800 0
------ ------ ------ ------
Cash, end of period $4,759 $4,800 $4,800 $4,759
====== ====== ====== ======
</TABLE>
See accompanying notes to financial statements & audit report
-F6-
<PAGE> 23
DIVERSIFIED MARKETING SERVICES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS February 28,
1999, December 31, 1998, and December 31, 1997
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized December 12, 1995, under the laws of the State of
Nevada as Diversified Marketing Services, Inc. The Company currently has no
operations and, in accordance with SFAS #7, is considered a development company.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Method
The Company records income and expenses on the accrual method.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Cash and equivalents
The Company maintains a cash balance in a non-interest bearing bank that
currently does not exceed federally insured limits. For the purpose of the
statements of cash flows, all highly liquid investments with the maturity of
three months or less are considered to be cash equivalents. There are no cash
equivalents as of February 28, 1999.
Income Taxes
Income taxes are provided for using the liability method of accounting in
accordance with Statement of Financial Accounting Standards No. 109 (SFAS #109)
"Accounting for Income Taxes." A deferred tax asset or liability is recorded for
all temporary difference between financial and tax reporting. Deferred tax
expense (benefit) results from the net change during the year of deferred tax
assets and liabilities.
Organization Costs
Costs incurred to organize the Company are being amortized on a straight-line
basis over a sixty month period.
-F7-
<PAGE> 24
DIVERSIFIED MARKETING SERVICES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS CONTINUED February
28, 1999, December 31, 1998, and December 31, 1997
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loss Per Share
Net loss per share is provided in accordance with Statement of Financial
Accounting Standards No. 128 (SFAS #128) "Earnings Per Share". Basic loss per
share is computed by dividing losses available to common stockholders by the
weighted average number of common shares outstanding during the period. Diluted
loss per share reflects per share amounts that would have resulted if dilative
common stock equivalents had been converted to common stock. As of February 28,
1999, the Company had no dilative common stock equivalents such as stock
options.
Year End
The Company has selected December 31st, as its fiscal year end.
Policy in Regards to Issuance of Common Stock in a Non-Cash Transaction
The Company's accounting policy for issuing shares in a non-cash transaction is
to issue the equivalent amount of stock equal to the fair market value of the
assets or services received. Stock issued to officers and directors was
determined to be for an immaterial amount of services.
Year 2000 Disclosure
Computer programs that have time sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruption of normal business activities.
The Company's potential software suppliers have verified they will provide only
certified Year 2000 compatible software for all of the Company's computing
requirements. Because the Company's products and services are sold to the
general public, with no major customers, the Company believes the Year 2000
issue will not pose significant operational problems and will not materially
affect future financial results.
-F8-
<PAGE> 25
DIVERSIFIED MARKETING SERVICES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS CONTINUED February
28, 1999, December 31, 1998, and December 31, 1997
NOTE 3 - INCOME TAXES
There is no provision for income taxes for the period ended February 28, 1999,
due to the net loss and no state income tax in Nevada, the state of the
Company's domicile and operations. The Company's total deferred tax asset as of
December 31, 1998, is as follows:
<TABLE>
<S> <C>
Net operation loss carry forward $202
Valuation allowance 202
----
Net deferred tax asset $ 0
</TABLE>
The federal net operation loss carry forward will expire between 2016 and 2018.
This carry forward may be limited upon the consummation of a business
combination under IRC Section 381.
NOTE 4 - SHAREHOLDERS' EQUITY
Common Stock
The authorized common stock of Diversified Marketing Services, Inc. consists of
50,000,000 shares with a par value of $.001 per share.
Preferred Stock
Diversified Marketing Services, Inc. has no preferred stock.
On March 15, 1996, the Company issued 20,000 shares of its no par value common
stock in consideration of $200.00 to its directors.
On September 30, 1996, the Company issued 4,800 shares of its no par value
common stock for cash of $4,800.00 to investors.
On March 15, 1998, the Company issued 200 shares of its no par value common
stock to its directors as a correction to the original issuance of stock dated
March 15, 1996, to equal the authorized number of shares per the board of
directors meeting dated March 15, 1996.
-F9-
<PAGE> 26
DIVERSIFIED MARKETING SERVICES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS CONTINUED February
28, 1999, December 31, 1998, and December 31, 1997
NOTE 4 - SHAREHOLDERS' EQUITY (Continued)
On December 15, 1998, the State of Nevada approved the Company's restated
Articles of Incorporation, which changed the par value from no par value to
$0.001, and increased its Authorized Common Stock from 25,000 shares to
50,000,000 shares.
On December 31, 1998, the Company approved a forward stock split on the basis of
10:1, thus increasing the outstanding common stock from 25,000 shares to 250,000
shares.
On February 8, 1999, the Company approved a forward stock split on the basis of
45:1, thus increasing the outstanding common stock from 250,000 shares to
11,250,000 shares.
NOTE 5 - GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company does not have significant cash or other material
assets, nor does it have an established source of revenues sufficient to cover
its operating costs and to allow it to continue as a going concern. The
stockholders/officers and or directors have committed to advancing the operating
costs of the Company interest free.
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company neither owns or leases any real or personal property. An officer of
the corporation provides office services without charge. Such costs are
immaterial to the financial statements and accordingly, have not been reflected
therein. The officers and directors of the Company are involved in other
business activities and may, in the future, become involved in other business
opportunities. If a specific business opportunity becomes available, such
persons may face a conflict in selecting between the Company and their other
business interests. The Company has not formulated a policy for the resolution
of such conflicts.
NOTE 7 - WARRANTS AND OPTIONS
There are no warrants of options outstanding to acquire any additional shares of
common stock.
-F10-
<PAGE> 27
DIVERSIFIED MARKETING SERVICES, INC.
(A Development Stage Company)
INTERIM FINANCIAL STATEMENTS
MAY 31, 1999
MAY 31, 1998
<PAGE> 28
DIVERSIFIED MARKETING SERVICES, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MAY 31 MAY 31
1999 1998
--------- ---------
<S> <C> <C>
CURRENT ASSETS
CASH 1,520.60 4,800.00
--------- ---------
TOTAL CURRENT ASSETS 1,520.60 4,800.00
FIXED ASSETS
--------- ---------
NET FIXED ASSETS 0.00 0.00
OTHER ASSETS
ORGANIZATION COSTS
LESS AMORTIZATION
--------- ---------
TOTAL OTHER ASSETS 0.00 0.00
--------- ---------
TOTAL ASSETS 1,520.60 4,800.00
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
--------- ---------
TOTAL CURRENT LIABILITIES 0.00 0.00
LONG TERM LIABILITIES
--------- ---------
TOTAL LONG TERM LIABILITIES 0.00 0.00
--------- ---------
TOTAL LIABILITIES 0.00 0.00
STOCKHOLDERS' EQUITY
COMMON STOCK 11,250.00 250.00
PAID IN CAPITAL -6,248.00 4,752.00
BEGINNING RETAINED EARNINGS -202.00 -200.00
NET INCOME (LOSS) -3,279.40 -2.00
--------- ---------
ENDING RETAINED EARNINGS -3,481.40 -202.00
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 1,520.60 4,800.00
--------- ---------
TOTAL LIAB & STOCKHOLDERS' EQUITY 1,520.60 4,800.00
========= =========
</TABLE>
-F12-
<PAGE> 29
DIVERSIFIED MARKETING SERVICES, INC.
INCOME STATEMENTS
FOR THE FIVE MONTHS ENDED
<TABLE>
<CAPTION>
MAY 31 MAY 31
1999 1998
---------------- ----------------
<S> <C> <C>
REVENUE
---------------- ----------------
TOTAL REVENUE 0.00 0.00
DIRECT COSTS
---------------- ----------------
TOTAL COST OF GOODS SOLD 0.00 0.00
---------------- ----------------
GROSS PROFIT 0.00 0.00
OPERATING EXPENSES
LICENSES & FEES 305.00
OFFICE EXPENSE 124.40 2.00
TRANSFER AGENT 500.00
AUDIT/ACCOUNTING 2,350.00
---------------- ----------------
TOTAL OPERATING EXPENSES 3,279.40 2.00
---------------- ----------------
INCOME FROM OPERATIONS -3,279.40 -2.00
OTHER INCOME & EXPENSE
---------------- ----------------
TOTAL OTHER INCOME & EXPENSE 0.00 0.00
---------------- ----------------
INCOME BEFORE TAXES -3,279.40 -2.00
PROVISION FOR TAXES
---------------- ----------------
NET INCOME / LOSS -3,279.40 -2.00
================ ================
NET INCOME / LOSS PER WEIGHTED SHARE $ 0.0003 $NIL
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 11,250,000 11,250,000
</TABLE>
-F13-
<PAGE> 30
INCOME STATEMENTS
STATEMENTS OF CASH FLOWS
FOR THE FIVE MONTHS ENDED
<TABLE>
<CAPTION>
MAY 31 MAY 31
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET LOSS -3,279.40 -2.00
ADJ TO RECONCILE NET INCOME (LOSS) TO NET
CASH USED IN OPERATING ACTIVITIES
--------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES -3,279.40 -2.00
--------- ---------
NET INCREASE (DECREASE) -3,279.40 -2.00
CASH AT BEGINNING OF PERIOD 4,800.00 4,800.00
CASH AT END OF PERIOD 1,520.60 4,800.00
</TABLE>
F-14
<PAGE> 31
DIVERSIFIED MARKETING SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
1. MANAGEMENT'S OPINION
In the opinion of management, the accompanying financial statements contain all
adjustments necessary to present fairly the financial position of the company as
of May 31, 1999 and 1998 and the results of operations for the five months ended
May 31, 1999 and 1998 and changes in cash for the five months ended May 31, 1999
and 1998.
2. INTERIM REPORTING
The results of operations for the five months ended May 31, 1999 and 1998 are
not necessarily indicative of the results to be expected for the remainder of
the year.
3. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
The Company was incorporated in Nevada on December 12, 1995. The Company was
organized for the purpose of developing third party motor vehicle title and
registration offices in California and throughout the Western United States. The
Company is a development stage company and has not conducted any business
activities to date.
Basis of Accounting
The Company's policy is to use the accrual method of accounting and to prepare
and present financial statements which conform to generally accepted accounting
principles. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from those estimates.
Cash and equivalents
For purpose of the statements of cash flows, all highly liquid investments with
a maturity of three months or less are considered to be cash equivalents. There
were no cash equivalents as of May 31, 1999 and 1998.
-F15-
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS (continued)
Income Taxes
Income taxes are provided for using the liability method of accounting in
accordance with Statement of Financial Accounting Standards No. 109 (SFAS 109),
"Accounting for Income Taxes." A deferred tax asset or liability is recorded for
all temporary differences between financial and tax reporting. Deferred tax
expense (benefit) results from the net change during the year of deferred tax
assets and liabilities.
4. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
OPERATIONS
Material changes in financial condition
As of May 31, 1999 the Company had $1520.60 of cash in the bank compared to
$4,800 of cash in the bank as of May 31, 1998. The Company had no cash receipts
for the five months ended May 31, 1999. The primary uses of cash during the five
months ended May 31, 1999 were $2,850 for professional fees, and $429 for
operating expenses.
Material changes in the results of operations
Expenses of $3,279 for the five months ended May 31, 1999 were primarily for
preparing the Company's legal documents and audit in anticipation of securing
private placement capital in 1999. Management believes it makes economic sense
for the Company to complete its business plan to raise capital through the sale
of private placement securities in order to develop its third party motor
vehicle title and registration offices.
-F16-
