UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1997
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the Transition Period From to
---------- ----------
Commission File Number: 0-24138
DIAMOND EQUITIES, INC.
----------------------
(Exact Name of Registrant as Specified in its Charter)
Nevada 88-0232816
-------------------------- -----------------
(State of Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
2010 E. University Drive, Suite 3, Tempe, Az 85281
--------------------------------------------------
(Address of Principal Executive Offices)
(602) 921-2760
-----------------------------
(Registrant's telephone number, including area code)
N/A
------------------------
(Former name, former address and formal fiscal year,
if changed since last report)
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 and, (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
----- -----
As of October 31, 1997, Diamond Equities, Inc. Registrant had 4,666,099 shares
of its $0.001 par value common stock outstanding.
Page 1 of 11 sequentially numbered pages
<PAGE>
FORM 10-Q
FIRST QUARTER 1998
Diamond Equities, Inc.
----------------------
INDEX
PART I. FINANCIAL INFORMATION
PAGE
------
Balance Sheets - September 30, 1997 and June 30, 1997............ 3 - 4
Statements of Operations for the Three Months
Ended September 30, 1997 and 1996................................ 5
Statement of Cash Flows - for the Three Months
Ended September 30, 1997 and 1996................................ 6 - 7
Notes to Financial Statements.................................... 8
Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................ 9
PART II. OTHER INFORMATION
Item 3(b) Defaults Upon Senior Securities....................... 10
Page 2
<PAGE>
Diamond Equities, Inc.
Balance Sheets
ASSETS
------
<TABLE>
<CAPTION>
September 30, June 30,
------------- -------------
1997 1997
------------- -------------
(Unaudited) (Audited)
<S> <C> <C>
CURRENT ASSETS
Cash $1,449,678 $1,586,983
Receivables
Trade accounts, net of allowance for doubtful accounts of
$0 at September 30, 1997 and June 30, 1997 35,588 20,292
Interest receivable -- 1,900
Note Receivable-current portion 56,873 41,123
------------- -------------
Total Current Assets 1,542,139 1,650,298
------------- -------------
PROPERTY AND EQUIPMENT 24,699 20,980
------------- -------------
OTHER ASSETS
Notes Receivable-noncurrent portion 770,127 770,127
Deposits 1,000 2,106
------------- -------------
Total Other Assets 771,127 772, 233
------------- -------------
$2,337,965 $2,441,405
============= =============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
Diamond Equities, Inc.
Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, June 30,
------------- -----------
1997 1997
------------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 130,227 $ 112,812
Accrued expenses 42,753 59,940
Sales tax payable 88,098 88,098
Accrued preferred dividends 194,023 194,023
------------- -----------
Total Current Liabilities 455,101 454,873
------------- -----------
Total Liabilities 455,101 454,873
------------- -----------
STOCKHOLDERS' EQUITY
Convertible preferred stock, $.001 par, 6% cumulative,
non-voting, class A; 10,000 shares authorized;
0 and 727 shares issued and outstanding -- 1,817,591
Convertible preferred stock, non-voting, non-cumulative
class B; 20,000 shares authorized; 18,000 shares issued
and outstanding 1,817,591 --
Common stock, $.001 par value; 50,000,000 shares
authorized; 4,666,099 shares issued and outstanding 4,666 4,666
Additional paid-in capital 2,582,282 2,582,282
Accumulated deficit (2,521,675) (2,418,007)
------------- -----------
Total Stockholders' Equity 1,882,864 1,986,532
------------- -----------
$ 2,337,965 $ 2,441,127
============= ===========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
Diamond Equities, Inc.
Statements of Income
(Unaudited)
For the Three Months Ended
--------------------------
September 30,
--------------------------
1997 1996
----------- -----------
Net sales $ -- $ --
Less cost of sales -- --
----------- -----------
Gross profit -- --
Selling, general and administrative expenses 121,058 --
----------- -----------
Operating income or (loss) (121,058) --
----------- -----------
Other income and (expenses), net
17,390 4,372
Income (loss) from Discontinued Operations 3,863
Gain on sale of assets -- --
----------- -----------
Net income (loss) before income taxes (103,668) 8,235
Provision for income taxes -- --
----------- -----------
Net income or (loss) before preferred dividends (103,668) 8,235
Preferred dividends -- (27,264)
----------- -----------
Net loss attributed to common stock $ (103,668) $ (19,029)
=========== ===========
Net income or (loss) per share $ (.02) $ (.00)
=========== ===========
Weighted Average Shares Outstanding 4,666,099 5,277,099
=========== ===========
See accompanying notes to financial statements.
5
<PAGE>
Diamond Equities, Inc.
Statements of Cash Flows
(Unaudited)
For the Three Months Ended
--------------------------
September 30,
--------------------------
1997 1996
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(103,668) $ (19,029)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 1,481 52,848
Changes in operating assets and liabilities
(Increase) decrease in
Receivables - trade and other (13,396) (15,647)
Prepaid expenses and other (1,000) (1,929)
Increase (decrease) in
Accounts payable 17,415 11,459
Accrued liabilities (17,187) 30,583
--------- ---------
Net Cash Used in Operating Activities (116,355) 58,285
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (5,200) (30,625)
Cash paid for notes receivable (15,750) (6,000)
--------- ---------
Net Cash Provided by Investing Activities $ (20,950) $ (36,625)
--------- ---------
See accompanying notes to financial statements.
6
<PAGE>
Diamond Equities, Inc.
Statements of Cash Flows (Continued)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
--------------------------
September 30,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable $ -- $ (184)
----------- -----------
Net Cash Provided (Used) by Financing Activities -- (184)
----------- -----------
INCREASE (DECREASE) IN CASH (137,305) 21,476
CASH, BEGINNING OF PERIOD 1,586,983 694,293
----------- -----------
CASH, END OF PERIOD $ 1,449,678 $ 715,769
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes $ -- $ --
=========== ===========
Cash paid for interest $ -- $ 134
=========== ===========
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
Diamond Equities, Inc.
September 30, 1997
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
GENERAL
- -------
Diamond Equities, Inc. (the "Company") has elected to omit substantially all
footnotes to the financial statements for the three months ended September 30,
1997, since there have been no material changes (other than indicated in other
footnotes) to the information previously reported by the Company in their Annual
Report filed on Form 10-KSB for the Fiscal year ended June 30, 1997.
UNAUDITED INFORMATION
- ---------------------
The information furnished herein was taken from the books and records of the
Company without audit. However, such information reflects all adjustment which
are, in the opinion of management, necessary to properly reflect the results of
the interim period presented. The information presented is not necessarily
indicative of the results from operations expected for the full fiscal year.
8
<PAGE>
Diamond Equities, Inc.
September 30, 1997
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources of the Company
- ----------------------------------------------
On November 15, 1996, the Company sold its payphone base and all
related equipment, contracts, automobiles and nearly all furniture & fixtures to
Tru-Tel Communications, L.L.C. for $1,711,250 in cash and a note receivable of
$811,250. The Company assigned the office and warehouse lease to the buyer and
moved its operations to another location in Tempe, Arizona. Since November 15,
1996, the Company has been winding down operations relative to the payphone
business and has been involved in searching for new business ventures and
operations to acquire in different industries. Because the Company discontinued
its operations in the pay telephone industry in fiscal year 1997, the results of
operations will greatly differ from that of fiscal year 1998.
Cash and cash equivalents totaled $1,449,678 at September 30, 1997 compared to
$1,586,983 at June 30, 1997. The decrease in cash was due primarily to general
and administrative expenses exceeding the interest income, which is the only
form of revenue the Company currently has.
Long term cash requirements, other than normal operating expenses, are
anticipated for the acquisition or start up of new business operations. The
Company believes that its existing cash and anticipated cash generated from
operations will be sufficient to satisfy its currently anticipated cash
requirements for fiscal year 1998.
The Company's principal commitment at September 30, 1997 consists of an
obligation under an operating leases for facilities.
Results of Operations
- ---------------------
Revenues of $17,389 from interest income for the first quarter of 1998 decreased
dramatically from the same period last year due to the lack of operations as
discussed above. The only form of revenues currently being recorded is the
interest on the cash accounts. Because the note receivable is in default, no
interest income is being recorded.
Selling, general and administrative expenses were $121,058 for the first quarter
1998 a decrease of $183,664 over the same period last year. The decrease is
primarily due to the change in operations and personnel.
Management anticipates that general selling and administrative expenses will
continue to remain constant until new business operations begin.
The Company incurred a loss of $(103,668) for the first quarter 1998 compared to
a loss of $(19,029) for the same timely period a year ago, due to the lack of
revenues. The Company no longer has a preferred dividend burden due to the
exchange of Series A Preferred Stock for Series B non-cumulative preferred
stock. This results in an additional net income of $27,264 available to common
shareholders every quarter.
9
<PAGE>
Diamond Equities, Inc.
September 30, 1997
There are no seasonal aspects of the Company's business which had, or are
expected to have, a material effect on the financial conditions or results of
operations.
Plan of Operations
- ------------------
The Company's plan for 1998 is to acquire or begin operations in a different
industry. Management is currently reviewing several potential acquisition
candidates in the plastics industry, and hopes to secure operations in the near
future.
PART II OTHER INFORMATION
Item 3(b) Defaults Upon Senior Securities
- -----------------------------------------
The Company is 21 months in arrears ($194,023) as of November 14, 1997, in the
payment of dividends to the shareholders of the Class A 6% Preferred Stock.
10
<PAGE>
Diamond Equities, Inc.
September 30, 1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 13, 1997
Diamond Equities, Inc.
By: /S/ David Westfere
------------------------------
David Westfere, CEO and
Principal Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 1,449,678
<SECURITIES> 0
<RECEIVABLES> 35,588
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,542,139
<PP&E> 24,699
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,337,965
<CURRENT-LIABILITIES> 455,101
<BONDS> 0
0
1,817,591
<COMMON> 4,666
<OTHER-SE> 60,607
<TOTAL-LIABILITY-AND-EQUITY> 2,337,965
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 121,058
<LOSS-PROVISION> (103,668)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (103,668)
<INCOME-TAX> 0
<INCOME-CONTINUING> (103,668)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (103,668)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
